Discretionary Funds

Diocese of Oregon
Operations Resource Manual

8.0 APPENDICES

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8.4 DIOCESE OF OREGON GUIDELINES FOR DISCRETIONARY FUNDS AND EXPENSE ACCOUNTS

It is important for the Clergy to separate their ex-pense Accounts from the Discretionary Fund. In the case of an audit, the taxing authorities will want to be shown that these Funds are independent of one another. Recommendations for administering these Funds is shown below.
The Expense account is to repay the Clergy for authorized expenses they incur in the conduct of Parish business.
The Discretionary Fund is to be used as noted below and not for Clergy expenses.
Any money used for personal use must be re-ported as taxable ordinary income.

DISCRETIONARY FUND

Clarifications:

- Any expenditures from this fund need to be dispensed in accordance with the Episcopal Church Title III Canon 14 Section 2 (f).
- Any money used from this fund which could be construed as income to the Clergy person must be reported as such when filing income taxes.
- If the governing body does not establish the discretionary fund, and have an audit done, then all of the money given to the Clergy for discretionary use must be reported as in-come to the Clergy person without regard to its use. Some items may be deductible if the Clergy person is able to itemize. Should such income not be reported to the taxing authority the Clergy Person and Vestry are separately and jointly responsible for any re-sultant penalties.
- Suggested procedure for the flow of funds is as follows:
- All money given as part of this fund should be given to the Church, not the Clergy Person. (This includes such items as contributions for weddings, funerals, plate offerings, funds from capital gifts etc.) The Treasurer deposits these funds in the Clergy Person's Discretionary Fund account and this becomes part of the Church's financial record.
- Two of the possible ways for the Clergy per-son to disperse funds are these:
- Issues a check request to the treasurer who initiates a check from the Discretionary Fund Account to the needy recipient.
- Writes a check to the needy recipient from the Discretionary Checking Account. The checkbook and the backup documents must be open for audit.
- An Outside Auditor or a Parish audit team audits the Discretionary Fund at year end, and reports to the Vestry and the Diocese.

Noted below are some of the items for which this fund should be utilized. All of these items are for the needy, poor or afflicted.
1. Food
2. Lodging
3. Transportation
4. Medical Bills
5. "Pious and Charitable Uses"

EXPENSE ACCOUNT

Suggested Procedure:
- An Expense Budget is established for the Clergy Person ,by the Budget Committee, ap-proved by the Vestry and made part of the annual Budget.
- The Clergy Person makes expenditures in accordance with general outline of the suggested expense items below.
- The Clergy Person provides the Treasurer with bills and/or invoices for the appropriate expenditures, including an accounting for mileage. The Treasurer issues a reimbursement check for these expenditures to the Clergy Person.
- Taxes and Tax reporting is not significant as long as this is a reimbursement account. How-ever, if the Clergy Person's reported expenditures at year-end exceed reimbursements by a significant amount, it is appropriate that a do-nation receipt be issued to the Clergy person in the amount of the overage.
- The outside auditor or the Parish audit team audits this account ,at year end, and reports to the Vestry and the Diocese.
- Expense Account Items noted below. These expenditures should be related to church activities. It is suggested that if the expenditure should be large, unclear in its purpose or cause the Budget to be exceeded there should be a prior discussion between the Clergy Person and the Vestry before it is made. Some Items are:
A) Conferences (Tuition, meals, transportation)
B) Air and Rail Travel
C) Auto Costs (These are frequently a separate expense item)
D) Entertainment of parishioners or parish guests
E) Organizational membership costs
F) Meals and refreshments
G) Books and Journals
H) Consultants
I) Any item which has a specific Vestry approval
J) Others that can be perceived by Audit as Parish related expenditures.

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