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Church Property, Loans, Trust Investments

One of the greatest amounts of time spent by the auditors in conducting our national audit was in the area of reporting for Church Property (Building and Land), Loans and Trust Investments.

As the legal entity, the Foursquare Gospel Church of Canada holds title to all church property and also carries the liability for all loans through CIBC. This means that it is the responsibility of FGCC to report church property and loans in the financial records of the national office and also report these amounts on the T3010 Annual Charity Return.

In the past we have encouraged our churches to also record church property and loans in their accounting records for reporting purposes to their councils and membership (always with the recommendation that these amounts are not to be reported on their year end financial reports submitted to CRA with the T3010 Annual Charity Return).

This practice of "double accounting" presented a great challenge to the auditors and they requested for the 2015 audit that all amounts reported for church property and loans in the financial records of the churches be removed. This would also include amounts held In Trust with the national office for proceeds of church property sales held in investments. The auditors request was presented to the national board by the Audit Committee and approved as a new Administrative Manual policy.

For those churches who have reported the property, loans and investments in the accounting records this means that year end adjusting entries will need to be made PRIOR to submitting the year end financial reports, trial balance and general ledger. If you have already sent these to the national office then adjusted statements will need to be resubmitted.

To help you with this here are some recommended steps to take:

Step 1: Adjusting Entry for Church Property Balances & Transactions

  • Church property balances reported on the balance sheet as of January 1, 2015 will need to be removed by crediting the church property account and debiting Retained Earnings.
  • Church property additions or renovations that were done throughout the 2015 year are to be treated as an expense and recorded in the section for Gifts to Qualified Donee to FGCC.
  • Additions to church property and renovations are to be reported on the 2015 Year End Audit Confirmation form.
  • Please also see Church Accounting - Church Property for further instructions.

Step 2: Adjusting Entry for Loan Balances & Transactions

  • Church loan balances (CIBC) reported on the balance sheet as of January 1, 2015 will need to be removed by debiting the loan account and crediting Retained Earnings. ** This does not include in-house loans with national office.
  • Loan payments that were made throughout the 2015 year are to be treated as an expense and recorded in the section for Gifts to Qualified Donee to FGCC.
  • Please also see Church Accounting - Church Loans for further instructions.

Step 3: Adjusting Entry for Investment Balances & Transactions

  • Trust Investment balances reported on the balance sheet as of December 31, 2015 will need to be removed by crediting the investment account and debiting Retained Earnings. ** This does not include Trust Investments that were funded by accumulated or excess church revenue.
  • Please also see Church Accounting - Investments for more details.

For those churches affected by this policy and procedure change we greatly appreciate you taking the time to make these adjustments before submitting your yearly reporting.

If you have questions or concerns about the auditors request please direct them to the Audit Committee at auditcommittee@foursquare.ca. 

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Church Property

All church property (building and land) purchased is held in title by the Foursquare Gospel Church and reported for accounting purposes in the financial statements of the national office and the T3010 Annual Charity Return. Church property, building projects and renovations to existing church properties are not reported in the financial records of the church.

Accounting for Church Property Transactions

Property Purchase

  • Church property is not reported in the assets of the church accounting or on the T3010 Annual Charity Return.
  • A monthly statement will be provided to the church by the national office to report church property values.

 

Renovations to Existing Church Property

  • Renovations to existing church buildings that are funded by church finances are to be treated as additions to property held in title by the Foursquare Gospel Church of Canada.
  • Expenses related to major renovations or alterations are not reported as an asset on the balance sheet of the church.
  • All costs are to be reported by the church in the section for Gifts to Qualified Donees - FGCC and reported on the T3010 Annual Charity Return.
  • Major additions or renovations to church property are to be reported on the Year End Audit Confirmation form based on the amounts recorded as Gift to Qualified Donee.

Building Projects

  • Building projects are treated the same as church property purchases.
  • Expenses related to building projects are not reported in the accounting as an asset on the balance sheet of the church. All costs are to be reported by the church in the section for Gifts to Qualified Donees - FGCC and reported on the T3010 Annual Charity Return.
  • Building Project costs funded by the church are to be reported on the Year End Audit Confirmation based on the amounts recorded as Gift to Qualified Donee.

Sale of Church Property

  • When a church property is sold the sale transaction is reported in the financial records of the Foursquare Gospel Church of Canada and reported on the T3010 Annual Charity Return.
  • No amounts are to be reported in the financial records of the church.
  • Net proceeds of a property sale are to be reinvested in another church property or held In Trust in the national office investment account.
  • See Church Accounting - Investments for more details.

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Church Loans

All lending arrangements for church purposes are to be done through the CIBC Credit Agreement with FGCC or through a national office in-house loan. Prior approval must be obtained from the national office. Contact the national office for further details.

Accounting for Church Loans

CIBC Loans: loans advanced by CIBC are a liability of the Foursquare Gospel Church of Canada and reported for accounting purposes in the financial records of the national office and the T3010 Annual Charity Return. CIBC loans are not to be recorded in the church accounting records. Loan payments are recorded as an expense in the Qualifed Donee section for FGCC and reported as such on the T3010 Annual Charity Return. A monthly statement will be provided to the church by the national office to report loan details and balances.

In-House Loans: loans advanced by the national office are to be recorded as a balance sheet liability in the financial records of the church. A new account called "FGCC In-House Loan Payable" will need to be created in the liability section of the balance sheet. Loan proceeds and payments are posted to the new Loan Payable account.

Upon national board approval, the procedure for disbursement of loan funds is as follows:

CIBC Loans - Property Purchase or Building Project

  • Loan proceeds will be requested from CIBC by the national office to be paid directly to seller.
  • Loan payments will begin once proceeds are advanced.
  • Monthly loan payments will be drawn from the church bank account and are recorded as an expense under Gifts to Qualified Donee to FGCC.
  • The national office will send a monthly statement to the church to report loan details.

CIBC Loans - Building Project

  • Loan proceeds will be disbursed in increments based on work-in-progress reports from church (supported by invoices).
  • At intervals throughout the project the church will send requests to the national office for work-in-progress advances. The request should include copies of invoices to support amounts being drawn.
  • The national office will request loan proceeds from CIBC to be deposited into general account.
  • Transfer request will be made to transfer funds from the national office account to the church project account.
  • Monthly loan payments will be drawn from the church bank account and are recorded as an expense under Gifts to Qualified Donees to FGCC.
  • The national office will send a monthly statement to the church to report loan details.

CIBC Loans - Building Improvements or Renovations

  • Loan proceeds will be disbursed in increments based on work-in-progress reports from church (supported by invoices).
  • At intervals throughout the project the church will email/fax requests to the national office for work-in-progress advances. The request should include copies of invoices to support amounts being drawn.
  • The national office will request loan proceeds from CIBC to be deposited into general account.
  • Transfer request will be made to transfer funds from the national office account to the church.
  • Monthly loan payments will be drawn from the church bank account and recorded as an expense under Gifts to Qualified Donees to FGCC.
  • The national office will send a monthly statement to the church to report loan details.


National Office In-House Loans

  • Loans for capital purchases or emergency will be funded by In-House loans by the national office from general funds.
  • Loan proceeds will be disbursed upon approval of loan to the church.
  • A loan agreement will be mailed with the loan cheque outlining the terms of payment. The church council will sign and return original to the national office.
  • The designated signor of the national board will sign the agreement. A copy will be mailed back to the church with a payment schedule. The original will be kept on file at the national office until paid in full.
  • Monthly loan payments are to be paid to the national office and recorded as a reduction of the In House Loan liability on the church balance sheet.

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Investments

Investments of the church can come from 2 sources: accumulated or excess funds of the church and proceeds from the sale of a church property.

Accounting for Invesments

Accumulated or Excess Funds

  • Accumulated or excess funds sent into the national office to be invested In Trust are to be reported in the current asset section of the balance sheet as Investments In Trust (new account to be created).
  • The church will issue a cheque to the national office and post the entry to the new Investment account.

Proceeds of Sale of Church Property

  • Proceeds from the sale of church property that are invested In Trust with the national office are not to be reported in the financial records of the church.
  • A monthly statement will be sent to the church that detail the account balance and earnings.

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