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From his column God, Government and Me—Money in the Churchgod-government-me-01-15-1

Early each calendar year is the best time for a church to take a check-up on these three important issues. Let’s look at them today.

Housing Allowance

If there were changes in the pastoral housing exclusion resolutions for 2015, hopefully your church has already made them. If not, now is the time to do this. Any increase in a housing allowance designation will become effective on the date the housing allowance designation is made and cannot be retroactive.

The good news is the constitutional battle against the housing allowance is over—for now. In November 2014, the Seventh Circuit Court of Appeals struck down the challenge of the Freedom from Religion Foundation. So, housing allowances should continue to be designated as in the past.

Health Insurance Reimbursements

While the change in the health insurance reimbursement rules has been with us since the Affordable Care Act (ACA) became law, the lack of clarity in its application has created challenges for churches.

In the past, many churches reimbursed staff for health insurance plans in which the staff members participated, and these reimbursements were tax-free. Then, it appeared the reimbursements could be made, but they would be taxable. Finally, the Department of Labor has clarified that these reimbursement arrangements, even if reported as taxable payroll to the employee, represent a violation of the ACA market reform rules. This is really bad news because the reimbursements could subject the employer to a penalty as high as $100 per day per employee. The guidance is effective for health plan years beginning on or after January 1, 2014. There are three exceptions to the ACA penalties:  

    1. A one-employee health plan;
    2. An employer-provided group insurance plan, whether furnished alone or accompanied by an integrated medical reimbursement plan; and
    3. Reimbursement plans that cover only ancillary benefits such as dental, vision, or long-term care premiums.

Unless one of the above exceptions is met, churches with health reimbursement arrangements should immediately take the following actions:

 

  • Discontinue any payments or reimbursements of employee individual health insurance policy premiums, and any reimbursements under employer-provided medical reimbursement plans;
  • Rescind any written plan documents, retroactive to the first day in 2014 when the plan was effective; and
  • Redefine any amounts paid to employees for these reimbursements as taxable compensation. 

The same regulations also prohibit, in effect, employers from providing health reimbursement arrangements (HRAs) or health flexible spending arrangements (FSAs) to their employees without also offering group health plans that meet Affordable Care Act requirements.

Digital Giving

Churches large and small are jumping on the digital giving train. Gifts are flooding in through church websites and other portals as givers use debit and credit cards, ACH (Automated Clearing House) debits to their bank accounts, electronic checks, charges to their cellular accounts, and even virtual currency. These transactions are being made using a variety of devices, including computers, tablets, and smart phones, as well as church-giving kiosks.

Unfortunately, digital giving also brings with it new opportunities for fraud—perhaps greater opportunities for fraud than with physical offerings. Here are some keys to preventing digital fraud:

 

    • Limit authorized changes to payment processor accounts.After initially establishing a payment processor relationship, changes to the account routing number should be limited to high-ranking church staff, none of whom participate in the reconciliation of digital funds or have access to the giver management system.

      This prevents any one person with access from changing the routing of funds from the church’s account to a personal account without being caught. Unless this system is in place, the routing number could be changed to divert incoming funds from a church account to an employee’s personal account for just a few hours or a few days each month. The church would still receive most of the digital gifts and might not notice the missing funds. If the payment processor does not notify the church of routing number changes or, if they send a notification and it goes to the person in control of making the change, no one else will know the funds have been diverted.

 

    • Require regular payment processor transaction reports. All payment processor transaction monthly reports should be received by a high-ranking church leader, in addition to a staff member more directly involved with the transactions. Use the reports to confirm the proper routing number was used.

 

  • Reconcile digital giving accounts regularly.A high-ranking church official should begin each examination of digital gifts with the following reconciliations: (a) bank accounts to payment processor transaction reports, (b) giving records to payment processor transaction reports, and (c) giving records to bank accounts.

Dan Busby is a certified public accountant (CPA) and president of the Evangelical Council for Financial Accountability (ECFA)—an accreditation organization that sets standards for governance, financial management, and fundraising/stewardship for churches and other nonprofits across the country.

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