Correct accounting for Endowment distributions

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PCC Treasurer
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Joined: Thu Mar 11, 2021 11:14 am

Correct accounting for Endowment distributions

Post by PCC Treasurer »

We have tan endowment set up in it's own fund account, separate from our General fund, that we receive quarterly dividends from. When the dividends are received, they are deposited into a checking account automatically from the investment company. A check is then written from that account to be deposited into our main checking account. However, 10% of the funds are designated for Disciples Mission Fund and 10% for local outreach. The DMF are immediately submitted via check or on-line transaction, but the local mission funds need to be designated as restricted, as they are not always distributed immediately. In fact, we keep an ongoing balance for donating to local organizations or individuals as the need arises. I am having difficulty balancing the transaction from one checking account to the other to restricted funds. I followed the example in the manual of using the transfer accounts from Fund 02(Endowment) to Fund 01(General), but get stuck when I credit the corresponding income accounts for DMF and Local Outreach as to what accounts to debit? Also, should the Local Outreach restricted funds be temporary or permanent? Should I treat the DMF funds in the same manner?

NeilZ
Posts: 9478
Joined: Wed Oct 08, 2003 12:20 am
Location: Monett MO
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Re: Correct accounting for Endowment distributions

Post by NeilZ »

PCC Treasurer wrote:
Thu Apr 22, 2021 12:40 pm
We have tan endowment set up in it's own fund account, separate from our General fund, that we receive quarterly dividends from. When the dividends are received, they are deposited into a checking account automatically from the investment company. A check is then written from that account to be deposited into our main checking account. However, 10% of the funds are designated for Disciples Mission Fund and 10% for local outreach. The DMF are immediately submitted via check or on-line transaction, but the local mission funds need to be designated as restricted, as they are not always distributed immediately. In fact, we keep an ongoing balance for donating to local organizations or individuals as the need arises. I am having difficulty balancing the transaction from one checking account to the other to restricted funds. I followed the example in the manual of using the transfer accounts from Fund 02(Endowment) to Fund 01(General), but get stuck when I credit the corresponding income accounts for DMF and Local Outreach as to what accounts to debit? Also, should the Local Outreach restricted funds be temporary or permanent? Should I treat the DMF funds in the same manner?
Why are you using two separate checking accounts for this? Why don't you just have the dividends deposited into the main checking account. Seems like that's a step you can get rid of. As it will make the transfer from Fund 02 to Fund 01 much easier to handle.

You would then show the income in fund 02, where it should as it is dividends on the investments. You would then transfer from checking in 02 to checking in 01. In 01, you'd write the 10% to the DMF as an expense and a regular check, or a manual check if using an EFT transfer.

Then you have to transfer the 10% to the local outreach temp restricted net asset/fund balance account. You would DEBIT unrestricted net assets for the amount and CREDIT the temp restricted net asset account.

As far as whether the account should be restricted permanently or temporarily, if you're going to use the amount in the fund, its temporary. If there is a permanent restriction on the funds, such as an endowment that says you cannot touch the principle but can use the accumulated income, you would set that as a permanent restriction.
Neil Zampella

Using PC+ since 1999.

PCC Treasurer
Posts: 2
Joined: Thu Mar 11, 2021 11:14 am

Re: Correct accounting for Endowment distributions

Post by PCC Treasurer »

Thank you for your help. I was making it much more complicated than it had to be. The separate checking account was set up years ago. I was told that the distribution of the dividends from the investment had to go to an account set up in the endowment fund name. Plus, 5% of the distribution stays in that checking account.

NeilZ
Posts: 9478
Joined: Wed Oct 08, 2003 12:20 am
Location: Monett MO
Contact:

Re: Correct accounting for Endowment distributions

Post by NeilZ »

PCC Treasurer wrote:
Fri Apr 23, 2021 5:03 pm
Thank you for your help. I was making it much more complicated than it had to be. The separate checking account was set up years ago. I was told that the distribution of the dividends from the investment had to go to an account set up in the endowment fund name. Plus, 5% of the distribution stays in that checking account.
I'd try to find out more about that, why 5%, for what reason? That said, other than moving funds from that checking account, to the main checking account, the action is the same.
Neil Zampella

Using PC+ since 1999.

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