PSK Celebrates the 2016 Summer Olympics

Aug 29, 16 • NewsNo Comments

PSK’s Office Olympic events were Waste Can Basketball, Pool Noodle Javelin Throw, Table Top Volleyball, Office Chair Rowing , Rubber Band Gun Shooting and  10 Key 100 Yard Dash.  Medals were awarded and everyone had a great time.

PSK’s Newest CPA

Aug 29, 16 • NewsNo Comments

 

Article On Proposed Overtime Rules

Mar 14, 16 • NewsNo Comments

http://www.fortworthbusiness.com/ceo_magazine/page-p/page_d550a18b-6fab-5356-9541-7b5a93caee3e.html

Announcement From PSK

Jun 4, 15 • NewsNo Comments

Bio photo

PSK LLP is pleased to announce the promotion of Marie Bosillo, CPA to partner as of July 1, 2015.  Marie joined the firm in 2007 and her main service area is audit. This promotion is well deserved and will add to the continued success of PSK in the years to come.

New website launched!

Apr 1, 14 • Breaking News, NewsNo Comments

PSK home page

We’re proud to unveil a site that we’ve put a lot of work into, and hope that you appreciate it as much as we do! We’re a proud member of the Dallas, Fort Worth community and we’re happy to provide a website for our company where you can get information about our services and contact us if you need them!

Please take some time to review the site and learn more about us.

Trap #8 Violating basic accounting rules and practices (Part 3)

Aug 3, 12 • NewsNo Comments

The larger a church grows the more ministries it will enter into. (Examples include day care services, private schools and family life centers.)  Following their parent church’s lead, these satellite ministries often launch into a significant growth arc placing additional pressures on church administrative staff. Due to the “tyranny of the urgent”, an already time-strapped admin staff cannot handle the accounting and management of another activity. To alleviate this pressure, many churches will allow the subsidiary activity to establish a separate management structure and maintain a separate set of books.

A separate set of accounting records is not necessarily a bad thing and in fact may be preferable.  This is due primarily to differences in the accounting needs between a church and its related entity.  For example, a church’s primary source of revenue is free-will gifts and offerings. But, a private school’s revenue stream is made up mostly of tuition and fees billed to students requiring a much more sophisticated accounting. (Accounts receivables, receivable write-offs, deferred tuition, etc.)

However, where churches tend to make a mistake is allowing a ministry to operate independently with LITTLE OR NO ACCOUNTABILITY TO THE CHURCH THAT BIRTHED IT.  All churches with satellite ministries need to understand that even though these ministries operate independently with little or no oversight, if no separate corporate structure has been created, the church is responsible for all of their subsidiary’s actions! 

Key: Best practices dictate that all satellite ministries should be included in the church’s regular financial reporting system.

Key: Some of the things we have seen go wrong when this doesn’t happen:

A ministry could be undergoing significant financial difficulties and the parent church has no knowledge of it.

Payroll deposits become delinquent; the church doesn’t find out about for several quarters and ends up having to fund the ministry to make up the shortfall.

An executive director, not accountable to the parent church, perpetrated fraud by creating “phantom employees” and cashing the phony paychecks.

A private school entered into transactions prohibited by the IRS Code endangering the church’s tax exempt status.

Trap #8 Violating basic accounting rules and practices (Part 1)

Jul 20, 12 • NewsNo Comments

In order to make good and timely financial decisions a church must have a strong financial REPORTING system.  This system will also provide the transparency and accountability in financial activity that all churches should strive for.  The end-product of a strong system is a complete set of financial statements that give a clear picture of where the church is (balance sheet) and where it has been (income statement)

Now, what I am NOT saying is you must prepare statements just like your CPA does at the conclusion of your audit.  Those statements have a different purpose than your internally generated statements. (Audits are for the public, internal f/s are for management)  In fact very few, (if any) of our church clients produce monthly financial statements that are strictly in accordance with generally accepted accounting principles (GAAP).

Instead, they produce budget reports, that help them monitor and manage cash flows on a month by month, or even a day by day basis.  And we are OK with that.  We can convert this to GAAP at year end.  Let me modify; we are ok with that as long as the church sticks to basic accounting/bookkeeping rules and practices. 

During the next few posts, we are going to be describing some of the “violations” we have spotted that have led to problems within a few churches.  And I am not referring to trouble from their auditors. It’s much worse than that. Their “violations” led to trouble with their members!

In the meantime, if you have a few good stories about unorthodox church practices, why don’t you share them with us…

PS – Unorthodox when it comes to accounting/bookkeeping.  No theology please….

Trap #7 Failing to develop a Fraud Prevention Program

Jul 13, 12 • NewsNo Comments

When discussing fraud, churches continue to believe in the myth that “it can’t happen here”. In their annual report to the nations, the Association of Certified Fraud Examiners released statistics that debunk this myth.  According to the ACFE, more than 14% of reported fraud cases involved nonprofit organizations with churches and religious groups accounting for almost a third of these cases.

There are two facts that need to be pointed out about fraud in the church. 

  •  First, as the statistics illustrate, it can happen here.  And the Bible, in John 12:6, tells us that this behavior has been going on for a long, long time.
  • One of the reasons that churches hang on to this myth is that they do not have a sufficient understanding of what fraud examiners call the “Fraud Triangle”.  The Fraud Triangle consists of the three elements normally present to create an environment conducive to conduct fraud.

The first leg of the triangle is – PRESSURE

Although it does happen, the normal pattern for economic abuse of a church is not that of a “crook” seeking out a vulnerable church.  The most frequent situation involves a trusted long-term church employee or volunteer.  Usually these individuals are facing some type of pressure that makes them consider taking things that are not theirs to take.  Examples are unexpected medical costs, business reversals of a spouse and more and more frequently, addictions.

The second leg of the triangle is – RATIONALIZATION

Rationalization is the “self-talk” a potential thief engages within his mind that convinces him that what he is doing is ok.  The most frequent rationalization is, “I’m not stealing.  I am borrowing.  I’m going to pay it all back.”  Unfortunately (for the thief) unauthorized borrowing will get you in just as much trouble with the law as actual stealing.

What these first two legs tell me is this; it is often not BAD people who steal from church, but rather good people who find themselves in difficult circumstances.  Another thing these first two legs tell me is that the church has little control over them. 

However, the church has total control over the last leg –OPPORTUNITY

Opportunity refers to the presence of weaknesses in the church’s management, accounting and cash control systems. If little thought is given to the strength (or weakness) of your church’s business operations, the church is creating a significant OPPORTUNITY for a fraud event to take place.  In other words, by ignoring this vital area, you may be adding the final ingredient to a “perfect storm” of financial calamity.

A fraud assessment and prevention program is a must. 

Planning tip – It is really not that difficult to at least get started.  One idea is to have a brain storming session for a couple of hours with key staff and volunteers.  During this session a simple flow chart of the church’s various cash flows could be developed.  From this simple process you might be surprised how many loopholes in your system exist…

Trap #6 Exercising Poor Credit Card Management

Jul 6, 12 • NewsNo Comments

Many churches issue credit cards (In the name of the church) to ministers and other employees.While credit cards provide the benefit of efficiency, they also present quite a few problems to a church.  For example:

  • Credit cards can be used to circumvent the budget. 
  • Poor judgment can result in a tarnished reputation for the church when credit cards are used in inappropriate establishments or used for improper purposes
  • Credit limits may be exceeded
  • Poor purchasing decisions are made in order to generate bonus miles/points
  • Personal expenses may “slip into” the church’s operations

In our opinion there are only two methods of credit card management.

  • Don’t do it! It is not the norm in the business community to issue credit cards in the business’s name to employees.  When cards are issued, the business wants their employee to have some “skin in the game” so the employee’s name is on the account too.  That way, if personal or other non-business expenses are charged, the employee will be required to pay, not the employer.
  • But if you insist on issuing credit cards be sure to adopt a clear, concise and written credit card use policy.  Also, it is a good idea to use a uniform plan through your bank or other financial institution.  (This way the bonus points accrue to the church, not employee…

Overlooked danger zone – Accountable reimbursement plan rules apply to credit card expenditures

Occasionally we notice that churches are using the monthly credit card statement as documentation for their accountable reimbursements.  Not a good idea – One of the requirements of establishing the business purpose of an expenditure is the documentation must be “contemporaneous”.  Waiting until the end of the month and reconstructing what happened will not get the job done.  You need to obtain the receipts…

Trap #5 Business Expense Reimbursements

Jun 29, 12 • NewsNo Comments

One of the biggest pains in the neck for church administrators is managing expenses incurred by employees (primarily ministers) on behalf of their church. Many ministers are very good about asking for the reimbursement but very deficient in sticking to accountability requirements. In spite of knowing that expenses reimbursed without accountability MUST be reported as income, to avoid paperwork some ministers will simply tell the administrator to “Put it on my W-2 and I will deduct the expenses myself.” For several reasons this makes no economic sense.

If a married minister has itemized deductions less than the Standard Deduction amount of $11,900 he will get no deduction to offset the additional income.

But, even if a minister does itemize, he will get to deduct an amount nowhere near the total of his business expenses because:

  • Miscellaneous Itemized Deductions (which include business expenses) must be reduced by 2% of his income.
  • Any of his payments for meals and entertainment must be reduced by 50%
  • The Deason Rule must be applied which reduces business expenses by the ratio of the housing allowance received to total compensation.

The best economic course for the minister is to give in and submit to an “accountable reimbursement plan”.  If only he will, all business expense reimbursed will be totally excluded from taxable income.  In other words his “deduction” will be 100%!

In order to take advantage of this an accountable reimbursement plan must at a minimum:

  • Be in writing
  • Require adequate documentation of the business purpose of the expenditure
  • Require substantiation within 60 days of the expenditure
  • Require excess advances to be returned within 120 days
  • Not allow advances to be made more than 30 days in advance of the event

Overlooked danger zone – Automatic excess benefits

If reimbursements are made to a senior minister, officer or director of the church and NOT included in the individual’s W-2 income, Intermediate Sanctions (Mentioned in the previous post) may be assessed.  The IRS deems these transactions as “Automatic Excess Benefits”.   

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