stjeromedeacon wrote:Has anyone ever had their books professionally audited (or by the IRS) using your PowerChurch reports? If yes, did the way PC handles Temp Restricted funds pass?
There is someone on the committee who insists that the way PowerChurch records the 3 various Temporary Restricted accounts is incorrect because it places them in the Operating Funds section of the Income and Expense report. I have set up and done finances for four churches on PowerChurch and have never had an issue with this.
She states that you cannot record Temporary Restricted contributions as Income until you actually expend the funds... she just wants to add them straight to the Balance Sheet without showing them as income. This seems unacceptable to me, and the section on Restricted funds in the manual (11.55) is exactly how I have done it for almost 7 years. How can you add funds that have come in during the year directly to the Balance Sheet without being shown as income?
Thanks for any info.
Peace
Ray
Ray ... there are professional accountants who use Powerchurch on a regular basis, and who teach use of the program, and they have never seen a problem with the way this is handled.
I suspect she's a bookkeeper or accountant who has never done funds accounting, which is entirely a cash basis. What she is saying sounds more like an accrual form of accounting.
The way PowerChurch is set up to record income for the 3 different types of restricted accounts (unrestricted, temporarily restricted, and permanently restricted) is based on the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standard Number 117 issued in June 1993. FASB Standard 117 has been superseded by the codification of the accounting standards in June 2009 as described in FASB Accounting Standards Update Topic 105. However, the codification of the accounting standards did not materially change the reporting requirements contained in FASB Standard 117 so the requirements laid out in FASB Standard 117 are still effective. I would recommend that you ask your committee person what authoritative guidance from the FASB, AICPA, or other authority prescribes the accounting treatment that she is stating needs to be done for restricted contributions and to provide you with a copy of that guidance. If it exists (which I doubt) please respond to this post with what it is, as I would be very interested in reading it.
Given what you describe I would not recommend setting up 7 additional accounting funds. Generally speaking, you should only set up an accounting fund for an activity that needs to stand on it's own.
Another thought is that maybe she is looking for a report that will show the beginning balance, income, expenses, and ending balance for each restriction. You might try running the Changes in Equity report and see if that is the type of report she is looking for.
Well, it looks like the challenge is that she doesn't correctly understand how double entry accounting works and the relationship between the Income and Expense Statement and the Balance Sheet reports. I would recommend that she read and study pages 185 to 196 in the 11.5 users manual. These pages provide a brief overview of basic double entry accounting concepts and how the accounting in PowerChurch works. For example, page 186 describes how all accounting comes back to one simple formula of Assets = Liabilities + Equity. Page 190 explains how debits and credits work. Page 190 also explains that income, expense, and transfer accounts (all of which show up on the Income and Expense Statement) all close into equity accounts (which show up on the Balance Sheet). This explains why it appears that when income is recorded in PowerChurch that the following entry is being made:
However, in reality what happens when income is recorded is that the following entry is made:
Debit Cash $100
Credit Income $100
Then, because the Income account closes into the Temp Restricted Equity account you also see the $100 increase in the Temp Restricted Equity account on the Balance Sheet. But there was only one credit recorded on the actual accounting entry, not two.
To help prove to her that PowerChurch is not making unbalanced debit/credit entries run the Trial Balance report. Go to the last page of the report. The Totals line should show 0.00, which means that the total of the debits and the total of the credits for all of the accounts are exactly the same.
Also, run the Balance Sheet report. The total of the assets should be the same as the total of the Liabilities + Equity. This also proves that PowerChurch is not making unbalanced debit/credit entries.
