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Treasurers Guide for Religious Organizations

Adapted From
Treasurers Guide for Religious Organizations
Philadelphia Yearly Meeting
2003

Chart of Accounts

A Chart of Accounts is a list of all of your accounts with a number assigned to each account. If you are using a computer system, a Chart of Accounts will be required. If you are keeping records in books by hand, you will quickly appreciate the shorthand of the numbers. A Chart of Accounts will give uniformity to the records from year to year and from Treasurer to Treasurer. By convention each type of account is assigned numbers in a series,

Assets 100-199

Liabilities 200-299

Net Assets 300-399

Income 400-499

Expenses 500-799

You will want to keep like items together If you decide that your checking account will be number 100, do not make petty cash number 101. Later you may wish to open additional checking accounts, so make petty cash 105. By skipping numbers you can add new accounts when they seem necessary. Below is a sample Chart of Accounts. This is not meant to be definitive, hut an example of how it works. Careful design of a chart of accounts specific to your Meeting will enable you to report meaningfully without wasting time on very small separate items. If you already have a Chart of Accounts, please consider this one carefully There may be parts that would be useful to the needs of your Meeting. If you have restricted funds or receive restricted income, it can be helpful to code the asset, income, net asset and expense accounts so that you can easily see the connection.

100 Checking

105 Petty Cash

113 Fund for Meetinghouse Repairs

115 Wells Education Endowment

120 Accounts Receivable — Pledges

125 Short Term Investments

130 Long Term Investments

140 Furniture

143 Antiques & Art

145 Inventory - Items Purchased for Resale

150 Equipment

155 Buildings

160 Rental Property

170 Vehicles

200 Accounts Payable

210 Current Notes Payable

220 Long Term Notes Payable

225 Sales Tax Payable

230 Payroll Taxes Payable

300 Unrestricted Net Assets

313 Restricted Net Assets - Meetinghouse Repairs

315 Restricted Net Assets

330 Cain (Loss) on Sale of Assets

400 Contributions - Members or Attenders

405 Dividend Income

410 Interest Income

413 Income - Meetinghouse Repairs

418 Facilities Rental Income

420 Burial Ground - Income

425 Rental Income - Leases

430 Fund Raisers

435 Sales

440 Other Income

500 Advertising

505 Bank Charges

513 Meetinghouse Repair

515 Tuition Expense

520 Burial Ground Expense

521 Charitable Contributions

522 Contributions to Quarterly Meeting

523 Contributions to Yearly Meeting

530 Education

535 First Day School

540 Hospitality

545 Insurance

550 Newsletter

555 Office Supplies

560 Overseers

565 Payroll

567 Payroll Tax Expense

570 Postage Expense

573 Purchases for Resale

575 Repairs & Maintenance

580 Telephone

585 Utilities

Bank Statement Reconciliation

If you are using a computer system follow the easy directions in the software.

If you have a hand kept system, use the following procedure.

1. List the balance the bank gives on the day of the statement

2. Add outstanding deposits

3. Subtract outstanding checks

4. List the new total

Next you will need to:

1. List your book balance (balance from your last month’s reconciliation) on the last day of the previous month

2. Add all receipts during the month

3. Subtract all disbursements during the month

4. Subtract bank charges on the bank statement if not included in 3

5, List the new total

The two new totals should be the same. If they are not you must analyze the situation until you discover the discrepancy.

Receipts

If you are maintaining a manual set of books, you should enter your cash receipts in a multicolumn Cash Receipts Journal using your Chart of Accounts. This will make it easier to total the various sources of cash at the end of the month.

Deposits should be made at least weekly; Each check should be stamped for deposit as soon as it is received,

On the deposit ticket either list each check by the name of the payee, or photocopy the checks and list a total on the deposit slip. You should include a calculator tape clipped to the checks. If you make a photocopy of the checks, clip this with your copy of the deposit slip. The possible advantage of photocopying the checks is that you have a good record to resolve disputes should they ever occur.

If the deposit includes checks and cash, be sure to list the cash separately. Do not photocopy cash. It proves nothing and wastes time, Use a cash receipts book to record all cash and make sure that a copy of the receipt is given to the person who gave the cash. The best type receipt book is one in which two additional copies are automatically made when you write a receipt. One for the bank deposit, one for the donor, and one stays in the receipt book. An office supply store will have these books.

Always verify all totals before taking the deposit to the bank.

Enter all information in your cash receipts journal. Be sure that your debits equal your credits in these entries.

When you receive non-cash assets, use a separate journal page to record them, At this point they are not income. They are Assets that increase Net Worth.

In response to donations of non-cash assets the Meeting may not place a value on the assets for the donor. The Meeting should not include a statement about the monetary value of the asset in the letter thanking the donor but should describe the donation in detail. Please see Forms for a sample letter for non-cash donations.

Some Meetings may decide to invest in a fidelity bond for the Treasurer If the Treasurer handles large sums of cash, it should be required. The bonds are expensive and in most Meetings the amount of actual cash handled is small. If the Meeting is nor considering a bond, the insurance coverage should he reviewed to be sure that there is adequate crime coverage. The Treasurer’s work will be audited. If additional controls are thought necessary a second person could be designated to oversee receipts, and two signatures can be required on checks.

SPECIAL FUNDS

In most cases the money that is given to the Meeting is unrestricted. This means that the Meeting may use it for any purpose it deems fit. These funds are better known as General Funds.

There are situations where the use of funds can be restricted in several ways. It is usually not necessary to open special bank accounts for these funds. You can track them by adding accounts to the Chart of Accounts.

Example: 413 Fund for Meetinghouse Roof Repair.

It is important to record the date, the donor and the restrictions that apply to special funds.

Designated Funds are ones that the Meeting sets aside for a certain purpose from unrestricted funds. Funds that are designated can become undesignated. Perhaps the Meeting decides to spend $5,000 for parking lot repairs and designates funds to do this. Suddenly a storm causes unprecedented tree damage. A substantial amount is not coveted by insurance. The Meeting defers the parking lot project and the funds become undesignated. The Meeting can then designate them to repair the damage, if it so chooses.

DONOR RESTRICTED FUNDS

The term restricted means that the donor has qualified the gift by naming a specific use for the funds. There are o types of restricted funds.

Temporarily Restricted Funds are given for a specific project and the entire donation can be used The Fund for Meetinghouse Roof Repair is temporarily restricted. When the roof is repaired, the fund is closed.

Permanently Restricted Funds are also called endowment. Only the interest and/or appreciation can be used, and it must be used for the stated purpose of the gift. The principal is held in perpetuity It is wise policy to use less than the full interest and appreciation each year so that the endowment can grow, or at least “keep up with inflation”. Income and expenditures from these funds must be accounted for in a way that clearly applies to the endowment fund, It may also be helpful to keep the principal of restricted funds in a separate bank account if it is not invest ed, The net value of an endowment fund will appear on the Balance Sheet as an asset and also as part of your restricted net assets. See the “Wells Endowment for Education” in the Chart of Accounts

Disbursements

All payments must be made by check The only possible exception is when there is a petty \ cash fund for minor expenses. If checks are manually produced, it is important to use a

system such as “Safeguard”, which automatically makes a carbon copy of the check in the journal and also provides a duplicate copy of the check, These checks are mote costly than bank issued checks, but the accuracy in recording and back-up information they provide is extremely valuable.

Always pay from original invoices, not monthly statements. The invoices need to be approved by signature of the appropriate person (Clerk, Committee Chair etc.). When paying bills, mark each invoice with the date paid and the check number. Invoices provide documentation for the purpose of the expense. Keep paid invoices on file

If you receive a statement, for which you have no invoice or missing invoices, trace the situation until you have obtained the invoices, Inadvertently paying twice makes life more difficult than locating invoices,

Should you receive an invoice from an unincorporated individual or business (or a la incorporated or not) for services rendered, you will need this person/agent to fill out a M form. You will need to report this information to the person/business and to the IRS on a 1099-MISC form the following January. An example might be that the Meeting needs some relatively minor painting work. Instead of hiring a contractor, the Meeting employs a skilled individual to do the work, Sums paid to an individual that total less than $600 in a calendar year do nor need to be reported on a Form 1099-MISC. However, the W-9 form should be filled out the first rime a person does work for the Meeting each year because the individual may ultimately perform several services during the year that collectively total $600 or more.

1n the case of reimbursement to an individual who has paid for Meeting goods or services from personal funds, a receipt must be presented to the Treasurer when reimbursement is claimed, In addition there should be a written request for payment. If your Meeting does not presently have this policy, it may seem like a bother to submit written requests. Please be mindful of the fact that accounting controls are for the benefit and protection of everyone concerned and need to be followed without fail. Please see the Forms section for a Check Request Form. Keep a supply of these forms on hand to simplify following this advice.

Checks are always numbered. Use them in order. If a check is spoiled, write “VOID across it and staple it in the appropriate place in the check register. Never destroy checks that you did not use or voided. Never sign a check before filling it our. Never prepare checks before there are funds to cover them. Holding checks to mail at a future date will lead to confusion.

For a manual system you will need multicolumn accounting paper for a cash disbursements journal.

Checklist for Treasurer

WEEKLY

o Deposit checks (and cash - if any)

o Send letters acknowledging donations

o Record all receipts in journals

o Verify that unpaid invoices have proper authorization

o Pay bills

o Record disbursements in journals

o Verify actual petty cash

o Add payroll hours (if any)

o If using manual system be sure all columns total correctly

MONTHLY

o Reconcile, replenish and record petty cash

o Reconcile bank statement(s)

o Review payroll records — be sure all files are updated

o Enter accruals for depreciation, prepaid expenses, accounts receivable, accounts payable — if using accrual or hybrid system

o Prepare Income Statement for month

o Prepare Report to Meeting for Business if you report monthly;

QUARTERLY

o Verify that payroll taxes have been paid and IRS form 941 has been filed

o Prepare quarterly Income Statement (and Balance Sheet if needed by Finance Committee)

o Prepare Report for Meeting for Business

YEARLY

o Prepare annual Income Statement and Balance Sheet

o Assist Finance Committee as needed with next year’s budget

o Assemble all records and turn over to auditor

o In January, be sure IRS fotmsW-2 are prepared and distributed and IRS form W-3 is filed All necessary 1099 forms must also be prepared and distributed and IRS form 1096 should be filed.

Miscellaneous Items That The Treasurer Needs To Know

1. Does your Meeting have a safe deposit box?

2. Where is it located?

3. Who has access?

4. What records are kept there?

You may or may nor be directly involved with a safe deposit box (if there is one), hut you should be aware of where records are kept, and how they can be accessed when needed,

1. What is the Meeting’s insurance coverage?

2. When is the renewal date?

3. Where are the policies?

4. See Forms section for information needed to report injuries.

5. If the Meeting has leases, where ate the actual leases kept?

Again, you may not be directly involved, but if an emergency arises, it may be very helpful if you have the answers.

1, Is your Meeting incorporated?

2. If so, what is the date of incorporation?

3. If not, should it be?

4. Is the Meeting complying with state laws to retain its status as a corporation?

It simplifies many dealings with governments and outside organizations if you are incorporated.

1. Does your Meeting deal with an accounting firm, legal counsel or a brokerage firm?

2. If so, who are the contacts?

1. What is your federal ID number?

2. What is your state ID number?

3. Does the Meeting have a Sales Tax account number? If so, what is the number?

4. Is the Meeting required to have any licenses? If so, where are they posted.

1. Where are old records stored?

2. How long is it necessary to keep old records. (See “Record Retention” section for guidelines.)

Record Retention

Document Retention Period

Accounts Payable records 7 years

Accounts Receivable records 7 years

Articles of Incorporation & Bylaws Permanently

Audit Reports Permanently

Bank Reconciliation 2 years

Bank Statements 3 years

Budgets 5 years

Can celled checks for important payments such as taxes, purchases of property, contracts Permanency

Capital Stock & Bond records Permanently

Cash Books Permanently

Chart of Accounts Permanently

Computer backup 1 year

Computer Data Entry of data in hard files 5 years

Contracts & leases (expired) 7 years

Correspondence — general 2 years

Correspondence — legal & tax related Permanently

Deeds, Mortgages, Bills of Sale Permanently

Deposit slips 3 years

Depreciation schedules Permanently

Employee personnel records (after termination) 7 years

Employee Applications 3 years

Financial Statements — year end Permanently

General Ledgers Permanently

Insurance Policies (expired) 7 years

Insurance records — claims, policies Permanently

Internal audit reports 3 years

IRA & 401 K plan contributions, transfers, distributions Permanently

Minutes Permanently

Payroll records, summaries, tax returns 7 years

Retirement plan records Permanently

Taxes, withholding statements 7 years

Tax returns & documents relating to income tax liability Permanently

Trust documents and restrictions Permanently

Trial Balances (monthly) 3 years

[Compiled from lists provided by Asher & Co, Zelenkofske, Axelrod & Co, CPA’s Inc, and Fishbein & Co.]

Glossary

Accounting Organized and structured systems of recording, explaining and reporting financial data

Accounts Payable Money that is owed but has not yet been paid

Accounts Receivable Money that others have agreed to pay, but has not been received

Assets Items that are owned by an organization. These may be physical (land, buildings, furniture, equipment etc.) or financial (bank accounts, stocks

etc.).

Audit Examination of all financial data by an outside or disinterested third patty to verify that proper procedures have been followed and that reports represent a fait summary of financial position and results of operations

Balance Sheet A statement of the financial position of the organization on a specific date. The concept of assets less liabilities equal net worth is used.

Bank Reconciliation Method of verifying the accuracy of the bank’s and the organization’s records

Bookkeeping Process of keeping records of financial transactions

Chart of Accounts A list of accounts that will be needed to keep appropriate records for the organization (for example, donation income, telephone expense), grouped by assets, liabilities, income, expenses, etc., with numbers in logical sequence assigned to each account.

Credits A bookkeeping entry that increases liabilities or income and decreases assets or expenses.

Debits A bookkeeping entry that increases assets or expenses and decreases liabilities or income.

Depreciation A method of recording the decreasing value of an asset as it ages over time to reflect its true present value.

Designated Funds Funds set aside for a specific purpose from unrestricted funds. Residue returns to unrestricted funds when the project is ended,

Disbursements Payments made by an organization.

Double Entry A bookkeeping system in which all transactions are entered twice using debits and credits, The total debits must equal the total credits. This proves the accuracy of the entries, and the books are said to “balance”

Fiscal Year A period of one year for recording and reporting financial activity. The Meeting may select the calendar year (Jan. 1 - Dec. 31) or another period such as July 1 - June 30.

GAAP & GAAS Accounting principals and standards adopted by the Financial Accounting Standards Board to create clear, uniform rules for the practice of accounting

Income Statement Summary of all revenues and expenses for a specific period of time

Invoices Itemized statement of goods or services received usually constituting a bill which must be paid.

Liabilities Items that are obligations to others

Net Worth The total of assets minus liabilities

Payroll The payment of money to employees for services rendered. The amount is calculated by time worked multiplied by an hourly rate, or by an agreed salary.

Petty Cash Small, fixed amount of cash for minor expenses to be replenished as depleted

Prepaid Expense Money paid in advance of service. Classed as an asset.

Receipts Monies coming to the organization to be deposited, recorded and categorized.

Permanently Restricted Funds Funds that can never be used for any purpose other than that named by the donor

Temporarily Restricted Funds Funds for a specific purpose or project. Restriction expires when the project is completed.

Transfer of Securities A donation of securities instead of cash.

Trial Balance List of accounts with debit or credit balances.

Unrestricted Funds Funds available for use as needed.

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