Meeting with Independent Verifiers 12 November 2016

Agenda Timetable Standard form of accounts Verifiers checklist Taxation issues Parish taxation Clergy and layworker tax

Timetable 22 days before Vestry – Notice of Vestry to be published and nominations called for Wardens and Councillors. Ideally, financial statements should also be available for inspection by this time and in any event not less than 6 days before Vestry 6 days before Vestry, nominations close and financial statements on notice board 15 March – Last date for Vestry meeting including presentation of verified accounts. (Note that Vestry cannot proceed until accounts have been approved by Vestry) Within 7 days after Vestry, all documents must be submitted to the Diocesan Office

Documents to be submitted to the Diocesan Office Within one week of Vestry, the following must be submitted (forms available on the website): Copy of the audited or verified Financial Statements; Electronic copy (the copy must include all signatures of responsible parties) including taxation return. Copy of the budget for present year; Copies of the Churchwarden’s Report and the Rector’s Statement of Needs; Declaration of those elected as Churchwardens, Alternate Churchwardens, and Parish Councilors. Return of attendance and communicants.  

Standard Form of accounts Accounts should preferably be submitted in the standard form on the website. The standard form includes the following tabs: File names Instructions for completion Standard codes Trial balance – all financial information should be loaded here – make sure the opening balances agree to the previous year verified accounts Standard cover sheet Wardens report Independent Verifiers report Income statement – automatically completed from TB Balance sheet – automatically completed from TB Notes Rental summary Tax calculation – automatically completed from TB Checklist

Verifiers checklist To be initialed on completion Section Description Checked Notes Minute Books Vestry Council Executive Portfolio Committees Cash And Bank Any payments taken from collections must be supported by vouchers Entries where the above happen have been grossed up Purchases of large items have been approved by council prior to purchase Bank statement checked to vouchers (2 signatures) (Matches cheque) Vouchers checked to bank statement (2 signatures) (Matches cheque) Files for vouchers Petty cash - Count Petty cash vouchers have 2 signatures Regular monthly payments (Are there 12? Telephone, lights, etc.) Deposit book rather than loose deposit slips Deposit checked to bank statement Deposit in bank statement checked to deposit slip Receipt book (All cash receipts must have a receipt) Banking done timeously Days and times of banking varied for security purposes (but still timeously) DG / Dues / Tithes / etc. Receipts consistent Bank reconciliation done regularly (Monthly) Fixed Assets Register Physical asset found in register Item in register found physically Insurance values realistic. Inspect registration papers and current licence disk of all parish vehicles Inspect lease agreements for office equipment Ensure that all property transactions of a capital nature have been done in accordance with Diocesan Rules Include any comments on errors or non- compliance

Taxation issues All parishes and organisations are taxed as part of the Diocesan PBO. It is critical that all information is properly completed as failure to do so may result in additional tax being paid by the parish All commercial income is taxable Rental of property Rental of cell phone masts Trading activities such as tea rooms or jumble shops. Once off activities such as jumble sales are not taxable. Expenses directly attributable to the income may be deducted in terms of a formula Expenses may include electricity consumed and other direct costs The Standard accounts template automatically calculates tax

Remuneration and taxation - PAYE All employees are subject to the deduction of PAYE if their earnings exceed certain thresholds.   To ensure compliance by the Diocese of its obligations in this regard, the earnings of all clergy and layworkers must be processed through the Diocesan office.   Earnings include all amounts whether received directly or indirectly by clergy or layworkers.   This includes special collections for clergy and gifts to clergy by members of the congregation.

Examples where tax must be paid by clergy 1.Farewell gifts collected by parishioners for a priest who is moving on 2.Farewell gift given by a parish council to a departing clergy person 3.Something (e.g. a computer or car) that a priest is permitted to acquire at less than market value– the discount is taxable.  (The fact that its value in the books might be nil  or very little is irrelevant– market value is the test.) 4.Easter or Whitsun / Pentecost collections taken by clergy 5.Retirement gifts collected by church entities such as parishes, archdeaconries 6.Welcoming gifts from parishes – example: a particular archdeacon was given R1,000 per parish when he became their archdeacon:  fully taxable Principle:  Whenever a gift arises because the connection between the giver and the recipient has its origins in the church, the employer of the priest, tax is payable. If in doubt – ASK!

Other remuneration issues The rules on clergy remuneration are on the website Specific issues to watch Clergy must have a written MOU with their parish Clergy increases are restricted where parishes are in a loss making position or have unauthorised loans from the Diocese It is not acceptable for clergy to receive both the proceeds of a collection (eg Easter) and a 13th cheque unless the parish is not indebted to the Diocese and are giving at least 10% to the Diocese Layworkers should all have letters of employment Watch for staff who should be on pension and medical aid but are not. There may be hidden liabilities

Other matters to watch Municipal accounts Ensure that all liabilities are recorded or include a qualification in the report including the amount outstanding and the period to which it applies Parish groups (such as fellowships) that are not included in the financial statements This is not normally permitted and should also be reported upon should it happen Management accounts The DFB has requested all parishes to present accounts on a quarterly basis both to their Council and to the Diocese. Please assist parishes in their compliance with this request.

Thank you