Setting up gnucash for charity with project

[Mike or Penny Novack]

Wm wrote:

> Wed, 29 Oct 2014 14:15:06 
> <00e301cff382$bd8ac500$38a04f00$@lineone.net> Chris Brittain 
> <chrisbrittain at lineone.net>
>
>> Hi! I am a newbie on the list and have just taken over as a charity
>> treasurer. The existing accounts are a bit random, but as it was just 
>> income
>> and expenditure they survived. About a year ago, they won some 
>> restricted
>> funding (about 5X annual turnover) from a range of funders for a new
>> building project and the old "system" collapsed along with the 
>> treasurer. I
>> am now trying to sort out the mess and have started to use GnuCash 
>> (for my
>> first time). The straightforward income and expenditure are fine, but 
>> what
>> is the best way to set up the project with its restricted funds?
>>
>> Also, what is the best management account report to show the 
>> relationship
>> between the project and the main P&L as reserves have been regularly 
>> moved
>> to and fro to meet matching requirements. Sorry to ask such a naïve
>> question. Thanks in anticipation
>
>
> This is a perennial question.
>
> I think the formal answer is that GnuCash doesn't do fund accounting 
> as expected.


As always, the way to proceed is to make sure you understand how you 
would have been doing this accounting in the old days of pen and ink on 
paper. Once you have that straight in your mind won't be hard to see the 
accounts you would set up using gnucash and the transactions you would 
enter between them.

Not exactly proper for us to give ACCOUNTING advice, but I am also the 
treasurer for some non-profits, and though while not at present, have 
had to deal with "restricted funds".

a) FORMAL (legally) restricted funds are usually shown as liabilities.
b) INFORMAL (just morally) restricted funds I have shown as a 
sequestered part of the savings account.

In both case, use of money according to the restriction releases that 
amount of funding from restriction. You could do this as each 
transaction came in, adjust quarterly, or adjust annually.

We'll take an example from one of my own (MA Chapter of TACF). We had  a 
large donation from an elderly retiring board member to fund the next 
stage (testing the trees for resistance)  which he might not live to 
see. But this was only an informal restriction. So I split the savings 
account to general savings and "Howard Fund". When after several years 
we began to have expenses in the category "inoculation and testing" I 
would make an annual adjustment transferring the sum of those qualifying 
expenses between Howard Fund and General Savings.

I will NOT describe exactly what you should be doing for a formal 
(legal) restriction, especially one several times in size your annual 
budget. You should get professional advice on how to properly account 
for that.

Michael