Accounting, Payroll & Pension Issues/Posting personal expenses as deferred salary
The executive director of our non-profit has accumulated quite a bit in deferred salary. Not having been paid a regular salary and thus being short of funds, she recently purchased an airline ticket for personal use with corporate funds, and posted the expense to "deferred salary." She has the financial authority to do this, but the board would like to ensure it is acceptable by accounting practice for an ED to make occasional personal purchases using corporate funds as long as any personal purchases are posted to her deferred salary. We believe these are not considered commingled funds because the transaction was carefully documented. Obviously all parties would rather she not have to ever use personal funds at all, but as she is not drawing a full salary, this is a benefit we would like to extend to our ED but only if it does not violate any accounting principles for non-profits. We have researched this quite a bit and cannot find a conclusive answer. Thank you for your help.
I cannot see a problem with your treatment per se. I believe that by your recording these personal expenses to the deferred salary account, they are not co-mingled.
Keep in mind that in the scenario as described, the personal expenses posted to the deferred salary account should probably be treated as a payment to the ED. It's as if payment was made to the ED and then she paid the personal expenses.As such payroll taxes need to be taken into consideration.
Please, please discuss this with whoever is doing your annual income tax returns as well as payroll tax returns. It is not clear to me how you are recording the deferred salary as there are several options and this needs to be considered.
If this is not clear, please ask follow-up questions.