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FROM: Jim Bramer, Retired CPA-Auditor
RE: Multiple QB Companies at a Church Originated May 2001
Below is a hypothetical interview between members of the M)inistry F)inance Team - MFTeam and an Interviewer. MFTeam members are PAT (Ministry Executive), LEE (Volunteer Board Treasurer), and/or FRAN (Business Administrator and/or Ministry Computer Bookkeeper). Both will be directing you to Internet resources, or links. The numbered XXXX references below are links within this www.bcidot.org Web Site.
Today we are interviewing Fran who is the Business Administrator for a Church that annually handles over $1,500,000. You can see the approximate scope of the Church by linking to 0709 and view a Chart of Accounts that is somewhat like Fran's Church. How long have you been using Quickbooks � (QB), Fran? Plus also please give us a little bit of background of the foregoing Church's Chart of Accounts.
OK. Well, we started using QB when I came onto the scene in early 1999. I was acquainted with Quicken, but not QB. I have learned a lot and feel quite comfortable using this software as it meets our unique needs for handling different funds. By the way, we use the terms that are found within 0041 . Namely, General Purpose Fund - GPFund and Special Purpose Funds or SPFunds. Our Chart of Accounts is built around the reason for these terms as almost 25% of the money that we handle has nothing to do with the General Fund. Or we handle a lot of money that is unique in nature.
We use more than one QB Company for a variety of purposes.
By the way .... what we do reminds me of some things I learned in my accounting classes when we talked about corporate subsidiaries and the periodic need to consolidate fully owned subsidiaries and remove transactions where one subsidiary did business with the other -- or there are some "Due To/Due From" balances among the subsidiaries.
This is what I want to focus on during this interview, Fran, as having more than one QB Company sounds like a lot of unnecessary work. There is some info within 0127 about why this is perhaps desirable, but please identify your QB Companies and tell us more about them. I will break in from time to time and ask questions concerning that specific QB Company.
We call the fundamental, or foundational, QB Company "REG"; of course, this is short for "Regular" and it covers probably two thirds to three fourths of all the Church's transactions. Please make applicable choice from 0719 and view samples of a Balance Sheet or Income Statement. We, obviously, handle within this QB Company at least the following:
We pool all of our Bank Accounts - see 0006 for more information on this topic, for example, we do NOT have separate bank accounts for SPFunds, etc., plus we --
Book our payables (primarily Credit Cards - see 0114 for more info) as the expense is incurred. Then we --
Use the QB Equity accounts for our SPFunds - this includes money "SetASide" (see 0088 ) for future purposes. And we --
Use the QB Income and Expense accounts for our GPFund. We also --
Use the QB/Intuit payroll services. Aspects include: some five clergy and their unique income taxation (see 0016 ); almost everyone of our some 12 staff members has their net pay check deposited directly to their own bank account; we handle various types of cafeteria/medical and retirement plans.
We use QB Class features to separate out about ten different Church Departments (Children, Youth, Music and Missions, etc) within our GPFund and we --
Account for "Virtual Self Funding" endeavors/events like AWANA, VBS, Mission Trips, Adult trips, etc. as if they were SPFunds. Then we --
Use the QB Class features to account for reasons why SPFunds begin and change during the year. And we--
Provide monthly Church Departmental "Actual to Budget - A to B" reports to our Department Heads, or upon request. See 0010 for more info.
We can sure see why you call this 'foundational', but what other QB companies do you have, Fran? Also, please make it clear why these activities are NOT a part of your REG Company.
Others are as follows:
- Building Fund
- Scrip Store
- Expected Receipts (Alternative for Accts Receivable) from Church Events -- Go to 5025 for more info.
- Women's Ministry and VBS
- Land, Building and Equipment Fund
- Annual consolidation, or we call it the annual COMBO QBs Company.
I think I understand the need for a separate set of QBs for the Building Fund; see 0124, especially if you are receiving both loans proceeds and donations for such a "in-process" project. Plus, I can understand the need to monitor the various phases of the Building project which probably does not fit in very well with the REG's SPFund structure. I suppose you have separate bank accounts for activities like this, right?
I understand that this is common, but the answer is "no." Within the REG we have the one "Pool", for the purposes explained via the 0006 mentioned above. Money flowing via the pool for the flow of funds per applicable activities go through "Clearing Accts" within QB's asset accounts. Then this info gets to the other QB sets of books.
Then I suppose the other half of the "Clearing Accounts" appears as if it were Cash within the other set of books. OK ... tell us about the Scrip Store.
As explained in more detail via 0101 , the Scrip Store is a fund raising endeavor whereby, for example, the Scrip Store buys Scrip for $95.00 and sell it to Church Buyers for $100.00, who can take the Scrip and buy $100.00 of merchandise. And the $5.00 difference (we call it Residual) can be used by the owner for understood Church purposes ... especially helping with Church activity expenses, like Camp, etc
A separate QB Company is valuable as it can efficiently handle the buying and selling of Inventory and who belongs to the above $5.00 Residual, etc. Some 100 of our people participate in this endeavor. See 0730 for Samples, etc.
Aha .... you buy and sell very much like a commercial endeavor; which, of course, the REG is not really structured to handle, etc. Now tell us why a Church would need an AR (Accounts Receivable) set of books.
Well, it is not really the usual "you make a sale and people owe you for it" type of thing. Many of our events/programs/activities are designed for the user to pay the Church a certain amount --- we call them "Virtual Self Funding" endeavors. So we have this AR set of books to help us keep track of what is expected from whom and if it is yet unpaid. The paid amounts from this set of books must agree with the money showing up as receipts for that endeavor in the REG. There are no legal expectation, but it helps to monitor all of them in a this manner. Oh yes .... we also can present reports to interested Department heads when they ask me "who has not paid, etc."
Ok ... that covers Building Fund, Scrip Store and AR. Why Women Ministry and VBS?
The Women have one GPFund Department, but they wanted to maintain some sub-department info, so it seemed the easiest thing for me to have a separate QB. But, I really should have arranged the GPFund Chart of Acct structure (with QB sub-departments, etc) so I did not have to re-enter the same tranx again.
By the way, we have recently used a QB set of books for our VBS Self Funding effort. As you know the Actual to Budget features of QB are restricted to the QB GPFund and VBS is a large endeavor that needs such accountability ....... plus we restrict VBS's AR (we call it "Expected Receipts") to this set of QBooks, etc.
Wow, you no doubt now have a better handle on the VBS. Now why the "Land, Building and Equipment (LB&E)" set of books, Fran?
As explained within 0127, the REG financial info as to GPFund and/or SPFunds is needed to make almost daily financial decisions and manage the Church during the year. The LB&E info is only needed periodically, so a separate set of books is updated at the end of the Church's year. Update info is gleaned from REG and Bldg Fund and, within the LB&E set of books, we increase our fixed assets as acquired from these sources, plus record the annual amount of debt retirement on our Mortgage, as paid via the REG budget process. During our Building program we would record within the LB&E set of books the amount of "Building in Progress" and also record any borrowing for such a purpose. Oh yes .... we handle our annual block depreciation requirements within this LB&E set of books.
OK, that leaves the COMBO set of books, right?
That is correct. The church needs to produce annual financial statements that are auditable by a CPA firm and follow certain accounting rules and regulations that we need to follow. See 0004 for more details. We also prefer to consolidate some of our expenses into smaller groups..... like Payroll and Operating Costs, etc (see 5012 as to Big Pix matters throughout the year); plus we need to zero out our "doing business with ourselves items" as they appear within the different sets of QBooks.
Accordingly, we establish a once a year COMBO QB, or Consolidation, set of QBooks. We take information from the REG, Scrip Store plus LB&E (the Building Fund info has already been integrated therein) and end up with an appropriate rendering of all of the Church's year end Assets, Liabilities, Equity and yearly Income and Expenses via an annual report that that satisfies both our Church Leadership and our CPA firm.
See 5702 and 5703 for some results of the COMBO effort.
You might also find of value very detailed samples on this overall topic within this 1000 folder.
Thank you very much, Fran. Having all of these separate QB Companies for a Church your size now makes more sense.
Frequently Used Terms below include:
A to B = Actual to Budget reporting
Big Pix = Big Picture, or financial overview reporting
COMBO = Consolidation of all QB Company activities
GPFund = General Purpose Fund, or GPF
LB&E = Land, Buildings and Equipment Fund
MFTeam = Ministry Finance Team, or MFT
Pool = bringing together of all Checking/Savings accounts
QB = The latest version of QuickBooks
REG=Regular QB Company
Residual=Amount remaining in a Scrip Store transaction
SetASide=Unique SPFs that result from charges to the GPF.
SPFunds =Special Purpose Funds, or SPFs
Virtual Self Funding=Users pay fees that cover ministry costs
Please Click here for more topics having to do with the use of "QuickBooks and Ministry Fund Accounting" on www.bcidot.org. This Publication originated in May 2001. UPTD: March 09, 2012
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