CHURCH AUDITS

 

            The Upper New York Annual Conference (and I assume, most Conferences in the United Methodist Church, as well as the Book of Discipline requires an annual audit of the financial records of the local church.

            Many of us hear the word “audit” and think a tax audit by the Internal Revenue Service or companies finding embezzlement because of an audit. Of course, both of those are true, but we need to consider a different question:

WHAT IS A LOCAL CHURCH AUDIT?

 

                A local church audit is an independent evaluation of the financial reports and records      and the internal controls of the local church by a qualified person or persons for the purpose of reasonably verifying the reliability of financial    reporting, determining whether     assets are being safeguarded, and whether the law, the Discipline, and policies and procedures are being complied with.

 

            The Discipline mandates that every local church finance committee shall make provision for an annual audit of the records of the financial officers of the local church and all its organizations and shall report to the charge conference in order to

 

            (1) to protect persons the local church elects to offices of financial responsibility from unwarranted charges of careless or improper handling of funds;

 

            (2) to build the trust and confidence of financial supporters of the church in the way their money is being accounted for (trust and confidence lead to improved patterns of financial support);

 

            (3) to set habits of fiscal responsibility to assure that when there is turnover in       personnel there will be continuity in accountability and nothing will fall through the cracks;

            (4) to assure that gifts made to the church with special conditions attached are     consistently administered in accordance with the donors’ instructions and thus let           donors know their gifts are used as intended; and

 

            (5) to provide checks and balances for sums received and expended.

 

           

            I know all of that may sound horrible, but:

 

Conducting an audit is not a symbol of distrust!

 

It is a mark of responsibility!

 

It is good stewardship demonstrated for all to see!

 

It is a message to local church donors that you care about their gifts!

 

            A church audit is important. I do many internal church audits every year, and while that work includes preparing the “fund balance report” and looking at bank statements, paid bills, payroll records, deposit tickets and counting sheets, I think the most important reason and outcome of a local church audit is to assist the local church is having good policies and procedures in place that will assure, as much as possible, that assets are protected, that donors’ gifts are used properly, that the best possible people are in place to do the work; and that the financial aspects of the church are used in the best way to enable the work of the church, what the church has been called by God to do gets accomplished.

 

 

Please feel free to contact me at (315) 427-3668 or susanranous@unyumc.org if you have any questions about an internal church audit.

 

                        QUALIFIED CHARITABLE DISTRIBUTIONS (QCD)

 

            I know it’s the start of a new year, but I wanted to talk about required minimum distributions from retirement plans. For those of us fortunate to have retirement funds set aside, there are rules on how and when to take those funds out. Required minimum distributions are the amounts that are required to be withdrawn by every person every year starting with the year they turn 72.

            The amount is calculated on worksheets, based on the age of the person, and the amounts in their retirement accounts. These required minimum distributions are mandatory. These withdrawals are often taxable and can affect the amount of Social Security that is taxable, as well as reduce the amount of medical expenses and other itemized deductions that might be allowed.

            For some people who don’t need the funds, they’re required to withdraw it anyway. Some of them set it aside, but still have to pay taxes on it now.

            A Qualified Charitable Distribution (QCD) might be worth considering. This allows someone to have a required minimum distribution (retirement distribution) sent directly from the retirement account to a charity, like your church.

            There are potential benefits from giving a Qualified Charitable Deduction directly to the church.

             If someone has Social Security income or something else that becomes taxable on their tax return because of other income, with a QCD, it doesn’t appear on the tax return, so gross income is reduced and the taxability of Social Security would likewise be reduced.

 In other words, if someone gives a QCD directly, it isn’t taxable income. If a taxpayer receives the total distribution, they pay taxes on that total amount of the and then give the contribution themselves. Since most people aren’t able to itemize, there is no tax benefit to the charitable contribution. Making a QCD is a smart way for individuals who don’t itemize deductions to still receive tax benefits from their charitable donations.

 If someone has significant medical expenses that could allow some deductibility as itemized deductions, the adjusted gross income that calculates the base for deductible is reduced with a QCD, so more medical expenses would potentially be deductible.

 Ultimately, if someone receives the retirement benefit directly and gives it to the charity themselves, the person is giving less than 100% because the retirement benefit is taxable.

 QCDs are a smart option for retirees who don’t need the additional money from their IRA — they can respect the RMD mandate without having that distribution included in their yearly income.

 The tax savings they offer let you maximize your charitable impact.

 Please note that because the retirement distribution isn’t taxable, the charitable contribution isn’t deductible either.

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Please feel free to contact me at (315) 427-3668 or susanranous@unyumc.org if you have any questions about a QCD.