Caring for a cemetery is time-intensive. Factoring this, and managing a perpetual care fund can be challenging, especially for those unfamiliar with the necessary accounting standards and regulatory requirements. It may often require expert-level skills like auditing, inventory and stock taking, investments, etc. A cemetery needs a perpetual care fund to keep doing its core activities, maintain its environment, and carry out its other duties. When managing a perpetual care fund, one will have to adhere to the best practices for fund management and compliance guidelines, while navigating its complexities.
Understanding Perpetual Care Funds
Perpetual care funds are crucial in supporting the long-term maintenance and care of cemeteries and memorial parks. They are called “perpetual” because they are essential for the ongoing care of cemeteries, and ensure that funds are available when needed. These funds are designed to ensure that these spaces remain well-kept and respectful for current users and future generations.
The perpetual care funds are invested into a trust to provide financial resources for upkeep and improvements. This fund is largely based on contributions from cemetery purchasers or donors. It accumulates over time and generates interest used specifically to maintain the cemetery, through activities such as landscaping, facility repairs, etc.
Like any other institution, there are legal guidelines that govern how perpetual care funds are managed. This is to ensure accountability and transparency. This is where getting a fund administrator or professional accountant becomes relevant! Fund administrators have a legal duty to act in the best interests of the fund’s beneficiaries – the cemetery – thereby protecting the integrity of the funds, while providing accountability to the investors.
Accounting Standards for Perpetual Care Funds
Certain standards must be followed when managing perpetual care funds. This is to ensure that the funds are accounted for, reported, and invested to provide sustainable care for the cemetery.
Organizations managing perpetual care funds must follow specific guidelines put forward by accounting authorities or varying state laws. These guidelines dictate how to register and record contributions, investment income, and the costs of maintenance. The funds must be used appropriately so that they can remain available for their intended purpose over time.
There must also be regular audits and financial reviews. These help to promote compliance with accounting standards. Aside from that, it also helps to identify any discrepancies in the spending of the perpetual care fund, or areas that may need better budgeting. These audits can be done internally or independently. However, independent audits give objective results of financial statements and documents and may be more accurate than in-house audits.
Investment and Fund Management Best Practices
To best manage perpetual care funds, relying on sound investment strategies is the best option. One of these strategies is diversifying the investment portfolio. This helps to mitigate risks associated with market fluctuations while still generating the necessary returns to support long-term cemetery maintenance.
History best predicts the future! Regular past performance reviews of investments and other variables will boost the chances of making accurate choices, and help adapt to market changes. Managers do this by assessing how fund assets are performing and making proactive adjustments when needed.
Moreover, liaising with experienced financial advisors and accounting firms may further better management of perpetual care funds. These financial experts can provide market trend insights, and investment opportunities, and even follow statutory progressions as related to the perpetual care funds.
Lastly, transparency in fund management is one of the most important perpetual care fund best practices, especially as it builds trust between stakeholders and fund administrators. This involves providing clear and prompt investments and expenditure reports, declaring investments, etc.
Compliance and Regulatory Requirements
There are several regulations guiding perpetual care funds. For instance, the Generally Accepted Accounting Principles (GAAP), and the Financial Accounting Standards Board (FASB) provide general guidelines to perpetual care funds management. However, more specific regulations may vary from state to state.
These regulations typically include requirements for regular financial reporting and audits. Audits and regular financial reporting keep the care funds intact and ready for use while preserving the solemnity of a cemetery.
Fund administrators are required to stay updated with any changes in perpetual care fund laws and operative allowances. Laws change every day, and what was legal yesterday may not be completely legal today. It is thus a matter of duty to keep abreast with legal changes.
Financial Reporting and Disclosure Best Practices
Organizations that prioritize best practices in financial reporting and disclosure attract more donations. The first best practice includes regular audits and financial reviews to signal accountability and responsibility in fund management. Audits may reveal tax activities, spending activities, adherence to guidelines, balance accuracy, etc. Regular auditing is as important as it gets!
It is also advisable for fund administrators to use more accessible language and straightforward formats to enhance the clarity of their financial disclosures. Simplifying the reports breaks down complex financial information and makes it understandable to all stakeholders. This increases trust and therefore engagement and support for perpetual care initiatives.
Common Pitfalls and How to Avoid Them
Inadequate financial reporting can severely stymie the effectiveness of perpetual care funds. Financial disclosures must be accurate and accessible to promote transparency and stakeholder confidence in their management practices.
As insinuated above, one common error in managing perpetual care funds is a lack of clear reports. One may often be tempted to use technical jargon in financial reporting. However, to build trust with stakeholders, fund administrators must publish easily understandable reports.
Also, there must be prompt communication with stakeholders. When organizations fail to provide regular updates on fund performance and expenditures, trust can be eroded among contributors. It is advisable to maintain regular communication and relationships with the stakeholders.
Another pitfall is when fund managers compromise investments, or fail to adhere to established investment strategies. Fund administrators, for whatever reason, may deviate from tested and trusted strategies. This may result in financial instability, and will grossly limit the perpetuity of the care funds.
Also, not assigning specific team roles and responsibilities may hamper their ability to manage the perpetual care funds properly. Perpetual care fund management involves several parties who must each know what their roles entail.
Finally, neglecting regulatory compliance poses significant risks to perpetual care funds. While following existing guidelines, the fund administrator must also remain informed about any changes in laws governing perpetual care funds.
Frequently Asked Questions
What are perpetual care funds and their main purpose?
Perpetual care funds are special financial accounts created to ensure ongoing maintenance and care of cemeteries or memorial sites. Their primary purpose is to provide long-term funding for the maintenance and general upkeep of these sites.
What accounting standards apply to perpetual care funds?
Perpetual care funds adhere to several accounting standards, including Generally Accepted Accounting Principles (GAAP) and the Financial Accounting Standards Board (FASB) guidelines among others.
What are the best practices for managing perpetual care fund investments?
Some best practices for effectively managing perpetual care fund investments include diversifying assets and portfolios, regularly reviewing performances, adhering to ethical guidelines, maintaining transparent communication with stakeholders, etc.
What regulatory requirements must perpetual care funds comply with?
Perpetual care funds may vary from state to state. So, the fund administrator must meet state-specific regulations, investment standards, reporting requirements, and fund management practices, while also ensuring adherence to general compliance rules.
How should perpetual care funds handle financial reporting and disclosure?
Perpetual care funds should follow standard accounting practices for transparency and reliability. This can be achieved by disclosing financial statements, investment performances, and fund usage.
Proper Financial Reporting Begins Here
Employing the services of an experienced accounting firm like MKS&H will bring a new air of prosperity and responsibility amidst these complexities. With our team’s expertise in managing perpetual care funds and other accounting functions, we can assure you of comprehensive audits, and cohesive advisory functions, all streamlined to make sure the cemetery’s perpetual care funds are properly managed. Contact us today to understand how we’ll do these for you!
About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture and your business goals. This approach enables our clients to achieve their greatest potential.
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