Be Thankful Even for Taxes

I have a friend who has reminded me to be thankful for annoying things such as the red light I am stopped at, because I am privileged enough to live in a country that has roads, and orderly ones at that. This same attitude can be applied to taxes—thankfulness for them and for the ability to pay them.

I wanted to start with this thought, because none of us like taxes. But we can be thankful for them, and also take care to report them properly. As additional incentive for excellence in this area, did you know that if payroll taxes are not withheld and paid to the IRS, the Church’s Board of Directors and employees may be personally liable? Some thoughts on ensuring your Church is addressing taxes appropriately:

Who performs the Church’s payroll? Even If the Church is fortunate enough to use an outside payroll service provider, it is still important that the Business Administrator ensure that the following are occurring:

  • For all non-minister employees, the Church correctly withheld and paid the employees’ share of FICA taxes.
  • IRS form 941 was filed for each quarter of the calendar year.
  • The totals from the four quarterly 941 forms agreed with the totals on IRS form W-3, which is prepared at year end and filed with the IRS along with employee W-2s by February 28 each year.
  •  Timely deposits of payroll taxes are made to the IRS. Required deposits vary. Generally, deposits may be made quarterly if total quarterly payroll taxes are $2,500 or less. Otherwise, deposits must be made monthly, or even more frequently for very large organizations.
  • W-2 forms are provided to all employees (including ministers) by January 31.

How about your Church? Do you know for certain that payroll taxes are calculated, withheld, and remitted to the IRS correctly and in a timely manner?

 

–Justin Baldwin, CPA is a Senior Auditor specializing in church accounting with PSK LLP.

Nothing Petty about Cash

Oct 10, 11 • NewsNo Comments

In the grand scheme of things – yes, it’s small change, but petty cash accounts are easy to mishandle and manipulate without proper oversight and controls. What controls are currently in place and are they followed? This is the primary focus of an internal audit of the petty cash funds.

Review the written policies governing petty cash accounts; looking specifically for what types and amounts of transactions will be reimbursed from petty cash, as opposed to a disbursement paid by check.

As with all expenditures, a voucher or request form should be completed and include the place, amount, and purpose along with the original receipt (dated within 60 days of the request). Review the general ledger and note the expenses accurately recorded and the funds replenished appropriately

Finally, count it. Make sure the cash and the receipts make up the total listed on the general ledger.

How many petty cash accounts does your organization maintain? Have you developed stronger controls than these to help ensure the integrity of your funds?

 

— Lisa Chapman is an auditor specializing in church accounting with PSK LLP.

$1.5 Million?

Oct 3, 11 • UncategorizedNo Comments

How does one get away with stealing $1.5 million? This Organization’s Financial Officer stole over a period of seven years. Obviously, adequate controls were lacking at some level in this organization. Read the full story here. Is your church or non-profit in need of a check up on internal controls? Let us help you evaluate and improve your organization’s internal controls.

Sourced from Dominion-Post news

Know What You Owe

Both, a statement and a question!

Knowing what the organization owes as well as having confidence you have a complete and accurate picture really takes little to no effort. Start with a review of the debt amortization schedule.  This schedule should require all note obligations and commitments including mortgage, loans, and leases.

Review the schedule on a routine basis, maybe monthly, and verify all obligations are reflected accurately on the balance sheet. For added assurance, periodically request written confirmation of the balance owed, directly from the lender. This should correspond to the amortization schedule. One added measure is a review of the general ledger for regular payments for the items listed on, or excluded from, the debt schedule.

As busy as your organization is, it is easy to miss something when trying to put it all together at the end of the year; but it is also easy to ensure all debt and obligations are accounted for with these basic internal audit steps.

Please share your insight. How involved or simple is your debt schedule? What do you feel needs to be included to be complete?

— Lisa Chapman is an auditor specializing in church accounting at PSK LLP.

67 Year-Old Man’s 54 Year Sentence Upheld

Sep 23, 11 • FraudNo Comments

In Indianapolis today, the courts upheld a man’s 54-year sentence for pocketing millions intended for the construction of churches. This man defrauded nearly 3,000 people. Who do you trust with your money? Is your Church doing all it can to protect its contributions and accounting personnel?

It’s not just the thought that counts…

Sep 19, 11 • Financial ReportingNo Comments

Your financial statements are a key to making decisions for your Church. Let me rephrase that…ACCURATE financial statements are a key to making GOOD decisions for your Church! 

I can’t stress enough just how true this statement is. Whether your Church is deciding to build a new campus, expand or remodel the existing campus, or even whether or not to purchase a new van for the youth trips, it is absolutely crucial that the Church is basing these decisions on accurate financial data.

A set of month end financial statements should be prepared on a timely (within 30 days) basis and submitted to the Church’s governing council. This “set” of financial statements should include at least a statement of financial position and statement of activities (more commonly known in the commercial industries as the balance sheet and income statement). The financial statements should include all funds: unrestricted, temporarily restricted, and permanently restricted.

Additionally, these financial statements should be reconciled with the amounts reflected in the accounting systems general ledger. For instance, if you pull an accounts payable aging report from your accounting system, does that total equal the amount you have recorded in accounts payable on your statement of financial position? It is very important that the Church’s sub-ledgers agree to the general ledger and financial statements. Two common fraud symptoms are a ledger that does not balance and that master account balances do no equal the sum of the individual customer or vendor balances.

How often is your Church preparing financial statements? What are some typical questions being asked by your Governing Council when reviewing these reports?

 -Tia Fisher is a Senior Auditor at PSK LLP, specializing in church accounting.

I owe you what??

Sep 12, 11 • Expenses, FraudNo Comments

In any business, having a high level of confidence in the amounts that are owed to various vendors is crucial. This fact is no different within our churches. The key to having this confidence is making sure adequate recordkeeping is maintained. Best practice guides stress that you should always have a consistent method for entering all invoices into your accounting system with the correct information provided on the invoice. This includes invoice number, invoice date, due date, amount, and a description of the products/services indicated on the invoice.

With all accounting software, you should be able to pull a report from your system that will show you a list of all unpaid invoices including the vendor name, invoice date, due date and amount. Having this report can help you examine various things; for instance, are there any accounts payable items that are significantly past due? If so, these should be researched further. Perhaps they have been paid, but due to an incorrect posting, were not removed from the accounts payable list, or maybe a certain invoice was mistakenly overlooked and is truly past due and, therefore, would need to be paid. Also, if there are ever any disputes with vendors over amounts owed, the accurate recordkeeping will give you the assurance you need in order to know whether or not the amounts have been paid in full.

From a fraud perspective, having the Church Governing Council review the unpaid invoice details regularly can hopefully uncover a possible fraud in the early stages.

What methods does your Church use to ensure accurate recordkeeping? Who reviews the unpaid invoice listing and how often?

 –Tia Fisher is a Senior Auditor specializing in church accounting with PSK LLP.

Who’s Looking Over Your Shoulder?!

Sep 9, 11 • FraudNo Comments

Who’s looking after your Church’s financial personnel? Are the necessary checks in place to, if not prevent fraud, catch it quickly? $51,000 may not be much to lose if you’re at a mega-church, but to a smaller Chuch in Indiana, it was. The full article can be found here.

Source: WISH TV 8 News

Could an Elderly Person take my Church for $1.5 mil?

Sep 7, 11 • UncategorizedNo Comments

Who would ever think that an elderly Church Secretary would steal from her Church? A simple routine review of the bank statement and reconciliation by an independent party may have prevented this church in east Tennessee from losing $1.5 million. You may read more here.

Anyone want some money?

At that announcement the line begins to form.

Cash disbursements are easily the most manipulated, error prone process of any organization. Without proper controls and oversight in place, and in practice, money doesn’t have to grow legs and walk – it gets handed out. Maintaining an internal audit process of this area is essential and very easy.

Review the written policy covering the procedures for all transactions paid through the organization. The procedures should include the requirement for support of all disbursements, including the rare petty cash reimbursement.

Review documentation, such as a voucher or request form; it should be completed with the place, amount, and purpose along with the original receipt (dated within 60 days of the request) and a copy of the issued check or stub. Verify check stock is secure and account for all check numbers, including voided checks.

As an added measure, review the most recent cash disbursements against the general ledger to ensure they are recorded accurately.

Does your organization have an accountable reimbursement plan? Do you ever have a hard time getting receipts from employees?

– Lisa Chapman is an auditor specializing in church accounting at PSK LLP.

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