of income and expenditure categories is given in Figure 1.
Figure 1: Typical income and expenditure categories in church accounts
| Income Pledged giving Tax recovered Loose collections Fees for weddings, etc. Investment income Hiring of hall Magazine sales Bookstall sales Refreshment sales Fund-raising activities Grants and legacies Transfers from accounts Other | Expenditure Parish share (or any payment to central body) Maintenance of building Office expenses Maintaining minister’s home Worship expenses Sunday school Music Youth work Donations to charities Church staff Stationery and telephone Electricity and gas Hall-hiring expenses Magazine expenses Refreshment expenses Transfers to accounts Other |
Each church probably may have at least one other item of income and expenditure which is relevant. A city church may receive significant income from letting out its car park during the week. A church in a tough area may spend significant sums on security. If there is a significant item of income and expenditure specific to your church, there should be a category for that. However, still keep the number of categories of each to around ten to fifteen.
Anglican churches may wish to have separate categories for parochial fees. These are paid in respect of weddings and funerals at a statutory rate and passed to the diocese. In practice, churches often charge a single fee, particularly for weddings, which includes the statutory fees along with additional fees such as for flowers, music, orders of service and other church facilities. Such fees should be apportioned between the various categories.
Another category which may be useful is that of Agency. This relates to situations where the church receives money to pass on to someone else. This includes parochial fees payable to the diocese, donations for specific charities, and payments earmarked for particular church officers. An Agency category may be created in both income and expenditure. At the end of the year, the balance on the Agency category should be zero as all payments received for payment to someone else should have been paid.
It is good practice for columns to be added to the same categories of income and expenditure on each page. Although not essential, this is good practice as it reduces the likelihood of mistakes and makes the books simpler to understand. The exact order of the categories is purely a matter for the convenience and preference of the treasurer.
Too much analysis is counter-productive. Normally, a church needs to know how much it costs to maintain its building. It does not need separate figures for cutting the grass, polishing the floor, cleaning the windows, mending pews and so on. Similarly, a church does not need to know separate figures for the vicarage water rates and altar candles. Even the telephone bill need not be disclosed separately, but can be included with stationery or office expenses. If the minister or church council wishes to know such information, it is better to produce it as a separate exercise on request, than to produce vast amounts of analysis on the off-chance that someone may want it.
All accounts are intended to paint a picture. A good picture focuses the eye on what is important, and does not distract the eye with irrelevant detail. If you do believe that some detail is needed, still prepare the simple accounts which give the overall picture, and then cross-reference the relevant part of the accounts to a separate statement giving the details.
There is always an ‘Other’ or ‘Sundry’ category for both income and expenditure for those items which do not fit into any other category, such as insurance claims, legal action and similar unusual items. Provided the total for such items is neither large nor significant in any other way, this is perfectly proper.
The process of how to analyse expenditure is explained below.
Remember that the law and accounting standards only state the minimum information you must disclose. You are always at liberty to disclose more information if you believe it is necessary to help understand the accounts. In practice, it can be better to have the information available but still to produce just simple accounts.
Understandable records
It must be possible for another treasurer or an accountant to look at the records at any stage of preparation, and understand them. There must never be a need for a treasurer to explain how the records are kept: it must be obvious.
If a treasurer has to explain the accounting records to an accountant or auditor, the treasurer is not keeping proper records. It is convenient and usual for the treasurer to give an overview explanation to the auditor or examiner, but it must never be an essential part of understanding the records.
The basic requirements of understandable accounts are:
every page and every document has a heading, such as ‘Deposit account, income April 2012’
all items are written neatly
there are no deletions or amendments which make it unclear what the figure is
no cryptic abbreviations are used (the auditor may not know that PYG is the parish youth group)
there is a proper audit trail (see Audit Trail).
Accurate records
It is obvious that records have no purpose unless accurate. However, that does not necessitate spurious accuracy, particularly with regard to rounding and estimating.
For rounding, the general rule is:
keep records to the nearest penny
publish accounts to the nearest pound.
Nothing is gained by reporting that the annual income was £147,692.14 rather than £147,692. This is an example of unnecessary detail crowding the true picture.
Sometimes it may be necessary to estimate an amount. The church may have agreed some building work and not yet know the full cost, or be in dispute about the cost. In such cases, the treasurer must:
estimate a reasonable figure, erring on the side of caution
state in the accounts that it is an estimate.
Timely records
Financial records must be kept up to date, in that all income and expenditure should be entered in a cash book or computer equivalent within a reasonable time. For income, that is likely to be no more than a day or two. For expenditure, provided details are noted on a cheque stub, it is probably sufficient that expenditure is written up once a month.
A treasurer usually needs to do some work at least once a week. Many treasurers find it convenient to set aside a regular time each week for this. A treasurer should not start work in a blaze of enthusiasm and then let things slip once the enthusiasm has waned.
Accessible records
Records must be accessible both to the treasurer and to anyone else who is legitimately entitled to see them. This always includes the minister, and usually it will include the churchwardens, trustees or equivalent. The auditor or examiner has the right to see such records whenever he wishes; the audit is not necessarily restricted to an audit period. Such people must know where the accounts are kept.
There is no objection to keeping the accounts at the treasurer’s home rather than on church premises, provided the exact location is known to at least two other people, such as an assistant treasurer and the auditor (or examiner).
The right to inspect the accounts does not mean that the auditor can knock on your door and demand immediate sight of the records in the middle of a dinner party. It does mean that such a person may ask to see the records at a convenient time and place at no more than a few days’ notice.
If you go away on holiday or for any