Church funds are sacred and must be carefully accounted for and protected (GH 34.1). The most effective tool bishops and clerks have to manage these sacred funds is the ward budget. Careful ward budget planning and monitoring can prevent the unfortunate occurrence of overdrawing the ward account.

Preparing the Annual Budget

Planning and implementing the ward budget involves 5 basic steps:

1. (Bishopric) Review amount spent during the previous year

2. (Bishopric) Ask organizations to estimate budget needs for the coming year

3. (Bishopric) Compile the budget using wise budgeting practices, being equitable, and ensuring projected expenses do not exceed anticipated budget allowance funds

4. (Clerks) Enter budget amounts to each category and subcategory as approved by the bishop in LCR. Also enter estimated quarterly budget allowances. Verify annual budget assigned does not exceed total estimated budget allowances.

5. (Bishopric and Clerks) Monitor and review budget status regularly throughout the year

Additional instructions are found in the General Handbook chapter 34 and in the online Help Center. The stake finance clerk can also offer additional assistance.

Special Note regarding Distribution Center Charges:

When planning the budget also include funds to cover Distribution Center charges. Whenever a unit orders items from the Distribution Center an IROP is generated and the charge is made to the unit's Distribution Center Charges budget category.

As an alternative, a Distribution Center charge can be re-characterized to a different budget category. For example, a charge for an order of Primary manuals can be re-characterized from the Distribution Center Charges category to Primary. If an order has items for multiple organizations, the single Distribution Center charge can be split between multiple budget categories.

Budget Allowance Funds

The amount of budget funds each unit receives is paid quarterly based on attendance and membership stats on the Quarterly Report from the second prior quarter. The schedule is as follows:

• Q1 20Y1 Quarterly Report submitted in March determines Budget Allowance for Q3 20Y1 paid in July

• Q2 20Y1 Quarterly Report submitted in June determines Budget Allowance for Q4 20Y1 paid in October

• Q3 20Y1 Quarterly Report submitted in September determines Budget Allowance for Q1 20Y2 paid in January

• Q4 20Y1 Quarterly Report submitted in December determines Budget Allowance for Q2 20Y2 paid in April

On 1 Aug 2021, the Church added ability to process donation batches online in LCR-Finance.

The process to enter donations in LCR is very similar to MLS. You will also find the interface familiar if you have used Online Donations. The user will start by selecting the Donations option - the default tab is Enter Donations - and will follow this 3-step process:

1. 1. Record donations

      • Select the donor

      • Identify the donation category and amount

      • Enter the amount in the appropriate donation instrument (check, currency, or coin)

      • Click Save and Add New Donation

      • When all donations have been recorded click Continue to move to the review stage.

   2. Review donations

      • Once all donations have been reviewed, click the check box at the bottom of the page and click Continue.

   3. Balance donations

      • Confirm the donation instrument totals. When the donation instruments are in balance with the recorded donations, click the Submit button.

   4. Approve donations

      • After submitting the batch, the user is automatically signed out of LCR and the user who is assisting with the recording and counting of the donation batch will sign in to approve the batch. This must be done on the same device used to record the donations.

After approval of the donation batch, the Donation Batch and Bank Deposit reports should be printed and stored with the donation slips and included with the checks, currency and coins in the bank deposit as usual.

Additional help documentation can be accessed from Help Center. Clerks needing additional assistance can contact the stake finance clerk.

On 15 March 2019, the Church added the ability to reimburse members' expenses electronically by direct deposit (ACH). The LCR has been updated to process reimbursements electronically in addition to initiate paper check printing from the LCR. Clerks can learn about the expense payment process in the online Help Center. Clerks needing additional assistance can contact the stake finance clerk.

In addition, organization leaders of Elder's Quorum, Relief Society, Young Men, Young Women, Primary, and Sunday School may submit organization reimbursements in LCR. Detailed instructions are located in the Help Center or contact the stake finance clerk for assistance.

Clerks are strongly encouraged to perform a self-audit during January and July prior to the Year-end and Mid-year audits. Contact the stake finance clerk if you need an updated audit form, have any questions, or need additional assistance.

BEFORE THE AUDIT

Before the audit appointment, please ensure your financial records are in order and audit-ready. The more organized you are, the shorter and easier the audit is for everyone. The following documents should be available and ready for review when the auditor arrives:

- Unit Financial Statements (Signed by both bishop and finance clerk, or if no finance clerk is called or available the ward clerk may sign. Starting with the Nov 2020 statement, UFS are reviewed and signed online in LCR-Finance.)

- Donation records (Donation records include MLS Tithing and Offerings Batch Reports, members’ donation slips, MLS Deposit Reports, bank deposit slips, and bank-validated deposit receipts.)

- Payment records (Payment documents, including check stubs [the portion of the check document retained by the ward], payment approval forms, payment request forms, paid bills, original invoices, original receipts, and MLS Expense Reports. Alternatively these may be stored electronically online in LCR-Finance.)

FREQUENT PROBLEM AREAS

When reviewing your records, please give special attention to the following frequent problem areas:

• Did the bishop and the ward clerk for finances promptly review each month’s Unit Financial Statement and then sign and date it to show that they performed the review? Verify each month's UFS has been signed online in LCR-Finance by both the bishop and finance clerk.

• Does each payment have proper support documents, and do the support documents match the details recorded in MLS? Every expense must have supporting documentation, such as receipts or an invoice. If a receipt is lost or not available, substitute documentation is required. The member should provide a written statement with details about the expense (such as the payment’s purpose, a description of what was purchased, the date the payment was made) and an explanation why a receipt or invoice cannot be provided. If needed please review the training at the online Help Center.

  • • Recurring payments for rental housing can use the same copy of a rental agreement for the supporting documentation. A master copy of the rental agreement can be kept on file in order to make copies as needed. Include a copy of the rental agreement for each expense to document the rental amount at the time the check was made. The rental agreement must be updated when the lease expires. The date on the check should not be later than the end date of the rental agreement unless it is for a past-due payment.

• Have all action items more than 90 days old been resolved? Typically these are outstanding checks but can also be overdrawn accounts such as Ward Missionary or OAMFA. Review the UFS each month and follow up any issues identified over 30 days to ensure they're resolved before they reach 90 days.

• Did the bishopric, the ward clerk, and the assistant ward clerk assigned to finances meet together to view the training video “Sacred Funds, Sacred Responsibilities” ? The training video is available in the online Help Center.

• Other: Authorized Member Funded Activities (OAMFA) category is for pass-through funds with a designated, specific purpose only. Subcategories should reflect the specific purpose. For example, “Young Women camp” is sufficiently specific, but “Young Women” is not. General descriptions such as “Youth fund raiser” or “Relief Society activities” do not identify a specific activity or purpose and should not be used. Please ensure all OAMFA funds have been transferred to a designated subcategory and the top level OAMFA account reflects a $0 (zero) balance. Any negative balances must be resolved and brought back to $0 or a positive balance. If needed, please review the online training at the online Help Center.

IMPORTANT: Please notify the stake finance clerk BEFORE making any payments that could require a 1099-NEC so required information can be collected from the payee using IRS Form W-9 as early as possible. Uploading the expense's supporting documentation to the LCR is EXTREMELY helpful in these situations.

The stake is required to file IRS Form 1099-NEC by January 31. Wards are responsible to report to the stake payments that require the issuing an IRS Form 1099-NEC.

The purpose of IRS Form 1099-NEC is to report to the IRS and vendor certain payments totaling $600 or more that the stake, ward, or branch made to any payee during the year. These include either a single or cumulative payments for rent or services, such as a dance DJ or catering service.

The IRS requires payments be reported if the following four conditions are met:

1. The payments were made to someone who is not your employee;

2. The payments were made for services in the course of your trade or business, including government agencies and nonprofit organizations. Nonprofit organizations (such as the Church) are considered to be engaged in a trade or business and are subject to reporting requirements.

3. The payments were made to an individual, partnership, estate, or, in some cases, a corporation.

4. The payments made to the payee totaled at least $600 during the year.

As with any rule there are exceptions. Reporting is NOT required for payments to:

• Vendors providing products, materials, food, supplies, or other tangible property (except when combined with reportable rent or services) or reimbursement to Church members for purchases of such items.

• Legally incorporated entities; but individuals, LLCs, partnerships, and sole proprietorships are generally reportable.

• Tax-exempt entities such as governments, schools, churches, and 501(c)(3) organizations (e.g., Boy Scouts, 4-H, etc.)

• Fast-offering recipients and vendors (such as doctors or landlords) who receive payments on behalf of fast-offering recipients.

• Church members for reimbursement of housing payments for missionaries that do not exceed $75 per month or $900 per year.

• Utility companies.

• Other Church units.

• Family Services.

A simple way to review payment records is by going to the LCR > Finance > Expenses > Expense Summary. Select the year to review and sort by Payee [click on Payee column header to sort]. All payments issued to a payee are now grouped together. Scroll down and review the payments to each payee. If all payments total less than $600, move on. If more than $600, review the payments to determine if they're reportable or not.

Contact the stake finance clerk for additional assistance or information.

The OAMFA category (sometimes referred to as the Other account) is for pass-through funds with a designated, specific purpose only. Subcategories should reflect the specific purpose. For example, “Young Women camp” is sufficiently specific, but “Young Women” is not. General descriptions such as “Youth fund raiser” or “Relief Society activities” do not identify a specific activity or purpose and should not be used. Please ensure all OAMFA funds have been transferred to a designated subcategory and the top level OAMFA account reflects a $0 (zero) balance. Any negative balances must be resolved and brought back to $0 or a positive balance. If needed, please review the training at the online Help Center.

Leaders and clerks should help members understand that when they designate money for the "Other" category, it should be for a specifically-stated purpose previously approved by the bishopric or stake presidency. Most contributions to the "Other" category are not donations to the Church; rather they are payments for a tangible benefit. For this reason they are not considered charitable contributions and are not included on the member’s year-end tax-valid statement.

When checks are delivered they should be cashed or deposited by the payee in a reasonable amount of time, typically 30 days is the expectation. If outstanding checks are not follow up and resolved within 180 days of issue, they are subject to a legal process called escheatment where the funds may eventually be claimed by the state as abandoned property. Once a check is escheated it cannot be voided and reissued and the recipient must contact CHQ for the funds. If the recipient declines to resolve it then the clerk should contact CHQ to resolve the issue.

The easiest way to avoid the difficulties of escheated checks is to resolve them before they reach 180 days. Review the monthly Unit Financial Statements for checks that have not cleared. They are listed under Action Items, usually on page 2. Any checks over 30 days merit a follow up. In most cases, simply asking the payee about the outstanding check results in a quick resolution. In rare cases the payee has lost the check and is unable to cash it. If that is the case the check can be voided and a replacement issued with emphasized encouragement to cash promptly lest it be lost again.

The status of checks can also be reviewed in near real-time by going to the LCR > Finance > Expenses and sort by Status [click on Status column header to sort]. Any checks listed as Issued have not cleared yet.

Clerks should follow the recommended routine to avoid check escheatment at 180 days:

• Review all outstanding checks at least once a month

• If over 30 days, give the payee a friendly reminder

• If over 60 days, give the payee an 'encouraged' reminder and brief introduction to escheatment

• If over 90 days, begin the process to void and reissue the check

Contact the stake finance clerk for additional assistance or review training on this topic in the Help Center.

Ward Missionary funds are used to financially support full-time missionaries called from the ward to various missions throughout the world. Guidance is primarily found in the General Handbook section 24.6 and at the online Help Center.

The Church utilizes an equalized contribution plan for single elders ages 18-25 and single sisters ages 19-39 to cover service-related expenses (housing, transportation, basic medical, etc.) and provide a small monthly stipend for personal expenses (food, hygiene) in most countries they may be called to serve. Other individual expenses (clothing, bicycle purchase/repair, souvenirs, etc.) are covered by the missionary's personal funds. This helps level the cost of serving a mission and reduce the financial burden on missionaries and their families. All other missionaries use other financing methods.

Before the Mission

About a month or two before a missionary leaves for the MTC, CHQ will create a sub-category in the missionary’s name under the main Ward Missionary category. Donations made by donors to cover the missionary’s equalized contribution charges are deposited here. It is recommended donors contribute enough to cover only a month or two ahead and not pre-pay the entire mission. In the event a missionary returns home early, any excess funds cannot be refunded to donors.

During the Mission

For missionaries covered by equalized contributions, CHQ will debit the missionary’s sub-category for the equalized contribution amount while the missionary is in the field. This begins the month the missionary arrives at the MTC and will occur each month for 24 months for elders and 18 months for sisters.

Clerks should pay close attention to the missionary’s actual return date as the mission draws to a close. Sometimes a missionary may be extended in the field. If extended for 15 days or more, then an additional month will be debited. Additionally, if the missionary returns early by 15 days or more, then the final month will not be debited.

As applicable, it’s also helpful for the clerk to keep the missionary's family updated on the sub-category balance, especially during the final months of the mission, so donors don’t unintentionally leave the sub-category overfunded or overdrawn. Again, excess funds cannot be refunded to the donor.

After the Mission

After returning from a mission, any excess funds must be transferred out of the missionary’s sub-category to the main Ward Missionary category. An exception to this requirement is when the missionary temporarily returns early and is projected to re-enter the mission field at a later date, such as returning early for medical treatment and is expected to return to the mission after recovery.

Any deficit (negative balance) must be brought up to $0 with additional funds donated by the returned missionary, the missionary's family, or other donors, or by using available funds in the main Ward Missionary category. Consult with the bishop to determine the appropriate course of action to resolve any deficit as each situation can have unique circumstances.

After 60 days with a $0 balance and no activity, CHQ will remove the missionary’s sub-category.

Excess Ward Missionary Funds

The bishop and stake president determine what level of funds is reasonable to maintain in a ward's main Ward Missionary category. Any excess above this amount should be transferred to the stake to cover needs in other wards. If no needs exist, the stake transfers the funds to CHQ for redistribution as needed.

Contact the stake finance clerk for assistance with resolving questions about or issues with Ward Missionary funds.

The Church fiscal year ends with the calendar year. When logging into MLS for the first time at the beginning of the year, MLS will close out the previous year's financial records and and create the new year's records.

Along with some mandatory activities, its also a good time to perform some financial record housekeeping.

• Complete and submit tithing declaration report by 15 Jan.

• Prepare donor Official Tax Statements and distribute by 31 Jan.

• Enter budget allocations for the new year in the LCR; remove locally created categories no longer needed (see Budget topic above).

• Review ward missionary sub-categories; zero out those who have completed mission (see Ward Missionary Funds topic above).

• Archive last year's financial records; keep current year (2021) plus previous 3 (2020, 2019, 2018), shred remaining years.

• Perform self-audit on last July through December records in preparation for the next audit in February (see Finance Audit topic above).