User Support Forum

FASB's don't cover this. Our Church's National does not give guidance to this level of detail. Our board of directors are clueless about accounting - which is fine. My gut tells me some carryover is good but I want conversation on those that are bad. By "carryover" I mean items in the operating income statement which are fully or partially just moving money to a separate accounting fund - no check is written. First let me list those that are GOOD:

• We want to put aside maybe $5,000 a year for big building repairs/equipment failures

• Minister goes on a 3 month PAID sabbatical every 5 years. So we put aside some funds each year so we have someone preach during that sabbatical

Now for the BAD:

• Friends give memorials upon a member passing. These donations have no restrictions, but none of this hits the operating income statement. 100% goes to a restricted fund. Use is determined by Board of Directors. Funds are rarely used - maybe a chunk is used every 5 years.

• On certain days we ask people for donations for flowers. We print up a list saying "Joe gives flowers as a tribute to his kids". "Jane gives flowers to thank the staff at the church." Each time we collect more money that we spend on Flowers. We also have a budgeted expense line for flowers. We never spend the budgeted amount. So the excess from specific days and at year end goes into "Flower Endowment".

• Same thing with Music - we budget for the purchase of music and people give contributions for music - sheet music purchases. Any excess in the budget or specific donations goes into a reserve fund - money is rarely spent.

• Minister has an agreement with church where there is a travel budget and an education budget. Each year, to the extent that funds are not used, they are added to a reserve fund. Agreement letter is silent on whether carryover is allowed.

• Board of Directors has a line item in operating budget for training/conferences/speakers, etc. To the extent that is not used, that is transferred to a reserve fund. Theory is that, if they have a big event one year, they may need the money.

• When the occasional bequest comes in, it is put in an endowment fund, even though the donor had no restrictions. None of this ever hits the operating budget.

Your experience with this type of item? Your link to technical guidance?

Here are my thoughts:

We want to put aside maybe $5,000 a year for big building repairs/equipment failures
I would think there be a motion that board passes to designate $5,000 from the general fund to a building fund.

Minister goes on a 3 month PAID sabbatical every 5 years. So we put aside some funds each year so we have someone preach during that sabbatical

The minister's paid sabbatical should be accrued for each pay period. You would have the liability "Paid Time Off Payable" and "Paid Time
Off Expense". This way you are recording the expense when it was incurred, while the minister is working. Each pay period you would only
record the paid time off (PTO) that he earned during that pay period. For example we assume 13 weeks sabbatical and 40 hours in each week for a total of 520 hours earned each year. The 520 hours would then be divided by the number of pay periods. Let's say 60. Each pay
period the minister earns 8.67 hours of PTO each pay period. The journal entry would be the minister's current hourly rate multiplied by
8.67 and that is what the liability and expense would be for. Now the minister is probably not going to make the same hourly rate over the course of the entire 5 years. You would make an adjusting entry for the increase in pay. This means you would have to track all hours earned somewhere to know how much you need to adjust for. When the minister goes on his sabbatical you pay out the liability instead of debiting wages expense.

Now for the BAD:
Friends give memorials upon a member passing. These donations have no restrictions, but none of this hits the operating income statement. 100% goes to a restricted fund. Use is determined by Board of Directors. Funds are rarely used - maybe a chunk is used every 5 years.

If this is not donor restricted, i.e. "I am giving $200 for the school roof in memory of Bob", then why is it not just held in the general fund?

On certain days we ask people for donations for flowers. We print up a list saying "Joe gives flowers as a tribute to his kids". "Jane gives flowers to thank the staff at the church." Each time we collect more money that we spend on Flowers. We also have a budgeted expense line for flowers. We never spend the budgeted amount. So the excess from specific days and at year end goes into "Flower Endowment".
Same thing with Music - we budget for the purchase of music and people give contributions for music - sheet music purchases. Any excess in the budget or specific donations goes into a reserve fund - money is rarely spent.

Two restricted funds ( 1 for Flowers and 1 for Music) to track the income, expense, and equity from year to year.

Minister has an agreement with church where there is a travel budget and an education budget. Each year, to the extent that funds are not used, they are added to a reserve fund. Agreement letter is silent on whether carryover is allowed.

Again this sounds like a restricted fund for "Travel and Education" where money is being moved each year from general to this fund. That way you can show the remaining balance year to year.

Board of Directors has a line item in operating budget for training/conferences/speakers, etc. To the extent that is not used, that is transferred to a reserve fund. Theory is that, if they have a big event one year, they may need the money.

Same answer as for the minister's travel and education above.

When the occasional bequest comes in, it is put in an endowment fund, even though the donor had no restrictions. None of this ever hits the operating budget.

This should be recorded in the general fund and then shown as a transfer to the endowment fund with board minutes or some other statement authorizing the transfer.

If the funds come in as unrestricted you may want to be careful having them designated by the board as restricted rather than spending the funds on the desired expense. For example the $5,000 a year for building improvements and maintenance. Instead of restricting funds from the general fund when they have a estate donation perhaps that is the time to spend $5,000 on needed improvements and maintenance.

Once the funds are restricted they should only be spent for that purpose. The board should not go back later and say we put too much money into the building fund and the general fund is too low so we cannot make payroll and "borrow" from the building fund.

The Lord's blessings as you work through these issues!

OhBeWan,
You don't sound like you have so much of an accounting problem as angst over carryover being collected 'just in case' instead of ministry.
Accountants are to keep track of the money and present to the decision makers how much and what restrictions there may be on that money, in a form they understand. The board is to decide how to utilize the money to do ministry.

There are accepted or convenient ways of keeping track of the money and how to present what you've got or you need. Your examples define good as when money helps ministry happen and bad when it is hoarded away like the third servant in the parable of the talents.

Try talking to the board in terms they should understand ... ministry happening. Usually, if extra money is needed to make a good thing happen, like your examples of a more expensive speaker or event; people pony-up if they see the worth.

We can get tied up in accounting properly for the money or we can not have the issue because we've used the money for ministry -- which is why people were supposedly giving it for to begin with.