Restricted Release in the Income & Expense statement

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debbieg
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Joined: Mon Jun 29, 2009 9:40 pm

Restricted Release in the Income & Expense statement

Post by debbieg »

I have apparently been misreading this report for quite some time. In the income section of this report you see both Unrestricted and Donor Restricted income. Then there is the section that has "Release from Restrictions". For some reason, I was thinking that this amount was included in the grand total listed under "Total Income". Of course, I realize that money that is "released" from restriction is not really income.

But now I realize that when I see the bottom line of "Excess Income/Expenses", it is not a true reflection of what I think of as "budget" spending. Let me see if I can give a simple example.......

If we collected general offerings of $25,000 during the month and spent $23,000 in regular budget expenses, I would have an excess income of $2,000.

However, if during that same month, I released and spent $6,000 out of restricted funds,
I would show -$4,000 in the "Excess Income\Expenses".

To me this is misleading. The restricted money that was spent was sitting there available to be spent for its specific purpose...it should not affect our picture of how we are doing on normal budget expenses.

Perhaps I have been doing this wrong all along or am I just misinterpreting the info that is provided the the I/E report?

Thanks,
Debbie

JohnDMeyers
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Re: Restricted Release in the Income & Expense statement

Post by JohnDMeyers »

The restricted income is not like a bank account. It is just another category of income.

Here is your scenario: Let's say the past four months you had $25,000 per month plus $6,000 in restrictions.

That's $100,000 in tithes and $6,000 in restrictions.

This month you had $25,000 tithes and $0.00 in restrictions.
This month you spent $23,000 in expenses against unrestricted income and $6,000 against restricted income.

For the month, your Excess Income and Expenses are -$2,000 ($25,000 - $23,000 - $6,000)

All the release does is put the $6,000 that was in the restricted category into the unrestricted category in order to spend it.

In other words, prior to spending the $6,000, there was $125,000 in unrestricted income and $6,000 in restricted income.

At the moment the $6,000 was spent and released, there was $131,000 in unrestricted income and $0 in restricted income. That's all it did.
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debbieg
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Re: Restricted Release in the Income & Expense statement

Post by debbieg »

JohnDMeyers wrote:All the release does is put the $6,000 that was in the restricted category into the unrestricted category in order to spend it.

In other words, prior to spending the $6,000, there was $125,000 in unrestricted income and $6,000 in restricted income.

At the moment the $6,000 was spent and released, there was $131,000 in unrestricted income and $0 in restricted income. That's all it did.
Exactly my point John. I understand the whole movement of restricted money to unrestricted at the time you do the release. So I was assuming that it looked at it that way when it prepared the I/E statement. If it followed your example, at the moment that the $6,000 was spent, I theoretically had $31,000 of unrestricted income for that month ($25,000 tithes plus the $6,000 that was released). Then when I spent $29,000 ($23,000 unrestricted and $6,000 restricted), I still would have had an excess of $2,000. Looking strictly at budgeted expenses (unrestricted) that is exactly what I had (25K-23K).

We would never overspend our restricted funds because that violates the whole purpose. I use the "Change in Equity" report to show what has happened with the restricted funds. I guess I had never done the math myself on the I/E report. I thought since I saw the "released from restriction" line in the Income section, that it was being added into the "TOTAL INCOME" subtotal. Then I would see a matching line in my "restricted fund expenses" and figured that they balanced each other out.

So, unfortunately, I've been scaring our congregation during some business meetings by telling them that we were spending in the red. :( All we were really doing is spending a lot of restricted funds in a given time period.

JohnDMeyers
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Re: Restricted Release in the Income & Expense statement

Post by JohnDMeyers »

Debbie:

Let's look at 5 months of income. $25,000 comes in each month, with $6,000 coming in restricted in January.

Jan
tithe: $25,000
restriction income $6,000
no expenses

Feb
tithe: $25,000
no expenses

Mar
tithe: $25,000
no expenses

Apr
tithe: $25,000
no expenses

May
tithe: $25,000
spend 01-5210-000 expense $23,000
spend 01-5810-000 expense $6,000
specific release income 01-4810-000 (-$6,000)
general release income 01-4999-000 (+$6,000)
--------------------
net for may -$4,000

I hope this shows that there was no additional $6,000 in income in May. Just moving January income from restricted to unrestricted. Both of the release accounts are in the 4000's. It is just a transaction that equals $0 net.
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JohnDMeyers
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Re: Restricted Release in the Income & Expense statement

Post by JohnDMeyers »

In case someone is wondering what is the purpose of the release if it equals $0 net, here's a look at the closes-to scenario:

Jan
tithe: $25,000
a) restriction income 01-4210-000 $6,000 -->closes to 01-3210-000
no expenses


May
tithe: $25,000
spend 01-5210-000 expense $23,000
spend 01-5810-000 expense $6,000
b) specific release income 01-4810-000 (-$6,000) -->closes-to 3210-000
general release income 01-4999-000 (+$6,000) -->closes-to 3110-000

The change is made in the Equity section of the balance sheet. The 6,000 that used to be directed to close to 01-3210-000 is directed to close to 01-3110-000 after the release. That's the whole purpose of the release.

Notice that line a) puts $6,000 in 01-3210-000, and line b) subtracts $6,000 from 01-3210-000
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Drummin' Mama
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Re: Restricted Release in the Income & Expense statement

Post by Drummin' Mama »

I know I'm replying to an old post here, but I have basically the same question that Debbie did. I understand the release from restriction process and that is an expense. But when I print an Income & Expense statement for our congregation, all they really want to know is how we did against budget, without the restricted expenses added to it. For Example:

We budgeted 5,000 for External Repairs, and spent 3,000 of it.
We also raised funds for roof repairs and that totaled 15,000 which we spent.
The reports show that we spent 18,000, because we did.
But all the congregation wants to know is how we did against budget. They want to see that we spent 3,000 of the budgeted 5,000 (not 18,000).

How can I set up the software to separately show the restricted activity in the I/E report? Or is there a better yet simple way to do this?

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Re: Restricted Release in the Income & Expense statement

Post by JohnDMeyers »

One frustration is that income and expenses are separated on the Income and Expense Report. That's true for most accounting softwares, not just PowerChurch.

The $15,000 in income appears at the top (in the income section) of the Income and Expense Report. The $18,000 appears at the bottom (in the expense section) of the Income and Expense Report.

You can distinguish between the budgeted expenses of $3,000 and the expenses-against-income of $15,000 this way:
01-5380-000 budgeted repairs
01-5385-000 non-budgeted repairs

And put the budget on 01-5380-000 and show $3,000 in expenses in that line item.

Then put the remaining $15,000 in expenses in 01-5385-000, but that still doesn't show the $15,000 in income anywhere nearby.
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Drummin' Mama
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Re: Restricted Release in the Income & Expense statement

Post by Drummin' Mama »

Yes I suppose I could do that but it still isn't just showing non-restricted in's and outs (just general fund). I'm not concerned about the income being at the top of the page and the expenses being at the bottom. I have a fairly good understanding of basic accounting, I'm just trying to keep it simple for the congregation. I guess I wish there could be another column for all Restricted income and expenses, so they're not muddled in with the general fund totals. Then the congregation could easily see how we're doing against the budget they originally approved.

Also, we're now putting together next year's budget. The only way I could accurately show how we did against this year's budget was to manually subtract out the restricted spending from the expenses (and of course also not show the restricted income). I just think there must be an easier way to do this.

Thanks,
Nancy

Jeff
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Re: Restricted Release in the Income & Expense statement

Post by Jeff »

A common way to handle this is to use a different accounting fund for restricted giving.

Keep your 01 (General or Operating fund) for just budgeted money. Use another accounting fund for all restricted giving. When you want to look at how you are doing in regards to budget, you can just look at the 01 fund. Because it only includes budgeted accounts, you can get a better picture of how you are on budget.

Another thing you can do to get better idea of budget is to include the budgeted and non-budgeted sub-totals on the Income & Expense statement. This will give you separate sub totals for budgeted and non-budgeted accounts.

CoveBaptist
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Re: Restricted Release in the Income & Expense statement

Post by CoveBaptist »

I had this same problem in regard to wanting to be able to present a "clean" report to the congregation. So two years ago, I went to a separate fund for Restricted Funds or Designated Funds (Fund 03). I thought it had been working well, but I'm not so sure now. Each month we have contributions to our Building Fund. I have a Contribution Fund set up so when entered through the Contribution Module, they go into Fund 03 under Building Fund. Then at the end of the month, we transfer these to our Restricted Money Market. I keep the Money Market Accounts - 3 separate ones - in Account 02. My questions are:

1) what should my transaction be to transfer these funds from 03 to 02?
2) Do I need to Release these Funds each time I transfer to the Money Market?
3) And what accounts should the Transfer Accounts used in these transactions be closing to?

Thanks!

NeilZ
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Re: Restricted Release in the Income & Expense statement

Post by NeilZ »

Since the last poster has opened a new topic on this, please answer his question in the new topic:

viewtopic.php?f=3&t=11432
Neil Zampella

Using PC+ since 1999.

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