Operations 103Finances: Class 2

Level 1:Certificate in Operations •Operations 101—Staffing•Operations 102—Communications•Operations 103—Finances•Operations 104—Finances•Operations 105—Facilities

Operations 103—Finances

Class 3—Expenses

Scripture 1 Chron. 29:11 Yours, LORD, is the greatness and the

power and the glory and the majesty and the splendor, for everything in heaven and earth is yours. Yours,

LORD, is the kingdom; you are exalted as head over all.

Prov. 3:6 in all your ways submit to him, and he will make your paths straight.

1 Chron. 10:31 So whether you eat or drink or whatever you do, do it all for the glory of God.

“I know my expense report is 2 weeks late, but I have been working on singing Happy Birthday to my wife”

“I lost my receipt, so I will just handwrite it”

“I can justify my expense account–not with facts and figures”

Will I be able to explain this expenseto the New York Times?

Expenses

Three Keys for Success

1. Organization2. Communication

3. Knowledge

Expense Definedex.pense /ik’spens/ noun1. the cost required for something: the money spent on something synonyms:cost, price, charge, outlay, fee. tariff, levy, payment; More2. the costs incurred in the performance of one’s job or a specific task, esp. one

undertaken for another person. plural noun:expenses “his hotel and travel expenses”

3. A thing on which one is required to spend money. plural noun: expenses “tolls are a daily expense”synonyms: overhead, costs, outlay, expenditures(s), charges, bills, payment(s):

verb3rd person present: expenses1. offset (an item of expenditure) as an expense against taxable income.

Fund AccountingFund Accounting reports and track information that is most

important to you, your board and your supporters.

Fund accounting records what types of direction the donor gave when giving and how then the funds were spent.

Each fund has a distinct purpose, ranging from operating expenses to funding the various activities of the organization.

Allowable/Non Allowable Expense

The IRS has no specific listing of expenses that the church are prohibited from spending money on beyond the three categories below.

1. Inurement and Private Benefit (Unreasonable Compensation or Personal Expenses)

2. Substantial Lobbying Activity & Political Campaign Activity (Politics)3. Illegal Items (Illegal Substances)

Tip: The IRS offers a quick reference guide of procedures for Churches and Religious Organizations to help them comply with tax laws. http://www.irs.gov/pub/irs-pdf/p1828.pdf

Expense DocumentationEstablished a policy that all expenses are an arrangement to either reimburse

or advance an employee's business expenses.

Follow the rules of an accountability plan where every reimbursable expense must meet three requirements: (1) it involves a church connection (it serves a purpose for the church); (2) it requires the employee to sufficiently explain why the expenses were necessary; and (3) it requires the employee to return any excess amounts that don’t comply with the policy.

Employees must provide the organization with sufficient information to identify the specific business nature of each expense and to prove the necessity of each expense. It is not sufficient for an employee to lump expenses into broad categories such as "travel," or to report expenses through the use of non-descriptive terms such as "miscellaneous business expenses."

Institute the "Three P" policy on every receipt, which includes 1. Purpose, 2. People, and 3. Place. A description and date should be on each receipt that is turned in, which is then entered on the proper expense reports.

Income/Expense Trips

● Create a separate Fund Class for each event

● Create a system that identifies income and expense

● Predict the budget but make sure staff understand if they don’t hit the income they can’t spend it.

Expense Review

● Send out Actual vs Budgets Reports once a month

● Do spot checks and compare balances

● Set up quarterly financial meetings with Board

● Have double signatures on all expenses

● Have someone do the bank reconciliations that doesn’t write the checks.

Internal Controls

Internal controls are what CPA’s do to ensure:

• What we want to happen will happen• What we don’t want to happen won’t happen

Contracts Capital Purchases

Contracts1. Have two sets of eyes.2. Have a lawyer review it if it's large or too

complicatedCapital Purchases1. Always have multiple vendors2. Be sure to save for purchases3. Use the Google Drive to track progress

Chart of Accounts

Chart of accounts is a way to identify expenses.

Just like passwords for the internet, you don’t want to many of them or you will forget.

Just like theology, you don’t want different interpretations of the same core scripture (expense).

Chart of AccountsSalaries and WagesEmployee Benefits

AdvertisingBanking Expense

Benevolence & MissionsTechnology

DepreciationDirect Program Expenses

EducationHonorariums/GiftsInterest ExpenseBuilding Expense

Meals and EntertainmentOffice Expense

Professional FeesRent

TravelUtilities

51000 Payroll &Employee Benefits

51100 . Salaries & Wages51101 . Salaries51102 . Bonus51103 . Housing Allowance51303 . Employee Honorarium51104 . Payroll Taxes51200 . Employee Benefits52702 . Workers' Comp

Insurance51201 . Medical Insurance51202 . Dental Insurance51203 . Life Insurance51221 . LTD

51222 . STD51223 . EE Life51224 . AD&D51204 . Vision Insurance51205 . Voluntary Insurance51211 . 403(b) Match51213 . Taxable Employee

Benefits51220 . Other Benefits51300 . Honorariums/Gifts51301 . Honorarium/Gift51302 . Gifts

52000 Operations Accounts

52100 . Rent52101 . Rent Building Space52102 . Equipment Rent52103 . Event/Other Rentals52105 . Ground Lease52200 . Utilities52201 . Trash52202 . Cable/Satellite TV52203 . Electric/Gas52204 . Water52300 . Building Expense52301 . Equipment Maintenance52302 . Building Maintenance

52303 . Cleaning Services52304 . Cleaning/Restroom Supplies52305 . HVAC Maintenance52306 . Security Monitoring52307 . Pest Control52308 . Snow Removal52309 . Landscaping52310 . Common Area Maintenance52701 . Building Insurance52801 . County and CA Taxes52400 . Professional Fees52401 . Auditing/ Accounting Fees52402 . Legal Fees

52000 Operations Accounts, cont.

52403 . Consultant Fees52404 . Background Checks52405 . Permit/Association Fees52407 . Payroll Processing Fee52500 . Interest Expense52503 . Interest - Howard Bank Loan52504 . Interest - Church Loans Loan52505 . Interest - Bentley-Forbes Loan

52506 . Interest - BB&T Loan 000152507 . Interest - BB&T Loan 000352508 . Principal - BB&T Loan 000152509 . Principal - BB&T Loan 000352600 . Banking Expense52602 . Online Merchant Fees52603 . Bank Fees52604 . Credit Card Fees

Ministry Accounts53000 . Direct Program Expense53100 . Direct Program Expenses54104 . Books/DVDs/Teaching

Resources53101 . Ministry-Specific Equipment53102 . Ministry-Specific Supplies53103 . Resource Ctr Inventory53104 . Food Supplies54000 . Technology/Equip/Office54100 . Office Expense54101 . Office Equipment54102 . Office Furniture/Decor54103 . Office Supplies

54105 . Postage54106 . Printing54200 . Technology52406 . IT54306 . Hosted Software54307 . A/V Equipment54201 . Cellular Phone54202 . Local/Long Distance Phone54203 . Phone System54301 . Computer Equipment54302 . Software55100 . Meals/Entertainment55101 . Meals

Ministry Accounts, cont.55102 . Entertainment55200 . Travel55201 . Lodging55202 . Transportation55203 . Mileage Reimbursement55300 . Education51212 . Education/Tuition Reimbursement55301 . Conference56000 . Advertising56101 . Programs/Flyers56102 . Business Cards56103 . Newspaper/Radio Advertising

56104 . Public Relations56105 . Directories56106 . Signs / Banners57000 . Benevolence/Missions57100 . Benevolence/Outreach57101 . Financial Assist./Benevolence57102 . Domestic Outreach57103 . International Outreach/Missions57104 . Outreach Supplies

Non Cash Expense Accounts

59000 . Non-Cash Transactions

59101 . (Gain) Loss on Disposal of Fixed Asset

59201 . Depreciation

Tools Income Collection:● City & ACS Technology: Collecting and Recording of Income● ServiceU & Shelby: Collecting and Recording of Income● mGive: Communication and Giving via Text● Square and Quickbooks Merchant: Collecting income from Cafe and

Resource CenterAccounting Software:● Quickbooks

Electronic File Room:● Corpsystem Workpaper Manager

Communication:● Google Drive: Centralize Purchasing, Collection of Data● Evernote : Organizing thoughts, ideas and task

A Few Finance FormsPlease feel to use any of these forms https://drive.google.com/folderview?id=0BzMarO-L4topcTBWQUNIZ2UxR00&usp=sharing

These forms are also on the class website.

Please don’t hold us legally responsible.

Q & ASend Questions via Chat

Matt BenfordThoughts for Money MattersChapter 5

 • Generally speaking, the authors mention that

setting a strategic budget and analyzing it should fall within the parameters they suggest.

• What would you say some of the reasons are that your church does or does not analyze their budgets strategically?

Thoughts for Money MattersChapter 6

• The authors mention how power can influence the analysis and allocation of budget and resources. What is the relationship, if any, between a church’s governance style/ polity and the giving strategy of its members?

• What we see in the book is that a lot of the power to influence the budget is tied in up in the people who help lead the church (formally and informally). What are some of the ways a monitored, strategic budget can utilize both the “power players” in church as well as making sure that the church moves forward as a unit, committed to the Great Commission?