Foothills Unitarian Church
Financial Handbook
June 7, 2007
August 2013
Finance Committee
Table of Contents
1 The Five Basic Funds 5
1.1 The Operating Fund 5
1.2 The Endowment 5
1.3 Temporary Restricted Asset Funds 6
1.4 The Property Fund 6
Value of the Property 6
Bonds 6
1.5 The Reserve Fund 7
2 Money Management 7
2.1 Banking Functions 7
Deposits 7
Requesting Payment 8
Check Writing 8
Account Reconciliation – new 06 8
2.2 Investments 8
2.3 Security 9
Safe 9
3 Financial Record Keeping 9
3.1 Financial Software 9
Balance Sheet 9
Net Income Statement 9
Treasurer’s Report 10
Committee Reports 10
End of Year Report 10
4 Payroll 10
4.1 Taxes 11
5 Pledge Drive 11
5.1 Automatic Payment of Pledges 11
5.2 Donations of Stock 12
6 Additional Procedures 13
6.1 Responsibilities 13
6.2 Credit Cards 13
6.3 Petty Cash 13
6.4 Government Reporting 14
Employer Identification Number 14
Sales Tax Numbers 14
Tax Exempt Numbers 14
6.5 Plate/Special Collections 14
Book Store 15
Grocery Certificates and Scrip Cards 15
6.6 Review and Revision of This Handbook 16
7 Financial Policies 16
7.1 Financial Issues Addressed in the Bylaws 16
Article III, Section 2: Reserved Powers 16
Article IV, Section 1: Membership and Voting 16
Article V, Section 1: Fiscal Year 16
Article VI, Section 3: Financial Responsibilities. 16
Article VI, Section 4: Emergency Expenditures 17
Article VI, Section 5: Employees 17
Article VII, Section 3: Treasurer 17
Article VII, Section 5: Treasurer-Elect 17
Article VIII, Section 11: Endowment Fund Committee 17
7.2 Financial Policies of the Board of Trustees (Approved 2-15-05 except as noted.) 19
Canvass 19
Cash Flow 19
Check Signing 19
Credit Cards 19
Donated Fees 20
Donation of Securities 20
Donor Designated Funds 20
Financial Disbursements 20
Fiscal Year 20
Fund Raising 20
Fun Fundraising 21
Fundraising for other Organizations 22
Grocery Certificates 23
Memorial Gifts and Bequests 23
Monitoring and Adjustment of Investment Portfolio Policy 23
Non-monetary Gifts to the Church 24
Offertory 24
Operating Funds at Fiscal Year-End 24
Petty Cash 24
Reserve Fund Policy 24
Special Collections and Change for Change 25
Records Retention Policy 25
Building Use Policy 25
8 Resources 26
Introduction
Church finances are surprisingly complex. While many people are familiar with basic business finances and some are familiar with non-profit finances, few have detailed knowledge of church finances. Volunteers and staff members oversee the finances of Foothills Unitarian Church. The purpose of this financial handbook is to capture in writing current policies and procedures, clarifying the church’s financial system to make it more open, accessible, and useful. Hopefully it will simplify the job of finance volunteers.
The organization of the handbook is as follows:
· The fundamental financial task of the church is stewardship of the church’s five basic funds: the operating fund, the endowment, designated funds, the property fund, and the reserve fund. These are described in Section 1.
· Money management is one of the challenges of the church. Section 2 details how we manage our funds.
· Keeping accurate financial records is an essential task in any organization, but it is particularly important in a church for two reasons. First, the church is funded almost entirely by donations. Financial managers need to be able to assure all donors that their money has been wisely spent to achieve the goals of the church. With many people having a part in the operation of the church, accurate financial records is the only way to ensure that decisions are fiscally sound. Record keeping is the subject of Section 3.
· Section 4 deals with payroll issues, including taxes.
· Pledges support approximately 80% of the church’s operating fund. The annual pledge drive, therefore, is extremely important. Section 5 covers the basics of the pledge drive.
· Section 6 lists financial responsibilities and outlines additional procedures.
· Section 7 lists all of the currently applicable financial policies of the church as approved by the board of trustees.
· Section 8 lists resources that could be of use to those managing church finances.
· Finally, a sample budget, chart of accounts, and request for payment form are provided in the appendices.
1 The Five Basic Funds
The five basic funds are described in the next five sections. The balance in each fund can be found in the monthly balance sheet (see Section 3.2.1).
1.1 The Operating Fund
The operating fund consists of monies available to meet the needs of the budget approved annually at the congregational meeting in May for the fiscal year beginning on July 1. The best sources of information about the operating fund are the budget itself, the monthly net income statement (Section 3.2.2), and the monthly treasurer’s report.
The operating fund budget for the current fiscal year is in Appendix A. The typical budgeted income and expenses are about $900 per member and are usually distributed as follows:
Income / ExpensesPledge Receipts / 78.8 / Personnel / 66.5
Fund Raisers / 7.9 / Denomination / 5.9
Plate & Donations / 7.5 / Buildings & Grounds / 9.3
Program Fees / 3.2 / Administration / 6.4
Building Use / 0.8 / Loan Payments / 2.7
Transfers and Other / 1.8 / Program / 9.2
The balance in the operating fund is at all times equal to the net income for that portion of the current fiscal year. If the operating fund suffers a net loss for the year, it will be covered by the balance in the reserve fund (see Section 1.5).
Note: Because we have a balanced budget, the net income for the year is planned to be zero. However, income and expenses are not distributed evenly through the year. In the first half of the fiscal year, income exceeds expenses, and the reverse happens in the second half of the year. The net income typically peaks in January at about 8% of the total budget. If the net income peaks at less than this, experience shows that a deficit for the year as a whole is likely to follow.
1.2 The Endowment
The endowment is monitored by the endowment committee using rules specified in the bylaws (Section 7.1.9). The assets are tracked by the church’s financial software, and the bookkeeper receives and files the financial statements from the investments and enters the data into the books. The endowment committee may issue grants to provide additional unbudgeted funds in support of the church and the bookkeeper distributes these funds as instructed by the committee.
Most of the endowment assets are invested with the Unitarian Universalist Common Endowment Fund, with only a small percentage kept liquid and a small amount in a Vanguard mutual fund.
1.3 Temporary Restricted Asset Funds
Temporary restricted asset funds are funds held for specific activities such as the Remembrance Garden, the minister’s discretionary fund, and the Smith and Crowder music funds. At present there are nine active asset funds. Money for these are held in separate interest earning bank accounts: #1050 for the Partner Church and #1060 for all others. Each asset fund is managed by its corresponding committee. It is the bookkeeper’s responsibility to make sure that they are accounted for properly.
Note: In some cases there are certain requirements that need to be met for specific funds. In these cases, it is the responsibility of the committee to take any required actions. For example, the Smith music fund requires that the music committee (which is in charge of the fund) report annually to the Smith family as to what has been done with the funds.
1.4 The Property Fund
The property fund is equal to the value of the church’s land, buildings and equipment, and it has by far the largest value of any fund. The property fund also has liabilities in the form of member loans known as bonds.
Value of the Property
Theoretically, the value of the property is the amount that someone might pay to buy the property, but until it is actually sold the value can only be estimated. The value that we currently use in the balance sheet (see Section 3.2.1) is the replacement cost of our buildings and equipment as evaluated by our insurer, Church Mutual Insurance.
Bonds
In lieu of a traditional mortgage, bonds may be issued and sold to church members and friends. As the bonds retire, new sets will be sold to replace any remaining principal. Bonds are financed at a market-driven interest rate and amortized over 20 years. They pay interest semi-annually, with a balloon payment at the end of a fixed term – usually five years.
The finance committee will plan for replacement of bonds the year before the balloon payment is due, and the treasurer is responsible for creating the amortization schedules. The church administrator will file details of all bonds issued and the bookkeeper is responsible for making the payments.
Bonds issued to members are not carried individually in QuickBooks. Instead, the total bonds issued amount is listed under account #2700 – long term notes payable. Bond payments (interest and principal) will be budgeted as account #8575 – debt service. At year-end, the total principle paid will be deducted from account #2700 via a general journal entry, and written off against account #3200 – perm. restricted net assets (bldg).
1.5 The Reserve Fund
The reserve fund consists of all of the assets of the church, which are not part of the other four funds. Currently, this includes inventory held for sale, money invested in account #1502 (currently FMS Bonds), and any cash in the bank which is not part of the other funds. The reserve fund serves several purposes:
· It contains the accumulated net income of the church from previous years.
· It covers deficits in the operating fund and it receives end-of-year surpluses.
· It helps manage our cash flow by protecting our checking account from overdrafts.
· It funds the purchase of inventory, which is sold at a profit to provide additional income to the operating fund.
· It supplies money for expenses approved by the board f trustees, which are not part of the annual budget. Necessary repairs and maintenance serve as examples. In other words, the reserve fund serves as an “emergency fund”.
It is a policy of the board that the target balance in the reserve fund be no less than 10% of the current year’s operating budget (see Section 7.2.17).
2 Money Management
2.1 Banking Functions
First National Bank is our bank of record, with the closest branch located in the plaza at the northwest corner of Drake and Taft Hill. There are four active accounts: operating fund checking account, operating fund savings account, partner church account, and a restricted asset funds account. Most banking activity can be tracked with on-line banking.Deposits
Depositsare made on a weekly basis or as needed to limit the amount of cash and checks held in the safe. The bookkeeper records deposits in QuickBooks with the following information: account number, memo (description), and class.
To submit money for a deposit:
· Complete a deposit record formnoting the source of the money (e.g., scrip sales, children’s RE registration fees, etc.), the total amount enclosed with a breakdown of cash and checks and, if known, the QuickBooks account number.
· Put the money and completed form into an envelope.
· Seal the envelope and either hand it to the bookkeeper, the church administrator,office assistant, or, if accessible, the drop-box drawer of the office safe.
· Keep a record of what is deposited so you can verify QuickBooks reports.
Requesting Payment
To request payment - either to reimburse someone for money he or she has spent or to have a check written to someone - fill out a Request for Payment Form (Appendix C), which can be found in the office mailbox marked Payment/Transfer Forms.
Check Writing
Checks are written on a weekly basis or as needed for emergency/special occurrences (Appendix C). Checks are written in response to invoices, billing statements, and payment requests (Appendix C) approved by a committee chair, the church administrator, treasurer, finance committee, or minister.
The Bookkeeper enters check details into QuickBooks, prints the checks, clips them to the back-up paperwork, puts them in a folder and notifies the treasurer and/or other approved signers when they are ready. (see Section 7.2.3 Check Signing)
When ready to be mailed, the check and one stub will be stuffed and postage affixed. The third stub will be stapled to the back-up paperwork and filed.
Account Reconciliation
The bookkeeper is responsible for monthly reconciliation of all bank accounts.
2.2 Investments
The church cash assets are held in such a way as to safely maximize the return on these funds for the church. Currently the church has two kinds of investments: endowment funds and reserve funds.
The endowment committee manages endowment funds. The majority of this money is deposited in the Unitarian Universalist Common Endowment Fund with the remainder in a Vanguard mutual fund.
The reserve fund is invested in various fund raising banks (cash boxes for UUSC coffee, bookstore, scrip and grocery cards) and inventories: grocery cards, scrip cards, the bookstore, and fair trade goods purchased by the social justice committee. The income from selling items from these inventories is included in the annual budget and is credited to the operating fund.
The balance of the reserve fund is managed by the finance committee and invested in mutual funds, CD’s and/or bonds as the committee see fit.
2.3 Security
Safe
We typically keep grocery certificates, scrip cards, and petty cash in the safe. On Sunday night the safe contains the collection plate which is deposited on Monday. The safe may also contain money collected for other events throughout the year, but it is kept on an extremely short-term basis. The safe can be opened by only a few staff members and the chair of the grocery certificate committee.
3 Financial Record Keeping
3.1 Financial Software
The church uses two types of financial software; one for membership and contributions, and another for bookkeeping. Currently we are using Church Windows (distributed by Computer Helper) for our membership database and contribution software. QuickBooks Non-Profit, distributed by Intuit, Inc. (http://www.intuit.com), is used for bookkeeping. The Bookkeeper is the primary user of QuickBooks, and it resides on the bookkeeping computer.