Last Updated: 1/14/2025
Purpose
To set forth and explain financial requirements that apply to all Parishes within the Archdiocese Territory.
Policy
I. UNIFORM ACCOUNTING SYSTEM
To facilitate uniform accounting practices in the Parishes of the Archdiocese, a standardized chart of accounts (COA) provides a framework for an accounting system for the Parish that aligns with the Annual Parish Financial Report (APFR). The COA allows for certain adaptations to fit the local Parish situation.
The Archdiocese has adopted the ParishSOFT accounting system for standardization of accounting and is a requirement for all Parishes. Utilization of an alternative accounting software must be approved by the CFO of the Archdiocese.
For reporting consistency and sound analysis of financial information, the Archdiocese has adopted the Accrual Method of Accounting and GAAP. For more detail regarding the operational accounting processes and procedures refer to the on-line Parish Financial Manual found at www.archspm.org.
II. FINANCIAL REPORTS TO ARCHDIOCESE
The Parish must complete the APFR within 90 days of the close of the Fiscal Year and the Annual Representation Letter within 120 days of the close of the Fiscal Year and submit them annually to the Archdiocese (see Policy N. 405 Annual Representation Letter). The data submitted will be utilized to satisfy the financial reporting requirement for the Archdiocesan Schools Report for Catholic Schools.
The APFR is reviewed by the Archdiocese and the assessment amount for the following Fiscal Year is disclosed to each Parish by the CFO of the Archdiocese through a commitment letter with a supporting assessment schedule within 150 days of the due date of the APFR. Parish appeals of the assessment amount are due no later than 60 days from issuance of the commitment letter to the CFO of the Archdiocese.
III. ANNUAL BUDGET REQUIREMENTS
1) Parishes must prepare and approve, on an annual basis, a balanced cash budget with adjustments made for depreciation, capital expenditures, principal payments on debt, and other non-cash transactions. The budget must be prepared using reasonable assumptions of income and expense.
2) Budgets must be approved prior to the beginning of the Fiscal Year.
3) The annual budget should include adequate reserves for future capital expenditures and deferred maintenance.
4) The final annual budget must be included in the Parish financial reporting.
5) Spending in excess of the annual operational and capital expenditures budgets requires the approval of the Pastor and the Trustees.
IV. INVESTMENTS
1) The Pastor, after consulting with the Trustees and the Parish Finance Council or a subcommittee thereof, is to invest Parish or School funds appropriately. In the case of a Regional School, after consultation by its Corporate Board and its appropriate committee, is to invest Regional School funds appropriately.
2) Parish funds may be invested in:
a) Accounts at banks, savings and loan associations (which have either a state or federal charter). Consideration should be given to maximizing FDIC (or similar insurance).
b) Any obligation of the United States Government or any of its agencies.
c) Common or preferred stock, debentures, money market funds, mutual funds, certificates of deposits, bonds or notes of any corporation providing security if listed on a recognized national or regional exchange or has a ready market available by a national or regional broker or dealer. Debentures, bonds and notes must have a rating of not less than “A” by the national rating services.
d) Agency and endowment accounts at the Catholic Community Foundation of Minnesota or other similar foundations.
3) All other investments not included in n. IV (2) above must receive written permission from all members of the Parish Corporate Board.
4) All investments must be made in the name of the Parish.
V. BANK ACCOUNTS
1) Persons authorized to sign checks drawn on any Parish account must be approved by the Pastor and both Trustees.
2) All Parish bank accounts must be opened in the name of the Parish entity and federal identification number.
3) The number of authorized signors should be limited. The Parish should record the resolution with the names of those authorized to disburse funds along with the name of the bank where the Parish funds are deposited.
4) Signatory authorization must recognize sound segregation of duties and other common internal measures, including prohibiting signatures by those processing the payment. Checks in excess of a certain dollar amount (e. g. $5,000) should require review by an individual other than the check signor and payment processor. Checks must be supported by an invoice(s) signed by an appropriate authorized employee. Signatures by a manual stamp are prohibited while software generated signatures are acceptable.
5) Pastors must be a signatory on all bank accounts including those for any affiliate group that operates as a ministry of the Parish. These groups generally rely on the Parish for their tax-exempt status. Funds received by these groups must conduct their business through the Parish operating accounts and be reported to the Parish Finance Council and included in the required financial reports of the Parish. Examples of affiliate groups, include, but are not limited to, ladies auxiliary, men’ s group, home and School, athletics, and fundraising.
6) A reasonable amount of cash should be retained in the Parish checking and petty cash accounts to conduct daily operations and pay bills timely. Excess cash should be held in an interest-bearing account or invested in accordance with the investment policy detailed above.
VI. VAULT AND SAFE
Each Parish must have a fireproof vault for the safekeeping of its official, financial, corporate, and sacramental records, along with other Parish valuables with dual secure access. A drop safe must be used for the safekeeping of cash and checks.
VII. FUNDS RAISED BY PARISHES AND AFFILIATE GROUPS
1) Funds collected by affiliate groups that are ministries of the Parish are the property of the Parish and the fundraising activities require Pastor
2) All fundraising appeals are to be truthful and forthright, theologically sound, and should strive to motivate the faithful. This requires that:
a) Fundraising efforts are to be for defined needs.
b) Funds collected are to be used for their intended purposes.
c) Fundraising costs should be reasonable and proportionate to the amount being raised.
d) Donors be informed regarding the use of donated funds and assured that any restrictions on the use of the funds by the donor will be honored.
e) Fundraising personnel (in-house or outside professionals) provide regular reports on the extent to which promises expressed or implied in the solicitation of funds have been fulfilled.
i. Fundraising reports are to be prepared in scope and design to meet the particular concerns of those to whom the reports are due, including: the governing body and membership of the fundraising organization, the competent authorities who approved and monitor the fundraising effort, the donors to the organization, and the beneficiaries of the funds raised.
ii. Annual fundraising reports are to provide both financial information and a review of the apostolic work for which the funds were raised. They are to set forth, at a minimum, the amount of money collected, the cost of conducting the fundraising effort, and the amount and use of the funds disbursed.
iii. Fundraising reports must be made available to benefactors on a regular basis or upon reasonable request.
iv. All fundraising reports must include an annual financial statement prepared in accordance with generally accepted accounting principles.
f) All funds received by a fundraising office should be turned over promptly to the Parish office for proper accounting. The Parish must have proper control over monies received from fundraising activities.
g) Special care is to be taken to ensure that fundraising personnel maintain ethical business practices and ethical relationships with donors and suppliers of goods and services.
h) Contracts between a Parish and commercial suppliers and consultants are to ensure that control over materials, designs, money and general operations remain with the Parish.
i) Agreements may not permit payments to a commercial firm or to a professional fundraiser on a percentage basis.
VIII. NATIONAL AND DIOCESAN COLLECTIONS
1) All proceeds from National and Archdiocesan collections must be forwarded to the appropriate location, Center for Mission or Archdiocese within 60 days from the date of the collection. Detailed information and a collection calendar for National and Diocesan Collections can be found at https://www.archspm.org/development. This site lists the collections being held and where to remit the collections received. The United States Conference for Catholic Bishops also posts a schedule of National Collections annually (https://www.usccb.org/committees/national-collections).
2) Funds collected must not be used for general Parish operating expenses at any time.
IX. SALES TAX AND USE TAX
1) Parishes are required to comply with Minnesota Sales and Use Tax, and, if applicable, qualify for sales tax exemption. To qualify for such exemption, the Parish must file a Form ST 16, Application for Nonprofit Exempt Status — Sales Tax, and receive qualifying notice from the State of Minnesota. To claim an exemption, provide the seller with a completed Form ST3, Certificate of Exemption. The Minnesota Sales and Use Tax is charged to purchasers of most tangible objects and some services. The seller must collect the tax and remit it to the State Department of Revenue. A Parish is exempt from paying this tax on most articles or taxable services which it purchases provided the use of such items is for the religious, educational, or charitable functions of the Parish. Notable exceptions to the exemption are purchases of motor vehicles, trash hauling, prepared foods and lodging.
2) In turn, while goods and services which a Parish sells at bazaars, festivals, picnics, rummage sales and similar events are not taxable, should the Parish engage in the selling of goods and services beyond these isolated and occasional instances (e. g., a weekly or monthly bingo game), it may incur the obligation to collect and remit sales taxes to the state. If such endeavors are contemplated, they must first be submitted to the Archdiocesan Office of Finance and Administration for approval.
X. EMPLOYERS IDENTIFICATION NUMBERS
1) As employers, Parishes are required to obtain Employer Identification Numbers from both the federal and state governments. These numbers are necessary for proper identification of the Parish on certain forms required to be sent to the Internal Revenue Service, Social Security Administration and the Minnesota Department of Revenue relating to the withholding of income taxes, social security taxes and, where applicable, unemployment compensation payments and sales tax payments.
2) Direct inquiries regarding Federal Identification Numbers to the Internal Revenue Office, (phone: 800-829-4933); direct inquiries regarding a State Identification Number to the State of Minnesota, Department of Revenue (phone: 651-282-5225 or 800-657-3605).
XI. PARISH ACCEPTANCE OF GIFTS AND DONATIONS
1) All contributions, gifts, and donations to a Parish must comply with IRS regulations and must be properly acknowledged in writing. Receipts that comply with IRS regulations must be issued.
a) Restricted Gifts: Acceptance of a restricted gift imposes an obligation on the Parish to comply with the terms established by the donor. Therefore, it is necessary that the nature and extent of this obligation be clearly understood. If a gift is deemed unacceptable because of the restrictions the donor has placed on its use, the donor must be informed promptly and provided with the opportunity to either withdraw the gift or to remove or modify the identified restriction(s).
b) Unacceptable Gifts: Gifts to a Parish, whether restricted or not, must be declined or returned when the gift:
i. Is inappropriate or not conducive to the best interest of the mission or ministry of the Parish;
ii. Is known or suspected to be from an illegal or questionable source;
iii. Would obligate the Parish to undertake responsibilities, financial or otherwise, which it may not be capable of meeting for the period required by the terms of the gift;
iv. Creates excessive administrative, recording, tracking or reporting procedures for the Parish;
v. Creates an improper or unreasonable conflict of interest;
vi. Contains a long-term or perpetual obligation that is or may become onerous to the Parish;
vii. Contains a condition attached to a gift that does not provide a clear and acceptable mechanism for the Parish to modify the restriction;
2) When accepting a gift, a Parish must take into account any associated potential or real liability.
3) Donor restricted gifts must be recorded in the Parish financial records according to FASB ASU 2016- 14 processes and GAAP reporting.
XII. INSURANCE
1) All Parish properties must be insured under the general insurance program of the Archdiocese. Reports of damage or loss should be made promptly (within 24 hours) to the local service office of the general insurance program of the Archdiocese.
XIII. REAL ESTATE TAX EXEMPTION AND APPLICATION FOR PROPERTY TAX EXEMPTION
1) Pursuant to the Minnesota Constitution and supporting statutes, churches, church property, schools and institutions of purely public charity are exempt from property taxes. There is no exemption from city or county assessments for local improvements except for cemeteries. In order to preserve tax-exempt status for all Parish property, the Parish must ensure that the property is used solely for religious, educational, or charitable purposes and, if required by Minnesota law, file an Application for Property Tax Exemption. This application must be filed every three years, on or before February 1, with the County Assessor of the county in which the property is located. The Application for Property Tax Exemption is available through the County Assessor’s Office. In submitting the application, the Parish must file as a church, and not as an institution of purely public charity.
2) Application for Property Tax Exemption is not required to preserve the exemption for the church building or School. However, for rectories, convents, cemeteries, or property other than the church or School, such filing is mandatory in the year such use is first made of this property and on a three-year cycle as indicated above.
3) Since frequently all or most of these Parish facilities are intermingled on a single tract, all Parish properties should be reported on the application to simplify the reporting and avoid omissions.
4) Property not used for religious, educational, or charitable purposes by the Parish or a tenant is not exempt from property taxes and should not be included in the filing.
5) The Chancellor for Civil Affairs is available to answer questions about the Application for Property Tax Exemption and real estate tax exemption.
XIV. SERVICE CONTRACTS
1) A service contract is an agreement or contract between the Parish and another corporation, individual, or other entity (contractor) wherein the contractor agrees to perform certain prescribed services, within a prescribed time period, for a specific price. Examples of the kinds of services which might be the subject of such a contract or agreement are the maintenance or repair of buildings, grounds, equipment or machinery, fund raising and investment services, and legal, accounting, engineering, or appraisal services. See Policy on Required Approvals for Corporate Actions (Policy n.216).
2) Service contracts should be reviewed by the local service office of the general insurance program of the Archdiocese for insurance compliance and limitation of liability. Significant service contracts should be reviewed by a competent attorney.
