Accounting Policies

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Christ the King Lutheran Church

Accounting Policies Approved by Congregation Council December 2015

Green designates new accounting policies in 2015. The Church has adopted the following accounting policies:

Basis of Accounting Financial statements will be prepared on the accrual basis of accounting whereby revenue and support are recognized when earned and expenses are recognized when incurred.

General Accepted Accounting Principles Financial reports will be prepared substantially in accordance with Generally Accepted Accounting Principles (GAAP), with certain departures from GAAP including: • Property and equipment will be restated at current insured value. • Land will be restated at management’s estimated current value. • Depreciation expense will not be recorded.

Financial Statement Presentation The Church reports information regarding its financial position and activities according to three classes of net assets: • Unrestricted Net Assets: Resources over which the Council has discretionary control. • Temporarily Restricted Net Assets: Resources subject to a donor-imposed restriction, which will expire when the time or purpose restriction is fulfilled. • Permanently Restricted Net Assets: Resources subject to donor designated endowment funds. The Church currently has no permanently restricted net assets. Note: The Church has established the Christ the King Lutheran Church Foundation which has its own Board of Trustees and prepares separate financial reports from the Church.

Fund Accounting Internal financial statements will be prepared using fund accounting to report financial activity in self-balancing funds (assets, liabilities, net assets, and results from operations) to provide informative details to the staff and the Finance Committee, Council, and the Congregation. Funds include: • Operating: General operations of the Church; the Annual Operating Budget is prepared for this fund. Donor-restricted gifts that will be used for budgeted activities within the fiscal year may be recorded in this fund. • Self-funded: Financial activity related to ‘pass through’ undertakings, such as acquiring books later purchased by members, and youth fundraising and related expenses. • Designated: Reserve fund designated by the Council. Additions to and Uses of the Reserve Fund are at the Council’s discretion. • Restricted – Financial activity related to donor-restricted contributions to be used for either Church activities or external purposes such as benevolences.

Christ the King Lutheran Church | Accounting Policies



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Christ the King Lutheran Church

Accounting Policies Approved by Congregation Council December 2015

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Capital: Financial activity related to donor-restricted Capital Campaign contributions to be used for purposes such as real estate improvements, debt payments (principal and interest), equipment and property purchases and leases, and major repairs and maintenance.

Property and Equipment Building improvements and purchases of or leases for equipment will be recorded as expenses in the Capital Fund where funds have been raised for this purpose. The balance sheet values reported for property and equipment will be adjusted annually: • Property and equipment will be restated at current insured value. • Land will be restated at management’s estimated current value. (Note: This reported values section has been the accounting policy for recent audited financial statements; in 2015, policy will be applied consistently to all financial reports.)

Benevolences Payable Benevolences Payable (Operating Fund) is accrued monthly so the year-to-date Benevolence Expense is a consistent percentage of revenue from offerings, regardless of when Benevolences are paid.

Accrued Vacation The value of accrued vacation pay is recorded as a liability and is adjusted at yearend.

Loans An internal loan has been recorded as a liability of the Capital Fund, replacing the third party mortgage paid off in 2015. Future Capital Fund gifts will replenish the cash used to retire that mortgage as monthly internal payments are made on the loan.

Member Intentions to Provide Support Intentions to provide support for operating and capital needs are recorded as Pledges Receivable when received in writing with the offsetting entry to Deferred Revenue. Pledges Receivable and Deferred Revenue balances will be updated monthly. At least annually, Pledges Receivable will be reviewed and intentions to provide support deemed to be uncollectible will be removed.

Revenue Recognition of Member Offerings Unrestricted offerings will be recognized as revenue when payments are received. Offerings that are purpose or time restricted will be recognized as revenue when payments are received. Offerings paid for a future year (Prepaid Gifts), which will be recognized as restricted revenue in the year received, and will be released from restriction in January of the year for which the gifts are restricted.

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Christ the King Lutheran Church

Accounting Policies Approved by Congregation Council December 2015



Contributed Services and Materials The value of contributed services provided by members of the congregation and contributed materials are not reflected in financial reports.

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