2006-07 Special Purpose Fund Acctg Issues

TO FORUM:
I've recently been elected treasurer of a nonprofit agency which has been using QuickBooks (TM) (QB) Pro for two fiscal years. The agency has two government contracts for which it receives advances; and receives restricted use grants from several charitable organizations. The current use of QuickBooks (TM) (QB) does not give an accurate picture of the financial health of the organization, and information is maintained by hand outside the accounting system. I've struggled for several weeks to figure out how to set up QuickBooks (TM) (QB) to do fund accounting. My general conclusion is that QuickBooks (TM) (QB) is not well suited for this type of accounting; but I have, I think, figured some "work arounds" which I describe in more detail below. I would appreciate any advice or other resources I can turn to.

Government advances: These are treated as "unearned income, liability-other current." When the advance is received, the deposit shows the unearned income account. The advance is applied over the last three months of each contract period. An "item" has been created which applies the credit to the invoice as a negative amount. (Note: the contract period crosses the end of the fiscal year, so the advance needs to show as a liability.)

Restricted grants: These are treated as "fund balances, liability/other current." When the grant is received, the deposit shows the specific grantee liability/other current account. As monies are used from each fund, the office manager does one transaction (usually a check) to a specific expense account, and a second journal transaction which transfers from the fund balance account to the appropriate restricted income account. While this results in the Balance Sheet correctly showing the fund balances as liabilities, it is cumbersome, prone to errors. I've also not figured a way
to assign a Class to the journal entry transaction, which means that a Profit and Loss report on the restricted funds class always shows no income.

My main concern is to be able to show Restricted funds as liabilities in the balance sheet, in accordance with modified accrual accounting rules. Thanks for any ideas, resources or assistance that is available.

TO ONLINER:

Your " Special Purpose Fund" accounting concerns via QB are very much to the point. Please go to the URL below as this FAQ probably speaks to most of the issues you raised.