FINANCE COUNCILS Roles & Responsibilities Margaret Thompson, - - PowerPoint PPT Presentation

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.

• 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 31st.

10 MAJOR FUNCTIONS

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
• ther 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

• taling

$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.

Archdiocesan Personnel

• David Hessel – Chief Financial Officer
• David McLaughlin – Treasurer
• Michele

Yanta – Director of Human Resources

• Jeannie Nelson – Manager of Compensation &

Employee Relations

• Frank Rynd – General Counsel
• Kirk Jenings – Risk Management
• Steve Faught – Construction
• Lisa May – Archives
• Margaret Thompson – Internal Audit

Thank You For What You Do!