FINANCE COUNCILS Roles & Responsibilities Margaret Thompson, CPA,CFE February 2, 2013
MAKEUP OF THE COUNCIL • At least 3 members of the parish • Practicing Catholics • Experienced in financial issues • Known for their judgment • No staff members or close relatives of pastor • No conflicts of interest • Appointed by pastor for three-year, renewable term or until there is a change in pastor
CONDUCTING BUSINESS COUNCIL LEADERSHIP : • Chairperson • Vice-Chairperson • Recorder MEETINGS : • Minimum of 4 meetings per year (e.g., Quarterly) • Keep minutes of the meetings • Maintain minutes at the parish office
PURPOSE • Canon 537 of the Code of Canon Law mandates a finance council in each parish • Primary purpose is consultative • Responsible for assisting pastor with parish financial administration, specifically to assist the pastor in the administration of parish goods
10 MAJOR FUNCTIONS I. Assist pastor in administration of parish goods. II. Become familiar with and recommend steps to comply with policies & procedures in the Internal Control Manual. III. Assist the pastor in preparation of the annual budget & share with the Pastoral Council. IV. Assist in preparation of annual financial report to the parishioners.
10 MAJOR FUNCTIONS V. Review financial statements & budget on a quarterly basis. Provide a status report to the Pastoral Council on a quarterly basis. VI. Assist parish boards & organizations in their preparing and submission of annual budgets. VII. Study parish revenues and make recommendations for increasing revenues to meet both parish & Archdiocesan goals.
10 MAJOR FUNCTIONS VIII. Become familiar with Archdiocesan fiscal polices, some of which are contained in the ICM. IX. Encourage and support parish & Archdiocesan stewardship programs. X. Annually complete the self-evaluation questionnaire and submit to the Office of the Internal Auditor by March 31 st .
Where Do We Start? • Gain an understanding of the pastor’s long and short term goals (e.g., pastoral, financial, physical plant, etc.) • With the pastor, discuss a way forward; formulate a plan • Set meeting dates/times & location • Establish manner of communication with the pastor and council members
What Resources Are Available? • History of Parish Finances – Consultation with Pastor & Minutes of Prior Council Meetings • Financial Controls and Procedures – Internal Control Manual • Current Financial & Administrative Reports • Consultation with Pastoral Council Members • Archdiocesan Personnel
Financial Controls & Procedures Internal Control Manual
Internal Control Manual • http://www.archgh.org/default/auditing/Internal ControlManual-061510.pdf • Cash Handling Controls • Disbursement Controls • Personnel & Payroll Procedures • Fundraising Procedures • Tax Reporting
Current Financial & Administrative Reports
Monthly Bank Reconciliation
Balance Sheet (Statement of Financial Position as of a Certain Date)
Statement of Revenues over Expenses (Operating Activity over a Period of Time)
Budget Comparison Revenues & Expenses Actual vs. Budget With Variances
Other Reports • Organization Chart • Employee Salary Data • Merit Increases • Master Vendor List & Amounts Paid by Vendor • Cash Flow Analysis Month over Month
Other Reports (Continued) • Diocesan Savings & Loan Statements Savings Capital Reserves Building Loans
Other Reports (Continued) • Archdiocesan Monthly Statement Cathedraticum Tax Insurance – Property, Liability, Health & Worker’s Compensation
Review of Financial & Other Reports • Review the LOGOS financial reports and other reports. • Determine if anything appears unusual based on past, current and anticipated (budgeted) amounts.
Financial Analyses
Two Types of F/S Analyses Vertical Analysis = Financial data examined over the same • period with each account expressed as a % of a base amount, e.g., total assets or total revenues. Horizontal or Trend Analysis = Comparison of financial • data over two or more years.
Simplified Vertical Analyses Balance Sheet : Does cash look right based on this month’s activities? • Example: Why is cash low after we held our bazaar? Do receivable accounts look right? • Example: Why are there no pledges receivable accounts? I know we haven’t collected all the pledges. Do accounts payable look right? • Example: Cash appears lower this month and yet my Accounts Payable are much higher. Did I incur more expenses this month that I owe or is something wrong ? Do the other liability accounts look right? • Example: Why are there payroll taxes due? I know the Archdiocese requires payroll taxes be deposited within 48 hours of payday. Based on the pay dates, that should have been the last week before month-end.
Examples of Vertical Analyses Income Statement : Do revenues look reasonable based on the month’s activities? • Example: I was told that many people paid their pledges this month and yet total revenues are down? Were my regular collections really that much lower this month causing this overall decrease? Do expenses look reasonable based on the month’s activities? • Example: Why are expenses so much higher? I’m not aware of any extraordinary expenses such as repairs, printing costs, etc. Do particular revenue or expense accounts look unusual? • Example: Payroll expense looks really high this month. The pastor was told by the bookkeeper it is due to more overtime hours worked. Does the pastor pre-approve overtime?
Horizontal Analysis • Also known as “trend analysis”. • Compares accounts month to month and/or year to year. • Very effective type of analysis because it examines changes in accounts over periods of time rather than viewing them at a point in time.
Examples of Horizontal Analysis • Salary expense is significantly higher than this time last year. Possible explanations: Created new positions Awarded merit increases Paid additional overtime Expenses are not classified properly • Parish subsidies to the school are slightly lower than last year. School received grants for new school year. School enrollment is up this year. Slight increase in tuition, with increase in enrollment, has offset some expenses that were subsidized by the parish last year.
Review of Tax Reporting
Tax Reporting • Sales Tax Returns • Payroll – Forms 941 • Forms W2-G (Raffle Winnings) • End-of-Year Reporting: Forms W-2 & W-3 Forms 1099-MISC & 1096 Donor Contribution Letters - Single $250 or More
The Budget Process
The Budget Process • The budget is an annual financial plan. • It is based on both current and anticipated resources and needs. • Last year’s performance provides guidance for this year’s budget. • The budget must allow for contingencies.
Budget Considerations • Contribution Levels • Parish Grants • Parish Ministries Funding • Planned Projects & Capital Campaigns • Parish Obligations • Grants & Support of Parish Schools
Recurring Themes • Lack of Segregation of Duties Common to medium & small parishes Requires mitigating controls, most importantly: Review Reconciliation
Recurring Themes • Cash Identifying All Sources of Cash Handling of the Offertory Handling of Monies Received in the Office • Disbursements Pre-approval Proper Support Management of Credit Cards
Recurring Themes • Personnel Complete Files Classification of Employees • Payroll Lack of Review of Pre and Post Payroll Reports Payment of “Stipends” to Employees Payment of Employee Bonuses through A/P Clergy Compensation - Accountable Reimbursement Plan & Business % of Auto Expenses
Recurring Themes • Lack of Reconciliations Revenues with Bank Deposits & Support Examples: CCE Revenues with Enrollment Numbers, Receipts & Bank Deposits Office Receipts with Bank Deposits Raffle Sales with Tickets in Drawing Bazaar Ticket Sales with Revenues & Deposits
Recurring Themes • Issues with Tax Reporting Reconciliation of Gross Wages with Forms W-2 & W-3. Forms 1099-MISC (Payments to Unincorporated Businesses/Individuals T otaling $600 or more per calendar year). Forms W2-G for Raffle Winnings.
Final Thoughts • Set a meeting agenda that includes a review of activity & related reports (preferably sent in advance). • Encourage discussion and constructive suggestions. • Track progress toward parish goals.
Final Thoughts • Ask Questions! • If the numbers do not “add up,” explore further. • Emphasize accountability & the importance of accurate reporting.
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