Current-Dormant Sets of Books   0127-02   ZZall

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                           TO: Interested Ministries                                                                                       FROM: Jim Bramer, Retired Auditor-CPA
                                                                                                              Col. 3:23                                  FILE: 0127-02/all

                            RE: Active/Current & Dormant Sets of QBooks                                             Originated:   1997                              


        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 Ministry Finance Team Helps


FR:  FRAN    

    Please clarify something for me, Jim.
    A number of times you have talked about the Ministry having different "Sets of QBooks".   When I think of this term I get a little "antsy", as I relate this to extra/unnecessary work or displaying financial facts in a potentially deceptive way. What do you mean?

           FR:  Jim@bcidot.org   

                  First let me clarify ....... "Set of QBooks" are not unique to just QuickBooks; any accounting system can have different self balancing sets of books. 
                 
I hear you, Fran. Indeed, my spin on different 'Sets of QBooks'  does need clarification.  Perhaps a better way of stating this is to take the complete Ministry financial structure and divide it up into different groups and have a self balancing set of QBooks for the different parts of your operation; examples include:  Land, Building & Equipment (LB&E),   Scrip,   Facility Construction/Building, etc. Or the Ministry has some Ministry subsidiaries (or satellites)  that are consolidated at least annually for complete reporting purposes.  No way are we trying to do unnecessary or extra work or displaying financial facts and deceptively restating them; as explained below.

      FR: FRAN

                OK, please  'splain'  further what you mean.

                   FR: JIM

                    Our thesis is that portions of a Ministry's financial accounting structure is day-to-day "CURRENT", or "ACTIVE" -- or it is needed to make daily informed decisions. While other financial facts are "DORMANT." So let's divide them up and enhance management reporting and functionality.

***CURRENT****

       This is the day-to-day "OPERATIONAL" Set of QBooks .... made up of the General Purpose Fund (GPFund), perhaps by department , and the Special Purpose Funds (SPFunds), as explained Here. The Ministry should focus on keeping it's books on what is happening on a day-to-day 'live' controllable basis. Money is obtained (Earned Income and Donations) from your constituency to be expended, under some type of spending control, for General plus Special OPERATIONAL Purposes. Often these purposes include acquiring, or paying for the financing, of   L)and B)uilding and E)quipment (LB&E),  or DORMANT, items. Some Ministries operate an "every day"  Scrip Store  via a separate set of QBooks that must also be combined at the end of the year. A number of Church Ministries are building new facilities and often this is best accounted for via a separate Building (BLDG), or Construction,  set of QBooks.
         This "
OPERATIONAL" set of QBooks MUST provide the Ministry's leadership with timely answers to questions like: > Of the money on deposit, how much of it is available for the GENERAL OPERATIONS - General Purpose Fund? > And how much of it can only be spent for the indicated special purposes - each Special Purpose Fund? > Do we have enough money to meet the next payroll? > Who else do we owe money to and are we current with them? > Who owes us money and how much are they behind in their payments? Discuss with us the concept of this set of QBooks providing GPFund and SPFunds "PHOTO", or point in time, reports, or info, etc.
      
QuickBooks (TM) (QB)  samples of OPERATIONAL reports can be found by linking Here.

****DORMANT ****

                The L)and B)uilding and E)quipment (LB&E) set of QBooks is updated at least annually from "Asset Procurement" or "Debt Retirement" transactions from the OPERATIONS  or BLDG sets of QBooks. You need to do what we accountants often call 'capitalizing Fixed Assets,' or booking these LB&E assets (and the reduction of the applicable LB&E debt). Some Ministries like to have these books updated quarterly... or even monthly. This is a necessary historical process, but it is 'DORMANT' ---- not a 'CURRENT' process... few, if any, current management decisions are made from this 'DORMANT' information.  Ask us about   > LB&E Samples, etc. : > Depreciation which shows up in the LB&E set of QBooks only. > Voluntary "CURRENT/ALIVE, or OPERATION'S "SetASides", which show up in the current OPERATION'S budget for future LB&E purposes.
                Another separate set of QBooks example is what we call Fiduciary Funds, or money is held
by the Ministry in somewhat of a trustee capacity.  Contact us at  Jim@bcidot.org  for more specifics.

ANNUAL (COMBO, or GAAP Recap) Set of QBooks

       The annual financial reports often do NOT parallel the format or structure of the Ministry's OPERATIONS books.  Accordingly, we therefore highly recommend that you have an ANNUAL Set of QBooks.  Ask us for more information re GAAP  and what FASB requires of Non Profit Organizations.  Things unique to this "once a year,"  or ANNUAL Set of QBooks -- please Go Here  for more details on this topic as it might include at least the following items

    > Condensing Income and Expense details.
    > Combining the 'General Purpose Fund'  details and the 'Special Purpose Fund'  Accounting features of why Fund Balances change - Income and Expenditures.
     > Integrating the year end LB&E or Fiduciary Fund information..
     > Fund Balances, or Ministry Equity status, must be structured in a unique manner. 
     > A Ministry usually needs to express its expenses differently; called Ministry Functional Expenses,  by various Ministry "Programs" and types of "Supporting Services".  Ask me at   Jim@bcidot.org   for sample
Annual reports at a Church.

FR: FRAN

        I hear you, Jim ...... but would not this approach defeat your objective of pooling all cash in the Ministry central bank accounts for what you can Float Management and described Here ?? 

        FR: JIM

                You are right on, Fran. this is an issue.  To continue to Float manage, we recommend that such monies flow through the OPERATIONS  (GPFund/SPFunds)  set of QBooks which has appropriate "Clearing" accounts for their transactions.  Then these "Clearing" accounts show up in the SCRIP, CONSTRUCTION-BLDG, FIDUCIARY FUND, etc separate set of QBooks appear their Bank Account as such cash flow transactions are mirrored within the applicable satellite set of QBooks. 

        FR: FRAN

            OK, thanks, Jim.
           
Let me say some of this in my own words. A Ministry like ours could benefit by having at least the following separate self balancing sets of books.

                    1> OPERATIONS
  
Meets our daily financial accrual basis reporting needs and provides decision makers with timely and relevant Internal financial information.- especially administration of "Spoken For".  I believe you call such fund "Special Purpose Funds."   We may need an occasional separate set of books for Facility Construction that would include use of Building Donations and Loan Proceeds, etc.

                     2> CAPITAL 
  
I prefer this as compared to the "LB&E" term that you use, as it shows only what has happened with respect to Fixed Assets, Depreciation and related Liabilities.  We do not have any Trust moneys for which we are responsible.

                     3> ANNUAL
   
I structure this set of books so I can annually combine the peculiarities of the OPERATIONS and the CAPITAL financial matters into one concise annual report. This process can also meet certain annual reporting via professional accounting standards, or GAAP, which are not important to me during the year.

            FR: JIM

                            An excellent overview, Fran!

FR: FRAN

            OK .... thanks again, Jim.


" FREQUENTLY USED TERMS"   BELOW INCLUDE:

                 FinCom = Finance Committee
                    GAAP = Generally Accepted Accounting Principles
                    GPF or GPFund =  General Purpose Fund
                    LB&E = Land, Building and Equipment
                    MFT or MFTeam = Ministry Finance Team
                    PHOTO = Balance Sheet
                    SPF or SPFunds = Special Purpose Funds


            Originated prior to the year 2000 ------  UPTD: May 23, 2010

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