Intersected

just got robo-called about MI speaker dillon’s “scheme” of a healthcare plan. I’m fully in favor of it, so I gave robot a piece of my mind!

From Bill Minchin at the Acts 29 2006  Troy, NY Boot Camp

Reference Materials

• Church and Clergy Tax Handbook by Richard Hammer
• National Association of Church Business Administration
  • Includes compensation data
• Evangelical Council for Financial Accountability
• National Sex Offender Registry
• VolunteerSelect

Guiding “Theology”

• We live in a litigious society and the church is not immune from that
• God has placed us in positions of responsibility and has called us to be faithful stewards
• Therefore, we should give proper attention to the corporate side of the church

Misc

• Make sure that sub-contracting vendors have adequate insurance
  • Liability ($1 million)
  • Have vendor name you as “additional insured”. Makes the vendors insurance primary and yours secondary
• Exempt and non-exempt employees
  • To be classified as exempt, making over $26k, pass duties test
  • Non-exempt gets minimum wage and overtime
  • simply paying an employee on a salary basis doesn’t automatically make them exempt
  • Non-exempt cannot volunteer to perform the same duties for which they are paid
  • Non-exempt should document hours on a daily basis

Sexual Abuse Prevention Policy

• Written application
• Interview
• Institutional reference
• Six month rule (need to be member six months before serving)
• Two Adult Rule
• Maybe Criminal Background Test (VolunteerSelect)

15 Passenger Vans – 1o Point NHTSA bulletin

Gross Negligence

• Board members can’t be sued for normal negligence
  • Can be sued for gross negligence
• 15 Passenger Vans (no safety measures)
• Sexual Abuse (no screening)

Tax Issues

• Housing allowance is tax exempt
  • Must be recorded in official board minutes
  • Must be done every year and is NOT retroactive
• Employee vs. independent contractor
  • IC – worker who contracts to do work using his/her own methods and is only supervised as to end product
  • 3 different tests (in Hammer’s book)
• Tax deductibility for contributions
  • Must be a gift of cash or property
  • Services are NEVER deductible
  • Contribution must be unconditional and without personal benefit
  • Contribution must be made to organization or for the use of the organization
  • IRS wants to see “Full administrative and accounting control to use gift consistent with churches mission and purpose”

From Bill Minchin at the 2006 Troy, NY Boot Camp

• There needs to be intentionality about financial issues in the church
• Preaching the gospel does not make you exempt from financial mis-deeds
• Financial controls – process
  • designed to provide reasonable assurance that a church’s business affairs are being handled appropriate
  • adherence to God’s law and principes
• 2 major components
  • Separation of Duties – separate physical handling of assets with responsibility to handle accounting
  • Independent Verification – have two people involved in every function, especially counting cash and signing checks

Lessons Learned

• Counting and handling of income – 2 persons involved in all transactions
• All income goes through church account, not just tithe received in Sunday service. Eg. donations for food at membership class, money received at youth group car wash fundraiser
• Check signers should have no financial responsibilities
• Bank reconciliation done by other person
• Independent oversight by board or committee
  • Who is asking the important questions?
  • • Are the mortgage payments being made on time and properly?
    • Bank reconciliation – are records up to day? is it being done every month? Is it accurate?
    • Has legal counsel been utilized in the last 6 months?
    • Has the church received any threatening correspondence?
    • Have there been any expenses over a certain limit?
• Provide user-friendly financial report to ministry leaders and congregation
• Get outside independent CPA audit
• Have procedures in written form
• Background checks and confidentiality agreements
  • No secrets, but we’re a family – there are things that are wise to keep in the family

Process

1. Create budget
   • Vision-driven
   • Create standardized worksheets and account codes
2. Have volunteer counters
   • Minimum 2
   • Records on form
3. Business office enters numbers into accounting software
   • All income!
4. Expenses
   • Tries to give priority to personal reimbursements
   • Large checks require elder signature
5. Bank reconciliation
   • Physically get mailed to elder’s home
   • Elder reviews bank reconciliation
6. Monthly reports provided to church and ministry heads
7. Quarterly audits
   • Evangelical Council for Financial Accountability

From Dominick Brignola’s talkat Acts 29 Boot Camp

1. Incorporate
2. Adopt by-laws
3. Apply for Federal recognition as church
4. Apply for State recognition as church
5. Get benefits available for ordained ministers
   • Housing allowance
6. Religious Corporation Structure
   • If you sell things (bookstore, etc)
   • Define membership structure, board structure, voting age
   • With big decisions, there needs to be definition of how approval happens
7. Association
   • Group of people joined together for common purpose
   • Leaves individual members of church to legal action
   • Sometimes associations can’t own real estate
8. How to incorporate
   • Fill out paperwork (charter) with state
   • Need corporate name
     • Isn’t federally protected. to do that, need search at LOC
   • Need corporate management (trustees, etc)
   • Identify membership and rights vested in members
   • Define corporate purposes
9. Draft set of by-laws
   1. Membership participation clause (including discipline)
      • Christian arbitration (you will not sue church)
   2. Non-discrimination clause
      • Have right to limit membership / involvement based on religious reasons
   3. How to replace elders (build something that will outlast you)
   4. Housing allowance
      • has to be renewed each year by IRS. By having in by-laws, you can say “treat money given to pastor the same as last year” so that you don’t get dinged at audit time.
   5. Have designated contributions clause
      1. Money’s given to church are distributed at the church’s discretion

Misc

• Get IRS Tax Guide for Charities and Non-Profits
• IRS has 15-month lookback
  • Created Jan 1, 2006
  • Paperwork comes back Jan 1, 2007
  • All donations given in 2006 are for sure deductible
• Getting 501c3 makes things much, much easier when it comes to deductions
• Have clause in by-laws to indicate that church works hard to confirm where money is going

Notes from Bryan Nelson’s talk at Acts 29 Boot Camp

Legal

1. Get PO Box
2. Check Secretary of State for availability of name
3. Prepare and file Articles of Incorporation
   • Lets you get insurance
   • Business transactions need incorporation (loans, bank accounts)
   • Center for Non-profit Creation can do all this (for cost)
   • Run by attorney
   • Define you legally as non-profit
   • Include
   • • Where do funds go when non-profit dissolves? Needs to be another non-profit
   • • limitation of liability for officers and directors
   • • Indemnification – if pastor gets sued, church can pay expenses
   • Keep them as simple as possible.
4. Prepare By-Laws (Constitution) to flesh out church’s policies and procedures
5. Includes things like membership, discipline, elder process, % vote, how business meetings are run, how to make amendments, fiscal year,
6. Obtain Federal Tax ID Number.
7. Get Business License
8. File Tax Exemption
9. Have initial organizational meeting
   • Adopt by laws
   • Select officers
   • Approve legal documents
   • Select bank
10. Get checking account
11. Get 501c3.
    • Gifts are deductible even without 501c3 but it makes life easier to have
    • Have two years after incorporating
12. Schedule filings
13. May need to renew Articles of Incorporation each year
14. Get insurance
    1. • Require background checks on anyone working with children and  youth
    • Real property (building)
    • Personal property (chairs, furniture)
    • May need rider if in non-owned building
    • Sexual misconduct
    • Directors and officers coverage
    • Need sexual misconduct prevention policy
    • Brotherhood Mutual, Church Mutual
15. Obtain copyright licensing (CCLI)
16. Facilities land-use
    1. Conditional use permit ?

Financial

1. Bookkeeping
   • QuickBooks (not ideal)
   • Excel
2. Process
   1. Not everything has to be in by-laws
3. Designated benevolent giving
   1. Gifts given to non-profit are not supposed to be for the benefit of an individual
   2. Designation is simply suggestion, church makes final decision
   3. Directed gift isn’t technically tax-deductible
4. Payroll
   1. Get payroll company (FreeChurchPayroll.com)
5. Budget

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