fund designations

[yoknox]

Received an offering envelope marked "for awana". We do not have an awana designated fund. Only an expense account. And no designated fund has been approved by the church. My understanding is that he cannot receive credit for the contribution or can he. Do we have to set up and have a awana designated fund approved by the church in order for him to receive credit. If so, where in the chart of accounts is this done. Can this $ go into the same checking as our unrestricted funds or do we have to have a separate checking account. These contributions probably will not amount to very much over a period of time so looking for a simple fix. Thanks.

[Matt]

I would recommend that you set up an income account called AWANA dues/income to post this contribution to. Set the close to account to go to unrestricted net assets (3110). Then set up a contribution fund with this same name in the Contributions Module, with the income account set to this new account. My experience has been that at most churches the AWANA program is primarily paid for out of General Fund monies, as the dues and other income that come in are usually minimal. That being the case, it really doesn't make sense to set up a designated fund, as the fund will almost certainly always have a negative balance.

[yoknox]

Thank you Matt. I realize I used the wrong word by calling this a designated "fund" so your answer is just what I need. My confusion is that because it was designated for Awana why is it not restricted. Will you clarify this?

[Matt]

Restricted means that the money can only be used for the specific purpose it was given for. However, in order to show funds as restricted in PowerChurch you need to set up a restricted income account, a restricted release account, and a restricted fund balance account. Given that at most churches the majority of the AWANA program expenses are paid for out of the General Fund budget I'm not sure it's worth the extra bookkeeping work to set up and maintain separate restricted accounts for the minor amounts of income that come in for AWANA. I would be inclined to just set up a separate income account for the AWANA income and include those monies as part of the unrestricted General Fund balance since they are very minor, the majority of the AWANA expenses are being paid out of the General Fund anyway and not from designated AWANA income, and you mention that you were looking for a simple fix. Having said this, it's up to the church on how they want to account for this income. So if your church wants to set up restricted accounts to separately account for and track the AWANA income and expenses that is perfectly acceptable too.

[yoknox]

Please ignore the word "fund" designation in the subject line. I should have just said designated. I am still a little confused about two issues: 1) Restricted vs unrestricted - when someone gives $ and designates it to buying a bus. Is this restricting?

When someone gives $ and designates it to a specific department within the church, although it is not designated for a specific purpose, it is designated so is this restricted or unrestricted.

2) In both situations is it permissible to include on the contribution statement.

I have read all the old postings on Power Church as well as many articles about these issues and it seems very confusing. Not everyone has the same answer so if I can get this forum to help me, I believe I can move forward and be assured it is being done correctly. Thank you in advance.

[yoknox]

Matt I apologize for crossing our postings. We must have done so at about the same time. I am still confused about whether or not $ designated for awana is restricted or unrestricted. I understand why the dues and books are just income but If this person continues his pattern, the pot will grow. Also, can it be included on the contribution statement if it is restricted.

Another example is someone gave money and designated it for a "bus". Not a specific definition. Is this restricted or not and can it be included on the contribution statement.

[Matt]

Technically, money given specifically for AWANA would be restricted. However, the challenge you have is that you say in your initial post that no designation for AWANA has been approved by the church. Is the church planning to authorize a designated account for AWANA? If so, the church board needs to approve this designation being set up. Then, once it has been approved, set up the restricted income, release, and fund balance accounts, along with the contribution fund. Once these are set up you can post the contribution. The contribution can be included on the donor's contribution statement.

If the church is not planning to authorize a designated account for AWANA then I would ask the donor if the money can be put into the General Fund. If the person says no then the church should return the contribution to the donor, since the church has not authorized this designation to receive contributions.

The same thought process applies for the contribution for the "bus". Has the church authorized a designation for a bus? If so, then this is a restricted contribution and the restricted accounts and funds should be set up to account for it. If not then once again I would recommend that you ask the donor if the money can be put into the General Fund. If the person says no then the church should return the contribution to the donor, since the church has not authorized this designation to receive contributions.

It sounds like your church needs to put together a policy to determine how the various types of designated contributions that are being received need to be treated--as either unrestricted, restricted, or returned to the donor if the designation is not authorized by the church. For example, the policy needs to state whether contributions given to a specific department in the church will be considered restricted for that department or will go into the General unrestricted account. I think getting this policy put together and then agreed upon by the church board will really help you in determining how the different types of designated contributions that are being received need to be treated.

[yoknox]

thank you Matt. This really helps.