QB-to do Endowment/Trust Fund Acctg - 0680-02 ZZqbb

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                        TO: Interested Ministries                                                                                                           FROM: Jim Bramer, Retired Auditor-CPA 
                                                                                                                                                                                 FILE: 0680-02/qbb   

                         RE: Use QuickBooks to do "Trust/Endowment" Fund Accounting                              Originated:   January 2006           

        I find of interest the following statement about a Non Profit Organization (NPO) who uses QuickBooks (QBs) to handle "Trust/Endowment" monies. This statement comes from an expert in using  QuickBooks (QBs) at Non Profit Organizations (NPOs). Let me know at  Jim@bcidot.org  if you are interested in contacting this expert.

       The Nonprofit Edition of QuickBooks Premier does not offer any additional functionality beyond the features in all Premier editions. Premier is just like the Pro version, but with a few features that accountants like such as automatically reversing journal entries, the ability to print past reconciliations, and some fixed asset functions. If you are going to get Premier, get the Accountant edition.
I think there is some confusion about endowment accounting. In the old fund accounting concept, the various funds each had their own balance sheets. This is not possible to do in QuickBooks. Endowments (and temporarily restricted funds) by nature do not have any expenses. The only activity they show are increases in the funds (interest and contributions) and releases of the funds. All expenses happen in unrestricted activities.
The way that I set it up in QuickBooks is by creating a separate Class for each major function of the organization, with sub-classes for the various activities/programs of the functions. In addition, I create a Temporarily Restricted class and a Permanently Restricted (Endowment) class. When there are multiple kinds of restrictions (say, time restrictions and use restrictions), I will create multiple classes. There are some easy to do, but hard to understand at first, work - arounds that I do to make these transactions post to the Net Asset (equity) accounts as well as to the classes and income accounts.
The endowment assets can not be spent. Earnings from the endowments are restricted to certain programs. These earnings can be collected in the endowment bank account or they can be paid directly to the operating bank account. Either way, this revenue is accounted for by posting an increase in cash and revenue in temporarily restricted funds. As the revenues are "earned" by way of expenditures for the stated purposes, they are released from the temporarily restricted class into the unrestricted program classes.
When you release funds from restriction in QuickBooks, you can associate a specific Customer-Job with the activity. By doing this, you can produce reports by customer showing how each person's money has been spent.  No matter what software you are using, it is going to take considerable time and effort to keep track of all this detail. Perhaps that effort would be better spent on a meaningful program of your Nonprofit

        Please contact me at  Jim@bcidot.org    if you would like to experiment with me as to the possibilities of using QBs to do something like what follows for handling of your "Trust/Endowment" monies



    Use QBs to do the financial accounting of status and financial tranx for "each Trust/Endowment" handled by a Ministry.
-- Know the Balance Sheet status (photo - point in time) by type of asset
        >> -- Know the Income/Expend activity (video - annual period of time by type of income/expenditure)
Use QBs to do the financial accounting of status and financial transactions of not only each
Trust/Endowment but also for "all Trust/Endowments" for needed annual reports, etc.



      A Ministry has one or more separate Trust/Endowment QB Companies (this is a separate set of QBooks from the Ministry's Operations, etc --- see  0127-02 for more perspective)  Each separate set of QBooks handles no more than a dozen separate Trust/Endowments Funds, etc.  Information from all of these sets of QBooks, of course, are consolidated annually with all other sets of QBooks for annual GAAP reporting purposes.


          Make use of a three digit code
to identify each
Trust/Endowment  -- example 001, 002, 003, etc.- see xx1 and xxx information below ---

QBs Assets

   Common Bank Account and QBs sub accounts which identify how much of the
Trust/Endowment Fund pertains to xx1 (and each xxx, etc.).

   Common Saving or DIBS Account where you also use QBs sub accounts to identify the amount of each xxx....plus provide the means to accurately get their share of Interest Income from this pool, etc.

   Non Cash Investments for each xxx
          xx1 Stocks Bonds
          xx1 Real Estate
          xx1 Other non cash investments 

QBs Liability acct - will need the type per applicable Trust/Endowment

xx1 mortgages payable, etc.

QBs Equity Accounts for each Trust/Endowment ( like SPFund #3 within 0601-06 ) per xx1 Endowment -- Use two digit (xx) QBs classes to show why the original Trust/Endowment Corpus changes (annual increases or decreases) -- see possible examples below:

      QBs Class aa-Original Corpus
      QBs Class z1-Payment of grants per
Trust/Endowment mandate perhaps by year etc.
      QBs Class a2-Cash Increase by type of income
              Rental Income
       QBs Class a3 cash paid outs by type of expend
               Debt Servicing-divide between interest/principal
               Payment for xx1
Trust/Endowment's share of overhead
       QBs Class a8-Market Value Increase
       QBs Class a9-Market value decrease

        QBs Equity xx1 accounts must agree with total xx1 assets above


    Since we use QBs classes within QBs Equity accounts for the purposes above, we would not normally use QBs Income and Expense Accts.  However, they could be used to account for common Trust/Endowment Administrative pool of common expenses that is appropriately allocated to each Trust/Endowment.  There might be a need to use QBs classes within these normal QBs Income and Expense Accts to specify different pools of common expenses, etc


   Regularly do a "
Proof-01" process using a manually updated Excel doc This process would insure that each Trust/Endowment is self balancing or the named  xx1 Assets minus xx1 Liabilities equal the xx1 Equity (regardless of why the Equity changes, etc).
   You might also regularly do a "
Proof-02" process via a manually updated Excel doc for assurance that the Classes within the QB Equity Accounts are in agreement with each Trust/Endowment;  like the xx1 QB Equity acct total etc


Note more information about this overall topic within the  www.bcidot.org  web site.

        0903-03 -- Endowments at Ministries
        0094-01 -- Two Sides of the Same Coin
        0051-02 -- Trust/Fiduciary Funds
        2038-07 -- More re Endowment Fund
        0127-02 -- Different sets of QBooks
        0044-01 -- Doubt Duty Investments 
        0019-01 -- Deferred Giving information

      This publication originated in January 2006 and was    UPTD: June 04, 2010