How to Manage a Contributions Sub-account

[RLM]

We have an annual budget of roughly $200,000. Ten percent of contributions that are brought into the General Fund are separated out into a sub-account 01-1110-365 which is used to manage our 'tithe' of budgeted general fund income. It is equally split into three categories: Mission support (8 missionaries), Evangelism (local evangelistic efforts), and a Local Outreach-HOPE FUND which is used as a benevolence fund for local families in need. The credit accounts that are used for transactions hitting the checking account also carry the 365 sub-account.

My question is regarding how to properly manage this budgeted 10%. Here is the scenario....

Scenario #1 - This year we used the 1/3 allocated for missions support. We had several thousand dollars remaining in the budget for the 1/3 Evangelism allocation, so the remaining budgeted amount was divided equally between the eight missionaries and added to their final 2012 missions support check. So now we have satisfied 2/3 of the 10% budgeted income amount. There remained roughly $1,300 in the Local Outreach-HOPE FUND allocation.

I made a journal entry that created a liability which carried $1,300 over into 2013. Right or wrong? The Elder council did not offer any push-back. Our income for 2012 was around 86%. This was too complex of a formula for me to attempt to figure out how to do this differently, so for simplicity, I used the budgeted income amount for all calculations.

Thoughts anyone? How do other churches handle this if they take 10% of their annual income as we do and use it to support other ministry efforts.

[JohnDMeyers]

I think I got it, but if my answer goes down the wrong path, maybe I don't.

I would create three sub-accounts under checking, and have the Contribution Fund put 3.33% in each one.

Contribution Fund 100 tithes
01-1110-000 checking
01-4010-000 tithe income

Contribution Fund 101 missions
01-1110-365 missions amount
01-4010-365 missions income
This account receives 3.33% of fund 100

Contribution Fund 102 evangelism
01-1110-366 evangelism amount
01-4010-366 evangelism income
This account receives 3.33% of fund 100

Contribution Fund 103 local outreach
01-1110-367 local outreach amount
01-4010-367 local outreach income
This account receives 3.33% of fund 100

Any money "left over" at the end of the year will simply stay in the checking sub-account and be added-to in the following year.

[RLM]

You have it right. I was hoping not to cloud the issue, but I didn't know how else to word this. I really didn't know how to properly utilize sub-accounts but you have made this very clear. Thank you for that! This will be a great way to manage this in 2013.

Is there anything that I should do with the $1,300 liability that I used in my scenario as I create my 2013 budget accounts?

Am I correct with having each expense carry the corresponding sub-account?

[JohnDMeyers]

I am puzzled about the liability account. Is it because you are saying that you "owe" that money to evangelism, or one of the other ministries?

I would think it should be an asset. It's $1,300 cash. It should be in a checking sub-account, in my thinking.

Keeping the sub-accounts consistent with expense accounts is a good idea, I think.

It will allow to run reports that show the income and expense on one piece of paper, by entering the unique sub-account number.

[RLM]

Correct, the liability is for the $1,300 (actually $1,037.65) that we carried over from the Local Outreach-HOPE FUND. Is that not a good way to show that? It is money 'owed' for the tithe for our 2012 budget. Would it have been better to just end the year showing $1,037.65 under budget, and not carry anything over?

In reality we missed the mark on our contributions for the year and finished with 86% of our budgeted income. That is what has made this so difficult for me to wrap my mind around. My though was that if this money was budgeted, then it was owed regardless of whether we realized the income or not. There are so many different ways to view how this should be handled.

[JohnDMeyers]

Is this the case? You budgeted something like $3,037.65 and only $2,000 came in.

So the difference of $1,037.65 you want to show as owed to this account?

My board would likely say to me that my optimistic budget was in error, and what came in, came in.

[RLM]

I am inclined to agree. Thank you for your input and direction, it's nice to have another set of eyes to look at this with me.