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Why a Church Balance Sheet is like a Pizza Pie
According to the Financial Accounting Standards Board (FASB), non-profit organizations – no matter the size – must produce a Statement of Financial Position. The Statement of Financial Position is a church balance sheet. In the past when viable software solutions were not available, churches would use separate checkbooks to keep the money separate for their ministries. Other creative ways developed over the years, like using spreadsheets or classes to tediously track money and produce reports.
These methods have led to inaccurate reporting, possible misappropriation of funds, slow production of the reports, and reports that were not in compliance. Fund Accounting was developed to help churches manage various funding sources and how money is spent. Fund accounting simplifies the process by having one checkbook, which is separated into multiple funds with individual balances.
To help clarify fund accounting, let’s pretend the checkbook is a pizza pie:
Each fund’s balance, or net amount, is a slice of the pizza pie. To simplify this example, we will not have any liabilities. If we apply numbers, the entire pizza pie is worth 1,000.00. (Yes, we realize that is an outrageous price for a pizza pie.)
| The Youth Fund’s slice is: | 400.00 |
| The General Fund’s slice is: | 500.00 |
| The Mission Fund’s slice is: | 100.00 |
| Total | 1000.00 |
The total still equals 1,000.00, but each fund has their respective slice of the pizza pie representing the net worth. The General Fund owns the majority and the Mission Fund owns the smallest slice. This does not mean either fund is more important than the other, only that one fund owns more than the other. In fact, a common church process that is often out of compliance is taking in all money through the General Fund and then distributing it to other funds. This suggests a hierarchical structure where the General Fund oversees the other funds.
Now let’s look at some transactions and see why fund accounting looks different from the accounting methods used in the For Profit industry. The For Profit method is shown first and the Fund Accounting method second.
The organization receives a Telephone Utility invoice for 150.00:
According to the organization accounting procedures, the double entry accounting would state the following:
| Debit | Credit | |
| Checking | 150.00 | |
| Telephone Expense | 150.00 |
This would not work or be in compliance with FASB because we do not know which Fund (remember funds are the slices of pizza pie) should be reduced to pay this bill, therefore adjusting the overall balance of the checkbook and the net amount of the fund. Fund accounting solves all these issues because you choose which fund should pay for this expense. In this example, the General Fund pays for this monthly bill.
The first part of the transaction mirrors the For Profit method; however, the addition of the Fund category is the key.
| Debit | Credit | Fund | |
| Checking | 150.00 | 150.00 General | |
| Telephone Expense | 150.00 | 150.00 General |
Now the new balances for each slice of pie should be the following:
| The Youth Fund still owns: | 400.00 |
| The General Fund is reduced: | 350.00 (500.00 – 150.00 = 350.00) |
| The Mission Fund still owns: | 100.00 |
| Total | 850.00 |
Fund accounting empowers the church by giving it the ability to see financial reports for the whole pizza pie as well as for each slice. A fund accounting system can produce a balance sheet just for the General Fund that would show 350.00 in the checkbook, which is the net amount (worth) of the General Fund. Additionally, a balance sheet for the Youth Fund would only show 400.00. A balance sheet for all funds would show the entire 850.00 in the checkbook, but would not specify how much money is allocated to each fund. This type of report is typically called a consolidated balance sheet.
Advanced Setup:
Generic accounts minimize the Chart of Accounts and simplify reporting (i.e. having one Telephone Expense instead of a Pastor Telephone Expense and a Youth Pastor Telephone Expense). The following example will show a Telephone Bill that is split between the General and Youth Funds. Notice the same generic accounts – Checking and Telephone Expense – are used for both funds.
| Debit | Credit | Fund | |
| Checking | 100.00 | 100.00 General | |
| Telephone Expense | 100.00 | 100.00 General | |
| Checking | 50.00 | 50.00 Youth | |
| Telephone Expense | 50.00 | 50.00 Youth |
Now the new balances for each slice of pie should be the following:
| The Youth Fund is reduced: | 350.00 (400.00 – 50.00 = 350.00) |
| The General Fund is reduced: | 400.00 (500.00 – 100.00 = 400.00) |
| The Mission Fund still owns: | 100.00 |
| Total | 850.00 |
The Balance Sheet for the General Fund would show 400.00 in the checkbook as the net amount (worth). The user should be able to create a report for the Youth Fund and only see 350.00 on the balance sheet as the net amount (worth). If the user ran a balance sheet for all funds, it would still show the entire 850.00.
Icon Systems is the only church management software provider that is certified in the FAS 95 and 117 required by the Financial Accounting Standards Board for the fund accounting standards that all non-profit organizations need to follow. Visit www.iconcmo.com for more information or to register for a free trial.
Social Media Engagement for Churches – Is it Important?
The short answer – YES!!!
The longer answer is more complicated and dives into what makes people tick or respond to information. People interact more than any other creature in the world through verbal, physical, or non-verbal communication. As people moved further away from family and friends to accomplish their dreams, today’s technology have allowed them to still stay connected. Instead of sitting at the local café like past generations and catching up on everything in town, we each log into a computer to share pictures, blogs, life stories, etc. at a personable level through Social Media.
Why are people attracted to this?
Social Media shows the human side of people just as if you were sitting in that café many years ago. In other words, people want to know that they are just as average as the pastor in the church is — he has struggles, triumphs, and questions just like anyone else. When the human side shows through communication channels, people will respond. Does your church show the personable side in its ministry to others inside and outside your organization?
We noticed this through our own company postings on Facebook, Twitter, Google +, and our blog on WordPress. More responses came from personal things like pictures of our first snowfall in the Upper Midwest, a picture of a box of chocolates that we received, and our team at the company Christmas party. Although many of our blogs discuss important aspects of church software and have pictures, the response rate is lower. Why? The blogs are viewed as information to consume; people learn from them and move on. People are more likely to respond to a personal story about Icon Systems and its employees or a friendly client interaction.
What things does your church do to show the personal side of the organization?
Church Donation Software – Audit List
It is that time of year when many non-profits like churches provide contribution statements to their donors. It is also a good time to assess if the current solution is able to give these statements easily, quickly and has majority of the features that are still important to the church. Over time, software becomes outdated or the organization’s needs change. What features would the church like to have that they currently don’t?
Having the ability to email statement to save money in these hard economic times and use it for more worth wild missions is an important consideration. For example, a church with 150 active donors that send quarterly statements would spend $264.00 annually in postage. This total does not include envelopes, labor, and labels associated with mailing the statements. Does the church software provide a return on investment and pay for itself each year it is used?
Having different options during the preparation of statements is an important consideration. Below are some items to audit, but feel free to create your own list and then audit the current solution and compare it to others.
For example, does the software have the ability to:
- Create different statements for the givers and non-givers?
- Follow the government regulations?
- Print statements based on status codes of the members?
- Print the pledge amounts?
- Print tax-deductible, taxable and IRA funds separately?
- Print check numbers on the statements?
- Print comments for Gift in Kind contributions without a monetary value assigned?
- Provide different formats for the contributions statements?
- Format statements for windowed envelopes?
- Print labels to match the statements?
- Include a church logo?
- Include a custom thank you letter at the bottom?
- Email statements to specific email addresses for each member?
- Produce statements quickly (eg: under 30 seconds for a mega church)?
Creating an audit list that the church can use to audit their current solution and compare it should be the first objective when reviewing church donation software. Additionally, churches need a software package that includes more than tracking church donations, which means a similar audit list should be made for membership and the accounting areas of ministry.
40% Off IconCMO Lite
Version 1.2 of the IconCMO Lite App is now available!
Some minor bugs were fixed and a ‘Go to Household’ button was added on the Member Detail screen. The biggest change is the price reduction – you can now purchase the app for only $2.99! If you already have the app, you can install the update for free by following the directions below.
To install the update:
- Connect your device (iPhone, iPad, or iPod Touch) to the Internet.
- On the home screen, tap the “App Store” icon.
- On the bottom right corner of the screen, tap the “Updates” tab to display a list of available updates for your apps.
- On the right, tap the gray “Update” button.
- You will now be prompted to enter a password – this is the same password you use to make App Store purchases.
- Tap the “OK” button to download and install the update.
IconCMO Lite is a native iOS (iPad, iPhone, and iPod Touch) app from Italic Software, Inc. The app provides pastors, staff, and even church members with the ability to view demographic data from IconCMO on the go – visit www.iconcmo.com for more information or visit the iTunes Store to download the app.
3 Essential Rules for Churches using Social Media
Facebook, Twitter, Google + and other social media platforms are great ways for churches to communicate with members, organize events, and attract new visitors. Although social media is convenient and fun, it can also have a dark side. Following these rules can help keep social media safe and enjoyable for all.
1. Be smart about what you say
As the saying goes, common sense isn’t always common practice. The purpose of social media is to communicate with and inform your network, but make sure you do so tastefully and without revealing too much information. For instance, avoid advertising the location (or future location) of minors. It is safer to say something after the fact.
Instead of posting this: The annual youth group lock-in will be at the local YMCA on Saturday night from 9 pm to 8 am – see you there!
Post this: The youth group had a great time at the annual lock-in last weekend. Thank you to everyone who participated!
Also make sure you also have permission when posting prayer requests – some people may not want personal matters shared online. If you do get permission, keep in mind that some situations are extremely sensitive and every little detail does not necessarily need to be shared.
Instead of posting this: Please pray for Susan – she is driving out of state this weekend to care for her mother who is experiencing post operative complications after her rhinoplasty.
Post this: Please pray for Susan – she is traveling this weekend to visit her mother.
Speaking of permission – verify the material isn’t copyrighted when posting things that are not your own (e.g. professional directory photos, clip art, videos, articles). Share a link to a video instead of embedding it on the church’s website or share a link to an article instead of copying and pasting it in a blog post.
Only post content that is appropriate for all audiences. You probably already refrain from posting offensive content but also make sure your posts are relevant and meaningful to everyone visiting the site (i.e. referring to an inside joke can alienate those who don’t know the story behind the humor.)
2. Monitor social media accounts regularly
Assign church staff or volunteers to monitor posts and delete any inappropriate content. Giving more than one person access to the accounts is a smart idea; that way if your social media person goes on vacation or leaves the accounts will still be updated and accessible. As insurance, post a disclaimer (just do a Google search for ‘Social Media Disclaimer’ if you need some examples.) You can’t control what others say, but most social media platforms allow you to block repeat offenders who continue to post offensive items.
3. Learn how to change security settings
Remember that social media pages can serve as a first impression to people outside of the church. Although content such as pictures, videos, etc. should be private, make sure some of the information is public so others can learn about the church and its mission. To use Facebook as an example, the church could have a public Fan Page with posts for everyone to see and also have a private group for members to share pictures, videos, and prayer requests. Read our previous post about Facebook to get instructions for creating a closed or secret group and other useful tips.
You asked, we listened!
We made a couple of changes to the contribution entry window:
Speed Contributions Entry:
The contribution entry screen has been slightly rearranged and modified to allow for fast keyboard access. The “currency type” option was moved up, and you can now use the “Enter” key to move between fields on the entry screen.
Allow EFT and Non-Cash Gifts in Contributions:
To enable churches to more accurately record contributions, we’ve added the ability to choose “EFT” and “Non-Cash” as currency types on the contributions entry screen. Posting journals and other contribution reports were modified accordingly. Non-Cash allows you to record gifts in kind with a zero amount as per IRS guidelines. Additional reports were added to give the church a record of all non-cash donations by date range.
Also in response to the many requests we received:
Icon Systems is happy to present the 2011 Year End Processing Tutorial Video. We are planning to create more tutorial videos down the road, so any comments or suggestions you have are most welcome! As always, the Year End Processing Guide is also available under your Getting Started menu in IconCMO or you can click here for a copy.
