Know what regulations pertain to churches and what organization creates them. Understand and know why you cannot keep balances in the revenue and expense accounts. Additionally, liabilities should not have fund balances because liabilities are money owed and not money the organization owns. Does church size matters when it comes to accuracy of church reporting or does the church have to report the financials at all? There are two major repercussions of having bad financials. One is moral and the other is legal. When an organization is out of compliance trust is lost in the community, which is the moral issue and is very hard to recover. The other is the church can lose its tax-exempt status and cannot claim to be a tax-exempt organization legally. Find out where to go to get more information. Tell us what you think.
Monthly Archives: August 2011
Cloud computing church management (or cloud based church management) is really a no-brainer for churches. The biggest advantage for the smaller church is; it frees up the time for the minister or other staff that are stretched thin to minister to the community and their members. It allows them to further their mission without worrying about the back-end data. For the larger organization; it saves them the nightly backup headaches, money from hiring an IT staff, and time. At Icon Systems we often hear several reasons why a church won’t move their data to the cloud. One is because of the security of their data. The data security issue is often laughable. When a church compares its current security practices with the safeguards available in the cloud by IT professionals, state of the art data centers, and security consultants at a fraction of the cost, this discussion usually vaporizes.
Often one of the underlying issues is that someone does not want the data taken from the church’s property. This reason is ironic because every security expert would agree that your data should be kept in at least two places which would force the organization to take the data off the premise. Additionally, security experts agree that the data should be a considerable distance apart because of natural catastrophes – IE: 1,000 miles or greater because of floods, hurricanes, or tornadoes. One of the most efficient and effective ways to accomplish this is to send it to the cloud at another location. When you start factoring in the cost of doing this as one organization it simply does not pay, because the organization can not leverage economies of scale like a software company that serves thousands of clients. Economies of scale is also why churches can not hire proficient security consultants in the industry for the servers they have in their data center. Churches are hiring one person to take care of one organization instead of hiring one person to take care of thousands of organizations with the same hardware and software architecture.
Another aspect that is often over looked for on premise computing is the budgets for the infrastructure that houses the servers. The budgets for on premise computing is relentlessly being cut back and one of those repercussions is security. In fact one of the first things to be cut is the security. The opposite is true for companies that are in the business of offering cloud computing solutions. They invest their revenue into state of the art facilities so they can have better hardware, software, security measures, data centers, remote recovery procedures, etc. at their disposal and beat their competition. This is one of the reasons Icon Systems is one of the only software companies that offer 256 bit data encryption the entire time the user is logged in – a feature that other companies charge extra for. The data centers they use are seen as profit centers (how they make their money) and not overhead (loss money with no return) as in other organizations. Cloud computing companies see security as part of their bread and butter because without investing in it they would go bankrupt.
Can cloud computing be scary from the security stand point? – Yes it can be. Understanding where the fear comes from within the organization is job number one. Assessing that fear to see if it is a valid fear or a myth is the next step. If it truly exist then what steps are necessary to minimize the risk? Does the solution provider have the right protocols in place for it? Remember this important rule – cloud computing is just as safe if not safer than on premise computing.Jay Technical Sales – Data Conversions – Multisite Strategies Icon Systems, Inc.
Lauren always comes up with thought provoking questions within the church. This time it is about visitation. Is it really breaking the ice or the follow up after wards for your organization? Read her latest thoughts on Church Tech Today Website!
Recently Steve Hewitt (Editor-in-Chief) of CCMag interviewed Icon Systems in regards to mobile computing in the church industry and how it can help churches in their missions. There is so many technological advantages to using mobile devices that not using them would be a disadvantage for any organization that wants to further their mission. Some of the uses are taking attendance, using it in the mission field, taking prayer notes, posting things to social networks immediately, updating profiles, creating reports on the fly, monitoring the church service through security cameras, child check in, multisite communication, etc. Continue reading the full interview!
At Icon Systems we are always looking out for our clients and wanted to pass this information on to you. Does your current software provide the right financial reports for the IRS? Ask the 3,000 organizations in Orange County, CA that lost their tax exempt status and it came down to not filing their financial records with the IRS. Small organizations are not exempt from this reporting requirement anymore as many believe. The IRS has revoked approximately 325,000 non profit tax exempt organizations this year alone. It will only get worst when non-profit organizations use sub-standard accounting packages that do not provide accurate reports based on the fund accounting standards. These standards are provided by the FASB organization and specifically written in the FAS 95, 116, and 117 regulations. Please see a more in depth discussion with the church accounting software guide about these guidelines.
A few months ago ChurchAccountingSoftwareGuide.com posted an interview with Icon Systems addressing some common questions about church software compliance with fund accounting standards and regulations.
The Church Accounting Software Guide recently posted another interview with Icon Systems discussing benefits of mobile technology as well as how the use of tablets (such as the iPad) can improve church management and accounting. The interview also offers some great insight to some of the exciting new features of the IconCMO web app for the iPad – you can read the full article here.
How is your church currently using mobile technology? We would love to hear from you – please share your comments and stories below!
Accounting for churches is radically different than accounting for for-profit businesses, or at least it should be. The Financial Accounting Standards Board (FASB: http://www.fasb.org) has defined how accounting for a non-profit organization differs from a for-profit organization. Icon Systems has gone to great lengths in designing IconCMO to follow these guidelines in order to be compliant with all government regulations. Following these guidelines also provides churches the reports they need to effectively manage their organization. We’ll try and define some of the methods companies are using today and their benefits and faults. Before we do so, we need to change some of the terminology.
o Income Statement is defined as Statement of Activities
o Balance Sheet is defined as Statement of Financial Position
o Owner’s Equity changes to Net Assets
o Income accounts are defined as Revenue accounts.
After reviewing different church accounting software systems some common practices have arisen.
Use Revenues and Expenses to track your Funds.
When using this method and you want to start a Capital Campaign drive, it would involve creating a Capital Campaign Revenue account and a Capital Campaign Expense account. While at first this seems like a good method you quickly realize that a single revenue/expense account on each side will not help the church board understand where the money was raised or how it was spent. This method creates headaches for the accountant that now needs a complete set of accounts defined for each fund which creates a bloated chart of accounts.
Use Liabilities to track your Funds
This involves adding a liability account for each fund that you manage. If the church has received “X” dollars that is earmarked for Hunger Relief, the money would go into the Hunger Relief liability. Once entered it is easy to see how much money is owed to the hunger relief. When money is spent against this fund, the Hunger Relief liability is reduced until it returns to zero. Unfortunately at the end of the year the church board doesn’t know how much revenue was generated for the hunger relief fund or what expenses were incurred by it. While these hurdles could be overcome with some manipulation in the revenue and expense accounts it would be difficult/impossible to view a Statement of Activities and know why money was spent on specific items.
Additionally, a General Fund that is defined as a liability account would appear to the church board as money owed. Incorrectly defining funds as liabilities will not provide an accurate Statement of Financial Position. Without the ability to see what the true balance is, the church board will not be able to make informed decisions for the organization’s mission.
While both of these methods provide the basic needs for a church, they lack the ability to report needed information to manage a church effectively. Borrowing money from one fund to help another fund becomes difficult to track. Neither method will inform the church of how much money that is currently in the checking account belongs to which funds. A church could write a check and not realize until later that the money was earmarked for Hunger Relief. Neither method will provide a Change in Net Assets report. Neither method will provide a Statement of Activities or Statement of Financial Position strictly for one particular fund. These are all required by FASB for any non-profit regardless of their size.
Fund Accounting: A Better Method
IconCMO has deviated from the prior two methods mentioned above to be compliant with FASB. Funds are no longer defined inside the chart of accounts but rather separately. Each fund can be defined as Unrestricted, Restricted and Temporarily Restricted. Each fund can use the entire chart of accounts. The only requirement is that every transaction “must” have a “fund” designation. Because of this change a person can review the checkbook and see that of the $5,000 they have in the checkbook , $3,000 belongs to the General Fund, $1,000 belongs to World Hunger and $1,000 belongs to the Capital Campaign. Now a church no longer needs multiple checking accounts, spread sheets, or other creative accounting methods to know how much money belongs to each fund. Because of this method, IconCMO now has the ability to extract data specific to a fund. It can easily create usable Statement of Activities and Statement of Financial Positions specific to one fund or print a Change in Net Assets report that displays the monetary change for all funds over a given date specified. It’s simply a better way to do church accounting and manage your finances.