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Restricted funds and their control

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  • Restricted funds and their control

    We are non-profit just getting started with Desktop Pro
    Question is managing Restricted funds, earmarked for specific projects.
    The board looks at the checking account statement balance to see if they have money for a given project. My issue is that there are earmarked funds co-mingled in checking account.
    I think just getting a separate bank account for those restricted/earmarked funds may solve my problem and then using Jobs to track the projects or area the funds are intended for.
    Is there a better way or is my plan reasonable?

    My general state of mind....
    "If you're not confused, you're not paying attention." Tom Peters

  • #2
    I am by no means an expert in non profits, but typically you have the general operating account and additional accounts per restricted donation

    When spending on a restricted donation project, you transfer funds from the restricted bank account to the operating account and then pay the expense from the operating account.

    This seems to be the accepted bible on QB and non profits
    https://www.barnesandnoble.com/p/run...oaAmN6EALw_wcB

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    • #3
      Thank you, Rustler.
      I ordered the book you suggested.
      I look forward to reading it (I think).

      Comment


      • #4
        From a GAAP viewpoint, since 1992 it is net assets that are restricted and not bank accounts. Government accounting, though, is still fund driven. Using the tools already provided by QuickBooks can greatly simplify QuickBooks entries and printing board reports.

        Of course, I am assuming that your version of QuickBooks has the Job reporting capability as does the Premier version of QuickBooks for Nonprofits. Most not-for-profits can get the 2019 version of QuickBooks through Tech Soup for a one-time fee of $50. See https://www.techsoup.org/intuit?cg=lpintuit for more details

        Let me suggest the following: Enter a new customer called Restricted Funds. For each "restricted" fund, enter a Job that a customer -- a separate and identifiable job for each fund. Donations with donor imposed restrictions are entered posted to the activity in the chart of accounts for which the donation is made and to the bank account or undeposited funds. When some of the funds are to be expended, write a check expensed to the appropriate expense account in the chart of accounts.

        Two comments:
        1. You don't need multiple bank accounts for tracking "funds". Think of the bank fees you will save. All "funds" can be tracked from the same bank account.
        2. The bank statement is not where the board finds the "fund" balances for which it is look. The board is looking in the wrong place. Use the Job reports I indicated in the earlier post to you, with appropriate job names for each job.

        Kathy Givens book (the one recommended by Rustler) is very good, but you may also want to see start with the first of four articles online for using QuickBooks for nonprofits: https://www.techsoup.org/Support/art...implementation.
        Last edited by Lorin Browning; 06-18-2019, 09:59 AM.
        Lorin Browning, Ph. D.
        Fellow -- National Tax Practice Institute
        lorin@lorinbrowning.com

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        • #5
          Thank you for the advice. I'll look into it.
          The main reason for multiple bank accounts is that I don't keep the check register. The folks who write the checks do and all they look at is the balance to see if they can write the check. If the funds are mixed, they see balance of $170,000 but only $18,000 is unrestricted. Not ideal, but that is what I have to work with.

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          • #6
            It strikes me from your last post that your company may be in dire need of some internal controls. It strikes me that there are too many persons writing checks to have satisfactory cash control.

            If you allow the same person to approve an expenditure, to write the checks for that expenditure, and is the only one who sees the bank statement to verify that the check cleared the bank, my concern is that the board is being derelict in not verifying the expenditure was actually used for the stated project.

            That there is money for a project does not entail that a given expenditure was actually used for the project. In other words, who determines whether an expenditure from a "fund" was a proper expenditure for that "funds" function?

            If you have access to free SCORE assistance, perhaps your organization could request an external evaluation of the financial controls now in place.
            Lorin Browning, Ph. D.
            Fellow: National Tax Practice Institute
            Lorin@LorinBrowning.com

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            • #7
              I agree that they are lax on controls. That is why I gave the bookkeeper job to someone else. I'm retired and my background is banking and the idea of the same person who set the procedure, who can then approve the expenditure, write the check with no oversight or approve a disbursement with no receipt and also balances the bank accounts is disturbing. We have no access to SCORE resources here and they do not want to pay for an accountant to review their methods. The bookkeeper was the only control point and that person reports to the one described above and has no one above them to whom discrepancies or issues could be reported. So, I told them they needed to find someone else to be their bookkeeper. Charitable foundation is new with no past to guide them. I would have been the first bookkeeper. And, thank you for reading between the lines. I feel a bit more justified in abandoning my commitment to them. You have been a great help.

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              • #8
                On our web site we have some suggestions that may help with this issue. See >>> https://eclientlink.com/WpNonProfitSetup.aspx

                eClientLInk

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