SECTION F:
FINANCE AND GOVERNANCE
Accounting and financial records
F1
Accounting Policies and Practices
F2
Auditors and Independent Verifiers
F3
Budgets & Other Internal Controls (Add Controls over
collections)
F5
Dedicated giving
F7
Financial Assistance from Diocesan Funds
F8
Parish Contributions to Diocesan Needs
F9
Sunday Collections
F10
Potential Taxable Parish Income
F11
F-1
F1: ACCOUNTING AND FINANCIAL RECORDS
A.
CANONS AND RULES
Canon 32
Rules schedule F
B.
DIRECTIONS
1.
PROPER BOOKS OF ACCOUNT
Schedule F3 provides that the Churchwardens, assisted by the Parish
Council, are responsible for proper books of account to be kept for the
Parish, which account for all income and expenditure and all assets and
liabilities.
It is common today for many parishes to maintain their books using a
computerised accounting package. The Diocese offers a simple accounting
package (Pastel My Business) to all parishes which has been set up to meet
parish accounting and reporting requirements.
2.
FINANCIAL YEAR
The financial year of the Diocese and all parishes ends on 31 December
each year.
3.
PRESENTATION OF ANNUAL FINANCIAL STATEMENTS
Before the Churchwardens can jointly vacate their office at the Annual
Vestry Meeting of the Parish, they shall present audited or independently
verified Annual Financial Statements to the meeting for adoption, having
previously been approved by Council and signed by the Churchwardens.
4.
ACCOUNTING AND REPORTING STANDARDS
As far as it is practical we ask you to comply with Generally Accepted
Accounting Practice. A summary of the more important accounting
practices relevant to parishes is provided as Appendix 1 to this Handbook.
The financial statements of every parish must be consolidated with those of
the Diocese and all organisations registered under our Diocesan Public
Benefit Organisation (PBO) number and filed with SARS in terms of the
PBO Act. This major process is simplified if all parishes use consistent
accounting practices and report in a consistent format.
F-2
A standard reporting format is provided to all Independent Verifiers and to
Auditors on request, and a copy of this is included as Appendix 2 to this
handbook. Electronic copies of the Excel file may be obtained from the
Diocesan Secretary.
5.
TRUSTS AND SPECIAL FUNDS
In terms of schedule F to the rules all money received by a parish shall be
used for the purpose for which it was collected or given. Trusts are
sometimes set up within parishes or funds collected or given for specific
purposes or projects. These must all be accounted for in the books of the
Parish, although they can be shown as separate funds in the balance sheet.
Income received in each fund and expenditure there from can be shown by
way of note to the financial statements.
C.
FOR MORE INFORMATION
1.
2.
Revised:
Contact your Auditor or Independent Verifier
Contact the Diocesan Secretary
May 2012
F-3
F2: ACCOUNTING POLICIES AND PRACTICES
As far as is practical we will comply with Generally Accepted Accounting
Practice (GAAP). However it is recognised that GAAP has become very complex
in order to deal with financial reporting of companies, and international reporting
standards have added to this complexity.
The intention in this statement of policies and practices is to ensure that the
annual financial statements of parishes fairly present the results and state of
financial affairs of each parish on a consistent basis, across the Diocese and from
year to year. The format, content and wording should make them easily
understandable to parishioners. A recommended form of presentation is included
as appendix 3.
Most parishes have well established accounting practices, which should only be
changed if they fail to meet the above principles or the practices outlined below.
The parish auditor or independent verifier is expected to report on this. See
section C 7.
Specific policies and practices are mandated as follows:
1. Fixed Assets
1.1. Should be capitalized at cost, subject to the following
1.1.1. Land is stated at cost and is not depreciated as it is deemed to have
an indefinite life
1.1.2. Buildings
 State at original cost, plus the cost of additions or major
improvements to the existing structures, which increase or
enhance capacity (AC 123 Para 27).
 Repairs and maintenance and replacement of components, e.g.
gutters should be written off in the year incurred.
1.1.3. Furniture and equipment
 Individual items costing less than 5% of gross parish income or
R5,000 should be written off on purchase.
1.2. Depreciation
1.2.1. Buildings are not depreciated, if the residual (market) value
approximates the cost, which is normally the case.
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1.2.2 Movable assets are depreciated on a straight line basis over their
estimated useful lives, which should be re-assessed annually. The
following rates are proposed:
 Motor vehicles
5 Years (20%)
 Furniture
10 Years (10%)
 Electronic equipment, including software purchased with it
3 Years (33.3%)
 Silver chalices and valuable artworks Need not be depreciated
1.3. Disposal of fixed assets
Surpluses/(deficits) on the disposal of property, plant and equipment
are credited/ (charged) to income. The surplus or deficit is the
difference between the net disposal proceeds and the carrying
amount of the asset.
1.4. Fixed asset registers
 A fixed asset register must be maintained and the total value must
agree with the annual financial statements.
 Unique numbers should be allocated to all assets on the register,
and physical verification must be performed annually
 All individual assets must be recorded in the fixed assets register
at written down value, with a minimum of R1.00.
 Donated assets should be capitalized at fair market value and
donation income credited.
1.5. Annual Financial Statements
 They should include a standard note stating that ownership of all
property (moveable and immovable) is vested in The Diocesan
Trustees (Article XVIII of Constitution)
 The insured value of each asset category should be shown in the
notes.
2. Accruals and provisions
2.1. In general a provision should be raised when the parish has a present legal
or constructive obligation as a result of a past event, and it is probable that
it will have to be settled in cash. Material expenses for the current
financial year paid after the financial year end must be accrued.
F-5
2.2. The cost of leave pay for lay staff must be specifically provided for (this is
a new requirement). The cost of all short-term employee benefits is
charged during the year in which the employee renders the related service.
The accruals for employee entitlements to wages, salaries and annual
leave represent the amount which the company has a present obligation to
pay as a result of employees’ services provided to the balance sheet date.
2.3. Leave pay for Clergy is NOT accrued. Any leave not used during a year
is forfeited.
2.4. Income not received is normally not accrued. Only income actually
received (or received or advised shortly after the year end, e.g. interest on
deposits with the Deposit Fund) should be taken into account. Pledges not
yet paid should not be accrued.
2.5. Provision must be made for any irrecoverable debts (financial assets)
owing to the parish.
3. Annual Financial Statements
3.1 All activities conducted by the parish and its various groups or
components must be included in the annual financial statements.
 It is acceptable to deal with groups individually or collectively on
the Balance Sheet as
“ABC Group Funds”
(the credit balance)
“ABC Group Fund Investments.”
(the debit balance)
 The movements, i.e. income and expenditure, on each group’s
funds should be shown by way of note.
3.2 Fund accounting
Funds are often received or allocated for a specific purpose, but not
spent or only partially spent in the financial year. The following
practice should be applied:
 All income must be shown in the income statement and then the
relevant amount transferred to the Fund as an application of
income. The purpose of the fund must be clearly described.
 An amount of cash equal to the Fund balance should be kept in a
separate bank or Diocesan Deposit account.
 This also applies to any funds set aside for augmenting retirement
benefits of clergy and lay staff.
F-6
3.3 A simple cash flow statement is to be included as a requirement from
the 2009 financial year-end.
3.4
A standard note should specify that the parish is only subject to
taxation on non-public benefit income if consolidated non-public
benefit income exceeds 5% of the gross income of the Diocese. The
amount of such parish income should be disclosed in the note. (See
appendix 5 for more information on this matter).
F-7
F3: AUDITORS AND INDEPENT VERIFIERS
A.
CANONS AND RULES
Canon none
Rule H-1.2 Business of annual vestry
Schedule E Parish auditors and verifiers
B
DIRECTIONS
1.
Appointment
An auditor or independent verifier is to be appointed at each annual vestry
meeting for the ensuing year.
If there is a nomination to appoint a new auditor to replace the present
auditor, the procedure set out in paragraph 3 of schedule E must be
followed.
2.
Qualifications
An auditor must be qualified, either as a Chartered Accountant or with a
similar qualification, but does not need to be a registered auditor with the
Public Accountants and Auditors Board (PAAB). Registered auditors have
very stringent auditing standards and it is difficult to find a firm prepared
to conduct an audit pro-deo or for a modest fee which a parish can afford.
The auditor must also be independent of the parish.
It is for this reason that we developed the alternative of an Independent
Verifier. This was done with the approval of SAICA, the South African
Institute of Chartered Accountants, provided such appointments meet the
independence criteria. The verifier:
o must be a member of an Anglican parish
o must not be a member of the parish being verified
o must not be related to any person in the parish leadership or in any
way involved in the financial affairs of the parish, present or recent
past
o must be reasonably well versed in the basics of accounting, i.e. have
some training or experience, and be capable of preparing annual
financial statements.
F-8
A certificate under the hand of the Bursar or Deputy Bursar is required to
authorise a verifier to act under the relevant rules.
3.
Duties of auditors and verifiers
The auditor or verifier is required to report on the annual financial
statement to be presented to the annual vestry meeting. The statements
should be approved by the Churchwardens and Council before the auditor
or verifier finalises his report as they have primary responsibility for the
fair presentation of the statements.
An auditor is required to conduct his audit in terms of Generally Accepted
Auditing Standards, which will determine the format of his report, whether
qualified or unqualified. Alternative formats for the verifier’s report are
given in the Manual, with flexibility to describe any qualifications that
may be required.
4.
Training of verifiers
The DFB has developed a manual of procedures for verifiers, which is
included as Appendix 3 to this Handbook, and annually runs one or more
training courses for new verifiers who volunteer for this valuable ministry.
In addition, at year end the Diocesan Office prepares a Parish file for each
verifier containing much of the information required to verify the financial
statement. This is all specified in the Verifiers’ Manual.
C.
FOR MORE INFORMATION
Contact the Diocesan Secretary
F-9
F5: BUDGETS AND OTHER INTERNAL COUNTROLS
CANONS AND RULES
Canon 29
Rules: Schedule F
B.
DIRECTIONS
In terms of Canon 29, Churchwardens (and Chapelwardens) are
responsible for the preparation of annual estimates of revenue and
expenditure (budgets) and for the execution of Council’s policy on finance.
Schedule F provides that:
 Council shall assist and advise the Churchwardens in the management
and control of the revenues of the parish.
 Churchwardens shall submit to each monthly meeting of Council a full
statement of income and expenditure for the preceding month
 The following specific controls are to be implemented:
o
o
o
o
Receipts issued for all cash received and deposited in the parish
bank account.
All payments shall be approved either by the Churchwardens and
Incumbent or by Council and shall be in accordance with the
budget approved by vestry.
No payments shall be approved for which the necessary funds are
not available.
All cheques are to be signed by two authorized signatories and all
expenditure supported by appropriate vouchers.
The following checklist is provided to assist in evaluating the adequacy of
internal controls which are considered sound:
Budgetary control
 Has an annual budget been prepared and approved by Council and
Vestry?
 Are monthly accounts prepared which measure performance against
budget?
 Are variances from budget explained to Council and approved by it?
F - 10
Controls over income
 Are there clear procedures in place to record all income, particularly
Sunday collections, as soon as possible after receipt and for regular
banking? (See Section F10)
 Is any expenditure made from cash income before banking properly
recorded and approved?
 Are these procedures working effectively?
Controls over expenditure
 Are there clear procedures for requesting expenditure e.g. a requisition
form which must be supported by vouchers and approved by the
responsible portfolio?
 Are cheques signed by two signatories only after the approved vouchers
have been presented?
 Is a list of cheque and cash payments made and to be made presented to
Council for approval at each meeting?
 Are all vouchers properly filed by month for easy reference and safekeeping?
 Where electronic banking is done, do both releasers have access to the
vouchers when releasing?
Accounting records
 Are suitable books or other forms of accounting record kept which
enable monthly accounts to be prepared and will meet the needs of the
auditors or Independent Verifier?
 Do you have an auditor or Independent Verifier?
 If not, have you discussed the matter with the Diocesan Office?
Human resource matters
 Do you maintain a file for each clergy person, lay staff member and
volunteer which contains all the information required by law, including
a contract of service or employment letter?
 Are you satisfied that no emoluments of any kind have been paid to
clergy, lay staff or volunteers without the deduction of taxes and
payment of UIF, in accordance with our tax laws?
F - 11
Controls over assets, registers and records
 Is a proper record of all Parish moveable assets maintained and kept on the
Parish premises?
 Do all these assets exist, are they maintained in good order and are they
adequately insured?
 Are Parish buildings being properly maintained?
 Are the parish buildings and contents adequately covered by insurance,
bearing in mind the replacement costs of these assets. (Advice may be
sought from the Independent Verifier or from a local builder or estate
agent.)
 Are proper registers of all Parishioners, Services, Baptisms Funerals and
Marriages being maintained?
 Are back-up copies of computer files made regularly and kept off the
premises?
 Are the parish records kept in fire-proof storage?
Reporting to the Parish
 Is there regular reporting to the Parishioners on the financial and other
performance of the Parish?
 Is this guided by the Parish Vision and related strategies?
 How frequently does it happen?
 Are both oral and written reports provided?
 Are written reports sent to all Parishioners or are they only seen by those
attending services?
 Are there suitable forums for Parishioners to discuss progress with
members of Council?
C.
FOR MORE INFORMATION:
Contact the Diocesan Secretary
F - 12
F7: DEDICATED GIVING
CANONS AND RULES
Canons None
Rules None
B.
DIRECTIONS
The Bible makes it clear that all members of God’s Church owe the Church at
least a tithe, being 10% of their income. As the tithe was applicable long
before taxation was invented, there can be no clarity as to whether the 10%
applies to income before or after tax. Whichever is correct 10% of income
after tax is required. The Bible also makes it clear those thank offerings and
gifts to the needy are very much to be encouraged and are over and above this
10%.
Parishes have a developed a variety of ways of collecting this tithe and no
Parish now relies only on money put into the collection plate. It is normal to
ask each parishioner or Parish family to commit themselves to a monthly
amount which may be paid:



by stop order into the Parish Bank Account
by electronic payment monthly into the Parish Bank Account
in a monthly envelope provided by the Parish:
These payments are all called by different names according to the tradition of
the individual Parish. Names such as DG, Pledge, Dues are all common.
A great deal of the gospel records of Jesus teachings are on the subject of
money and so it is appropriate that much of the teaching of our Church to our
members should be on the same subject. It is common for the Churchwardens,
the Incumbent or any other qualified member of the Parish to talk to the
congregation on this subject. Remember too to ensure that someone reports
back to the congregation about the details of Parish, Diocesan and Provincial
finances. It is important that the congregation have some idea of what the
Parish, the Diocese and the Province does with their contributions.
Details of individual pledges are to be kept confidential, so it is common for
one of the Churchwardens or a nominated member of Council to help in this
regard, but the information must still be kept confidential. Computer software
F - 13
is available to help keep track of who has pledged. Suitable password controls
should be used to maintain confidentiality.
It is understood that pledges are only an undertaking by members of the
congregation to do their best to contribute as they have promised and in no
way are pledges in arrears owing to the Parish. For this reason it is considered
incorrect for outstanding pledges to be accrued in the year-end accounts. It is,
however, quite acceptable for the responsible person to remind a member that
their monthly Pledge is in arrears. This can be done lovingly to show the
member that the Church values their contribution and is concerned that the
member may be having problems for which they may need prayer or some
other form of support. However, they should never be pressured to catch up
their arrears and it is totally unacceptable to suggest that the member should
not receive communion until the arrears have been caught up.
The Diocesan Secretary has a variety of information, stationery and forms
which can help a Parish with their Dedicated Giving programme.
F - 14
F8: FINANCIAL ASSISTANCE FROM DIOCESAN FUNDS
A.
CANONS AND RULES
Rule C5.3 - Diocesan Finance Board (DFB)
B.
DIRECTIONS
1.
DEPOSIT FUNDS AND INVESTMENT FUNDS
The DFB has the power to operate deposit and investment funds as laid
down in Schedule A of the Constitution of the Church.
2.
BASIS ON WHICH LOANS OR GRANTS WILL BE MADE
The Diocese will normally only assist new developments and the
expansion of ministry within the Diocese including the provision of extra
housing in any growth plan.
Loans or grants will be made on a first-come-first-served basis taking into
account the ability of the applicant parish or organisation to obtain
commercial funding and to become self-sustaining in the medium term.
The financial records of the parish must be up to date and the annual and
special vestry meetings required by the Rules of the Diocese to approve
projects at the parish level must have been held.
Assistance will only be granted to projects approved by the Trustees or
Diocesan Finance Board and in which the Plans' Committee and Diocesan
Finance Board have been used as specialised advisors.
3.
LOANS FROM THE DEPOSIT FUND
The Diocesan Deposit Fund exists to receive surplus funds available in the
parishes and in the Diocesan Organizations and deposit these funds with
leading banks so as to maximise the income of the depositors. It is
authorised by Provincial Rules to lend a maximum 25% of the total
deposits it has received on to Diocesan projects at rates of interest to be
determined by the DFB. Loans will be made on the following conditions:
o Interest will be charged at a rate to be determined by the DFB. The
current rate is 2% below prime so as to give a benefit to depositors
and borrowers.
F - 15
o Repayment is to be made within five years by monthly debit order
and at an agreed rate. Such conditions to be understood and
approved by a parish vestry. There will be no penalty for early
repayment of any loan,
o If granted for buildings, the building supervision and contract for
work to be done must be acceptable to the Trustees of the Diocese of
Johannesburg.
o The parish funds collected for the project must be used first before
use is made of the borrowing facility from the Deposit Fund.
o Reporting of the status of loans granted will be published in the
annual financial statements of the Trustees.
4.
LOANS FROM THE DEVELOPMENT FUND
o Interest will be charged at the rate currently charged by the Trustees to
borrowers from the Development Fund or such other rate as the
Trustees may agree.
o Repayment is to be made within five years by debit order and at an
agreed rate. Such conditions to be under-stood and approved by a parish
vestry. There will be no penalty for early repayment of any loan.
o The monthly loan repayment and the stipend package to be mandatory
upon the parish and paid before any other parish expenses.
o If granted for buildings, the building supervision and contract for work
to be done must be acceptable to the Trustees of the Diocese.
o The parish funds collected for the project must be used first before use
is made of the borrowing facility from the Development Fund.
o Reporting of the status of loans granted will be published in the annual
financial statements of the Trustees.
F - 16
5.
GRANTS FROM THE DEVELOPMENT FUND
Application may be made for grants from the development Fund to provide
“seed” funding for a new ministry. Application forms are available from
the Diocesan Office. In considering whether a Diocesan unit should be
given a grant (as against a loan) the Diocesan Trustees will wish to
consider the following:
o What the applicant has done/is doing to raise money from other
sources
o The long term sustainability of the project
o The long term value of the new ministry.
C.
FOR MORE INFORMATION
Contact the Diocesan Secretary
Revised:
May 2012
F - 17
F9: PARISH CONTRIBUTIONS TO DIOCESAN NEEDS
A.
CANONS AND RULES
Rule Schedule L Parish Contributions and the Diocesan Finance Board
(DFB)
B.
DIRECTIONS
1.
DFB CALL FOR CONTRIBUTIONS
After consulting with parish representatives at a meeting convened late in
each financial year by the Bursar, at which the state of affairs of the
Diocese and a budget for the ensuing year is presented, the DFB shall call
for contributions from each parish towards the Diocesan operating
expenses. The contributions required are of two types:
o The amount required to pay the Parish clergy stipends and
contributions paid by the Diocesan Office on behalf of the clergy
o A voluntary monthly contribution towards the operating expenses of
the DFB.
2.
IF DFB IS NOT SATISFIED
If the DFB is not satisfied that the contribution volunteered is fair, it shall
delegate a representative to meet with the Parish Council to discuss the
matter and reach agreement. If agreement is not reached the matter may be
referred to the Bishop whose decision shall be final.
C.
FOR MORE INFORMATION
Contact the Diocesan secretary
Revised:
May 2012
F - 18
F10: SUNDAY COLLECTIONS
A suggested guide to controlling Sunday (and other services) collections
1.
Two sidespeople per service
a) The sidespeople should be rotated on a weekly basis to ensure that there
is a segregation of duties. Members of the same family cannot be
sidespeople at the same time.
b) Count collection for each service (separate).
c) Enter cash/cheques and number of envelopes in Collections Register
(MUST SIGN REGISTER).
d) Collections locked in parish safe.
e) Completes Service Register with number of Attendees/Communicants.
2.
Parish Office/Church Warden (TWO People)
a) Count collection and match to Sunday list.
b) Envelopes are opened and recorded in the Dedicated Giving/Tithe
register.
c) The deposit slip is prepared.
d) Deposit taken to the bank as soon after Sunday as possible.
3.
Treasurer/Bookkeeper
a) Uses Deposit book as prime entry in the Cash Book.
F - 19
F11: POTENTIOAL TAXATION OF PARISH INCOME
1.
Introduction
As you are no doubt aware there have been numerous changes to taxation
legislation over the past couple of years. The Diocese of Johannesburg is
registered with SARS as a Public Benefit Organisation (PBO) and as such
is exempt from tax on income received as a result of conducting Public
Benefit Activities. Public Benefit Activities (PBA) include, but are not
restricted to, church services, counselling, casual letting of church property
for local community functions, fete’s and other one off fundraising
initiatives.
The following income sources do not qualify as tax free income and
income derived from these sources, net of direct expenses, could be subject
to taxation at the current tax rate applicable to business. (2012 = 29%)
Rental of church property (rectories etc.) to persons who are not ministers
of religion
Rental of space for Cell phone masts
Rental of Property for advertising boards
Rental of church property, i.e. church hall for long term periods for secular
use (e.g. yoga training)
In terms of current legislation the following applies:
2.
To qualify as a PBO
The sole or principal object of the Diocese must be to carry on one or more
of the PBAs listed in the ninth schedule of the PBO Act.
The Diocese may, itself, conduct the PBAs or it may provide funds to
enable other approved PBOs to carry on these activities
Notes on PBAs:
 They must be carried on in a non-profit manner and with an altruistic or
philanthropic intent.
 They must be carried on for the benefit of the general public. This may
include a specific sector of the general public (e.g. Anglicans) but may
not be a small and exclusive group.
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3.
Trading and Partial Taxation
Current Provisions
PBO’s are permitted to carry on business or trading activities on a tax-free
basis within specific parameters, but will be taxed on the receipts and
accruals derived from any business undertaking that falls outside of the
parameters of these basic trading activities, after deducting the basic
exemption.
Basic Exemption
An amount constituting the greater of 5% of the total receipts and
accruals, including donations by parishioners, or R100,000 will be exempt.
Passive investment of surplus funds in an interest bearing investment with
a financial institution is not currently regarded as a business undertaking or
trading activity. (This applies to the total Diocesan interest income)
Categories of trading activities not subject to tax are:
Integral and directly related trade (Collections, Dedicated Giving,
Pledges, etc.)
Occasional Trade (An undertaking or activity of an occasional nature and
undertaken substantially with assistance on a voluntary basis without
compensation) Church fetes, raffles, dances, social evenings, other fund
raising efforts where the funds are used to assist with the ministry of the
church would be regarded as occasional trade.
4.
Municipal rates and taxes
The Diocese and the various units that make it up are also exempt from
paying rates and taxes to Metropolitan Councils for activities that fall
within the scope of the Ninth Schedule referred to above.
Exceptions to the above are any property that is rented to a third party and
vacant land. Such income is not only potentially liable for normal taxation
but the property will also attract rates and taxes. If you are in any doubt
contact the Diocesan Office for assistance.
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Suggested Guidelines for Church Councils
 Keep proper records of all trading that does not fall within the
definition of a PBA.
 These records must include both monetary values, time periods
involved and the area used for such activities.
 Be aware of and plan for the impact of activities on the municipal
zoning of the church property. The quantum of income generated
from rentals might be sufficient to justify municipalities removing any
tax exempt status. However the additional costs might be justified by
the size of income earned.
In such cases at least 85% of the property, both in terms of size (area) and
period of use, must be for PBAs to retain exemption. The period of use
refers to the entire life of the property from time of construction or
purchase.
5.
Capital Gains Tax
Capital Gains Tax (CGT) could apply when a building is sold if the
building has been used for trading that does not fall within normal (PBA)
church activities during its life.
The potential CGT is dependent on the above business use in terms of
period, physical size and monetary value. If any of the above exceed 15%
of the total period, size or monetary value of the property then CGT could
be payable.
The capital gain is based on the amount received at date of sale less the
value of the building at 1 January 2007. All buildings in the Diocese were
valued during 2008 and SARS has a formula which facilitates calculating
the value at 1 January 2007.
FOR MORE INFORMATION
Contact the Diocesan secretary
Revised:
May 2012
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