Designing an appropriate approach to "restricted"

[rosscons]

We have been using PowerChurch for several years for membership and contributions and we are just getting around to implementing the accounting module. It seemed reasonably straight forward until I got to the restricted equity accounts. Like most church's we have a number of small "funds" that are earmarked for small groups. Generally these are characterized by small balances although a few are material. Some live only a short time (e.g. broken dishwasher fund), but others are perpetual (e.g. youth group).

Most of these accounts have only a few transactions each month and many are fairly dormant. Simple transaction listings are generally all the reporting that we need for these items.

For the most part, the balances in these accounts are truly restricted equity but PowerChurch's process for dealing with them seems pretty complicated (restricted income, restricted expenses, release transactions, etc.).

Reviewing the forum, it seems as though there are three basic approaches that people seem to be following:

1. Adopt the full "restricted account" PowerChurch process, or
2. Treat the account as a separate fund (which has its own issues), or
3. Treat the account as a liability (which simplifies the accounting but mischaracterizes the account).

Do I have that right?

One option that I did not see in the forum posts (but I certainly may have missed it) is whether it is possible to simply post directly to the restricted equity accounts and ignore the restricted income, release transactions, and such. I tried a test transaction and the system accepted it but I'd hate to get too far down the road and learn that there is something later on that will object.

Has anyone tried this approach?

Thanks for your help,

Bill Ross
First Unitarian Church of Omaha

[JohnDMeyers]

First off, I'll be the first to admit that it took us awhile to get comfortable with using the features dealing with tracking restricted income in powerchurch. For several years, I was manually compiling the information for our annual reports.

Out of necessity (our church's financial statements are rather complex, now), I decided to try to learn how to use the built-in restricted income procedures.

I can now report that we are quite comfortable using them.

Here's my recommendation: use restricted income for items like you mentioned - the dishwasher, the youth group, etc.

Use the liability account for pass-through money (collecting money that will be paid to another non-profit organization).

If you directly manipulate the equity accounts, what you will be missing are income/expense statements that support your balance sheet. This will matter in integrity on your annual statements, and if you are presenting your financial statements either for a loan, or for a grant, etc.

By using the Maintain Donor Restriction wizard, you get all the accounts set up fairly easily. We have around 6 - 10 restrictions at any given time.

By using the Release Restriction button on the bottom of the Accounts Payable / Maintain Open Invoices screen, or the Fund Accounting / Enter Transactions screen, maintenance of donor restrictions is only a few extra clicks. Clicking on the button brings up a window with all the named restrictions. You just select the correct one and click on it, and you're done.

I would say the only hard part is remembering which items have a restriction. We haven't figured out a bullet-proof procedure for that, yet.

The benefit of being able to have complete, accurate annual statements coming out of Powerchurch at the end-of-year more than makes up for any inconvenience of maintenance throughout the year. (I still produce my own "Sources and Uses of Cash" Statement).

It's not so bad, once you get used to it. I recommend trying it.

[rosscons]

John,

Thanks for your comments. I appreciate the information.

Since we have significantly more than 6-8 accounts that could be classified as "restricted", we've decided to go ahead with our current practice. In the future, we may go the route suggested by PowerChurch but we're going to opt for simplicity right now.

Thanks again,

Bill Ross