Operations 103 Finances: Class 2

Level 1: Certificate in Operations Operations 101—Staffing Operations 102—Communications Operations 103—Finances Operations 104—Finances Operations 105—Facilities

Operations 103—Finances 1. Cash & Fungible Assets 2. Income 3. Expenses 4. Budgets 5. Reporting 6. Audits & Financial Reviews 7. Financial Health 8. Tax & Legal 9. Insurance for Employees 10. Insurance for the church

Chris Gunnare Chief Operating Officer Lutheran Church of Hope West Des Moines, Iowa

Cash Flow Management Since cash flow describes how and when money comes into the church and is spent, cash-flow management involves projecting income and expenses with the goal of paying bills on time and creating a surplus for growth.

Cash Flow Management Project revenue each June for following fiscal year Use historical data to project future giving

Cash Flow Management Project expenses each July for following fiscal year Payroll should be 50% of general fund giving 10% of general fund goes to external mission partners & projects Operational budget is set using historical data (utilities, interest, phone, internet, etc) Program budget set based on strategic objectives, allowing us to move resources based on what we are focusing on

Cash Reserves / Surpluses Liquidity simply means available funds. The goal of liquidity management is to have enough funds available for current expenses and new ministry opportunities. Managing liquidity is tougher than it seems because income doesn’t always come in when expenses need to be paid. And we always have unexpected expenses. Cash Flow Fluctuation + Unplanned Events + Potential Opportunities = Operating Liquidity Balance Target

Cash Reserves / Surpluses How much cash do you have in reserve? Is it enough? 60 to 90 days of expenses is ‘average’ Does your senior pastor know? Does your council know? Do you have/need a sweep account? How much interest is your reserve earning? What interest rate are you paying on loan(s)? Work with experts in your area you trust Work with ECCU (link on xpastor.org) Excellent white papers on many subjects we covered today

Income – Sources & Types Cash & Check Covered last week Stock Process to receive Hold or Sell Property Donor values property Donor reports to IRS

Income – Sources & Types Property (cars, boats, planes) – Pub Sells vehicles and uses proceeds exclusively to fund it’s charitable programs Regularly uses vehicles for significant period of time to conduct activities that further it’s charitable programs. Sells the vehicle after it makes a material improvement to the vehicle and uses proceeds to … Distributes the vehicles at a price significantly below fair market value to needy individuals in direct furtherance of its charitable purpose of relieving the poor and distressed. If partner with for-profit agency – ensure it’s legal.

Income – Sources & Types Legacy Giving Life Insurance Estate Planning Tax advantage for donor Endowment Manage internally Manage professionally Manage through community foundation

Income – Charitable Contributions Charitable contributions generally must satisfy six requirements. 1)Give of cash or property 2)Claimed as a deduction in year it was made 3)Unconditional and without personal benefit to donor 4)Made to or for the use of the charity 5)Within allowable legal limits 6)Properly substantiated

Restricted & Designated Funds Restricted funds are charitable gifts whose use is restricted by donors to churches. The church has no discretion in the management and disbursement of such funds. (could be mission partner, denomination, etc) Designated funds are charitable gifts with the stipulation that they be used for a specified purpose. Such funds could support a building project, mission fund, organ fund, etc. It is very important to note these gifts are held by the church “in trust” for the specific purpose outlined by the donor.

Restricted & Designated Funds Policy for Restricted & Designated Funds Counters/Tellers flag ‘new’ funds Finance team reviews and contacts donor Council approves all new funds Building Fund (delay but not abandoned) Project abandoned Contributions to foreign charities

Restricted & Designated Funds Where do my donations to Willow Creek go? General Operating Fund: Donations to Willow Creek Community Church support its General Operating Fund. This fund makes possible the day-to-day ministries and services of the church. Special funds: Periodically, opportunities to designate a donation to a specific ministry initiative become available. Celebration of Hope and the Year-End Fund are two examples of ministry-initiative funds with specific start and end dates. To designate your contribution to a specific fund, simply indicate the name of the initiative (e.g., COH or YEF) on the memo line of your check or on your envelope.

Income – Unrelated Business Income (UBIT) Net income from unrelated activities will be subject to UBIT if the following three conditions are met: The activity constitutes a trade or business, The trade or business is regularly carried on, and The trade or business is not substantially related to the organization’s exempt purpose. Examples Advertising / Gaming / Merchandise / Rental Income / Bookstore / Coffee Shop / Catering / Concerts

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Justin Gottlieb Questions/Thoughts for Money Matters Chapter 3 & 4: * What maximizes giving in your church? * The need for mission and vision in successful budgeting.