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Financial Aspect of the Northminster Presbyterian Church - Report Example

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This work "Financial Aspect of the Northminster Presbyterian Church" describes the budgeting of this church, accounting system, its income, disbursement of funds, financial controls. From this work, it is about the importance of budgeting and financial reporting in each community. …
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Financial Aspect of the Northminster Presbyterian Church
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1. Teaching stewardship In Northminster Presbyterian’s point of view, the basic concept behind the stewardship is sharing. “Christian stewardship is the free and joyous activity of the child of God, and God’s family, the church, in managing all the life and life’s resources for God’s purposes.” (Williams 2002). God gives us a lot of good things and we can share those things. This sharing attitude promotes our positive, upbeat mentality and self esteem. Stewardship teaching helps the children to properly distinguish the needs and wants. Through stewardship one can show his graceful response to God’s grace. Stewardship gives the priority to individuals needs and it does not focus on church’s need to receive. Major stewardship activities conducted in this Presbyterian Church are food drives, care projects. And also they decided to add more activities. Stewardship teaching is done based on three principles. The first one is an owner manager relationship. Here the owner is God and the man (or woman) is the manager. The second principle is love is the foundation of stewardship. Relationship, ownership, possession, sacrifice are the branches of the love. Through stewardship one can show God’s love in action. The third principle is the starting of the stewardship is presenting life’s resources. Teaching stewardship helps the life management which will enhance the kingdom of God. Presbyterian Churches usually conducts parish member meetings and forums for promoting stewardship activities. They also publish new brochures and flyers and newsletters for this purpose. Instead of these, the Northminster Presbyterian Church conduct Heritage education program in schools. They also present various cultural programs and dramas for convey the message of stewardship to the people. 2. Budgeting: Budgeting is an important process required for the survival and growth of any organization. The Northminster Presbyterian Church takes this process very seriously. According to the pastor in charge of finances, the Church holds a large amount of public money donated by members and other charitable individuals. These donations are made for the purposes of running the day to day operations of the Church as well as for the many activities (religious and charitable) that the Church conducts. In such a scenario, the responsible person or persons should be doubly careful in the way finance is handled. For this proper budgeting at the beginning of a financial year is essential. The budgeting process followed by the Church is given here. The Church has a permanent budget committee or budget council. Its members include pastor, other Church officials, the finance/stewardship committee chief (treasurer), and selected (and respected) members of the congregation. In all there are ten members in the committee and the breakup is as follows. The pastor will be the head of the committee, with four Church officials, four members of the congregation and the finance committee chief making up the rest of the council. This committee is elected every year. The pastor and the finance/stewardship committee chairman are permanent posts and whoever is in charge will automatically become members of the committee. The Church officials are elected by the priests and other staff of the Church while representatives of the congregation are elected by the whole congregation. The Election Day will be given in advance and is done by secret ballot. All members are expected to work in adherence to the Church’s bye-laws and more importantly in adherence to God’s will. There are many committees in the Church that are in charge and control of the various activities of Church. Each committee is required to present a financial request in the form of a detailed budget. The budget committee will examine each in detail and also have meetings with each of these committees. The total amount needed is disbursed as per request if the individual budgets are feasible and in order. If the Church has the required funds to meet the amount it is allocated as and when needed. In most years additional funds will be needed and hence fund drives are conducted every year with the cooperation of everybody connected with the Church. The Church is careful not to eat up into capital investments and focuses mainly of interest from these investments. In case the donator gives permission to use the capital investment, then it is taken. Monthly meetings are conducted to see whether the various committees are working within budget. Any deviations will be corrected in the following months. It is the policy of the Church to keep all activities within budget and rarely is any excess allocations made. 3. Church Accounting System: An interview with the treasurer on church accounting system has been conducted and his views are explained here with. Present changes in the accounting requirements for religious institutions have created a burden on their accountants. However, proper accounting system is essential for internal control and for controlling fund misuse. Churches require accounting system for meeting expenditure and purchase order and are helpful in reducing risk of fund management. A fund is restricted for a particular purpose should be used for intended purpose. Proper accounting system in the church will help to utilize funds for meeting social and legal responsibilities of the church. Now churches are required to disclose their depreciation expenses, depreciable assets, accumulated depreciation and method adopted for computing depreciation on asset is also required. Church Accounting software system: Church accounting system is not designed like ordinary commercial accounting system which gives importance to profit or loss statement. Church accounting system mainly shows revenues and expenditure. Fund Accounting Software is specific software used in churches. “For fund accounting, funds must be treated as separate entities, with their own general ledger and individual revenue, expense, income, and balance sheet reports. True fund accounting software automatically handles the offset postings to cash or payable accounts by fund, as well as the encumbrance processing, grant tracking, and budget controls.” (Nine Reasons You May Need a Fund Accounting Solution 2009). The Northminster Church uses the above software for its accounting purposes. Fund accounting useful in maintaining various funding sources, operating budget, sponsorships details and capital budget .It is designed in such a way to meet the administration of church. This software is helpful to maintain contribution records, membership details, contribution tracking, attendance tracking, financial analysis, fund accounting, and cash management. Fund Accounting Software makes it easy to find out expenses in a variety of funds and allocating of funds is easier. 4. Receiving and accounting of Church income: The Northminster Presbyterian Church has many activities that are in conjunction with the directions of Jesus Christ. They include spreading the messages of the Lord and in helping humanity. Activities are of two types, one serious and one filled with fellowship and fun. For example, softball games are played against other church teams mainly in Tucson. It is a time for competition and enjoyment and also a means of raising funds. The major ways in which the church raises income are given below Donations and endowments: The Church raises income through donations and endowments to fund its various activities during the year. The Church also has investment funds which provide yearly interest. In such cases only the interest is taken and the capital fund is kept intact. This process will help the institution to have a permanent income source which will be used to fund various activities. In some cases endowments and donations are made for specific purposes. They are also made to increase specific funds maintained by the church. For example there are two major funds operated by the Church. They are the Permanent Fund and the Birthday Fund. “A gift made to the Permanent Fund and invested over time has the power to grow while making grants along the way that benefit the church.” (Gratitude Gifts Beyond Your LifeTime 2007, 7). This is a capital fund and only the income through interests is utilized. The Birthday Fund is an interesting concept and the Church requests each member to donate one dollar per year on their birthdays to give gratitude to the Lord for one more year of life. The income from this fund is mainly used for any incidental expenses that are to be met outside the budgeted annual expenditure and forms a part of the Permanent Fund. Another way is through the softball game mentioned above. Each selected player will pay a fixed amount of $25 for playing for a season. In case of softball fees, donations and endowments proper computerized receipts and give and are accounted correctly under respective heads automatically. Income from investments is also recorded as such. The collection from the offerings box is counted every month in the presence of members of the finance committee (headed by the treasurer) and duly accounted as income. This is used mainly for conducting the day to day activities of the Church. Accounting is done with the help of an accounting package and details about that will be given separately in this paper. The system of accounting is properly done and there does not appear to be any need to change the system since it is in tune with what have been learnt in the class. But the one recommendation that is to be given is that all Presbyterian Churches in the congregation should follow a universal accounting package for the sake of compatibility. Even better would be to develop a customized package that is common for all churches and the congregation head office. This will make the reporting process easy and less time consuming. 5. Disbursement of funds In Northminster Presbyterian Church, disbursement of funds is done by based on their annual budget meeting decisions. At this annual budget meeting they develop annual budget for the Church, and in most case it is controlled by the stewardship committee chairman. This committee considers the request from various areas of the ministry for the fund and if they satisfied in their request they will allot money to them. In Northminster Presbyterian Church majority of their fund is disbursed to some particular areas. This disbursement is done based on the priority of the needs in these areas. Major such areas and the process is given below. First one is the fund for the current ministries, missions and operations. A Church needs money for their day to day activities. Also at every year they plan certain goals to be achieved in that year. Prayer is the most important day today activity. Second one is building capital fund. It is used for the development of capital fund for various purposes like construction works, planned acquisition of assets and other capital requirements. Third one is vocation fund. Through this vocation fund Northminster Presbyterian Church allocate amount for various scholarship, which is donated for the school and college students especially for the orphans, different training programs conducted by the Church and other extra activities. Fourth one is Northminster preschool & kindergarten Fund. The Bible has mentioned about the Jesus Christ’s affection to the children. It is the motivation for this type of fund. So Presbyterian Church always promotes scholarship and other activities for the little ones. Fifth one is mission and outreach fund, this is allocated for the various services like serving food and medicines for the old age homes. And the last one general ministry fund. It is used for the general activities like cultural programs conducted by the Church, and for the other goals planned in the budget. Disbursement of fund in each area is done according to the message given by the bible. That is love and service. From this lesion Northminster Presbyterian Church’s fund disbursement is done in proper and appreciable way. 6. Financial reporting: As mentioned earlier, the Northminster Presbyterian Church is a public religious institution. The Church and all those who are in charge of administration have a responsibility to conduct the all the affairs of the church (including finances) in an equitable and responsible manner. The Church has a well established accounting and budgeting procedures. It has also a reporting procedure that is in tune with statutes of the country. It is also prepared in accordance with the bye laws and requirements of the diocese. The Presbyterian Church of the USA has prepared a Legal Resource Manual that provides details of legal requirements, other recommendations and good practices that are to be followed by trustees of the church. All trustee board members have to shoulder a fiduciary responsibility that is tune with the teachings of the Bible and Jesus Christ. The Northminster Church has the practice of following the above mentioned manual. Some relevant sections with regard to reporting is given below. None of the trustees should have a private agenda and should only focuses on the wellbeing of the church and the congregation. For example, if a situation arises with regard to any conflict of interest between a trustee and church, that member should disclose the fact of conflict and refrain from decision. The same rule applies where a member becomes a beneficiary in church operations. For example, the church may approve and award a contract in constructing a building. The contractor can by chance happen to be member of the church. Such abstention should also be recorded in the minutes of the church. Normal and routine gifts and presentations to the church can be accepted by the board, but with regard to restricted gifts, the byelaws, the Legal Resources Manual and other statutory regulations have to be followed. Examples would be sale and purchase of property. The way in which all these are reported is mainly through the annual report which is not mandatory but recommended. According to the Manual, “It is advisable for the board of trustees to make an annual report to the session.” (Smithers). Ideally, the following contents should be included in the annual report apart from what has been mentioned above with regard to disclosures. The assets and liabilities and with an income and expenditure statement is a necessity. Approximate valuation of each item of real estate along with the name of the custodian is also recommended. If the church is a beneficiary of any trusts, the details should be included. Income from investment and any capital debt should be disclosed. Inventory held by the church with regard to any assets is also recommended. Donations and endowments especially with regard to construction should be provided in detail. Each of the committees report their activities with regard to the above to the board of trustees every quarter and a full report at the end of the year. The trustees in turn present a formal report to the members of the congregation once a year. Even though the North Minister Church has meticulous records and minutes with regard to the above, they do not have the practice of publishing an annual report in the above mentioned format. It is recommended that they start publishing one for convenience and to avoid issues in accountability. 7. Financial controls: The importance of budgeting and financial reporting has been mentioned earlier. The concept of financial controls is equally or more important especially if an organization is engaged in handling public money and is engaged in social and religious work. A system of sound financial controls has been implemented in the Northminster Church also. The control mechanisms are based on practical applications of sound financial control practices found in religious and not-for-profit organizations. When handling finance, there should be at least two or more people involved in aspects like collection and accounting. The Church here has a financial committee headed by a treasurer and is in accordance with sound financial principles. The collection and accounting of cash should not under any circumstance be done by a single person. In this case, the collection is carried out by various members of the church and accounting is done by the treasurer. In case of donations, collection of cash and checks is done by one staff while receipt is provided by another staff. In case of large amounts, the collection is done by the treasurer or chief accountant and accounting has to be approved by two other members of the committee. In case of large donations in kind, it has to be approved by the committee before acceptance. Counting of offerings for which no receipt can be issued is done on the first of each month or in extreme cases, when the offerings box gets filled before the month is up. The box is sealed every month when it is emptied and made ready for the next month. The seal is opened only in the presence of at least three members of the finance committee and is counted in their presence. All members usually and willingly help with the counting. The total is then passed on to the treasurer or accountant written is a signed paper bearing signatures of two members of the committee. In case of large donations, especially for specific projects, periodic reports are sent to them. List of donors (both in cash and kind) are published with the amount donated in the monthly church bulletin. Petty cash is under the control of one of the accounts assistants. Two members who are qualified CPAs are at present conducting biannual internal audit of the accounts at reduced rates. Their report is sent to the trustees immediately after it is ready. A shorter version of the report is then sent to the addresses of each member of the congregation shortly after the CPA report is received. Bibliography Gratitude Gifts Beyond Your LifeTime. 2007. On-line. The Wine and the Branches, accessed 05 February 2009: available from http://www.northminstertucson.org/resources/downloads/vb200703.pdf; Internet. Nine Reasons You May Need a Fund Accounting Solution. 2009. On-line. Buzzle.com, accessed 05 February 2009: available from http://www.buzzle.com/articles/nine-reasons-you-may-need-a-fund-accounting-solution.html; Internet. Smithers, Brenda. Annual report and Record Keeping. On-line. Legal Resource Manual, accessed 05 February 2009: available from http://www.pcusa.org/legal/ibt2; Internet. Williams, Barry MC. 2002. Stewardship 101: An Overview. On-line. accessed 05 February 2009: available from http://www.eldrbarry.net/clas/stew/stew101.htm; Internet. Read More
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