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Are You Protected?

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Despite the interruptions to business as usual over the last eighteen months, it is still critical that churches maintain policies and procedures that assure a proper level of control over church assets, especially cash.  Proper controls protect both the church from theft and the staff and volunteers from any false allegations of wrongdoing.   It is not a matter of IF someone would violate the church’s trust and embezzle funds but COULD they do so as the result of weak internal controls.  Here are some basic guidelines:

  1. Lock all collections in a fire-proof safe until two or three unrelated people can count the money together
  2. Collections should not be taken off site to be counted
  3. All cash (both loose and in envelopes) should be recorded on a “Receipts Record” and each counter should sign the form to indicate that they agree to the amount counted.
  4. The deposit should be taken to the bank as soon as possible.
  5. Verify that the deposit and the “receipts records” match, thus verifying that all monies counted equals the amount of the weekly deposit.

For a check list of these and other internal control issues, please email us.

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Free Credit Reports

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You can check your credit report for free annually (once for each of the three major credit reporting agencies).  However, due to the pandemic, you are now able to obtain a free report weekly until April 20, 2022.

To request your free credit report, go to AnnualCreditReport.com.  You will have to provide some personal information to verify your identity (date of birth, Social Security Number, and address).  The report will provide a detailed list of all your open and closed accounts, payment history, any late payments, recent credit inquires and additional personal information.

With the prevalence of data breaches, it is necessary to monitor this information at least monthly.  Look for errors – things like inaccurate late payments or accounts that you did not open and then dispute those with the credit bureau.  The website will provide instructions on how to report any errors.

There are also credit monitoring services available which will alert you to any suspicious activity.  Some are free from your bank or credit card company, while others charge a monthly fee.  Also call your homeowners insurance and inquire about the cost of a rider that will reimburse you for the expenses incurred if your identity is stolen.

Always review your report prior to applying for a loan to make sure there are no errors affecting your score that need to be corrected.  Finally, avoid going to freeannualcreditreport.com, which charges a fee to be able to access your report.

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FRAUD (continued)

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“Internal theft of church funds remains a pervasive and largely unaddressed problem in churches.” Richard Hammar

One expert in church fraud explains that three things are present in most cases: a perceived opportunity, financial pressure, and rationalization.  The number one sign to look for is the lifestyle of the person.  If they seem to be living a lifestyle beyond what they earn, this could be a red flag.  In forty-two percent of fraud cases, the guilty party was living beyond their means.   Twenty-six percent were struggling financially.  It should go without saying that putting someone who is struggling with money issues or has had a recent financial hardship in charge of church funds is not a good idea.

Other red flags are someone who refuses to take time off, refuses help or complains that they are underpaid.

Since a leading cause of fraud is the lack of segregation of duties, whenever possible, have separate people count the money, pay bills/sign checks, and reconcile the accounts.  At the very least, someone not involved in the handling of cash should review the bank statement each month.  As Ronald Reagan once said “Trust, buy verify”.

Finally, no one should ever count money without someone else being present.

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Important Changes To PPP Loan Forgiveness

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I have waited to send out an update pending the changes expected to be implemented by Congress and the SBA.  Last night, the senate passed the bill previously passed by the House, and is awaiting signature by President Trump.  While it is expected that the SBA will issue an FAQ to further clarify certain areas, here is a summary of what you need to know.

  • The time period you have to spend the funds has been extended from 8 to 24 weeks (or December 31, 2020, whichever is earlier).  This means that there is no longer a concern over how to make sure you spend all of the funds within the 8 week period.
  • Any amount not forgiven will be payable over five years (previously 2 years)
  • Payments will begin after 6 months from the date that the forgiveness is determined, or 10 months after the covered period if the borrower fails to ask for forgiveness.
  • The calculation for Full-time equivalent (FTE’s) has also changed.
    • The safe harbor period for re-hiring employees to avoid penalty has been extended from June 30, 2020 to December 31, 2020
    • If an employee voluntarily quits, or was dismissed with cause, you will not be penalized for the reduction in FTE’s
  • The amount of the loan that is required to be spent on payroll has been reduced from 75% to 60%.
  • Borrowers can now take advantage of Section 2302 of the CARES Act, which allows for the delay in payment of payroll taxes.

Recent guidance also allows you to choose an “alternate covered period” so that you can cover as much payroll as possible, but with the extension to 24 weeks, this is probably no longer needed.

If you are self-employed, we are waiting on more information to determine what your forgiveness application will look like.

Remember, under the original guidance, payroll paid with the loan proceeds was limited to $15,385 per employee (annualized, that equals $100,000).  It is unclear if the extension of the covered period to 24 weeks increases this amount, but we expect that it will.

The SBA does have a forgiveness application available, but our recommendation for now is to wait until they issue further guidance before doing anything.  Given the recent amendments to the law, the application is already out of date.  We also assume that just like the application process, most banks will have their own forgiveness application rather than use the one issued by the SBA.

Once you apply for forgiveness, the bank has 60 days to review the application, then the SBA gets an additional 90 days to make a determination.  The SBA also has 6 years to audit any loan, so plan on keeping your records for at least 6 years.

If you have not yet applied for a PPP loan, funds are still available.

As always, if you have any questions, please call or email our office.

 

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Credit Freeze Update

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Last November, we reported on the need to protect your identity by putting a freeze on your credit.  Beginning September 21, 2018, there is no longer a fee to do so.  A freeze stops someone from getting a loan or opening a credit card in your name (it does not restrict your ability to use your credit cards).

Once a request is made, it must be completed no longer than the next business day.  When you request a freeze, you will receive a PIN.  The PIN is used to unfreeze your account when you need to apply for a new loan or credit card.  Keep the PIN in a safe place.  When you request the freeze to be lifted (which is also now free), the credit agency must comply within one hour.

Insurers, employers, existing creditors and debt collectors can still access your credit report after a freeze is in place.

You can request a freeze by phone or online at all three of the major reporting agencies (Equifax, Experian and TransUnion).  We recommend that you do so with all three.  You can also place a freeze on your children’s account, which is also recommended.