ECCU Blog

It is common for ministries to transport U.S. dollars internationally for ministry work. When doing so, it is important to follow the U.S. laws that relate to transporting of cash and monetary instruments. 

An individual can legally carry or mail any amount of money into or out of the U.S., but you must report it to U.S. Customs and Border Protection using this form. If this reporting isn’t done, the traveler is at risk having the funds confiscated and potentially not getting them back. In addition, criminal and civil penalties may apply. 

People who travel with money will be asked if they are transporting more than $10,000 in cash or monetary instruments. If they answer yes, then they must complete this form. After this document is completed, the inspector may choose to verify the funds. If the form was completed accurately and truthfully, the form is accepted and the traveler is free to depart. However, if the inspector finds additional funds, then all the money will be seized and the traveler will have to petition U.S. Customs for its return. 

It is important to note that these laws apply to cash or monetary instruments that are mailed or shipped. They also apply if your ministry receives cash or monetary instruments that have been mailed or shipped internationally. (Note: The term “monetary instruments” includes foreign currencies, traveler’s checks, and checks or money orders which are in bearer form or from which the name of the payee has been omitted.)

 A transfer of funds through normal banking channels, such as international wire transfer or international ACH, which does not involve the physical transportation of currency or monetary instruments, does not need to be reported. 

If your staff or volunteers travel with, mail or ship cash or monetary instruments, provide them with this Currency Reporting Flyer from U.S. Customs, which includes good summary information and requirements to ensure that you’re in compliance.

“As hard as it may be to believe, embezzlement is a relatively common occurrence in churches.”  — Richard Hammar, attorney and CPA

I recently did some research on fraud while preparing a presentation for ministry leaders about protecting their ministry assets. I expected to find some news articles but was surprised to find so many reports of fraud recently discovered in churches and nonprofits.

Like me, many in the ministry world probably think that embezzlement rarely happens. Unfortunately, we are wrong.

So why is fraud on the rise—and what can we do to prevent it?

We know that three things must exist for fraud to occur: pressure, opportunity, and rationalization. Certainly, the current economic environment has created financial pressure for some workers and volunteers who, given the opportunity, might rationalize this immoral behavior. While we can’t control the pressure workers or volunteers may experience, or even how they may rationalize stealing, we can control the opportunities for fraud or embezzlement within our ministries.

The first step is to conduct a risk assessment. This simply means sitting down with your team and talking about where losses might occur. As you begin to identify those risk areas, you can determine which ones pose the greatest risk for your organization, workers, and volunteers. Typical high-risk areas include inadequate separation of duties between related tasks and a lack of dual custody when handling valuable assets such as contributions.

Addressing these areas doesn’t mean you are creating an environment of distrust. On the contrary; you are building accountability and transparency—protecting both your ministry and the people who work or volunteer for it.

Guarding your ministry against fraud begins with an honest assessment of your vulnerability. Then, apply a sound system of internal controls such as separation of duties, dual custody, and transparency in financial reporting. (You may also want to revisit who has authority over your accounts.)

To learn more about preventing fraud, you might want to read our white paper Handling Cash: A Common Sense Approach to Securing Your Ministry’s Most Liquid Asset.

Has your ministry taken any other steps to reduce opportunities for fraud?

If your ministry accepts debit or credit cards for donations, café or bookstore purchases, or other ministry activities, you will most likely be required to report the total payments made with the cards to the IRS starting in 2012.

According to Becky Kopplin, vice president at The CashLINQ Group, “As one part of the Housing Assistance Tax Act of 2008, merchant processors are now required to report gross payments by credit or debit card to the IRS. This requirement applies to all merchants, including non-profits.”

Kopplin adds, “In order to report this information, the merchant processors must match the ministry’s legal name and tax identification number (TIN) to the IRS record. If the information provided does not match, the merchant processor may be penalized and/or credit and debit card payments made to the ministry may be subject to a 28 percent backup withholding.”

Reporting this information to the IRS does not change your other annual IRS reporting requirements. For example, if you are a church, you will not also be required to complete IRS Form 990 just because you accept debit or credit cards, unless of course you have unrelated business income tax (UBIT) due.

These regulations have been put in place to help ensure businesses adequately report taxable income to the IRS. In most cases, ministries do not utilize debit and credit cards for taxable business but are still required to report.

Kopplin explains, “The best way to verify that your merchant processor has the correct information is to provide them with any notice from the IRS that contains your legal name and TIN, like a 501(c)3 letter, a tax determination letter, or a Request for Tax Payer Identification letter (IRS Form W-9).” 

The 28 percent backup withholding will go into effect in 2013. For more information on this new requirement, see irs.gov.

Nearly every church has set up a fund for benevolence purposes, but often the program for disbursing those funds is not as effective as it could be at meeting people’s needs. By reviewing my church’s process and disbursements over the past many years, I’ve come up with this list of best practices for evaluating your benevolence program:

• Establish a benevolence policy that empowers or delegates authority, ensures accountability and confidentiality, and sets boundaries rather than rules.
• Use a separate budget to track benevolent donations and disbursements.
• Take a team approach to benevolence ministry without creating a burdensome process.
• Report success stories to your donors but maintain confidentiality.
• Identify resources in advance, such as local businesses or individuals who have agreed to assist with specific needs.
• Keep records of assistance provided and follow up with those you help.
• Learn from your mistakes.
• Allow room for God to guide.
• Identify real needs, not just temporary issues or symptoms, then look for ways to help recipients “learn to fish.”
• Help recipients be accountable with agreed-upon next steps.
• Integrate your existing ministry outreach programs as well as other local churches into your benevolence efforts.
• Set aside funds to be used in case of local community disasters.

Providing a helping hand to those in need is a critical part of what we are called to do as followers of Christ. However, as you have probably learned, providing money by itself rarely meets people’s real needs.

What have you found to be critical success factors for your benevolence ministry?

PS: You are only required to do any tax reporting when benevolence gifts are provided to a staff member. Those gifts should be reported on IRS Form W-2.

Yes, this is a blog post about the IRS. So, understandably, I’m afraid I might lose you before we even begin. Please don’t check out too soon, though, because here’s the bottom line: The IRS actually has a new program designed to save you hassle and money. 

Good, you’re still reading. Now let’s talk about why this program might be important to your ministry. 

In the nonprofit world, especially in churches, it isn’t uncommon to find misclassification of workers—usually meaning an employee is mistakenly classified as an independent contractor. Why is it a problem? According to the IRS, “Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.” 

The new IRS program allows employers to resolve past worker classification mix-ups. By making a minimal payment to cover past payroll tax obligations, employers can come back into compliance rather than waiting for a dreaded and painful IRS audit. 

If your ministry is eligible for this new program, you can obtain substantial relief from past-due federal payroll taxes. Once accepted into the program, you will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties are due, and you will not be audited on payroll taxes related to these workers for prior years. 

(Need help determining if you have classification mix-ups? In a blog post I wrote addressing the issue last year, I included a resource from the IRS to help distinguish employees from independent contractors.) 

There you have it. If you discover your ministry has employees who are classified as independent contractors, take advantage of this program to avoid hassle and expense and get into compliance. After all, how often does the IRS try to make things easier for you?