Handling Church Income

Generally, taxpayers who itemize may deduct contributions of money or property made to charitable organizations. The Revenue Reconciliation Act of 1993 has changed the way donors can substantiate their donation. Prior to 1993, all a donor needed to support a deduction was a canceled check. For contributions made after December 31, 1993, the following new rules apply. 

Substantiation of single contributions of $250 or more. 

Any single contribution of $250 or more can no longer be substantiated by a canceled check. Donors will not be allowed a tax deduction for an individual contribution (cash or property) of $250 or more unless they receive a written acknowledgment from the charitable organization that satisfies the following requirements:

The receipt is in writing.

The receipt identifies the donor by name.

For donations of property, the receipt describes the property but does not state a value of the property.

The receipt shows separately each individual contribution of $250 or more.

The receipt states whether or not the charitable organization provided any goods or services to the donor in exchange for the donation, and if so, the receipt includes an estimate of the value of those goods and services.

If the charitable organization provides no goods or services to the donor in exchange for a contribution, or if the only goods or services the organization provides are "intangible religious benefits," then the receipt must contain a statement to that effect. An appropriate statement would be "No goods or services were provided to you by the church in connection with any contribution, or their value was insignificant or consisted entirely of intangible religious benefits."

The receipt must be received by the donor on or before the date the donor files a tax return claiming the deduction.

"Quid pro quo" contributions of more than $75.

A quid pro quo contribution is one that is a payment that is partly a contribution and partly a payment for goods or services received in exchange for the contribution. For every quid pro quo payment the charitable organization receives, it must provide a written statement to the donor that satisfies the following conditions:

The statement informs the donor that the amount of the payment that is tax-deductible is limited to the excess of the contribution over the value of any goods or services provided by the charitable organization

The statement provides the donor with an estimate of the value of goods or services furnished by the charitable organization.

In the handling of church income a climate of personal trust is usually assumed in the congregational setting. This is healthy and proper. However, some systems of handling money place individuals in a position in which their honesty can be questioned or in which they may be tempted to sin. Prudent and consistent practices in handling money are needed to maintain a trustful climate.The following policies should not be interpreted as a lack of trust in the financial officers of a congregation. Rather, they offer protection for their reputations. No person with this kind of responsibility should be placed in a position where any suggestion of mishandling of funds must be defended by the word of one person against that of another. This system is intended to provide verification and support of sound practices at every step. This is important for the church as a trustee of "public" funds. 


Income Handling Principles

Normal handling of funds in the congregation involves several steps. Some general principles:

1. No individual should be required or allowed to handle the congregation's income alone at any time.

2. It is preferred that no cash be stored in the church.

3. It is preferable for several people to be involved on a rotating basis in handling income.

4. All income transactions (receipts and disbursements) should be properly recorded and verifiable. It is understood that the recording of income/gifts from individuals of the congregation is a confidential matter and such records are only available to the Pastor, Financial Secretary, and the Official Board when required.

5. It is preferable that the pastor should not serve in the position of the Treasurer and pastor should not have check signing authority over any church account.


Suggested Steps in Handling Income

1. Immediately following the service, two persons carry the contents of the offering plates to a room for counting or placed in an adequate safe for counting the following day. Church funds/offerings should never be taken to a private home for counting.

2. The envelopes are immediately opened by at least two persons. Envelopes are marked as to intent and purpose if for other than undesignated offerings.

3. Balances between envelope totals and cash/check totals are reconciled.

4. A summary report outlining the various accounts income is to be credited to, is prepared and initialed by at least two persons.

5. A deposit slip is prepared and at least two persons bring the deposit directly to the bank.

6. A copy of the deposit slip and the summary report are given to the treasurer and to the financial secretary.

7. Persons in the above steps should be rotated periodically. It is best if the treasurer and the financial secretary are not personally involved in the above procedure.

8. The term of office, served by the treasurer, should be limited to a specific period of time. The successor to the treasurer should not be from persons of the same family nor should this office be rotated between the same individuals serving as financial secretary and treasurer.

9. Persons involved in handling income should not be involved in any way in the handling of expenditures.

10. Funds collected from other activities (fundraisers, special events, etc.) should be directed to those responsible for recording and making bank deposits of these funds. A copy of the deposit slip and summary report is given to the treasurer and financial secretary.

11. Members should be encouraged to make their offering by check, not cash.