How to post transactions re 'earmarked' contributions, and how to post in-kind contributions

[Anita Graves]

Thank you, Adrien.

I live in Cyprus.  We probably are a taxable entity, and that is currently being investigated, but we are a religious corporation without share capital.  Our accountants have never mentioned anything about these ‘earmarked’ contributions, but they are not sinister money laundering income, and here are examples of what they are:

1)  Contribution earmarked to offset electricity expenses in the meeting place

2)  Contribution earmarked for the fencing of our property where our meeting place is located

3)  Contribution earmarked for repairs and maintenance of the building where we meet

4)  Contribution earmarked for the purchase of furniture for our meeting place

5)  Contribution earmarked for our religious community in another country to build a house of worship

6)  Contribution earmarked for our Faith’s international fund in another country

We view these as restricted funds.  They cannot be spent for anything except for the donor-designated purpose, except with the permission of the donor.  The treasurer has to account for how these funds are drawn down when expenses are made accordingly, and must always have the information that the balance in our sole bank account has to be considered as not spendable income, depending on how much of our assets contain these ‘earmarked’ funds.

We are a small corporation, members of an international Faith organization, and we very carefully monitor the nature of our voluntary contributions.  We are a small religious population (about 200 persons) on a small island in the Mediterranean Sea.

I hope this is clarification, but if you suspect we have a problem, please give me your advice.  We have a professional accounting firm that is preparing our audit for our past financial year now.  This is their first audit as they were recently engaged by us for their services.  We are a non-profit corporation, but not a charitable entity.  I have no idea about the tax deductibility of our contributions, but they rarely exceed Euro 2000 (and those usually come from the UK or the USA), and are mostly in the very low denominations up to Euro 100 - 200, so we probably have never met this question….  I guess we need to have legal advice? Our previous accountant/audit firm has never mentioned these things to us and we have existed as a corporate body since 1959.  

Please comment again,

Anita

> On 19 May 2017, at 10:25 AM, Adrien Monteleone <adrien.monteleone at gmail.com> wrote:
> 
> I’d double check with a CPA or legal advisor concerning the ‘earmarking’ of donations if your organization takes them as tax-deductible in the U.S.
> 
> I could be wrong, and I may only be thinking of certain types of non-profits, but my understanding is that tax-deductible donations to non-profits cannot be earmarked by the donor.
> 
> If that’s the case, it would save you some accounting work.
> 
> Regards,
> 
> Adrien
> 
>> On May 18, 2017, at 10:03 AM, Anita Graves <anitagraves at mac.com> wrote:
>> 
>> Dear All, 
>> 
>> I am the treasurer for a religious organization and we have contributions coming in that are earmarked for a certain purpose.  I propose to enter these as separate Asset child accounts and then spend them in the corresponding expense account.  Do I have that right?
>> 
>> What do I do with ‘in-kind’ contributions?  No cash changes hands but it is the same difference, so do I debit the cash income account and credit the expense account?
>> 
>> Thanks for helping, everyone.
>> 
>> Anita
>> 
>>> 
>>> Exactly—the bank shows our actual lump asset, but we care about the movement of these ‘earmarked’ funds and keep them in our reports, so we know at a glance how much spendable money in the bank we actually have, as opposed to what the bank statment gives as our balance.
>>> 
>>> Anita
>>> 
>>>> On 18 May 2017, at 5:49 PM, Maf. King <maf at chilwell.net> wrote:
>>>> 
>>>> On Thursday, 18 May 2017 15:39:59 BST you wrote:
>>>>> Maf, I forgot to mention an important thing:  I am not moving money from the
>>>>> bank, I am keeping it in the GC account tree along with cash, current,
>>>>> savings accounts, so one would only know about these funds that are set
>>>>> aside by looking at the GC accounts, not by looking at the bank statement. 
>>>>> It initially comes in as a contribution, and so I would put the
>>>>> contribution in the asset subaccount, as an earmarked account, and then
>>>>> spend that balance down to zero in the expense account.  Is that right?
>>>>> 
>>>> 
>>>> Yes.  your GC bank account can have sub-accounts - virtual "pots" of money 
>>>> that only show up if you look at GC.   The bank thinks you have 1 "big" 
>>>> account, you think in terms of several mini accounts within the main bank 
>>>> account that keep your reserved totals easy to find...
>>>> 
>>>> Maf.
>>>> 
>>> 
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