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Nonprofit Law/restricted account reporting for church accounting

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Question
Our Church uses ACS acounting software to record our expenses and receipts.  Many of our contributions are designated for specific funds/expenses.(restricted). The restricted funds are recorded in restricted funds and these funds are moved to a seperate bank account.
Question, the restricted funds are not part of a bank reconciliation report in the ACS accounting system.  They are reported on a manual report presented by our finance team.  There is no way for us to everify the total amount. Is there an accounting principal for reporting these funds.

Thanks,
Sandy

Answer
I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. The IRS does not have any particular requirements as to methods of accounting, and only requires that good records be kept. As to record-keeping, see IRS Publication 4221-pc "Compliance Guide for 501(c)(3) Public Charities" which is available at http://www.irs.gov/pub/irs-pdf/p4221pc.pdf

Even though this free forum is about legal issues and not accounting methods, I may be able to give you some leads. You may certainly have a separate bank account and separate accounting for those restricted funds. If you want to follow the recommendations of the Financial Accounting Standards Board (FASB), see their Statement 117 "Financial Statements of Not-for-Profit Organizations". That 70 page pdf file is available at http://goo.gl/DvrIU

Specifically, as to donor-restricted cash, we see on page 4"
--- Start of excerpt ---
This Statement amends FASB Statement No. 95, Statement of Cash Flows, to extend its
provisions to not-for-profit organizations and to expand its description of cash flows from
financing activities to include certain donor-restricted cash that must be used for long-term
purposes.
--- End of excerpt ---

That Statement No. 95 is available at http://www.fasb.org/pdf/fas95.pdf and its description of cash flows from financing activities starts on page 18.

On page 10 of the Statement No. 117 we see:
--- Start of excerpt ---
Donor-restricted contributions are reported as restricted
revenues or gains (restricted support), which increase temporarily restricted net assets or
permanently restricted net assets depending on the type of restriction. However, donor-restricted
contributions whose restrictions are met in the same reporting period may be reported as
unrestricted support provided that an organization reports consistently from period to period and
discloses its accounting policy
--- End of excerpt ---

Then samples start with Note A at the bottom of page 58 through Note D.

If you want less technical information, I suggest you consult the 4 page pdf at https://goo.gl/5G1adS

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather more information.

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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