Accounting for Ministers Discretionary Fund

[SML]

We take donations for a ministers discretionary fund. Our pastor is able to disburse these amounts to members who are experiencing hardship. What account would you suggest these be set up under? The balance does carry over from one fiscal year to the next.

The restricted accounts just seem so cumbersome and confusing to me so I avoid them and have been using a short term liability pass through account. I just wondered if there are any accounting rules that says I shouldn't use that approach and what others do?
Thanks,
Suzanne

[JohnDMeyers]

Technically, this is a donor restriction. A pass-through is money collected that then gets passed off to another organization. However, you're collecting the money, tracking it, and disposing of it within one year, so you have found a method that works. Someone, other than me, who has a background in accounting will have to tell you not to do this. I have done similar things, where the method works, but the absolute accuracy of accounting methods wasn't quite right.

I have told others on this forum that I avoided using donor restrictions for years, and had to create them by hand for our annual reports. I finally decided to figure out how to use that feature on PowerChurch, and now it doesn't seem so bad.

So, I encourage you to use the donor restriction where appropriate, as in this case. Use the Maintain Donor List wizard, and it is pretty straight forward.

Using the wizard, you can create these accounts (use whatever numbers fits your chart of accounts)

Name: Ministers Discretionary Fund
01-3210-000 Discretionary Fund Equity
01-4210-000 Discretionary fund income
01-4810-000 Release Discretionary income

01-4999-000 General Release
01-5350-000 Discretionary expense
Contribution Fund - 120 Discretionary Fund Income

Then, you receive money using Contribution Fund 120 (or whatever number you assign), and when you spend money, just click on the "Release from Restriction" button at the bottom of the Open Invoice window and select the correct restriction. Everything else is automatic.....really!!

The first three accounts are unique to this restriction. If you create a second restriction, use 3212, 4212, and 4812, for example.

[CoveBaptist]

I too had been tracking this type funds as a Liability. My accounting knowledge is minimal. What entries do I need to make to move the balances to the appropriate accounts at this point?

Looking at the List, I assume I create an Expense Account for each donor restricted fund (5350)? Is the 4999 my account all donor restricted funds close to? And do I have to have a contribution Fund for each donor restricted fund?

01-4999-000 General Release
01-5350-000 Discretionary expense
Contribution Fund - 120 Discretionary Fund Income

Perhaps using the wizard would answer these questions ? And when I post an expenditure from these funds, what do I debit and credit?

Thank you

[JohnDMeyers]

01-3210-000 is the equity account that the two unique income accounts close to:

01-4210-000 closes to 3210
01-4810-000 closes to 3210

01-4999-000 closes to 3110 (unrestricted net assets)

and all the expense accounts close to 3110 (unrestricted net assets)

You will need a unique Contribution Fund for each donor restriction.

When you use the temporarily restricted money, and click on the "Release from Restriction" button, the following happens:
DB 01-4810-000 (which closes to 3210)
CR 01-4999-000 (which closes to 3110)

Basically, this is how the system keeps track that the money was taken out of the restriction and is now closing to unrestricted net assets.

Let me know if you have trouble getting these set up.

[CoveBaptist]

Thanks - maybe it will make more sense as I set it up and use it.

Do you know what my transactions would be to move the money I am now showing as a liability into these new donor restricted accounts? I have two, one for Youth Ministry - General and one for Music Ministry - General.

I realize that I first have to create the appropriate accounts - then balance the debits/credits. But what to what? Thank you!

[Jeff]

If you already have the amounts in a liability account, you just will need to move the balance to the equity section. To do this you would debit the liability account (decreases it in value) and credit the restricted equity account. (increase it in value)

If you have existing income accounts you want to change over to the donor restriction, there are additional accounting entries that need to be made, but it doesn't sound like you will need to worry about that.