2017 CHURCH AND MINISTRY SEMINAR Presented by Monica J. Stern, CPA, PLLC Sponsors Please Thank Our Sponsors! Gallagher
& Kennedy, P. A. American Church Group of Arizona Computers in Ministry Churches for Sale Realty Executives Wells Fargo Bank Nonprofit Banking Division Church Mutual Insurance Company Evangelical Christian Credit Union Talentum Group (MassMutual Financial Group) Christian Investors Financial MidFirst Bank Business Express
La Casa de Cristo Lutheran Church 2017 CHURCH AND MINISTRY SEMINAR Presented by Monica J. Stern, CPA, PLLC Fraud and the Church Fraud and the Church
Fraud is defined as: Wrongful or criminal deception intended to result in financial or personal gain. Fraud and the Church When does fraud happen? Opportunity No-one
checks the credit card Statement. Pressure Theres never any money left over. Rationalization They dont pay me enough anyway. Fraud and the Church Types of Financial Fraud: Embezzlement, also
called larceny, which is the illegal use of funds by a person who controls those funds. Internal theft, which is the stealing of company assets by employees, such as taking office supplies or products the company sells without paying for them. Fraud and the Church
Types of Financial Fraud: Payoffs and kickbacks, which are situations in which employees accept cash or other benefits in exchange for access to the companys business, often creating a scenario where the company that the employee works for pays more for the goods or products than necessary. Skimming, which occurs when employees take money from receipts and
dont record the revenue on the books. Fraud and the Church Embezzlement in churches is, sadly, common. Over 10% of churches report they have experienced embezzlement. That number is likely low, because churches dont want to admit it happens.
Fraud and the Church How does it happen? Only one answer - Lack of good, sound internal controls. Fraud and the Church Internal controls Are good stewardship no-one should have unfettered access to church funds.
Does not mean a lack of trust. Protect the innocent from being accused. Protect struggling people from being tempted. Fraud and the Church Internal controls in the Bible 2 Kings 12:9-16 the good: The priest took a chest and bored a hole in its lid. He placed it beside the
altar, on the right side as one enters the temple of the LORD. The priests who guarded the entrance put into the chest all the money that was brought to the temple of the LORD. Whenever they saw that there was a large amount of money in the chest, the royal secretary and the high priest came, counted the money that had been brought into the temple of the LORD and put it into bags. When the amount had been
determined, they gave the money to the Fraud and the Church The not so good With it they paid those who worked on the temple of the LORDthe carpenters and builders, the masons and stonecutters. They purchased timber and dressed stone for the repair of the temple of the LORD, and met all the other expenses of restoring the temple.They
did not require an accounting from those to whom they gave the money to pay the workers, because they acted with complete honesty. The money from the guilt offerings and sin offerings was not brought into the temple of the LORD; it belonged to the priests. Fraud and the Church The Church does not belong to the pastor and Church funds are not
his to spend personally. Boards must be responsible to ensure that Church funds are spent responsibly. They cannot be rubber-stampers of whatever the pastor desires. Fraud and the Church Embezzlement: Misuse of credit cards is the most
commonly seen embezzlement Employee expense reimbursements with fake receipts and mileage Cutting checks to self or family or a fake business and recording it as a legitimate expense to another payee Cutting extra payroll checks to self or to relatives Fraud and the Church
Controls to help prevent credit card embezzlement: Credit card charges must be supported by detailed receipts showing what was purchased. No exceptions! A statement is not a receipt. Credit card charges and receipts should be reviewed by a board member or some other individual that does not have credit card access.
Fraud and the Church Controls to help prevent credit card embezzlement: Individual credit cards should have reasonable, small limits. Require credit card receipts to be turned in daily and record the receipts as they are turned in. It is easier to control and prevent fraud in a timely manner.
Revoke credit card privileges for abusers. Fraud and the Church Controls to prevent employee expense reimbursement embezzlement: Have clearly defined policies for what the church will reimburse. Require detailed receipts for each
item. For meals, require a notation of who was involved and the purpose of the meal meeting. Fraud and the Church Controls to prevent employee expense reimbursement embezzlement: Review receipts for unusual items such as alcohol or food items that
would not normally be purchased. Design a form for reimbursements that requires the employees and supervisors signature with a statement that the reimbursement is true and correct. Fraud and the Church Controls to prevent fake check embezzlement:
Insist that the bank provide cancelled checks or copies of checks with the statement. The cancelled checks should be reviewed by someone with no access to cutting checks before the statement is given to anyone cutting checks. Fraud and the Church
Controls to prevent fake check embezzlement: Consider using an on-line payment service whereby payments are set up by one individual and released by another. Review general ledger expenses for unusual items compare actual expenses to budget and to prior year. Investigate unusual items.
Fraud and the Church Controls to prevent fake check embezzlement: The individual who signs checks should be completely independent. The check and all supporting documents should be reviewed by that individual and the support document
initialed by the individual. Fraud and the Church Controls to prevent extra paycheck embezzlement: Have payrolls approved by someone outside the accounting department, Review W-2 forms annually and compare to approved salary. Set up controls with outside payroll
service to require management authorization for pay rate changes. Fraud and the Church Internal theft: Not as big a problem as in businesses with inventory. Postage, copies, office and other supplies, coffee shop supplies are all susceptible.
Consider surveillance cameras in sensitive areas. Have clear policies stating that church assets are not to be used for personal purposes. Fraud and the Church Internal theft: Watch for increases in line items that cant be explained.
Monitor coffee shop and bookstore shrinkage through the use of good inventory software. Take regular inventory counts. Compare gross profit percentage to other churches or businesses. Fraud and the Church Payoffs and Kickbacks: Commonly affected:
Copier toner Office supplies Construction/maintenance contracts Fraud and the Church Controls to prevent payoffs and kickbacks: Use only pre-approved vendors. Have written pricing guidelines for
commonly purchased items. Pay attention to physical quantities on hand excess stock is a sign there may be kickbacks. Monitor line item budgets for increasing costs or excess ordering Fraud and the Church Controls to prevent payoffs and kickbacks: Periodically spot check prices being paid
for purchases. Consider having employees who purchase goods sign a conflict of interest statement. All board members who approve contracts should disclose and sign conflict of interest statements. Have a clear policy requiring employees to report any gifts from vendors.
Fraud and the Church Skimming: Removing cash from the offering Removing cash from special events and other places where cash is collected Fraud and the Church Controls to prevent skimming: Offerings:
Have a firm, unrelenting policy of requiring two unrelated individuals to be present at all times cash is handled. No exceptions. Always have a cash count sheet that is signed by at least two individuals doing the counting. Fraud and the Church Controls to prevent skimming:
Offerings: Have a secure place for two people to drop cash, such as a safe or other locked place. The safe should require two people to open a key and a combination or other dual entry. Neither person should have access to the others method of entry.
Fraud and the Church Controls to prevent skimming: Offerings: After counting, a copy of the count sheet should be forwarded to accounting and the cash promptly deposited. Individuals recording the deposit should not have access to cash. Counters should stamp and endorse
checks for later deposit. Fraud and the Church Controls to prevent skimming: Special events: Use prenumbered tickets where possible and reconcile after the event. Always have two or more people at the sales area.
Consider the use of cameras in high-risk areas. Fraud and the Church Other security issues: If scanning checks to the bank for deposit, do not retain the checks after the deposit clears, unless the checks are mutilated. Check your bank account often, at
least weekly. Your account and routing number are on every check and can be misused by anyone. Fraud and the Church All cash collected must be deposited do not allow payouts of cash from any collections. On Mission trips where cash is carried provide a log for individuals to record
cash expenditures. Have a second person observe each payment and initial the payment unless a receipt can be obtained. For safety, one person should not carry all the cash. Fraud and the Church The most important internal controls Tone from the Top if the pastor is the biggest offender, how can lower level
staff be expected to maintain controls? Establish a safe, non-retaliatory way for a volunteer or staff member to report abuses to a board member. Prosecute embezzlers. Do not make deals to pay it back, as you then cannot prosecute. This likely wasnt the first time and absolutely wont be the last. Fraud and the Church
Behavioral red flags of those committing fraud (many have more than one) 45.8% Living beyond their means 30.0% Financial difficulties 15.3% Control issues; wont share duties 7.8% Refuse to take a vacation 9.0% Complained about low pay 10.0% Addiction issues 13.4% Divorce/family issues
Fraud and the Church How fraud is detected: 39.1%A tip 16.5%Internal audit 13.4%Management review 5.6%By accident 5.5%By account reconciliation 3.8%Document examination 3.8%External CPA audit
Fraud and the Church Internal controls prevent the opportunity for fraud. Fraud and the Church
Luke 17:1-3 One day Jesus said to his disciples, There will always be temptations to sin, but what sorrow awaits the person who does the tempting! It would be better to be thrown into the sea with a millstone hung around your neck than to cause one of these little ones to fall into sin. So watch yourselves! Source for statistics: Report to the Nations on Occupational Fraud
and Abuse: 2016 Global Fraud Study Conducted by the Association of Certified Fraud Examiners 2017 CHURCH AND MINISTRY SEMINAR Presented by Monica J. Stern, CPA, PLLC Before You Build, Borrow and Sign
Before you build Someone from the finance team needs to be involved in construction meetings you have to know what is happening to help manage the process. Account for your building project appropriately in your books enter details for each item so costs can be properly segregated.
Before you build Costs that are part of the fixed asset: Architect, contractor and engineer fees Permits and development fees to city Utilities during construction Interest during construction Construction insurance and bonds Porta-johns, safety fence, signage, temporary hook-ups
Demo of any existing structures Salaries, benefits for employees managing construction Before you build Costs that are part of the fixed asset: Volunteer labor, at fair market value, if they enhance the project Supplies and other costs related
to workers such as ice, food etc. Before you build Costs that are NOT part of the fixed asset: Fundraising program costs or fees Loan fees, including appraisals and title fees (these costs are capitalized into a contra-loan account) Interest, utilities or other carrying
costs once the building is ready for use Before you build Costs that must be segregated: Land Land improvements by component Building structure, with major components identified like roof, A/C units, carpet, cabinets etc.
Furniture and equipment over and under your capitalization limit Carrying costs are allocated to the components Before you build Plan for the project to cost at least 10% more than you think. Remember to plan for the additional costs of operating the
new space build up to two years operating costs into your construction budget Before you borrow Prepare financial package Internal financial statements must reflect all assets, liabilities, revenues and expenses in accordance with GAAP (generally accepted accounting
principles). Be prepared to present clean financial statements for 2 3 years plus current year-to-date statements. Before you borrow Balance sheet (statement of financial position) must reflect all liabilities of the organization. Balance sheet must reflect all fixed assets
at cost, not appraisal. Depreciation must be recorded in compliance with GAAP. All accruals must be made and all accounts must be reconciled. Before you borrow Get outside help, if needed, to ensure the financial statements are correct before giving them to the lender. Problem areas Negative items on balance sheet except accumulated depreciation and contra
accounts Nonexistent bank accounts I have no idea what that number is accounts Balance sheets that dont balance Before you borrow Well-prepared and presented financial statements are indications of a good, responsible borrower.
Generally, lenders dont require a compilation, review or audit for borrowing, but may require one annually. Nothing destroys lender confidence faster than financial statements that arent correct or dont make sense! Before you borrow Other reports generally required: Giving unit reports:
Number of giving units Average amount per giving unit Report of total giving by giving unit in descending order (no names) Budget for current year or actual vs. budget on financial statements Attendance reports by week and/or by children vs. adults Before you borrow
Other reports generally required: If you have a capital campaign, with pledges or without, separate reporting for pledges received and due. Do not bury in operating results. Tax returns, if your organization files churches are exempt from filing May request resume of individual preparing the financial statements and for governing board or leadership
Before you sign READ THE PROPOSED COVENANTS THEY ARE NEGOTIABLE BEFORE YOU SIGN! Generally, lenders dont require a GAAP based compilation, review or audit for borrowing, but may have a covenant that requires one annually. This is an additional annual cost of
borrowing. Before you sign If you have not properly maintained your financial statements in accordance with GAAP, dont agree to provide GAAP based financial statements annually. Alternate options: CPA prepared financial statements
Cash basis compiled financial statements with or without disclosures (reviews and audits require disclosures) Before you sign Watch the dates for submitting financial statements can you comply? If not, negotiate a longer deadline. If CPA prepared statements are required, check with your CPA. Prepayment penalties 1 to 5% may make
refinancing prohibitive Key person life insurance additional annual cost to consider can key person meet the health requirements? Before you sign Borrowing restrictions the lender may prohibit or limit any future borrowing during the life of the loan. This generally includes leasing equipment, like copy machines.
Compliance with ratios for debt service similar to terms to issue the loan -1.0 to 1.25 ratio Net income + depreciation + interest expense = ?? Annual payments on debt May have limits on compensation for key staff Before you sign May require the church to maintain bank accounts or retain a cash
reserve balance with the lender Be sure you understand that a 20 or 25 year amortization doesnt mean you have a 20/25 year loan. The loan period is generally 5 years, but may have an extension option built in or not! 2017 CHURCH AND MINISTRY SEMINAR
Presented by Monica J. Stern, CPA, PLLC Qualified Small Employer Health Reimbursement Arrangements Qualified Small Employer Health Reimbursement Arrangements The 21st Century Cures Act was signed in December 2016
Allows small employers without group plans to fund an HRA for employees for both medical expenses and medical insurance. This was not previously allowed under the Affordable Care Act and would result in a $100 per day per employee penalty. Qualified Small Employer Health
Reimbursement Arrangements A small employer has fewer than 50 fulltime equivalent employees - working 30 hours per week is full-time. An employer cannot offer a group plan to any of its employees. All eligible employees must be covered under the same terms, except for age/family size variations as related to health insurance.
Qualified Small Employer Health Reimbursement Arrangements Can exclude some employees: Part-time Seasonal Under age 25 Less than 90 days service Collective bargaining employees Qualified Small Employer Health
Reimbursement Arrangements All contributions to the plan must be employer funded employees cannot fund their plans. Annual limit on the employer contribution is $4,950 for single employees and $10,050 for employees with family expenses for 2018. These are maximum amounts.
Qualified Small Employer Health Reimbursement Arrangements Expenses that can be reimbursed are: Any documented healthcare costs, including co-pays, prescriptions, dental costs, eyeglasses etc. If it is an allowable medical deduction on a tax return, it can be reimbursed. Documented medical insurance premiums, even if purchased on the exchange or even
if not ACA qualified insurance (Minimum Essential Coverage), but not healthcare sharing ministry payments. Qualified Small Employer Health Reimbursement Arrangements Employer requirements: Provide written notice 90 days before the start of the plan year for: Amount of the benefit
Informing employees that if they receive an ACA subsidy, they must notify the exchange of the amount of the benefits under the plan Consequences of not having an insurance plan that offers minimum essential coverage all benefits are taxable. Qualified Small Employer Health Reimbursement Arrangements
Employer requirements: Must have a written plan with a summary plan description Include amount of benefits paid on employees W-2 forms Box 12 code FF Qualified Small Employer Health
Reimbursement Arrangements Tax consequences: Employees with health insurance with minimum essential coverage will not be taxed on benefits. Employees without health insurance with minimum essential coverage will be taxed on all benefits received from the plan. The employer has no liability for these taxes, nor is required to report the taxable
amount. But it must report all payments in box 12 of the W-2 form, code FF. Qualified Small Employer Health Reimbursement Arrangements To set up a plan, contact a benefit specialist. This is not do-it-yourself as there are many compliance requirements. Watch the 90 day notice
requirements too late for 01/01/2017 effective date. 2017 CHURCH AND MINISTRY SEMINAR Presented by Monica J. Stern, CPA, PLLC DOL White Collar Wages Where are we now?
DOL White Collar Wages Where are we now? In 2014, President Obama directed DOL to review the minimum salary for exempt employees, currently at $23,660 per year. For an employee working a 40 hour week, this is equivalent to $11.38 per hour.
For an employee working a 50 hour week, this is equivalent to $8.27 per hour. DOL White Collar Wages Where are we now? Poverty level for a family of four is $24,250. This was the issue to be resolved. DOL set new salary at $47,476 to be effective on December 1, 2016
In November of 2016, a temporary injunction was issued to keep the rule from taking effect. DOL White Collar Wages Where are we now? DOL White Collar Wages Where are we now? In August 2017, the rule was struck down
as being unconstitutional, permanently blocking it from becoming law. The judge stated: Congress intended for there to be an exemption for bona fide executive or administrative employees based on duties By setting the salary so high, DOL effectively eliminated the duties test Automatic COLA adjustments are unlawful
DOL White Collar Wages Where are we now? DOL had a request for public comment period expiring on September 25, 2017. Comments solicited: Whether the salary levels in the enjoined 2016 rule effectively identify employees who may be exempt Whether a different salary level (presumably lower) would be preferable, and why The basis and methodology that should be used to determine a different salary level
The RIF also poses these specific questions for comment: Should the new rule include provisions for automatic increases (indexing)? Should geographic regions have differing salary levels? DOL White Collar Wages Where are we now? DOL had a request for public comment period
expiring on September 25, 2017. Comments solicited: Whether different white collar exemptions should have different salary levels Whether there should be multiple total compensation levels set for the exemption for highly compensated employees (perhaps by geography) Should the highly compensated exemption be subject to indexing?
The impact of the 2016 Final Rule on employers who made changes before it was enjoined. DOL White Collar Wages Where are we now? Some employees are exempt from minimum salary requirements under current standards Clergy courts, and a few DOL references indicate they are
exempt from minimum wage and overtime. Teachers are exempted by DOL Employees who do not work in interstate commerce DOL White Collar Wages Where are we now? What happens now. DOL will make a new rule after
confirming it has the authority to do so. Likely the wage will go up at some point to $30,000 to $36,000, maybe $32,000 Perhaps in 2018?? For now, follow existing 2004 rules and come back next year 2017 CHURCH AND
MINISTRY SEMINAR Presented by Monica J. Stern, CPA, PLLC Ministers and the Social Security System Ministers and the Social Security System Two social security systems:
FICA Federal Insurance Contributions Act - taxes are withheld from the employees paycheck and matched by the employer. SECA Self-Employed Contributions Act taxes are assessed in connection with the individual income tax returns.
Ministers and the Social Security System Ministers are NEVER covered by FICA. Ministers are ALWAYS covered by SECA, unless they have filed form 4361 to exempt out of the Social Security system. Ministers and the Social Security
System A minister is considered to be an employee for all tax purposes other than Social Security. A minister is considered self-employed ONLY for Social Security purposes. A ministers wages are reportable on a W-2 form, not a 1099 form. Ministers and the Social Security
System The W-2 form does not indicate whether a minister has elected out of the Social Security system. Those who prepare payroll do not need to know whether or not the minister has elected out of the Social Security system. Ministers and the Social Security
System If a minister elects, he or she may have Federal or State income taxes withheld, but it is optional. Many ministers will request Federal withholding in an amount equal to their income tax plus SECA. Treat only as Federal withholding and not Social Security.
Ministers and the Social Security System A minister must be treated as a minister for Social Security purposes it is not an option if the employee is performing ministerial functions. Fix now for 2017! 2017 CHURCH AND
MINISTRY SEMINAR Presented by Monica J. Stern, CPA, PLLC Supporting Faith-Based Organizations through Arizona Tax Credits Supporting Faith-Based Organizations through AZ Tax Credits
Arizona has a number of tax credits available to donors to faith-based organizations: Student Tuition Organizations Qualified Charitable Organizations Qualified Foster Care Organizations Also available Public Schools Supporting Faith-Based Organizations through AZ Tax Credits
Tax credit programs are a way to support missions at no cost to a Church or to the donor. Donor receives a federal, but not state, charitable deduction and receives a dollar-for-dollar tax credit for contributions that meet State criteria. Supporting Faith-Based
Organizations through AZ Tax Credits Example donor gives $400 to UMOM, a qualified charitable organization. Donor receives a tax deduction for $400 on the federal, but not state, return Donor receives a tax credit of $400 on the state return. The $400 is refunded by the state assuming the donor has at least a
$400 tax at the state level. Supporting Faith-Based Organizations through AZ Tax Credits A donor can participate in all tax credit programs and receive benefit, assuming their state tax obligation is high enough. Excess contributions are carried
forward for five years. Supporting Faith-Based Organizations through AZ Tax Credits Student Tuition Organizations (STO) Two different credits available Original and Switcher (aka Plus, Overflow etc.) Can recommend a school or a specific child (not your dependent or swap)
Credit maximums for 2017 are $1,089 for single or head of household, and $2,177 for married filers Supporting Faith-Based Organizations through AZ Tax Credits Qualified Charitable Organization Credit Limited to preapproved charities providing basic needs for AZ
residents Credit maximums for 2017 are $400 for single or head of household, and $800 for married filers Must contribute directly to the charity, not through the church Supporting Faith-Based Organizations through AZ Tax Credits Qualified Foster Care Organization
Credit Limited to preapproved foster-care charities providing foster care services Credit maximums for 2017 are $500 for single or head of household, and $1,000 for married filers Must contribute directly to the charity, not through the church
Supporting Faith-Based Organizations through AZ Tax Credits Public School Tax Credit Limited to public schools, including charter schools, for extracurricular programs Credit maximums for 2017 are $200 for single or head of household, and $400 for married filers Fees paid for your own child also
qualify as a tax credit, but not a deduction Supporting Faith-Based Organizations through AZ Tax Credits All credits can be made up to the April filing deadline for the prior year. However, tax deduction is for the year it is actually paid. Lists of STOs, Qualified Charitable
Organizations and Qualified Foster Care Organizations are available at www.ador.gov Supporting Faith-Based Organizations through AZ Tax Credits CAUTION! Do not provide tax advice to Church members. All information should include a form of this statement:
Since individual circumstances will vary, please consult your tax professional before participating in the Arizona tax credits program to ensure your own benefits under the program. 2017 CHURCH AND MINISTRY SEMINAR Presented by
Monica J. Stern, CPA, PLLC Non-cash Contributions Vehicle Donations IRS publication 4302 is a must-read before you accept a vehicle donation. Special rules apply to vehicles, including: Motorcycles Recreational vehicles
Collectors cars Buses Any motorized vehicle manufactured for use on public roads as well as boats and airplanes Vehicle Donations Donors deduction depends on what the charity does with the vehicle after the donation.
Deduction is generally not fair market value or appraisal value or blue book value. Vehicle Donations If the charity sells the vehicle, the donor deduction is limited to the sales price of the vehicle received by the charity. If the charity has significant
intervening use of at least one year after the donation, the donor deduction is the fair market value of the vehicle. Vehicle Donations If the charity intends to make material improvements to the vehicle before selling it, the donor deduction is fair market value.
If the charity gives the vehicle, or sells it substantially below market value, to a needy individual as part of its programs, the donor deduction is fair market value. Vehicle Donations If the vehicle is auctioned to the highest bidder, the contribution amount is the winning bid, or fair
market value, whichever is less. If the vehicle is raffled, the donor deduction is $500 regardless of the raffle proceeds or the fair market value of the vehicle. Vehicle Donations Special IRS forms are required: 1098-C filed by the charity for all vehicles with a claimed value of
more than $500 with a copy to the donor within 30 days of the sale or the donation, if not selling. Donor attaches this form to his return. Vehicle Donations 8283 filed by the donor on an individual tax return when all noncash gifts are over $500. If the deduction is over $5,000, the charity must sign the form acknowledging
the receipt of the gift, but not the value. If the vehicle was not sold, and the deduction is more than $5,000, the donor must have a qualified appraisal. Vehicle Donations Form 8282 the charity files this form if it initially signed form 8283 and sells the vehicle within three
years. A copy must be given to the donor. A wildly differing sales price may cause the IRS to review the donors valuation. Vehicle Donations Client calls to my office: Recreational vehicle worth $40,000 Austin-Healey worth $65,000
Muscle car worth $80,000 Harley Davidson worth $15,000 The muscle car was scheduled to be raffled. Donor deduction = $500 Vehicle Donations Do not provide tax advice on vehicle donations advise the client to contact a tax professional.
The rules are complex and you do not want an unhappy donor. Stock Donations If the stock is publicly traded stock (on an exchange), no appraisal is needed. If the stock was held at least one year, the donors deduction is generally fair market value at the
time the donor donated it. Stock Donations Donor will need to file form 8283 for the donation - Section A only, regardless of amount. The Church does not need to sign form 8283 for publicly traded stock.
Stock Donations Donor will need a letter from the Church stating the following: Number of shares of stock Name of Company whose shares were donated Date received by the Church (this may be different than the date the donor donated it) A statement that no goods or services
were received by the donor for the gift Stock Donations Do not indicate a share price or total value of the donation. Donor determines this. Do not post the amount of the gift on the donor records. Only cash contributions belong on the donor statement. You can record a non-cash gift against a
pledge in most software. Other Non-cash Donations Donors can deduct out-of-pocket costs for volunteer activities. If the donor contributes more than $250 in one day, the donor must have a receipt from the charity acknowledging the donation containing the statement regarding
no goods or services. Receipt must be in hand before filing the return. Other Non-cash Donations It is never appropriate to include a stack of donor receipts as a cash contribution on the donors statement. For donors with a large amount of volunteer expenses, a church may issue a letter thanking the donor for
his volunteer services in connection with the church. This will help support the donor in case of audit. Raffle and Auction Donations Raffle tickets are not donations ticket purchases are gambling. Auction purchases are not donations they are purchases of merchandise. If a donor pays more
than fair market value for the item, he may have a partial donation to be determined by the donor. Raffle and Auction Donations Donors who contribute an item for raffle or auction are making a noncash donation. Receipt should indicate a date and description of the item donated and must contain the no goods or services
statement. Do not mention value. No Goods or Services Every single donation receipt, whether cash or non-cash, must contain a statement that the donor received no goods or services (except intangible religious benefit) in exchange for their contributions. A taxpayer recently lost a $65,000,000
deduction when the charity failed to include this statement on the receipt. That failure was the only reason! 2017 CHURCH AND MINISTRY SEMINAR Presented by Monica J. Stern, CPA, PLLC The Fair Wages and Healthy Families
Act Earned Paid Sick Time Please note visit www.azica.gov for the latest rules! Updated through 10/15/2017 The Industrial Commission of Arizona (ICA) is still proposing rules and interpretations of the act. This presentation is updated through the latest posting by ICA dated 10/15/2017 only and changes may occur that will
affect employers. The Fair Wages and Healthy Families Act Earned Paid Sick Time Proposition 206s effective date was July 1, 2017 All Arizona employers are subject to the act except the State of Arizona and the US Government. There are no other exemptions! Even if an employer is exempt from the
minimum wage portion of the act, an employer will be subject to the earned paid sick time portion. The Fair Wages and Healthy Families Act Earned Paid Sick Time Employees begin accruing sick time on July 1, 2017 or at the commencement of employment, whichever is later. Earned Paid Sick Time accrued is compensated
at the same hourly rate and with the same benefits, including health care benefits, as the employee normally earns. The Fair Wages and Healthy Families Act Earned Paid Sick Time Employers with 15 or more employees must accrue a minimum of one hour of earned paid sick time for every 30 hours worked, but an employee may not accrue or use more than
40 hours per year, unless the employer provides more. The Fair Wages and Healthy Families Act Earned Paid Sick Time Employers with fewer than 15 employees must accrue a minimum of one hour of earned paid sick time for every 30 hours worked, but an employee may not accrue or use more than 24 hours per year, unless the employer
provides more. The Fair Wages and Healthy Families Act Earned Paid Sick Time ACCRUE OR USE very important concept. An employee may accrue or carryover far more time than the employer is required to allow them to use in a year. However, carryover can be limited to 24/40 hours.
The Fair Wages and Healthy Families Act Earned Paid Sick Time How to count the number of employees? 15 or more Arizona employees for some portion of a day in each of 20 different calendar weeks in the current or preceding year. Must count temporary and part-time as well. Weeks do not need to be consecutive.
What happens if you meet the requirement mid year??? Consider changing the accrual at the point of meeting the 15 employee requirement?? The Fair Wages and Healthy Families Act Earned Paid Sick Time Employer must establish a regular and consecutive 12-month period for its year. Could use a calendar year or fiscal year or
anniversary year If other than July through June, will require additional accrual for short period. The Fair Wages and Healthy Families Act Earned Paid Sick Time No requirement to accrue for time worked before 07/01/2017. Employees hired on or before 07/01/2017 may take the time as soon as it is accrued.
Employer can, at their option, require employees hired after 07/01/2017 to wait 90 days before using sick time, but must accrue from date of hire. The Fair Wages and Healthy Families Act Earned Paid Sick Time Accrual calculations: All employees for all employers accrue at 1 hour of sick time for every 30 hours worked.
Exempt employees (not paid hourly) are presumed to work 40 hours unless their regular workweek is less. If less, use the regular workweek hours. The Fair Wages and Healthy Families Act Earned Paid Sick Time Maximum Accruals: Employers with less than 15 Arizona employees will accrue a maximum of 24 hours of sick
time per employee per year. Employers with 15 or more Arizona employees will accrue a maximum of 40 hours of sick time per employee per year. The Fair Wages and Healthy Families Act Earned Paid Sick Time Example: Jane works for a large employer. She works 25 hours per week. Jane will reach the full accrual
of 40 hours of sick pay after 48 weeks of work. If she works for a small employer, she will reach 24 hours after 28.8 weeks of work. The Fair Wages and Healthy Families Act Earned Paid Sick Time Employers have the option to front-load time instead of accruing i.e. provide 24/40 hours at start of the year. If estimating the front-load, the employer must
adjust to actual if an employee works more hours. The Fair Wages and Healthy Families Act Earned Paid Sick Time Rate of pay required for paid sick time Not addressed in the proposition, but the Industrial Commission proposes:
Single hourly rate pay that rate Multiple hourly rates Pay the rate employee would have The Fair Wages and Healthy Families Act Earned Paid Sick Time Rate of pay required for paid sick time Not
addressed in the proposition, but the Industrial Commission proposes: Salaried pay based on the hourly rate that equals the salary divided by the number of hours the salary is intended to compensate for that pay period. If not known, use 40 hours. No additional pay is due when the
employees use of sick pay results in no reduction in the regular salary. (i.e. sick pay can substitute for regular salary.) The Fair Wages and Healthy Families Act Earned Paid Sick Time Rate of pay required for paid sick time Not addressed in the proposition, but the Industrial
Commission proposes: For commissioned, fee for service or piece rate employees, use (in this order) the agreedupon hourly rate, the wages the employee would have been paid The Fair Wages and Healthy Families Act Earned Paid Sick Time Rate of pay required for paid sick time Tips are not included in the rate of pay
calculation, but all sick pay must be paid at a rate that is at least minimum wage. Must include shift differentials or hazard pay, but not overtime, bonuses, holiday pay or incentive pay. The Fair Wages and Healthy Families Act Earned Paid Sick Time An employer can opt to loan the employee earned paid sick time at employers discretion.
It is not required. Sick pay must be allowed to be used in the smallest increment in which the employer tracks time i.e. tenths of an hour or actual minutes. The Fair Wages and Healthy Families Act Earned Paid Sick Time Carryforward provisions: Two options:
1 Pay out all unused sick pay time at the end of the year AND provide full amount of allowable time for the next year on the first day of that year i.e. pay out balance of 24/40 hours on 6/30 and accrue 24/40 on 7/1. The Fair Wages and Healthy Families Act Earned Paid Sick Time Carryforward provisions: Two options:
2 Carry forward unused earned paid sick time to the next year and accrue 1 hour for every 30 worked. Note, employee is still limited to using 24/40 hours in the next year. i.e. employee has 17 hours on 06/30 and accrues 40 more by 12/31. He is limited to using 40 hours in the year, unless employer allows otherwise. The Fair Wages and Healthy Families
Act Earned Paid Sick Time Carryforward provisions: ICA rules allow the employer to limit the carryover to 24/40 hours if not paid out. This rule will help reduce unreasonable and unusable hours from accruing. The Fair Wages and Healthy Families Act Earned Paid Sick Time Carryforward provisions:
There is no requirement that the employer pay out earned paid sick time upon termination of employment, whatever the reason. However, if the employee is rehired within 9 months, unearned sick pay is reinstated. The Fair Wages and Healthy Families Act Earned Paid Sick Time Covered absences under the Act for employee or for family members:
Medical care for mental or physical illness, injury or other health condition Closure of the business, a school, care center or quarantine under order from a public health agency The Fair Wages and Healthy Families Act Earned Paid Sick Time Covered absences under the Act for employee or for family members:
Domestic violence, sexual violence, abuse, or stalking, including legal, shelter, counseling, relocation, etc. to ensure safety Family member is defined in the statute. May not meet a religious definition of family member The Fair Wages and Healthy Families Act Earned Paid Sick Time Employer must pay earned paid sick time upon the
request of employee either orally, in writing, by electronic means or any other means agreeable to employer. The employer cannot limit how employee requests sick time. An employee can be required to follow a written policy that contains procedures for providing notice, if the employee was provided with the policy. Exceptions for emergency situations or incapacitation. Authorized individuals (family, friend, doctor) can request earned paid sick leave in appropriate circumstances.
The Fair Wages and Healthy Families Act Earned Paid Sick Time Employee must make a good faith effort to provide notice of the need to use earned paid sick time, including expected duration. The Fair Wages and Healthy Families Act Earned Paid Sick Time The ICA will not pursue enforcement when an
employer, in good faith, designates and pays out earned paid sick time when an employee is absent for an event allowable under the act, even if the employee has not specifically requested the paid leave. The Fair Wages and Healthy Families Act Earned Paid Sick Time Employers cannot require employees to find a substitute worker.
Employer can require reasonable documentation that the leave is covered under Arizona law for leaves of 3 or more days Employers cannot require that an employee explain the nature of the health condition or the details of abuse or stalking. The Fair Wages and Healthy Families Act Earned Paid Sick Time Written notice is required by July 1, 2017 or at
hire, if a later date: See link below for official poster. THIS POSTER REFLECTS MINIMUM REQUIREMENTS ONLY. https://www.azica.gov/sites/default/files/AZ%20 Earned%20Paid%20Sick%20Time%20Poster%2 02017.pdf The Fair Wages and Healthy Families Act Earned Paid Sick Time Employer must provide employees, either on paycheck
or attachment to paycheck, the following information: Amount of earned paid sick time available. The amount of time taken to date in the year in hours. The amount of time taken to date in the year in dollars. Can be on-line access as well. The Fair Wages and Healthy Families
Act Earned Paid Sick Time Record keeping retain records for four years. Must post notices in the workplace. Must provide all employer contact information in writing upon hire. Provide notice that informs employee of all rights and responsibilities under the Act. Maintain payroll records that meet statutory requirements.
The Fair Wages and Healthy Families Act Earned Paid Sick Time Implementation: Determine and communicate the following: Year to be used Smallest increment of time Method for providing pay-stub information Cash-