Fund Accounting - Not Fun      0041-01   ZZall

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                     TO: Interested Ministries                                                                                             FROM:  Jim Bramer,  Retired Auditor-CPA 
                                                                                                                                                                FILE: 0041-01/all

                     RE: Ministry and "Fun"d Accounting - Not Fun                                                    Originated in January 1996                            


   Ministries (sometimes called Non Profit Organizations - NPOs) are different from regular businesses, as they:

  >>  Have a Ministry focus, or purpose, and not a profit focus,
  >>  Deal with donors instead of investors (shall we say "stake-holders"; not "stock-holders"),  
  >>  Gather, or raise, Ministry F
unds (via Donation/Contribution Income)  rather than make sales
        of products/services.

    Given these differences, there are obviously some unique accounting aspects of finances at "Christ Centered Ministries".  Foremost is the need for what is normally called "Fund Accounting." and you strive for the goals found BELOW  As a matter of fact, in my view, finance/accounting systems at any Ministry are synonymous with "Fund Accounting" as money is used for General Operations  plus  money is also used for Donor and Board restricted purposes/objectives.

    The following comments come about as a result of working for almost five decades with small to medium sized Christ-Centered Ministries. 

    My view of  "Generally Accepted Accounting Practices/Principles - GAAP "  at such Ministries is two-pronged.  Or a Ministry needs definite Daily/Internal GAAP emphasis that enables their leaders to make prudent financial decisions within context of its every day plans and objectives. Please note explanations of this when you Go Here.  It seems that there is a tendency to overlook Daily/Internal GAAP issues and over-emphasis Year End  GAAP   issues during the year.

Perhaps the categories of information below will help you with "Fund Accounting" matters as well as other unique named areas of Ministry finance/accounting.   Please also  Go Here  for  information about our WebBOOKs. 

   Please click below for more information on your topics of interest in the list below:




  4. DONAMAIL - Donation Accounting












     Please also Go Here   for a dialog with a Ministry Executive on the topic of Ministry Accounting Issues. Please also Go Here  for a list of other known web sites for Ministry Finance resources.  Please Email us at  if you would like this entire free 0041-01 document in WORD format, etc.   


        The first issue is that money (mostly Donations) come into the Ministry for restricted/designated purposes; or they are to be used for a stated Ministry's Board pre-approved Special Purpose.  Such money is sometimes called  "Spoken For Funds" ---  please note that you can also abbreviate this as "SPFunds."  Of course, both the Special Purpose and General Purpose monies below are all "Purpose Driven",  if you please. 

        Suffice is to say, almost all Christian Ministries manage "Imposed Limits" money.  The dictionary defines
"imposed" to include such things as:  to force or thrust something on oneself or on others; to put a burden on.  This comes about via "Outsiders", or donor, directed monies plus there are "Insider",  or Board directed,  monies SetASide for a stated purpose.  Please
Go Here  for some more perspective on what we call S)PECIAL P)URPOSE FUNDS - SPFunds. The information shared Here  might also be helpful. 

A related issue is that
SPFund money comes in that is for Activity Reimbursement (or Defrayment) purposes. Please  Click Here  for more specifics below. 
Of course, being good stewards of these special fiscal resources give rise to the whole 'Fund Accounting" issues that Ministries  must  address.   Please also digest the  General Purpose Fund  issues discussed next. 

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                This statement from a "Christ-Centered Ministry" caught my attention:  "MEET THE GENERAL "
               As we know a "General" is absolutely essential to the leadership and success of a military effort.  It is equally important and significant with respect to a Ministry's "GENERAL"  FUND (
I prefer the term GENERAL PURPOSE FUND  or GPFund)  that is made up of unrestricted and/or undesignated monies that is righteously administered by a Ministry's "Board of Leadership" as it carries out it's purpose. 

                This Board discretionary "GPFund" monies is usually under some type of expense
"line item"   Budget  "control";   as apposed to the "control" method whereby "if a fund has a balance, we can spend it."  Please  Click Here  and view a sample actual to budget  "line item"  GPFund Budget report.  Then  Go Here  and learn about a "GPFund"  spending control "running balance" alternative as it readily enables a leader, after you have covered the Ministry's "GPFund" fixed operating expenses, to answer this question:  Do I 'really' have money this week to spend in my area of responsibility ??

                You will note that the "GPFund" term is singular, while the SPFunds term that we reference above is plural.   With respect to the "GPFund"  (we shalt) and the "SPFunds" (thou shalt)  money management issues,  I like the analogy that people are either "right handed"  or "left handed"  but  we learn to use them together.   Both of these "GPFund" and the "SPFunds"  accounting functions are different,  yet  (like left or right handed issues)  they are part of a Ministry's single unified finance and accounting system.  Maybe you are like my wife Bettie and I  who grew up singing  the song "One-Door and only One and yet its Sides are Two, etc. etc." ----  OK OK ,  I think you get the idea !!!!!! 

Click Here. and notice the "total" and yet the "separate" "GPFund"  and "SPFunds"  activities as shown within this sample one-page "Big Pix" overview report.

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       Computerization of Fund Accounting is usually wise for the reasons mentioned when you Click HerePlease Go Here  for information about using the popular desktop software product known as Quickbooks Pro (QBs) to do this.  Please Go Here  for information using QBs Web Based software.  

        Ask us about your
Ministry using the  eFinFax  accounting system as it contributes to answering this essential weekly question of a Ministry leader:  "Do I have money to spend in my area of responsibility?"

       Please Go Here   and read about our proposed
Chart of Accounts  structure for Ministries like:   Churches, Christian Schools, Mission Agencies, Christian Conference/Camps or any any other Christian Ministry.  If interested, please  Click Here and go to a sample One Page Annual Operating Financial Statement. 

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      DonaMail  is a contraction of Dona)tion and Mail)ing - Churches often use the term "Church Management Software/Systems - ChMS" but DonaMail goes beyond Church applications.  This is a term we have used for a number of years to emphasize the need to have, for administrative reasons, if for nothing else, the giving unit and people information in one place (preferably another database, etc.). Or you add or update names/addresses, for instance, in one set of records only, as you establish and utilize DonaMail computer database software with 'human being ' profile emphasis and contact purposes.  Please Go Here for some overall uses of this DonaMail file, etc.  You will find a list of DonaMail providers Here.

      Also some Ministries insist upon integrating the
Ministry Fund Accounting,  or bookkeeping,  system and the DonaMail computer system. We feel such integration is undesirable .... especially for smaller Ministries.  When you Go Here  you find more DonaMail perspective about how that DonaMail  fund batch information suffices for manually recording the deposit going into the Ministry Fund Accounting system.  Generally, we see very little value in doing this electronically from the DonaMail software to your Ministry Fund Accounting software.

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       In addition to the goals set forth  HERE  ,  the primary objective of the Ministry Fund Accounting system is to timely provide decision makers with the following seven "Vital Signs."

1> How much money is on deposit and how much is "really" available to spend.
2> Who owes us money and how late are they
3> What "strings are attached" to this money; or our money pertains to which part of our Ministry
4> How much do we owe and are we current with our bills and like obligations
5> What is the scope of donor restricted money
6> What is the amount of Board discretionary money; often setaside by the Board for a specific purpose.
7> Are we living within our General, or Operating, Fund Income and budget constraints

      This can best be done via an Operational Accounting Set of Books with a liquid emphasis that is designed for this purpose --- and it does NOT include all of the non liquid (cash) fiscal resources - like Land, Buildings & Equipment.  In addition to the #6 info below, please Go Here  for more info.  The content of   Two Sides of the Same Coin   might also be of interest.  Please note the use of the terms PHOTO and VIDEO   when you Go Here and in this issue of  JIMs JRNL..  Please note when you Click Here  our comments about Accrual and Cash basis of accounting/reporting.

       Generally Accepted Accounting Principles (
GAAP) for Ministries is dealt with in depth Here. - especially note the Daily/Internal emphasis where the "General Purpose Fund" Income pays for the usual operational expenditures that includes Debt Servicing costs plus the acquisition costs of most of the new Furniture and Equipment, etc.  Such matters are then finalized at the year end only for full GAAP purposes.  We also deal with what we call "GAAP Overkill"  at churches in  This  Editorial. 

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        Information on Ministry resources tied up in Land, Buildings and Equipment, along with related mortgages or long term obligations, is NOT needed for current decision making. We recommend that almost all Ministries maintain this type of fiscal accountability in a separate Set of Books and update this information at least annually. Please Click Here  for another possible reporting option. 

        Also discuss with us, as applicable,  aspects of
Fiduciary Funds, or money where you function as a trustee. Please  Click here  for more info on this topic - especially note the desirability to also have these Fid Funds in a separate set of books.  Information about the use of QuickBooks to account for Endowments Here  might also be of interest.

        Year end reports that are GAAP compliant for your constituency (or to the IRS, etc.) can also efficiently flow via another Set of Books.  Go to the content Found Here  for more information on this topic.

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        Many Ministries often insist on having a separate Bank (Checking or Savings)  accounts for SPFunds  so that such assets can be 'married' up to the respective SPFund. We embrace heartily the need for "SPFund Integrity" with as little inter-fund borrowing as possible. The understood intent is to insure that "my SPFund money does not get spent for some other purpose" --- especially if the  GPFund  is "lagging behind".   The emphasis should be "why" you have money as maintained via SPFunds  accounting methods and not  "where" it is deposited etc.  Click Here for more info about this.

        A  '
'whole bunch'  of Bank/Savings accounts is administratively a MESS plus a related objective is to "Manage Your Money" and obtain the maximum yield from all Bank balances; never unnecessarily leave money in an account that does NOT bear interest or substantially reduces your Bank Service Fees. Please Go Here for more information on this topic. Please also Click Here  for more info about deposit management and earning as much "Interest Income" as possible..

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        We strongly believe that most all Ministries should NOT have a fiscal year that ends on 12-31-xx, or have a Calendar Year End. The Staff of a Ministry is "very"  busy during the months of December and January --- many Ministries derive a large portion of their Donations during each December.   Holidays,  plus calendar year payroll tax accounting,  add to the 'hub-bub', so why add more with having a Ministry year end also. 

        But most importantly, one of the fiscal and operational year end objectives is to "
look back and then plan forward" so you can put dollars to your annual plans   ....  this is very hard to do during these months. Please consider Spring year ends for Churches; summer time year ends for Schools and early Fall year ends for other Ministries.

      From Onliner:   I have this past calendar year been using the Ministry Finance infra-structure and our QuickBooks (QBs)  Chart of Accounts that you helped us put together.  Our fiscal year ends 12-31-xx.  Please provide me with some help with the fiscal year end things that I have never done before. 
      From  Thanx for asking .  Please remember, of course,  to do the appropriate filing so that people get their W-2s and 1099s for the calendar year.  You will also remember that Clergy Housing matters need to be authorized annually, in/around the calendar year.  Plus, of course, you will need to provide people with a report of their donations made during the past calendar year.  Reminder:   Please remove (maybe replace) any old outstanding checks as part of your Bank Reconciliation process.  Of course, in around this time of year you have to cope with your entire General Fund   fiscal year budget issues of the upcoming new year.  Please also consider the following:

    >>  "EOY -End of Year " and "EOP - End of Period" dates, I hope the content of this link is helpful:
    >>  Accounting for Special Purpose Fund year end balance forwards, please go to this link:
    >>  If you have more than one QBs Company, please go to this link:   
    >>  Other Onliner discussions that might be of help - please go to the list via this link:   
    >>  "Setting things in concrete" as discussed within the content of this link:

      Recently there was a "when does your Church Fiscal Year End'  poll out on one of the Internet Church Forums.  As indicated below,  among these 50 responders,  over half had a December 31st fiscal year end.   Isn't this interesting in light of what I have shared above.

                                Jan, Feb or Mar                          3
                                Apr, May or June                     13
                                Jul, Aug or Sep                          6
                                Oct or Nov                                   1
                                December                                  27          

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        As indicated in #11 below, probably the most efficient way for everyone to buy these days is via the use of Plastic, but you may want to establish an Imprest Petty Cash Acct;  please Go Here  for more details about how to manage these type of accounts.  Usually a flat amount remains on the books and the petty cash expenses show up when the cash expenditures are replenished.  Some systems (like QuickBooks)  encourage you to place advance amounts into this asset account and then reconcile the actual unspent monies on hand to the Petty Cash amount appearing on the books.

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       .  Please begin by Clicking Here  for more information on the topic of Self-Employed Clergy, as we highly recommend that such matters be handled along these lines, etc.   Please Go to   Clergy Payroll   for a list of our publications on this topic
        We especially recommend automatic direct deposit of anyone's net pay.   Please  Click Here for a dialog on this topic.

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        Advance approval for buying is essential.  Some Ministries attempt this via a Purchase Order (P.O.) system.  Management of a P.O. system in a volunteer setting is often quite awkward.  We, therefore, recommend the use of a Plastic Buying system as set forth Here   plus a slight alternative mentioned when you Go Here.   Be sure you understand the value of using the Plastic via the eCHECK  method to process a check, in essence, via this process.

Very few vendors these days do NOT sell via Plastic. Therefore, we recommend, rather than have a number of vendor charge accounts, that Small Ministries have only one charge account -- namely, their Plastic accountThe control of charge accounts then is dependent on who has the Ministry's Plastic.  Further,  such controlled charges are entered into the accounting system as such expenses are incurred throughout the month.   Ask me at  about going Online and obtaining your Plastic's transactions and doing the accounting therefrom, etc.

        Ask us about the general idea of writing a Plastic weekly check from known plastic charges.   Or, i
n essence, have the Ministry use the  eFinFax  method  (
also Go Here  and learn about utilizing the "Accrual" Basis of Accounting, etc. )   as it contributes to letting everyone accurately know the complete and real financial situation. Please   Click Here  for more information about the eFinFax Accounting System..

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There are two aspects of Activity Reimbursements or Defrayments:

        1>       A ministry collects money to offset a portion of the costs of an event or activity. Church examples are
               AWANA and Vacation Bible School.   We recommend that you report only real income and reflect this
type of Special Purpose Fund activity as Defrayments, or as expense offsets  (
contra expense accounts
and not income per se.  Our experience is that such  activities are best managed by them having their
               own  Special Purpose Fund  that may be partially funded from the  General Purpose Fund  budget. Please
Here   and  Here  for more information about such Church operations --  also Go Here  for more info
               on this topic.

        2>       Some Ministries buy specific General Purpose Fund event material in advance and then seek
               reimbursement, or defrayment --- especially in small church settings. We believe the material costs should
               appear as an expense and the defrayment appear, not as income per se, but as an expense offset.   Having
               both flow through the same expense account does NOT fully report what has happened.

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        Obligations like monthly Mortgage payments include both principal and interest. But the total obligation usually must come from operations income or the GPFund.   Therefore, we recommend that the budget expenditure line item have a generic title like "Debt Servicing" and be for the total amount of the monthly payment.  The principal portion will at least annually show up as a reduction of the liability account. More information along these lines is found when you Click Here.   Please Go Here and see the discussion about a "Three Legged" accounting entry on this subject.

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        At times Furniture and Equipment will be acquired from monies gathered specifically via a  SPFundBut the usual practice is to purchase such items from the GPFund  per se as a budget expenditure line item.  All  Furniture and Equipment costs should be added to the Fixed Assets at least annually. Please Go Here  for more information about Land, Building and Equipment and related accountability issues.  The Construction information Found Here  might also be of interest.  Ask us about SetASide funding via the GPFund as to needed replacements or for anticipated major Facilities repairs and maintenance. Please Click Here and see the discussion about a "Three Legged" accounting entry on this subject.

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   >>  Accrual = A type of accounting where you book all of the income "due to you" plus all expenses "you owe"
                      when known.  Please
Click Here for more info.
   >>  Chart of Accounts  =  Infrastructure of assets, liabilities, income/expenses plus applicable operating
   >>   Debt Servicing = Total amount of the usual monthly principal and interest paid on something like
                    a mortgage.
   >>   DonaMail = Donation and Mailing database file
   >>   eFinFax   = Accounting system with a Spending Control thrust
   >>   Fixed Assets = Land, Buildings, Equipment, Vehicles Furniture, etc.
   >>   GPF = General Purpose Fund, or
   >>   IRS = are you kidding????
   >>   MFTeam = MFT, or Ministry Finance Team
   >>   NPO = Non Profit Organizations
   >>   Plastic - Credit or Debit Cards
   >>   QB = Quickbooks, not necessarily the latest version. Set of QBooks
   >>   QBOEQuickbooks Online Edition via the web, or directly via the Internet
   >>   SPF = Special Purpose Funds, or SPFunds

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Have "FUN" with Ministry "FUN"D ACCOUNTING !!!!!!

This was updated: July 06, 2013