Segregating designated and budget funds

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Northside PdL
Posts: 6
Joined: Thu Sep 30, 2021 7:39 pm

Segregating designated and budget funds

Post by Northside PdL »

We recently installed Power Church to replace an excel spreadsheet. Everything is working well escept the designated funds are problematic in that there is no segregation of activity between budget funds and designated funds. In other words, for example, the church commonly receives gifts designated for youth. The expense paid by such a gift is mingled with all the youth expenses. This causes problems in budgeting and financial statement preparation.

I came upon the idea of creating a new accounting fund for designated funds, so that Fund 01 will be General Fund and Fund 21 will be Designated. My concerns are:

Will this approach effectively segregate the transactions?

The first 9 months of this fiscal year uses only Fund 01. Do I have to post a correcting entry for each traction individually for the past months?

What issues am I overlooking that will be problematic in the future?


Thank you.

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

Re: Segregating designated and budget funds

Post by NeilZ »

Northside PdL wrote:
Sat Jul 09, 2022 10:30 pm
We recently installed Power Church to replace an excel spreadsheet. Everything is working well escept the designated funds are problematic in that there is no segregation of activity between budget funds and designated funds. In other words, for example, the church commonly receives gifts designated for youth. The expense paid by such a gift is mingled with all the youth expenses. This causes problems in budgeting and financial statement preparation.

I came upon the idea of creating a new accounting fund for designated funds, so that Fund 01 will be General Fund and Fund 21 will be Designated. My concerns are:

Will this approach effectively segregate the transactions?

The first 9 months of this fiscal year uses only Fund 01. Do I have to post a correcting entry for each traction individually for the past months?

What issues am I overlooking that will be problematic in the future?


Thank you.
I would NOT create a separate fund, I would use the DONOR RESTRICTED FUND function, and then create a different, unbudgeted expense account to track expenses paid by the restricted fund. You can read about using such funds on page 190 of the User Manual. I would take the time to read that section on Restricted Contributions. You can do the separate Accounting Fund, but even there I would use the Donor Restriction process as if provides a good audit trail of temp restricted funds.

You start by heading to Accounting -> Fund Accounting -> Setup -> Maintain List of Donor Restrictions and clicking on the ADD button. This process is detailed in the User Manual starting on page 228.

Then when you pay expenses covered by this Temp Restricted Fund, you would list the unbudgeted expense account on the invoice, and click on the RELEASE RESTRICTED FUNDS button, select the temp Restricted Fund from the list, and the system ask for the amount covered (in this case the full amount), then when you're finished will add a few lines to the invoice or manual check showing the release of the funds.

I'm assuming you're using v14 of Powerchurch, if not find the related sections in your version's User Manual. If you have questions please don't hesitate to ask.

In any case, you will have to VOID the existing check and REISSUE (not reprint) the check using the same check number and date, and update it to reflect the new accounts used.
Neil Zampella

Using PC+ since 1999.

Northside PdL
Posts: 6
Joined: Thu Sep 30, 2021 7:39 pm

Re: Segregating designated and budget funds

Post by Northside PdL »

First, thank you for the help. I think I understand the process, but I need a clarification:

In the Maintain List of Donor Restrictions window, I selected Youth, which is temporarily restricted. In the setup section, the Release account is 01-4854-118. Associated accounts are:

01-3254-118 Equity

01-4254-118 Income

01-4854-118 Income

The budget expense account is 01-6390.

In this case, I think I need to add an Associated account as follows:

01-6390-118 Expense,

And follow that pattern for the remainder of the donor restrictions.

We are using Power Church Plus+ Version 14.

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

Re: Segregating designated and budget funds

Post by NeilZ »

Northside PdL wrote:
Sun Jul 10, 2022 8:33 pm
First, thank you for the help. I think I understand the process, but I need a clarification:

In the Maintain List of Donor Restrictions window, I selected Youth, which is temporarily restricted. In the setup section, the Release account is 01-4854-118. Associated accounts are:

01-3254-118 Equity

01-4254-118 Income

01-4854-118 Income

The budget expense account is 01-6390.

In this case, I think I need to add an Associated account as follows:

01-6390-118 Expense,

And follow that pattern for the remainder of the donor restrictions.

We are using Power Church Plus+ Version 14.
You don't want to use the same expense account number as the budgeted one, even with a different sub-account number. I would use a completely separate account number. If 01-6395-118 is open, I'd use that, and set it up without any budget.
Neil Zampella

Using PC+ since 1999.

Northside PdL
Posts: 6
Joined: Thu Sep 30, 2021 7:39 pm

Re: Segregating designated and budget funds

Post by Northside PdL »

Great. Thank you.

Northside PdL
Posts: 6
Joined: Thu Sep 30, 2021 7:39 pm

Re: Segregating designated and budget funds

Post by Northside PdL »

I don't know what I've done, but I'm hoping you can help.

I made the changes in the set up and reversed / changed the entries to reflect the new expense gl account numbers.

I ran a changes in equity report and it looks like, although it is not exact, the amounts reported are way lower than the actual balances. It looks like the release and payment are both deducted.

I'm hoping you can help. Thanks for looking at this for me.

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

Re: Segregating designated and budget funds

Post by NeilZ »

Northside PdL wrote:
Tue Jul 12, 2022 8:35 pm
I don't know what I've done, but I'm hoping you can help.

I made the changes in the set up and reversed / changed the entries to reflect the new expense gl account numbers.

I ran a changes in equity report and it looks like, although it is not exact, the amounts reported are way lower than the actual balances. It looks like the release and payment are both deducted.

I'm hoping you can help. Thanks for looking at this for me.
The equity account should not be the same as the normal unrestricted net assets account (usually 3110-), what then happens is when you release the funds, the funds are moved from the restricted equity account to the 3110- account, which covers the check written from the standard checking account (normally 1110-)

Your invoice should show something like this:

01-1110-000 Checking CR 250.00
01-6390-118 Expense DB 250.00
01-4854-118 Youth Release DB 250.00 <- releases money from 3254-118 restricted net assets
01-4999-000 Release CR 250.00 <- adds money to 3110-000 unrestricted net assets

When you did the reversals, did you do a fund release on each new invoice ?
Neil Zampella

Using PC+ since 1999.

Northside PdL
Posts: 6
Joined: Thu Sep 30, 2021 7:39 pm

Re: Segregating designated and budget funds

Post by Northside PdL »

I made the entry as per your example. I did not press the release button, since the accounts, except the exp accts, were already there. Do I need to pull each transaction up and reinput with the button?

Thanks.

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

Re: Segregating designated and budget funds

Post by NeilZ »

Northside PdL wrote:
Wed Jul 13, 2022 3:08 am
I made the entry as per your example. I did not press the release button, since the accounts, except the exp accts, were already there. Do I need to pull each transaction up and reinput with the button?

Thanks.
Each transaction needs to show the release accounts, otherwise the Unrestricted Net Assets account is NOT getting the Restricted Net Assets funds to cover the purchase.

In effect, you're still paying out of the budgeted General Fund, just showing that the expense is non-budgeted.

NOTE: I hope you did a Powerchurch backup of the Accounting files before you started. This allows you to bring everything back to the way it was.
Neil Zampella

Using PC+ since 1999.

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