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Section 258.4(d) of the 2008 Book of Discipline makes it mandatory that every local church finance committee “shall make provision for an annual audit of the financial statements of the local church and all its organizations and accounts.”
But there are more reasons than that for annual audits. Here are a few:
- to protect the persons the local church elects to offices of financial responsibility from unwarranted charges of careless or improper handling of funds;
- to build the trust and confidence of the financial supporters of the church in the way their money is being accounted for (trust and confidence lead to improved patters of financial support);
- to set habits of fiscal responsibility to assure that when there is turnover in personnel there will be continuity in accountability and nothing will fall through the cracks;
- to assure that gifts made to the church with special conditions attached are consistently administered in accordance with the donor’s instructions, and thus let donors know their gifts are used as intended;
- to provide checks and balances for sums received and expended.
Conducting an audit is not a symbol of distrust
It is a mark of responsibility.
It is a message to local church donors that you care about their gifts.
It is good stewardship demonstrated for all to see.
Protect your people and your finances: perform an annual audit
You can get the help you need from the UMC General Council on Finance and Administration in the form of the latest version of the Local Church Audit Guide. The guide is available online at gcfa.org/audit.html, or if you are unable to access the guide, contact the district office. It includes an audit check list and a “Report of the Annual Audit” with instructions. The guide answers such questions as:
- Who can perform a local church audit?
- How do restricted assets differ from designated assets?
- How is an audit conducted?
Qualified nonprofit organizations (e.g. churches) do not need to collect or pay sales tax on goods they sell if annual gross sales are less than $5,000. Public Act 156 of 1994 exempts from sales tax sales at retail made by certain organizations from tax if aggregate sales at retail for the calendar year are less than $5,000. Sales at retail are defined as transfers of ownership of tangible personal property such as food, shoes, toys, clothes or appliances. “Sales at retail” indicates transfer of goods from one entity to another regardless of profit.
Nonprofit organizations making sales at retail are still required to register and obtain a sales tax license even if their total sales for the calendar year are less than $5,000 and they have no tax liability.
Items intended for resale can only be purchased without payment of tax by making a claim of exemption on the Certificate of Exemption by reason of “for resale at retail.” A sales tax license is required before such a “resale”claim can be legally made.
Exemption is only available to those noted organizations who have total aggregate sales in a calendar year from all sales activity of less than $5,000. If sales in the year are $5,000 or more, all sales are subject to tax. This is not an exemption for the first $5,000 in sales.
Any tax you do collect must be paid to Treasury regardless of the amount of gross sales. For example, if you expect your gross sales to be $6,500 and collect sales tax, but later find your gross sales were only $4,000, you must pay the sales tax collected to Treasury. You must register even if the items you sell are not taxable. If you don’t collect sales tax on your sales, but your sales exceed $5,000, you are liable for the tax on the sales. For more information contact the Customer Contact Division, Technical Services Division, at 517-636-4730 or go to www.michigan.gov/treasury.