Mission: We strive to share God’s love by creating safe places where all are accepted and welcomed,

connecting the needs of people to the presence of God, and transforming the world through Christ.

Vision: We see strong leaders who develop vital congregations that eagerly make new disciples, actively nurture
existing disciples, and passionately advocate for the needs and concerns of all people.

Core Values: The values that drive us are deep love for God and unconditional love for all people. We value
collaboration and partnerships that demonstrate God’s love to a world that divides and alienates. We value
relationships that foster accountability, excellence, and an ability to engage in open, honest, and respectful
conversations. We value the hope that we have in Christ that, when discovered, brings us a unity of purpose, a joy
that enlivens our spirit, and a peace that surpasses all understanding.

Church Finances

November / December 2018

 Agenda
• Tax Exempt Status • Budgets & Reporting
• Rental of Property • Tax Reporting
• Employment Taxes • Tax Cut & Jobs Act
• Housing Allowances / • Clergy Health Benefits
Housing Exclusions • Clergy Pension Benefits
• Internal Controls • Treasurer Remittance Form
• Checks & Balances • Church Statements
• Insurance • Job Descriptions
• Audits • Financial Secretary
• Treasurer
• Reimbursement Accounts
• Finance Committee
• Discretionary Accounts
• Finance Contacts
• Authority & Secrecy

2
 Tax Exempt Status
• UMC is Tax Exempt Religious Organization under
Section 501(c)(3) of tax code

• Group Tax Exemption ruling granted to GCFA in 1974

– Exempt from Federal Income Tax
– Generally exempt from filing Form 990 (Return for Organizations Exempt from
Income Tax)
– Donors may deduct contributions on tax returns (timely acknowledgement
required)

• All NYAC churches / ministries covered by group ruling

• Churches may request a specific IRS inclusion letter. Process is

automated http://www.gcfa.org/services/legal-services/group-ruling/

• Churches may elect to be included on GuideStar, a database of IRS-

recognized Not-for-profits.

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 Rental of Property
• Tax-free status:
– Rental of real property by a church does not jeopardize tax-free status.
– Many churches rent steeples to telecommunication companies & facilities to outside groups.
– As long as income is used for 501c3 purpose of the organization (religious activities) & rental
income does not constitute primary source of income, rentals are allowed.
– Creation of leases and use of terms such as landlord / tenant / rent is not problematic.
• Income Taxes:
– Outside income is usually subject to UBIT (unrelated business income tax)
– Exemption for the rental of real property.
• If there is no debt on property, all rental income is excluded from UBIT and not taxable.
• If there is debt on property income could be subject to UBIT but only if less than 85% of the facility is
used for exempt (church) purposes.
– Rental of parking lots is not considered rental of real property and is taxable
• Property Taxes:
– Churches should assume that any property rented (to any organization) will be put back onto
property tax rolls.
– Example - if church rents the entire 2nd and 3rd floors of a three story education building to a
preschool, municipality could make the case that 2/3rds of the building is taxable for property
tax purposes.
• Approvals:
– Any property leased for a term of more than 30 days must comply with approval requirements
of ¶ 2540 & 2541 of The Book of Discipline.

4
 Employment Taxes
• Know difference between an “employee” & “independent contractor”
• Significant back taxes, fines and penalties for improper classification
• How the individual wants to be classified is irrelevant
• IRS 20 Questions Test
– Work hours. Do you set the worker’s hours? (Independent contractors work when they want)
– Instructions. Do you have the right to give the worker instructions about when, where, and how to
work? (This shows control over the worker.)
– Integration. Are the worker’s services so important to your business that they have become a
necessary part of the business? (This may show that the worker is subject to your control.)
– Services rendered personally. Must the worker provide the services personally, as opposed to
delegating tasks to someone else? (This indicates that you are interested in the methods employed,
and not just the results.)

• Must withhold & remit Federal, State, Local & Social Security taxes for:
– Secretary & other lay employees
– Organist
– Sexton
– Child-care providers (e.g. nursery care during church services)
• Use of outside vendor (ADP, Paychex, etc) or software program that is
updated regularly is critical. Ensures current withholding rates are used
& that quarterly payroll records are accurate.
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 Housing Allowance /
Housing Exclusion
• Churches are required to provide housing to clergy either in the form
of a parsonage or a Housing Allowance.
• Per IRS rules, clergy are not taxed on housing including the value of
parsonages, housing allowances and / or housing expenses.
• A Housing Allowance is cash that is paid to the pastor, in addition
to salary. It is usually paid when no parsonage can be provided.
• A Housing Exclusion is an amount of salary that the pastor
designates to treat as non-taxable because it relates to housing. It
is not paid to the pastor but instead deducted from income for W-2
purposes.
– If a pastor is provided a parsonage with the church paying all associated
expenses, it would be unusual for the pastor to have a large Housing Exclusion.
– A Housing Exclusion must be signed by the pastor and the church prior to the
income being earned that is being excluded.
– Generally speaking, a pastor and church should sign the Housing Exclusion prior
to January 1st of each year (or July 1st if being reappointed).
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Housing Allowance / Housing
Exclusion Examples
Pastor A Pastor B
Salary $40,000 $40,000
Parsonage Yes No
Housing Allowance N/A $10,000
Housing Exclusion $2,000 * $5,000

Total Compensation $40,000 $50,000

Amount Reported on W-2 $38,000 $35,000

Available at NYAC/Resources (under “Pastors”)

• Housing Allowance Exclusion Worksheet
• Housing Allowance Q&A’s
• Housing Allowance Resolution

* Housing costs paid by the pastor personally such as furniture 7

 Internal Controls
• Segregation of Duties:
– Prevents a single person from perpetrating fraud
– Separates income and expense sides of church
• Income: Financial Secretary
• Expense: Treasurer
– Financial Secretary & Treasurer must be separate
and unrelated people.
– Offerings should be counted by two unrelated people
– No person should be able to do more than one of the
following:
• Approve payments
• Sign checks
• Reconcile bank accounts
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 Internal Controls
• Securing Assets:
– Keep offering securely locked
between collection and deposit.
– Deposit funds promptly. Funds are not to be
taken home. Consider establishment of a night-
drop for Sunday collections.
– Maintain bonding on church members handling
money. (BoD ¶ 258.4b)
– Limit distribution of keys / security codes and
maintain a log of who has access
– Strictly limit use of credit cards and petty cash
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 Internal Controls
• Documentation:
– Support each check issued with written
documentation
– Vendor invoices should be approved by the
ordering party prior to payment (signed)
– Count offering using a formatted count sheet and
have two counters sign the sheet

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 Internal Controls
• Reconciliations:
– Reconcile bank statements to accounting records
monthly.
– Bank statements should not be reconciled by
individuals that have signing authority on the
accounts.
– Reconcile offering counter sheets to accounting
records

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 Checks & Balances
• Review bank signatories annually
– Remove those that have left their role immediately
– Clergy should not be signatories on any account

• All church mail should be addressed to the church address, not to individuals.

• Adopt policy that all checks require two signatures

• If you see something on a statement or report that does not make sense,
question it.
• Do not ignore mail from municipal officials or tax / regulatory authorities.
• Pastors are entitled to question and understand all financial activities of the
church - but they must not personally manage any of them.
• Minimize the use of petty cash. Establish procedures for the permissible uses of
petty cash and maximum amount that may be used at one time.

• Two areas of finance that should be kept confidential:

– Records of giving by person
– Pastor’s use of a Discretionary Account (not the Reimbursement Account)

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 Insurance
• Possibly the single-most important action a church
can take to protect its assets, people and ministry
• Each church is required to bind its own insurance
– Property, Liability, Automotive, Umbrella
– Umbrella coverage is required if operating a preschool
– Ensure policy has updated and accurate values for costs to rebuild church
structures and replace contents.
– Obtain bids every few years to ensure that premiums are competitive in the
marketplace.
– Report claims to your insurer immediately.
• All churches and church-controlled preschools participate in the
Conference’s policy for Workers’ Compensation.
• Save expired insurance policies for potential future claims
• Minimum Insurance requirements can be found at nyac.com “click on
“Resources” and scroll down to “Local Church Policies”

13
 Audits
• Annual Audits are required by the BoD:
– Section 258.4 c) makes it mandatory that every local church finance committee "shall make
provision for an annual audit of the financial statements of the local church and all its organizations
and accounts. The committee shall make a full and complete report to the annual charge
conference.“

• Finance Committee is charged with ensuring annual audits are performed

• GCFA publishes the “Local Church Audit Guide” and a related FAQ
Find them online at: http://www.nyac.com/church-audits

• Don’t need to be or engage a CPA to perform the audit

• Meant to be a process that provides reasonable assurance that good

stewardship is practiced handling & accounting for funds & other assets
of the church.
– Needs to be “independent”
– All accounts of all organizations must be included or separately audited (e.g. Trustees,
pre-school, operating account, brokerage accounts, UMW, UMM, etc.)

• Audit reports provided to District Superintendent at time of Charge

Conference.

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 Audits (continued)
Why do an Audit?*
• Because the BoD requires it!
• To protect the people the church elects to offices or financial responsibility from
unwarranted charges of careless or improper handling of funds
• To build the trust and confidence with the financial supporters of the church in
the way their money is being accounted for.
• To set habits of fiscal responsibility to assure that when there is turnover in
personnel there will be continuity in accountability
• To ensure that gifts made to the church with special conditions attached are
consistently administered in accordance with the donor’s instructions
• To provide checks and balances for monies received and disbursed

Conducting an audit is not a symbol of distrust

• Mark of responsibility
• Good stewardship demonstrated for all to see
• Message to church donors that you care about their gifts

* From the Local Church Audit Guide

15
Pastor Reimbursement Account
• Required by BoD & NYAC for those under Episcopal appt.
• Provided to cover various costs related to performing ministry
• Church determines amount but minimum is $5,550 ($5,700 in 2019).
• Prorated for service (e.g. half-time pastor gets $2,775)
• Church should have policy with clear guidelines
• Account cannot be divided into installments and paid to pastor
• Disbursement requests must be accompanied by receipts
• Funds remaining at end of year expire
• Examples of Professional Expenses:
– Auto / travel
– Books / periodicals
– Continuing education
– Conference fees
– Dues / memberships
– Electronic devices (cell phones, PDA’s, tablets, etc.)
– Meals (business only)
– Move costs that exceed reimbursement
16
 Pastor Discretionary Account
• Optional - Not required by BoD or NYAC
• Funded by church budget or special donations
• Details of spending not required to be disclosed by Pastor
• Spending must be documented carefully by Pastor with records
maintained in the event of an audit
• Disbursements must only be for ministry-related expenses
• In the event that funds were not spent on ministry such amounts are
considered taxable income to the Pastor
• Funds remaining at end of year can be “rolled-over” into next year

17
 Authority & Secrecy
• The Book of Discipline (BoD) is the authoritative governing document for United Methodist Churches.
• On-line version available at https://www.nyac.com/thebookofdisciplineoftheunitedmethodistchurch
• Church Council functions as the executive agency of the Charge Conference. BoD ¶ 244.1
• BoD ¶ 722 requires all meetings, except for SPRC, to be open
• Bod ¶ 258.4.d requires all financial statements of the church and all its organizations and accounts to
undergo an annual audit.
• Finance committee must provide “full and complete report to the annual Charge Conference”.
• Membership of Charge Conference includes all members of Church Council.
• All church financial statements are therefore open to all members of the Church Council.
• Details of financial giving should be shared only with those that have “a need to know”
• Financial Secretary
• Pastor (BoD ¶ 340.2.c.2.c now clarifies that pastor shall have access to such records)
• BoD ¶ 244.3
– "The pastor shall be the administrative officer and, as such, shall be an ex-officio member of all conferences, boards,
councils, commissions, committees, and task forces, unless otherwise restricted by the Discipline."

– Pastor is “member” of all committees except Trustees and SPRC

– Pastor has full access to all information for committees and sub-committees

• No one person can make unilateral decisions of significance. Such decisions are made by the Church
Council and executed by committees. 18
 Budgets & Reporting
• Essential component of a well-run church
– Facilitates projection of income and expenses
– Provides yardstick to measure progress in meeting goals
– Presents a snapshot of financial matters to congregation

• Prepared annually:
– By Finance Committee member with expertise
– Based upon input from Church Council and Committees
– Published in advance & approved by the Church Council
• Should reflect all income and expenses including
apportionments
• Periodic financial reporting can strengthen Stewardship
efforts; some consider lack of reporting to be drag on efforts
to promote giving

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Sample Budget Calendar
(based upon a calendar fiscal year)

• February thru December:

– Furnish Church Council & Committees with “Budget vs. Actual” report with
explanations of variances
– Project amounts to year-end
– Determine actions needed to bring spending in line with Budget

• October:
– Request Committee Chairs to provide input for next year’s Budget
– Obtain NYAC: Apportionments, HealthFlex, Pension, CPP

• November:
– Compile & distribute draft budget to Church Council

• December / January:
– Revise as necessary & obtain Church Council Approval
– Communicate budget to congregation
– Budget does not require Charge Conference approval

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Sample Budget vs. Actual Report
First United Methodist Church
2019 Financial Results
Year-to-Date Through March 30th

A B C D E
YTD Deposits / Bills Adjusted YTD Variance
Actual Outstanding YTD Actual Budget (Fav / Unfav) Comments
Income
I-1 · Pledges
I-2 · Non Pledge Regulars
I-3 · Loose Plate / Visitor Donations Includes a $1,500 donation in June
I-4 · Christmas/Easter Offering
I-5 · Facilty Rent
I-6a Preschool Facilities Donation
I-6b Preschool Insurance
I-7 · Fund Raising Projects/Tag Sale Cancellation of fund-raising dinner
I-8 · Designated Contributions
I-9 · Misc, Other Income
I-10 · Interest Income
I-11 · Cell Tower Income
Sub-total $ - $ - $ - $ - $ -

A · Administration
A-1 · Administrative Salary
A-2 · Office Supplies
A-3 · Office Equipment
A-4 · Postage
A-5 Communications
A-5a · Telephone - Church
A-5b · Telephone - Parsonage
A-5c - Cable/Internet - Parsonage
A-11a - Workmans Comp
A-11b · Insurance Property & Liability
A-11d · Umbrella Policy
Sub-total $ - $ - $ - $ - $ -

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 Tax Reporting
Clergy Taxes:

A. Ordained, commissioned, or licensed ministers have dual tax status:

– “employees” for tax reporting purposes (MUST BE ISSUED A W-2, NOT A 1099)
– “self-employed“ for Social Security tax purposes

B. No mandatory income tax withholding (may be done voluntarily)

C. Social Security / Medicare taxes are never to be withheld for clergy

D. Clergy should be making quarterly estimated payments of Federal, State, Local and self-
employment taxes. Self employment taxes should include value of parsonage.

Payroll Taxes:

A. Withhold taxes, file forms and comply with deposit requirements

1. Federal Social Security
2. Federal Income Tax
3. State and Local income tax withholding (requirements vary from state to state)

B. Quarterly Filing Requirements (April 30, July 31, October 31 & January 31)
1. Form 941 - Federal
2. State equivalent form (may vary from state to state)

C. Annual Filing Requirements: By January 31st:

1. Form W-2 provided to employees
2. Form W-3 filed with Social Security Administration
3. Form 1099-MISC supplied to individuals (compensation of $600 or more)
4. Form 1096 & 1099-MISC filed with the IRS 22
 Tax Cut & Jobs Act Implications
Disclaimer: Representatives of the Conference are not tax professionals and should
not be relied upon for tax guidance or advice. Please consult a qualified tax
professional for all questions and clarifications.

Move Costs:
– Act suspends both the tax exclusion and the deduction related to moving expenses for
taxable years 2018 until 2025.
– Reimbursement (or direct payment) of move costs now taxable to the recipient
– Must be reported on W-2

Job Expenses:
– Act eliminates deduction of unreimbursed job expenses for tax years 2018 - 2025
– Encourage the use of Accountable Reimbursement Plans, which are not affected

Charitable Contributions:
– Allowable deduction increases from 50 to 60% of AGI
– Standard deduction doubles (currently $6,350 single, $12,700 married)
– State & local tax deduction limited to $10,000
– For many taxpayers it will no longer make sense to itemize
– One can only deduct charitable contributions if itemizing
– Some taxpayers may be less charitably inclined if they don’t receive a tax benefit from their
donations.
– Individuals required to take minimum IRA distributions can reduce their AGI if giving the
distribution to a charitable organization.

23
 Clergy Health Benefits
• Must be under Episcopal appointment at ¾ time or greater to be eligible.
• Conference participates in plan provided by Wespath – “HealthFlex”
• HealthFlex costs are allocated based on a “uniform rate” regardless of
number of dependants or participation of eligible clergy
• Uniform rate billed to churches for 2019 is $17,208 / year
• Premium billed to Pastor is based upon which plan of six offered is selected
• Pastor contributions can be deducted pre-tax if church adopts Section 125
Cafeteria Plan – http://www.nyac.com/section125plans)
• Clergy may elect a Medical Reimbursement Account (up to $2,700 pre-tax)
• MRA is “use it or lose it” but one may rollover $500 into new plan year
• Policies are set annually by Conference Board of Pension & Health Benefits

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Clergy Pension Benefits
A) For clergy under Episcopal appointments serving at least 75%:
• Current plan known as CRSP (Clergy Retirement Security Program)
• CRSP has both a Defined Benefit & Defined Contribution component
• 11.8% of Plan Compensation for DB / DC for 2017 administered by Conference
• If clergy contributes 1% to UMPIP an additional 1% is contributed to CRSP DC

B) For clergy under Episcopal appointments serving less than 75%:

• 10.8% UMPIP (DC) contribution administered by church with Wespath directly
• Increases to 11.8% for clergy that contribute 1% to UMPIP

Contributions are based upon “Plan Compensation,”

• Plan Compensation defined as salary plus either:
a) 25% of salary if parsonage provided
b) actual housing allowance, plus any other allowances paid.

25
Treasurer Remittance Report
• Available on-line www.nyac.com
(“Finance,” “Apportionments”)

• Provided in Word or fillable PDF

• Used to instruct Conference

how to apply payments

26
Church Statements
• Mailed to churches monthly
• Provides budget for apportionments
• Provides a record of actual giving:
Ø Apportionments
Ø Benevolences
Ø Integrity in Pensions
Ø Prior year apportionments

27
 Job Description
Financial Secretary
Role:
• Receives, records, & deposits funds in timely, thorough & confidential manner
• Works with Treasurer & Finance Committee to develop policies & procedures to ensure funds are
available to support the ministry of the congregation

Qualifications:
• Skills & interest in financial record keeping; ability to keep detailed, accurate records & maintain
appropriate confidentiality; ability to work with individuals & ministry teams.
• Skills in identifying new revenue sources along with an understanding of biblical stewardship &
management of all resources that God provides.

Responsibilities:
• Deposits money as soon as possible after it is received
• Works according to guidelines established by Finance Committee to receive funds, record them, &
report them to the Treasurer and Finance Committee
• Maintains records of how much money is given & by whom
• Checks records against those of the Treasurer and keeps records in good order for audit
• Arranges for collecting offerings received during worship services & other church gatherings
making certain that more than one person is involved in collecting & counting money.

More information available at:

• http://www.gbod.org/lead-your-church/local-church-officer-job-descriptions/resource/financial-secretary

28
 Job Description
Treasurer
Role:
• Disburses funds in a responsible and timely manner
with funds identified and bills paid when due, as directed by the church council.

Qualifications:
• Should demonstrate skills and interest in financial matters; have the ability to keep detailed,
accurate records and maintain appropriate confidentiality; have an understanding of biblical
stewardship and management of resources that God provides.

Responsibilities:
• Disburses all money contributed to the local church budget, keeping accurate records of how
money is spent.
• Manages disbursement of funds according to the guidelines established by the committee on
Finance and SPRC. This includes maintaining compliance with all disciplinary requirements and
applicable governmental tax guidelines.
• Works with the Financial Secretary to check the records, quarterly, and keeps records in good
order for an annual audit.
• Works with the Financial Secretary and chair of the committee on finance to make regular
financial reports to the committee on finance, church council, and the charge conference.

More information available at:

• http://www.gbod.org/lead-your-church/local-church-officer-job-descriptions/resource/church-
treasurer

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 Finance Committee
Role:
• An effective finance team proposes a budget, then raises, manages, & distributes the financial
resources to support & strengthen the mission & ministry of the congregation.

Qualifications:
• Ability to listen to & communicate with people of all ages who have ideas about the mission and
ministry of the congregation. Skills with financial budgetary matters along with understanding of
Biblical stewardship and management of the resources God provides.

Structure:
• Comprised of a chairperson, pastor, lay member of annual conference, chairperson of church
council, chairperson or rep. from staff-parish committee, a representative of the trustees, lay
leader, financial secretary, treasurer and others determined by the charge conference.

Responsibilities:
• Compile annual budget to support mission and vision of the church. Submit budget to church
leadership for review & adoption
• Provide reports that show how the church is doing vs. budget
• Develop & implement plans to raise sufficient income to support the approved budget
• Establish written financial policies for the church
• Recommend proper depositories; carry out leadership team’s directions about administration &
disbursement of funds; follow procedures for the church treasurer and the financial secretary.
• Arrange for annual audit of financial records of church & all its organizations and accounts.

More information available at:

• http://www.gbod.org/lead-your-church/local-church-officer-job-descriptions/resource/finance-
committee2
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 Finance Contacts
CFO & Director of
Ross Williams Admin. Services 914-615-2212 [email protected]

Diana Moore Controller 914-615-2235 [email protected]

[email protected]
Sally Truglia HR and Benefits 914-615-2220
Administrator

Judy Walters Statistical Tables 914-615-2236 [email protected]

Conference Budget

Apportionments
Fran Collins Integrity in Pensions 914-615-2223 [email protected]
Parish Development

Gail Kamerman Accounts Payable 914-615-2215 [email protected]

Billing for Health

Jasmine Albert Insurance, Pension, 914-615-2232 [email protected]
Workers Comp.

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