Cash Disbursements

[SGBC1874]

At my church we do cash disbursements. These disbursements come out of the cash that we collect on that Sunday. How can I record these disbursements in PowerChurch?

[NeilZ]

At my church we do cash disbursements. These disbursements come out of the cash that we collect on that Sunday. How can I record these disbursements in PowerChurch?

FWIW ... it is NEVER a good idea to disburse cash out of the collection plate before accounting for it in the Contributions system. You are basically under counting your Income, which then gives the congregation's leaders and members invalid reports.

You need to setup a petty cash system so that part of what you collect is kept as petty cash in Funds Accounting. There are a number of ways to do this, here's one. In this you will have to have a PETTY CASH asset setup in Funds Accounting. For this example, we'll use 01-1110 as the checking account, 01-1120 as petty cash and 01-4010 as your contributions income.

1. Set up two Contribution Funds:
The first will be your standard Tithes and Offerings fund, the second will be a Office Use Only fund whose sole purpose is to collect a portion of the collection from the Tithes & Offerings to "deposit" in the Petty Cash.

a) setup the Petty Cash Contribution Fund as Fund #1000, not shown on contribution reports, Office Use Only (add the code), on the Accounting Tab show the Bank Account as the 01-1120, and 01-4010 as the Income Account.

b) setup the Tithes & Offerings as Fund #100, SHOW this on contribution reports as this is the fund most members are contributing to.

On the Accounting tab, select the Bank Account as 01-1110, and 01-4010 as Income. Then show an AUTOMATIC TRANSFER at posting time of 10% (or whatever you deem necessary) to Fund 1000. This will move the funds over to 1000 where, when Contributions are posted, the transaction to deposit funds in Petty Cash will be created.

This accounts for the income. There is a problem with this method, but only if you do not keep an eye on how much is transferred to petty cash. You may have more income in petty cash, than is disbursed one Sunday. This is why you need to NOT disburse anything on the first Sunday this is instituted until you have Posted Contributions and know how much was transferred over to Petty Cash.

You can manually do the math, by multiplying what came into Fund 100 by the 10% (or whatever you have decided) after all income has been counted. You will then know how much is in Petty Cash, but the other issue is what happens if you have more in petty cash than you have disbursed. That may involve having a cash box, and safe. That's up to your church.

2. Now for the expense.

The 'disbursements' are, make no mistake, an EXPENSE to the church. You need to follow prudent, audit trail procedures to insure that there is an open and above board procedure to account for all money coming from members contributions.

a) Any request for a 'disbursement' must be written on a form, authorized by a church elder/ministry officer. It must show what the disbursement was for, and what ministry the expense will be against.

b) Two persons (not related to each other or anyone else involved with this disbursement) must sign the form, and disburse the money. The person receiving the disbursement must also sign the form.

c) This form is then given to the bookkeeper/accountant/treasurer who then enters the information as a MANUAL CHECK in Accounts Payable. The manual check will then CREDIT the 01-1120 petty cash account, and DEBIT the ministry EXPENSE account (usually a 5000 series account). The Vendor on the check will be the person receiving the disbursement so that there is a computer record of the transaction. The original form is then filed, and kept as the IRS requires for at least 4 years.

This looks like a drawn out process, and it may cause some people to complain, but it is the MOST open process for the church, as it gives a full audit trail of all income and expenses. This insures that no one in the chain can be accused of impropriety.

[NeilZ]

Valerie

this is the thread you started in January.

[SGBC1874]

I did read and re-read this post. I think we will try this method. I have one last question. When disbursements are sent over to funds accounting, that creates the deposit in the check register. Will this amount be reduced by the amount that goes into the petty cash account?

[NeilZ]

I did read and re-read this post. I think we will try this method. I have one last question. When disbursements are sent over to funds accounting, that creates the deposit in the check register. Will this amount be reduced by the amount that goes into the petty cash account?

If you use the system as described above, what goes into the petty cash does NOT show up in the checking account . However, this also means that the built-in Bank Deposit Slip report will no longer work for transcribing the amount of cash going to the bank. You can use it as a total received for the day, but you're going to have to manually write the bank deposit slip.

The system will automatically move the percentage of offerings to the petty cash Contribution Fund 1000, then when you post contributions, this amount will be posted to the petty cash Funds Accounting account of 01-1120. However, note I mentioned when you setup the Contribution Fund 1000, you USE the same 01-4010 income account that you do for your Tithes & Offerings. What this does is separate the petty cash automatically (I used the 10% as an example) from the bank checking account, but your INCOME account will reflect the entire amount coming in through offerings, which will be reflected on your Income & Expense report.

Petty cash, by definition, are an accessible store of money kept by an organization for expenditure on small items. Which is why I suggest that you have a petty cash box or keep the petty cash in a separate envelope or bank zipper bag in a safe.

If you find that there's too much being moved from Tithes & Offerings to Petty Cash you can reduce the percentage until you reach a point where what is in petty cash, is being mostly disbursed.

Here's what happens:

a) Money is received through offerings, entered into Contribution Fund 100. For ease of this example, we'll use a 1000 in checks, and 1000 in cash.
b) You disburse cash for expenses, using the process listed above. 2 signatures for disbursement on form, with full explanation of why the funds were disbursed.
c) Remaining cash is entered on deposit slip - minus 10% which is going to petty cash. This is the only manual calculation you will need to do on Sunday (or whenever you count and disburse funds).
d) Post Contributions to Funds Accounting. You will want to check the UNPOSTED Contribution Transaction in FA to adjust the funds sent to checking and petty cash so they equal what was actually deposited in the checking account. Again, this is a manual adjustment as what was calculated on Sunday, may not have been exactly what the system calculated.

This unposted transaction will look something like this taken directly from a transaction test I made:

01-1110 - Checking account - Contributions 01-1110 - 1800.00 Debit
01-1120 - Petty Cash - Contributions 01-1120 - 200.00 Debit
01-4010 - Tithes and Offerings - Tithes & Offerings - 1800.00 Credit
01-4010 - Tithes and Offerings - Petty Cash - 200.00 Credit

as you see, while funds are split between the two asset accounts, checking & petty cash, the total income amount will be reflected in the 01-4010 Income account, with notation of where it is.

e) Create the Manual Checks for the disbursements using the 01-1120 as the CREDIT account (normally a bank account is used here, but the funds are coming out of petty cash), and an expense account that reflects what ministry or area the money was spent on as the DEBIT.

Again, in the area for NOTES at the bottom of the Manual Check screen, you would enter appropriate audit trail data, such as what was bought or paid for, who authorized and who received it.

Hope this helps. If you have more questions please ask.

[SGBC1874]

I am pretty certain that I will not convince the finance chair to actually keep cash at the church so there will be physical money at the church "in theory" but not really there. PC is a great program! I am still learning how to use it and have so much more to learn. I am actually the software administrator for the program and am working with our financial secretary to get her up to speed using it. By the time I think I have learned enough to understand how the program works, I have made a huge mess of our database.

We only have January in right now so I am thinking that I am going to back up the backup membership and reload the program and re-key the AP, contributions and payroll. Funds accounting is a mess!!!

[NeilZ]

I am pretty certain that I will not convince the finance chair to actually keep cash at the church so there will be physical money at the church "in theory" but not really there. PC is a great program! I am still learning how to use it and have so much more to learn. I am actually the software administrator for the program and am working with our financial secretary to get her up to speed using it. By the time I think I have learned enough to understand how the program works, I have made a huge mess of our database.

We only have January in right now so I am thinking that I am going to back up the backup membership and reload the program and re-key the AP, contributions and payroll. Funds accounting is a mess!!!

No need to reload the program, or reenter Contributions. Just restart Accounting, use the accounting setup wizard and include any deposits made from Contributions when asked about deposits. Contributions is not reset, so you don't have to re-enter any of that data, but since its already been posted, you'll have to manually add those Funds Accounting transactions.

As far as keeping money at the church, there will really be no need once you get the system running. They can disburse to their hearts content on Sunday (with the appropriate paperwork ), you can adjust the Funds Accounting unposted transaction from Contributions to properly show how much was sent to checking,and how much to petty cash.

I see you're working with the financial secretary. She also acts as Treasurer ??

[SGBC1874]

Okay what will that do to AP and payroll?

[SGBC1874]

No the financial secretary is not the treasurer.

[SGBC1874]

Okay I see what it will do to AP and payroll...Lord...lol..I have to though because fund accounting is a mess.

[NeilZ]

Okay I see what it will do to AP and payroll...Lord...lol..I have to though because fund accounting is a mess.

This is often why I suggest to new Funds Accounting users that they sit down and design what they want for a Chart of Accounts before actually starting to setup Funds Accounting.

What I also suggest is that they download the demo, and print off the chart of accounts that is setup there and use that as an example of how to setup the COA.

[SGBC1874]

Yes hard lesson learned but we are a small church so there wasn't much for this month and a half. I have restarted funds accounting and put everything back in. It's all good! Thanks so very much for your assistance. You have been a tremendous help!!