Construction & LB& Equipt matters  0124-02    ZZall

                                                                                - - - Rejoice in the Lord always ... again I say Rejoice !!! - - -

                            TO: Interested Ministries                                                                                                           FROM: Jim Bramer, Retired Auditor-CPA 
                                                                                                                                                                                     FILE: 0124-02/all  

                             RE: Construction & LB&E Matters                                                                                        Originated: June 1990              

        Below is a hypothetical Online Email thread (THRD) between any one of the following MFTeam members: PAT (Ministry Chief Executive), LEE: (Ministry Volunteer Treasurer), or FRAN: (Ministry Computer Bookkeeper) and  Jim@bcidot.org   Click here and go to List of threads (THRDs) at www.bcidot.org

FR: LEE          TO:   Jim@bcidot.org   

        Thank you for asking for 'an update on how things are going', Jim .... everything is going well out here; we are almost ready for ground breaking on our new church. But please share with me any thoughts you have on the general topic of Construction and Land, Buildings and Equipment .... I have noticed that you use this term rather than Fixed Assets.

FR: JIM

        Almost ground breaking, WOW!!!. That's great, Lee!!! By the way please link up to 0018 as I have some over-all Fixed Asset - Land Building and Equipment (LB&E) thoughts that might be of interest to you and the MFTeam.

FR: LEE

        Right on .... I'm interested, please share your accounting for Construction and Fixed Assets (LB&E) thoughts with me.

FR: JIM

        In reviewing our past Emails, Lee, I discover that we have not discussed anything about the structure of your Church's set of books. Therefore I will make the following assumptions:

        >> The Church handles Undesignated monies (I call this the General Purpose Fund - GPFund) plus a variety of designated monies (I call them Special Purpose Funds - SPFunds); one of which is a Building SPFund that has been accumulating money for some time for this project. Link up to 0041, if needed, for thoughts about Fund Accounting and GPFund and SPFunds issues in more detail.
        >> The Bldg Fund, or one of your SPFunds, monies have been added to the Common Operations Bank Account ... although you may have placed the bulk of it into a generic Church Savings Account. Please link to our Float Management Writ for thoughts on this general topic.
        >> The Church has arranged to borrow money for the bulk of the Construction costs of the new Facility. I am supposing that you do NOT have a Church Bond program as you would have to deal with additional finance issues there.
        >> Future "Debt Service" obligations resulting from the new Facility borrowings will be paid by the General Fund - GPFund - although the Church might have a Debt Retirement effort from time to time.
        >> Like most businesses, the church has integrated its Land Building and Equipment (LB&E) assets and related liabilities into the Church's one big set of books.
        >> You have considered a separate Building Fund QB Company. This would be separate from both your regular GPFund/SPFunds QB Company and the LB&E QB Company mentioned below. 
        >>  Plse also we aware of Brad has shared at  3333.

- - - S O M E  T H O T S - - -

        A> As advocated within link 0127, please consider dividing up your one set of books into two self balancing set of books; One for your Church "OPERATIONS" and the other for "LB&E". I believe it is safe to say, that most of the time, your MFTeam is focused during the fiscal year in effective stewardship of the GPFund - SPFunds, or "OPERATIONS" 'goings on' and status. And, after construction, it will have only annual focus in the "LB&E" activity, or Fund Balance or Equity.
        B> When construction begins, you will probably want to set up an Imprest Construction Bank Account and have it appear on the "LB&E" set of Books. To be a good money manager  0006 , then you only seek Bldg SPFund transfers from the "OPERATIONS" Bank account, and Loan proceeds, as Construction Bank Account deposits only to the extent of Construction Disbursements.
        C> Many churches do NOT have a record of their "LB&E" for earlier years. If not, then link to Fixed Asset Accounting and establish such by estimating the original costs by group of such assets; determine the status of applicable loans, and reflect the residual "LB&E" Fund or Equity on this separate of LB&E books. This does NOT have to be a long process.
        D> On the "LB&E" set of books, Construction Costs flow as increases to a single Asset account (like, "Construction in Progress" account) and, of course, Construction/Mortgage loan proceeds will show up as "LB&E" liability increases. All Bldg Fund transfers to the Construction Bank Acct will appear as "LB&E" Equity increases so that they can be reconciled, and offset, to like amounts appearing within the "OPERATIONS" set of books.
        E> Sometimes the Church places Construction workers on its Payroll. If so, the "OPERATIONS" set of books handles the one payroll. Construction worker payroll costs flow to a "TOBE_REIMB" Account in the "OPERATIONS" set of books, and then such amounts are reimbursed by the Construction Bank Account on a per payroll basis.
        F> Link to our 'Three Legged Accounting" for its possible application. At the fiscal year end, any Equipment Acquisitions or Debt Retirement paid for via the "OPERATIONS" set of books also appear in applicable "LB&E" Asset-Liability accounts. Again, they will also show up in such a way in the "LB&E" Equity area so that they can be reconciled, and offset, to like amounts appearing within the "OPERATIONS" set of books.
        G>. I recommend combining (accounts call this 'consolidating') the "OPERATIONS" and the "LB&E" set of book at the fiscal year end only for annual accountability and reporting purposes. Let us know if you need more info as to how this is done using the QuickBooks (TM) (QB)  computerized Fund Accounting system.

FR: LEE

        Very, very helpful, Jim! Let me digest this, take it up our MFTeam and then perhaps get back with you for more specifics.

  " FREQUENTLY USED TERMS"   INCLUDE:

             BLDG = Building                    
                FinCom = Finance Committee
                GPF or GPFund = General Purpose Fund
                LB&E = Land, Building and Equipment
                MFT or MFTeam = Ministry Finance Team
                SPF or SPFund = Special Purpose Fund

    The bulk of this publication originated in June 1990 and was    UPTD: May 03, 2008  

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