Before the Allocation Form is signed and submitted, take one last look for the following common errors:
- Not including all expenses in Line B: Total Parish Expenditures . Some income statements have a supplemental P&L section for “Other Expenses” which needs to be added to the Total Expense Line B. Expenses that are reported as negative income should be converted to expenses added to Line B. All accounts and funds should be included in Line B, for example a building fund or a festival fund should be included in Line B. If you have a question about a particular situation, reach out to your Metropolis Finance Committee.
- Deducting expenses that are not included in Line B. It’s very important to verify that every deduction corresponds to an expense that was included in Line B. For example, if mortgage principal payments were not included in Line B, then they cannot be deducted. Another common example would be deducting capital improvement expenses when those expenses were capitalized – in the Balance Sheet – and not included in Line B.
- Deducting expenses that do not qualify for any deductible category according to the Archdiocese’s guidelines. A common case is trying to deduct a portion of undifferentiated parish operational expenses as fundraising expenses.
- Misreporting transfers as expenses. A transfer of money into a savings account or between accounts and report is not an expense. This is an accounting error. As long as the money is still held/owned by the parish, the transfer is not an expense.
- Reporting depreciation, lost income, or other kinds of write-offs as an expense in Line B. For the purpose of our allocation formula, depreciation, lost income, and other kinds of write-offs should not be included in Line B. Unfulfilled pledges are not expenses. Parishes should not be booking pledges as income and should not be reporting unfulfilled pledges as an expense.
Calculation errors and typos. Please double check the values entered on the allocation forms to make sure there is no typo or transposition. Also, please check the sums and the additions for accuracy. Looking for Consistency or Does This Make Sense?
Look for the following signs that something may be amiss:
- If you see a large change in net expenses (B – C) from one year to the next, this may indicate a reporting error in one year or the other (or both). Large changes in any individual line of the allocation form should also be investigated and verified.
- If the reports contain just a few large line items that are summations from the financial statements, it’s very difficult to verify the deductions. A parish should provide a detailed breakdown of the large items.
If you as the preparer of the Allocation Form are just not comfortable with the instructions or are concerned that the compilation is incorrect, you should call your member of the Metropolis Finance Committee to assist with preparation of the Allocation Form. The Metropolis Finance Committee members are there to assist the parishes.
Why a Correctly Prepared Allocation Form Matters
All of the Parishes report their expenses net of allowable deductions to their Metropolises. Each Metropolis reports its cumulative parish net expenses to the Archdiocese. The budget necessary to fund our Archdiocese and Metropolises is then apportioned to each Metropolis based on net parish expenses.
Accordingly, this process works if each parish makes an honest and accurate report. A parish that claims improper deductions or does not report its expenses fairly shifts its pro rata share of the allocation to other parishes. A parish that misses deductions unfairly shifts its pro rata share of the allocation to itself.
The process begins with each parish completing the form accurately with the appropriate documentation. Each parish allocation form is reviewed by the respective Metropolis Finance Committee; members of this committee are well versed in the completion of these Allocation Forms. The final step is the Archdiocese level review that is intended to ensure that all parishes throughout the United States are preparing the forms similarly.
Perhaps the most important reason for reviewing parish reports and providing feedback to the parishes is to help the parishes learn good techniques for reporting and tracking their finances. Not only does this help safeguard the parish’s resources, it can also help the parish make better financial decisions.