Funds vs. Donor Restricted Accounts

[CrossPoint Toledo]

I'm helping our treasurer set up the accounting module in PowerChurch. We haven't entered anything into the module yet.

The PC literature talks a lot about donor restricted funds for things like building and missions. We're used to having separate funds, each with their own income and expense accounts. Is there anything wrong with having a total of five funds, and not even using the restricted and release accounts?

We have five funds (General, Building, Memorial, Missions, and Benevolence). Each has a Jan. 1, 2016 balance. The balances add up to our total cash in checking and savings. Each account would use our Checking Account as the cash account. Can that work? Does each fund have to have its own separate checking account?

Thanks for any help with this.

Mike DeLong - (a pastor with some accounting experience from the 80's, when we used green Wilson-Jones accounting sheets)

[NeilZ]

I'm helping our treasurer set up the accounting module in PowerChurch. We haven't entered anything into the module yet.

The PC literature talks a lot about donor restricted funds for things like building and missions. We're used to having separate funds, each with their own income and expense accounts. Is there anything wrong with having a total of five funds, and not even using the restricted and release accounts?

We have five funds (General, Building, Memorial, Missions, and Benevolence). Each has a Jan. 1, 2016 balance. The balances add up to our total cash in checking and savings. Each account would use our Checking Account as the cash account. Can that work? Does each fund have to have its own separate checking account?

Thanks for any help with this.

Mike DeLong - (a pastor with some accounting experience from the 80's, when we used green Wilson-Jones accounting sheets)

Nothing wrong with that at all. This is the way we have it setup here, with operating, building, missions, etc. All using the same checking account, but each fund has its own balance.

The restricted funds and/or contributions are usually used for special purposes. I'll give you the Powerchurch explanation as its fairly precise:

There are two different kinds of restricted contributions: Temporary and Permanent. After unrestricted contributions, temporarily restricted contributions are the next most common type of contribution you will probably receive. These are contributions where the donor has specified where, how, or when the contribution can be spent. Contributions given to areas like the Building Fund or a Benevolence Fund are common examples of temporarily restricted contributions.

Not all temporarily restricted contributions have to be for a particular purpose, like buying choir robes. Sometimes contributions have restrictions in which they are to be used during a specific time. For example, a donor could give money with the restriction that it not be used until next year. This example would be considered a temporarily restricted contribution.

Permanent restrictions are contributions where the original contribution can never be used. The most common example of a permanent restriction would be if your church has an Endowment Fund. Contributions to the Endowment Fund are added to an investment. However, according to the terms of the endowment, the interest received from the endowment can be used for designated purposes by the church.

Here's an explanation on how that ties in with Funds Accounting:

Donors often apply restrictions regarding how the money they contribute may be spent. For example, a donor may contribute money to support missions or to fund a new building. It is the church's responsibility to manage and spend these funds in the desired manner and to account for their proper use. To help you, PowerChurch Plus tracks how restricted funds are handled and spent by linking together a Contribution Fund with specified Equity, Income, and Release accounts. You can then track and report on money that moves through your accounting system, until the restriction is satisfied. You can even track what happens to the excess.

Since you're looking at keeping the restrictions by using separate funds, there isn't any need to use restricted accounts at this time.