2052-07 Restricted Donations & CarryOver Issues -- ZZeod

TO Jim@bcidot.org or to www.bcidot.org

    I am a fellow CPA serving at a Church and I have discovered that our church uses its Temporary Restricted Funds "after" it has used the Unrestricted Fund.   As a result some of the donor Restricted Funds for various specific purposes have been on the books for as long as ten years. The reason given by the Church Leadership is these funds provide a buffer or they are used as cash flow management.
    I contend that this practice defeats the purpose of the donor Restricted Fund. I consider use of the Temporary Restricted Funds last as poor management. GASP Statement No. 34, Paragraph 115h says it is a management decision, but priority of use should be disclosed.. FASB Statement 116, Paragraph 117, as I understand it, means that Restricted Funds funds should be used up prior to using any of the Unrestricted Fund.

TO Onliner:
    This process does appear to have the 'cart before the horse." My experience is that the Donor Restricted/Designated Donations are used up first and then, as needed, the Project/Endeavor activity calls upon the Unrestricted Fund/General Fund to pick up any needed authorized balance.

TO www.bcidot.org :

    I am wondering if this policy is ethical. Let me give you a "point in time" example of what I am talking about.

********Description*******

**Amount**

Unrestricted Fund

$ 1,000.00

Temporarily Restricted Funds

Project One

$5,000.00

Project Two

$7,500.00

Endeavor A

$1,500.00

Endeavor B

$ 100.00

$14,100.00

Total

$15,100.00

TO Onliner:

    From my perspective it is NOT ethical of the Board of Leadership (regardless of GASP mandates, etc.) as they did not account for and use the funds for which they were raised.
    As you will notice when you digest the contents of some of the links below, the Board should be in control of all the money. Or it should authorize in advance a Project/Endeavor that donations are made to and the Church does not accept money for un-authorized Projects/Endeavor/Person. Or there should NOT be a Church pass-through with a tax deduction in mind for money going to a Project/Endeavor/Person that a donor alone believes appropriate, etc.

TO www.bcidot.org :
    It is entirely possible that the Unrestricted Fund did in fact pay for all of the expenses of these Board authorized Projects/Endeavors. That might be why there is only $1,000.00 in the Unrestricted Fund. If so, are these monies still restricted?

TO Onliner:

    They are no longer restricted, or if an audit of these matters does in fact show that the General Fund (or via the use of Unrestricted Money) did disburse the same or more in fact than the restricted money that came in for such efforts down through the years. Then, in my opinion, you no longer have an unresolved issue.
    For example, let's suppose that Project One and Two and Endeavor B were in fact paid for via Unrestricted Fund monies. Or the only real Temporarily Restricted Fund on hand is $1,500.00 pertaining to Endeavor A. Then the Church leadership needs to conclude how to account for it and then distribute it per the original intent and the desires of donor - regardless of how old it is. If there no longer is an Endeavor A then the Church leadership should have the $1,500.00 go to something similar plus, in my judgment, so inform the constituency.

TO www.bcidot.org :
    What do you think? Is this poor management?

TO Onliner:

    As shown in your revised "point in time" report below, the Church leadership is still managing the same $15,100.00 of pooled resources --- there are just more dollars in the Unrestricted Fund and fewer dollars that are Restricted.   The Church leadership might want to "set aside" discretionary unrestricted excess money - somewhat like what is mentioned with in 0088 . Somewhat like what I have done with the $10,000.00 in the format below.

********Description*******

**Amount**

Unrestricted Fund

$ 13,600.00

     SetASide as a Voluntary Reserve $10,000.00

Temporarily Restricted Funds

Project One
               .00

Project Two

.00

Endeavor A

$1,500.00

Endeavor B

.00

$ 1,500.00

Total

$15,100.00

TO www.bcidot.org :
     Are there other known resources so that I could get some opinions on these matters?

TO Onliner:

    Yes, I have found very helpful the CHURCH ADMIN Yahoo Forum found at this web line:

             http://groups.yahoo.com/group/churchadmin

    It is frequented by some very Church Finance savvy people that have been very helpful to me

TO www.bcidot.org :
     Anything else, Jim?

           TO Onliner::


                         Yes, please also reference more links below within www.bcidot.org on this overall topic

Restricted/Restricted Monies at a Church
Church Policies
Church Financial Policies
GAAP at Ministries
Ministry Fun(d) Accounting -- not Fun
Editorial re ":Where" and "Why"

Editorial re Functional Exp Overkill at Churches
Dialog re "Special Purpose Funds" Issues
Church Missions and Designated/Restricted Donations
JIMs JRNL reference to Designated/Restricted Funds in 2003
JIMs JRNL reference to Designated/Restricted Funds in 2004

JIMs JRNL reference to Designated/Restricted Funds in 2005 - Truism
JIMs JRNL reference to Designated/Restricted Funds in 2006

TO www.bcidot.org :
    Thank you ever so much for your responses above, Jim.   This has been very helpful.

******Description*****			Amount
Unrestricted Fund			$ 1,000.00
Temporarily Restricted Funds
	Project One	$5,000.00
	Project Two	$7,500.00
	Endeavor A	$1,500.00
	Endeavor B	$ 100.00	$14,100.00
	Total		$15,100.00