Creating a Fund for pass through expenses

Fund Accounting, Accounts Payable, Accounts Receivable, Payroll

Moderators: Moderators, Tech Support

Post Reply
sknopp
Posts: 2
Joined: Mon Nov 04, 2013 9:05 am

Creating a Fund for pass through expenses

Post by sknopp »

Hello,
I have some different scenarios with money passing through the church books towards other functions such as trips, family camps, retreats etc. I will use the example of a trip. Money is collected through the church and then one lump sum payment is submit to a travel agent. So the church is merely collecting and redistributing money. I understand I can create sub accounts to track the income and expenses of these various projects but would rather not have them included in the General Fund as it gives unrealistic totals on the income statement. I could also enter these various projects as a liability having a running total of money in and out but may have to create many different 2000 accounts as different projects come up.

I am wondering if I can create a separate fund perhaps labelled "Project Fund" were all these various items could be tracked and not be included with the General Fund? On some occasions the church may have to cover additional cost if perhaps fees were not budgeted high enough so in this case I would have to transfer the balance the church is picking up back to the General Fund into an appropriate expense category.

Please let me know if this could work or if I may be overlooking some areas of problem?

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
Contact:

Re: Creating a Fund for pass through expenses

Post by NeilZ »

sknopp wrote:Hello,
I have some different scenarios with money passing through the church books towards other functions such as trips, family camps, retreats etc. I will use the example of a trip. Money is collected through the church and then one lump sum payment is submit to a travel agent. So the church is merely collecting and redistributing money. I understand I can create sub accounts to track the income and expenses of these various projects but would rather not have them included in the General Fund as it gives unrealistic totals on the income statement. I could also enter these various projects as a liability having a running total of money in and out but may have to create many different 2000 accounts as different projects come up.

I am wondering if I can create a separate fund perhaps labelled "Project Fund" were all these various items could be tracked and not be included with the General Fund? On some occasions the church may have to cover additional cost if perhaps fees were not budgeted high enough so in this case I would have to transfer the balance the church is picking up back to the General Fund into an appropriate expense category.

Please let me know if this could work or if I may be overlooking some areas of problem?
No need to create a 'separate fund', just use one or two liability accounts along with Contribution Funds.

Setup the Contribution Fund to not print on the Contribution Statement, and allow DESIGNATIONS, and setup a DESIGNATION, for example "Yearly Trip". Then when you have something coming up that you are collecting for (Yearly Trip) you enter the funds in that fund account, select the YEARLY TRIP designation, and the funds then are listed in the liability account.

You need to know how much was collected for the YEARLY TRIP, you run a Designated Contributions report, select the proper designation from the list, select the calendar period you need to use, and you have a total, as well as a list of people who paid with the amounts they paid.

Then you would just write the check, DEBITing the liability account, along with any normal operations expense account if additional funds are needed.

Adding another 'fund' will cause more problems than it will solve, one of which you mentioned about moving funds about.
Neil Zampella

Using PC+ since 1999.

TonyL222
Posts: 47
Joined: Wed Feb 10, 2016 10:55 am

Re: Creating a Fund for pass through expenses

Post by TonyL222 »

sknopp wrote:Hello,
I have some different scenarios with money passing through the church books towards other functions such as trips, family camps, retreats etc. I will use the example of a trip. Money is collected through the church and then one lump sum payment is submit to a travel agent. So the church is merely collecting and redistributing money. I understand I can create sub accounts to track the income and expenses of these various projects but would rather not have them included in the General Fund as it gives unrealistic totals on the income statement. I could also enter these various projects as a liability having a running total of money in and out but may have to create many different 2000 accounts as different projects come up.

I am wondering if I can create a separate fund perhaps labelled "Project Fund" were all these various items could be tracked and not be included with the General Fund? On some occasions the church may have to cover additional cost if perhaps fees were not budgeted high enough so in this case I would have to transfer the balance the church is picking up back to the General Fund into an appropriate expense category.

Please let me know if this could work or if I may be overlooking some areas of problem?
NeilZ's solution to use PC+ fund Designation is a good one to keep from creating a new contribution fund for every church special event. It's an easier way to track than it is to create new funds every time there is a new activity. But I just want to offer a couple on comments. One on "pass through" contributions and another on your view of "merely collecting and redistribution of money."

It's my understanding that a "pass through" contribution applies when one tax exempt organization collects contributions on behalf of, and then distributes to, another tax exempt organization. For example your church conducts a special collection for a tax exempt relief organization. In that case, you create a liability account to record the collected contributions. Then when you write the check to the organization you retire the liability. This way it doesn't affect your income or expenses. Your church was just a conduit, and funds just "passed through" your church. As you described it, collecting money for a church retreat and then sending a single check as payment to the retreat facility is not a pass through. Which leads to the second comment.

If the trips, camps, and retreats are part of meeting your church mission, then why would you not recognize the contributions donated to support that event, and the expense required to carry out that event? I would ask myself is this an approved church activity and is it "on mission", i.e. does it support the church's stated religious mission and purpose (do you have a written mission statement)? If so, why would you not want to record the income and expense as part of the church's overall finances? There may be some goods or service received that reduces the deductible amount for the donor, but that is more for the individual donor to account for when they file their persona taxes (or you can create a contribution fund and uncheck the box for showing on the Contribution Statement). It doesn't affect the donations toward, or expenses of, the activity.

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
Contact:

Re: Creating a Fund for pass through expenses

Post by NeilZ »

TonyL222 wrote: NeilZ's solution to use PC+ fund Designation is a good one to keep from creating a new fund number for every church special event. It's an easier way to track than it is to create new funds every time there is a new activity. But I just want to offer a couple on comments. One on "pass through" contributions and another on your view of "merely collecting and redistribution of money."

It's my understanding that a "pass through" contribution applies when one tax exempt organization collects contributions on behalf of, and then distributes to, another tax exempt organization. For example your church conducts a special collection for a tax exempt relief organization. In that case, you create a liability account to record the collected contributions. Then when you write the check to the organization you retire the liability. This way it doesn't affect your income or expenses. Your church was just a conduit, and funds just "passed through" your church. As you described it, collecting money for a church retreat and then sending a single check as payment to the retreat facility is not a pass through. Which leads to the second comment.
Pass through money can be anything that is not used by the church for its own mission. As noted in the original post, this includes collections for trips, family camps, etc.
If the trips, camps, and retreats are part of meeting your church mission, then why would you not recognize the contributions donated to support that event, and the expense required to carry out that event? I would ask myself is this an approved church activity and is it "on mission", i.e. does it support the church's stated religious mission and purpose (do you have a written mission statement)? If so, why would you not want to record the income and expense as part of the church's overall finances? There may be some goods or service received that reduces the deductible amount for the donor, but that is more for the individual donor to account for when they file their persona taxes. It doesn't affect the donations toward, or expenses of, the activity.
9 out of 10 times, the trip to a theater (think Sight and Sound Ministries in Lancaster PA, and Branson MO) involves bus costs and tickets to the show. A retreat weekend usually involves paying a local retreat center or camp a requested amount per attendee. Yes its something that the church does in its ministry, but its also not something that can be deducted as the costs are usually figured to the penny. The IRS specifically requires a church to list on its contribution statement that

"This Contribution Statement satisfies the IRS requirement for a written receipt of contributions: The ChurchName states that the contributor has only received intangible religious benefits in exchange for their contributions, and no goods or services have been provided."

The trip to the theater or retreat center may involve religious benefits from the show or the retreat, but the attendee does get services (a musical) or services (bed and breakfast).

If the church does not weed out what does not fall into that statement it violates the IRS rule. Thus trying to figure out the amount that was 'given can be a lot of work, for very little return. The only time I would say this works is if you are having a $30 benefit dinner, where $10 goes toward the meal, and $20.00 towards a donation. The $20 is a valid item to show on the Contribution Statement, the $10.00 covers food costs, and thus not deductable.
Neil Zampella

Using PC+ since 1999.

sknopp
Posts: 2
Joined: Mon Nov 04, 2013 9:05 am

Re: Creating a Fund for pass through expenses

Post by sknopp »

To clarify. These types of scenarios I am speaking about would not qualify for a tax receipt. It is simply an event the church supports but those attending are asked to pay their own way. So it is not a budgeted item on the church books, therefore this is why I'd prefer to not have it on the income statement. The goal would be to create a price for each participant that would cover bus tickets etc. so no church funds would hopefully be needed. If the church had to cover a small shortfall then this amount would show up on the income statement "General Fund" in the appropriate expense category?

Also to clarify I wasn't think of a fund for each different project/event just one fund to track various events that come up but perhaps the liability option is better. Hopefully I would only have to create 3 or 4 accounts in the liability section to track the different events occurring.

TonyL222
Posts: 47
Joined: Wed Feb 10, 2016 10:55 am

Re: Creating a Fund for pass through expenses

Post by TonyL222 »

"Pass through money can be anything that is not used by the church for its own mission. As noted in the original post, this includes collections for trips, family camps, etc. "

I'm not an accountant. But that is contrary to everything I've read and understand.

"9 out of 10 times, the trip to a theater (think Sight and Sound Ministries in Lancaster PA, and Branson MO) involves bus costs and tickets to the show. A retreat weekend usually involves paying a local retreat center or camp a requested amount per attendee. Yes its something that the church does in its ministry, but its also not something that can be deducted as the costs are usually figured to the penny. The IRS specifically requires a church to list on its contribution statement that."

I wasn't addressing the deductibility for the donor (at least not in any detail) - only how the church accounts for contribution on its books. Certainly if there are some goods and services received, the value of that is not tax deductible to the donor. But that is not what the questionwas about.

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
Contact:

Re: Creating a Fund for pass through expenses

Post by NeilZ »

TonyL222 wrote:"Pass through money can be anything that is not used by the church for its own mission. As noted in the original post, this includes collections for trips, family camps, etc. "

I'm not an accountant. But that is contrary to everything I've read and understand.
Why ... the money is not to the church, but is to be paid to a third party. This is a pass through. Just because it is not an organization such as the Gideons does not make it any more than a pass through.
"9 out of 10 times, the trip to a theater (think Sight and Sound Ministries in Lancaster PA, and Branson MO) involves bus costs and tickets to the show. A retreat weekend usually involves paying a local retreat center or camp a requested amount per attendee. Yes its something that the church does in its ministry, but its also not something that can be deducted as the costs are usually figured to the penny. The IRS specifically requires a church to list on its contribution statement that."

I wasn't addressing the deductibility for the donor (at least not in any detail) - only how the church accounts for contribution on its books. Certainly if there are some goods and services received, the value of that is not tax deductible to the donor. But that is not what the question was about.
The point being .. this is not a contribution, it is a payment for goods and services, therefore should not be listed on the contributions statement. You're right, its not what the question was about, you brought it up, and I was just pointing out the logical fallout from trying to track it as a normal Contribution.
Neil Zampella

Using PC+ since 1999.

TonyL222
Posts: 47
Joined: Wed Feb 10, 2016 10:55 am

Re: Creating a Fund for pass through expenses

Post by TonyL222 »

sknopp wrote:To clarify. These types of scenarios I am speaking about would not qualify for a tax receipt. It is simply an event the church supports but those attending are asked to pay their own way. So it is not a budgeted item on the church books, therefore this is why I'd prefer to not have it on the income statement. The goal would be to create a price for each participant that would cover bus tickets etc. so no church funds would hopefully be needed. If the church had to cover a small shortfall then this amount would show up on the income statement "General Fund" in the appropriate expense category?

Also to clarify I wasn't think of a fund for each different project/event just one fund to track various events that come up but perhaps the liability option is better. Hopefully I would only have to create 3 or 4 accounts in the liability section to track the different events occurring.
If that is the case then Neilz's suggestion of a single Contribution Fund with "include on statements" unchecked and "Allow Designations" checked is a great way to approach it.

TonyL222
Posts: 47
Joined: Wed Feb 10, 2016 10:55 am

Re: Creating a Fund for pass through expenses

Post by TonyL222 »

Why ... the money is not to the church, but is to be paid to a third party. This is a pass through. Just because it is not an organization such as the Gideons does not make it any more than a pass through. "

"The point being .. this is not a contribution, it is a payment for goods and services, therefore should not be listed on the contributions statement. You're right, its not what the question was about, you brought it up, and I was just pointing out the logical fallout from trying to track it as a normal Contribution."

Neilz (et al), this forum is a great resource for PowerChurch users. Neilz, it easy to see that you have been on for years and have proven to be a valuable resource here. You've helped me out on many occasions. So what I really don't want is to be part of turning this into a debate forum. I'll explain what I do at my church and why, and leave it at that. Some things are objective and have to be done a certain way. Other things can be done different ways depending on the circumstances. In those cases, I think it's great to have different options to review.

In my church, EVERY event/activity falls within the purview of one of our several ministries. It is budgeted for by the ministry. Its planned and executed by the ministry. It is on our church calendar and approved by our Board of Directors. It is covered by our property and casualty insurance. It is part of our ministry to church members and community, and hopefully will some contribute to saving souls. I don't treat the bus trip and admission to Sight and Sound (Yes, we've done that, so Neilz we must be fairly close to each other) as simply "passing through". It is part of our minission. No question that a part (maybe all) of the contribution is likely to be "quid pro quo" and should be treated as such.

Neilz, you are a great resource and clearly know more about PowerChurch than most of us ever will. I thank you for all you do. If they aren't already, PowerChurch should acknowledge you in some way for your service to this forum.

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
Contact:

Re: Creating a Fund for pass through expenses

Post by NeilZ »

sknopp wrote:To clarify. These types of scenarios I am speaking about would not qualify for a tax receipt. It is simply an event the church supports but those attending are asked to pay their own way. So it is not a budgeted item on the church books, therefore this is why I'd prefer to not have it on the income statement. The goal would be to create a price for each participant that would cover bus tickets etc. so no church funds would hopefully be needed. If the church had to cover a small shortfall then this amount would show up on the income statement "General Fund" in the appropriate expense category?
Yes .. the bulk of the funds would come from the liability account, thus draining the account until the next time its needed (or trip), anything that the church needed to 'chip in' would then show up on the I&E statement as an expense since you would need to enter it on the check.

The check transaction would look like this:

Code: Select all

01-1110-000      Checking             CR   1200.00
01-2370-000      Trip Liability        DB   1159.00
01-5520-000      Fellowship Trip    DB       50.00
Also to clarify I wasn't think of a fund for each different project/event just one fund to track various events that come up but perhaps the liability option is better. Hopefully I would only have to create 3 or 4 accounts in the liability section to track the different events occurring.
The liability account is better as it reduces any errors when having to transfer funds between funds, and does show up on the same Balance Sheet as the rest of any Operations liabilities to show transparency to the church board about funds the church is obligated to pay out.

Depending how often you have events, like trips, you can use the same one each time. For instance, we have a liability account for flowers, and we use the same one for Easter & Christmas. Its drained a just before Easter, and just before Christmas when we pay the florist.
Neil Zampella

Using PC+ since 1999.

DBS_CBC
Posts: 18
Joined: Tue Jan 20, 2015 11:53 pm

Re: Creating a Fund for pass through expenses

Post by DBS_CBC »

NeilZ wrote:
sknopp wrote:To clarify. These types of scenarios I am speaking about would not qualify for a tax receipt. It is simply an event the church supports but those attending are asked to pay their own way. So it is not a budgeted item on the church books, therefore this is why I'd prefer to not have it on the income statement. The goal would be to create a price for each participant that would cover bus tickets etc. so no church funds would hopefully be needed. If the church had to cover a small shortfall then this amount would show up on the income statement "General Fund" in the appropriate expense category?
Yes .. the bulk of the funds would come from the liability account, thus draining the account until the next time its needed (or trip), anything that the church needed to 'chip in' would then show up on the I&E statement as an expense since you would need to enter it on the check.

The check transaction would look like this:

Code: Select all

01-1110-000      Checking             CR   1200.00
01-2370-000      Trip Liability        DB   1159.00
01-5520-000      Fellowship Trip    DB       50.00
Also to clarify I wasn't think of a fund for each different project/event just one fund to track various events that come up but perhaps the liability option is better. Hopefully I would only have to create 3 or 4 accounts in the liability section to track the different events occurring.
The liability account is better as it reduces any errors when having to transfer funds between funds, and does show up on the same Balance Sheet as the rest of any Operations liabilities to show transparency to the church board about funds the church is obligated to pay out.

Depending how often you have events, like trips, you can use the same one each time. For instance, we have a liability account for flowers, and we use the same one for Easter & Christmas. Its drained a just before Easter, and just before Christmas when we pay the florist.
I realize that I am late responding to this thread but I came across it while looking for ideas on how to manage the expenses for our youth camps and mission trips and the suggestion of using one or more Liability Accounts along with the Designated Contributions sounds like just what I am looking for. We have three Youth Mission Trips each year and at least two Youth Retreats. All are funded partially by the participants and partially by the church. I would appreciate a little more clarification on how to set up the contribution accounts. I think that a separate liability account for each of the three mission trips because they two of them may overlap timewise. The Retreats are spring and fall so a common liability account would probably work there.

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
Contact:

Re: Creating a Fund for pass through expenses

Post by NeilZ »

DBS_CBC wrote:
I realize that I am late responding to this thread but I came across it while looking for ideas on how to manage the expenses for our youth camps and mission trips and the suggestion of using one or more Liability Accounts along with the Designated Contributions sounds like just what I am looking for. We have three Youth Mission Trips each year and at least two Youth Retreats. All are funded partially by the participants and partially by the church. I would appreciate a little more clarification on how to set up the contribution accounts. I think that a separate liability account for each of the three mission trips because they two of them may overlap timewise. The Retreats are spring and fall so a common liability account would probably work there.
The setup of the Contribution Funds are basically the same as you would for any other Contribution Fund. Under accounts, you select the debit (bank) account (usually 01-1110-000 - Checking) and a credit (income) account, which is usually a 4000 level income account, but in this case you would use the liability account created in the 2000 level accounts.

You would then use the Contribution Maintain List of Designations to create any designations that would apply.

Does this help?
Neil Zampella

Using PC+ since 1999.

DBS_CBC
Posts: 18
Joined: Tue Jan 20, 2015 11:53 pm

Re: Creating a Fund for pass through expenses

Post by DBS_CBC »

NeilZ wrote:
DBS_CBC wrote:
I realize that I am late responding to this thread but I came across it while looking for ideas on how to manage the expenses for our youth camps and mission trips and the suggestion of using one or more Liability Accounts along with the Designated Contributions sounds like just what I am looking for. We have three Youth Mission Trips each year and at least two Youth Retreats. All are funded partially by the participants and partially by the church. I would appreciate a little more clarification on how to set up the contribution accounts. I think that a separate liability account for each of the three mission trips because they two of them may overlap timewise. The Retreats are spring and fall so a common liability account would probably work there.
The setup of the Contribution Funds are basically the same as you would for any other Contribution Fund. Under accounts, you select the debit (bank) account (usually 01-1110-000 - Checking) and a credit (income) account, which is usually a 4000 level income account, but in this case you would use the liability account created in the 2000 level accounts.

You would then use the Contribution Maintain List of Designations to create any designations that would apply.

Does this help?
Yes, that helps. If I use 3 individual Liability accounts for the mission trips, then no contribution designations would be required, just a contribution fund for each. But to use a single liability account for the two retreats , set up the spring/fall designations. Correct?

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
Contact:

Re: Creating a Fund for pass through expenses

Post by NeilZ »

DBS_CBC wrote:
Yes, that helps. If I use 3 individual Liability accounts for the mission trips, then no contribution designations would be required, just a contribution fund for each. But to use a single liability account for the two retreats , set up the spring/fall designations. Correct?
Yep ...
Neil Zampella

Using PC+ since 1999.

DBS_CBC
Posts: 18
Joined: Tue Jan 20, 2015 11:53 pm

Re: Creating a Fund for pass through expenses

Post by DBS_CBC »

Thanks for sharing your wealth of knowledge.

Post Reply