Policies on Moving Funds Between Two Major Cateogories

Discuss questions around local unit policies for budgeting, reconciling, etc. This forum should not contain specific financial or membership information.
Gary_Miller
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Postby Gary_Miller » Fri Jan 20, 2012 2:23 pm

Bom1 wrote:Before following the procedures to move funds between two major categories, such as Budget to Other or Other to Budget, do we need to notify HQ (via MLS Messaging) and ask for permission prior to moving the funds? If yes, where do I find that information?

Example:
Other YM -$XX.XX (The expenses exceeded the income for a ym camp)

Budget YM +$XX.XX (Funds to be moved to cover the shortage in Other YM)


There no need to move any funds between the categories. All thats needed is to wright a check using multiple categories.

Example:

One check -$xx.xx (Total expense)

Categories to take fund from.

Other YM -$XX.XX (Money to be used for YM camp expense. In this example all thats available.)

Budget YM +$XX.XX (Funds to be used to cover the shortage)

All done using one check.

If a check is already written just go edit the check to make the corrections.

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aebrown
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Postby aebrown » Fri Jan 20, 2012 3:51 pm

Gary_Miller wrote:There no need to move any funds between the categories. All thats needed is to wright a check using multiple categories.
...
If a check is already written just go edit the check to make the corrections.


Although the procedure you outlined is indeed possible, one needs to exercise some care on the option of "just go edit the check to make the corrections." The concern is leaving a proper audit trail for what was done.

In the example shown, the bishop would have approved the original check to be written from AMFA:YM for a camp. Later, it was found that there was insufficient money in AMFA:YM for all the expenses, so Budget funds need to be used to cover the shortfall. If the clerk simply changes the category for some portion of the expense from AMFA:YM to Budget:Young Men, then he has essentially unilaterally decided to spend Budget money without the bishop's approval. So in my opinion, this approach would create an audit exception, unless the bishop somehow gives his written approval for the category change. That could be done with some additional form that documents the category change and includes the bishop's signature, which would be attached to the documentation for the original expense.

Of course, if a separate check is written to cover the shortfall, the normal approval process and paper trail will clearly satisfy all audit requirements.
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Postby Gary_Miller » Fri Jan 20, 2012 5:15 pm

aebrown wrote:Although the procedure you outlined is indeed possible, one needs to exercise some care on the option of "just go edit the check to make the corrections." The concern is leaving a proper audit trail for what was done.


The proper audit trail would come from the reason for the change in the MLS and on a MLS generated Finance transaction report.

aebrown wrote:In the example shown, the bishop would have approved the original check to be written from AMFA:YM for a camp. Later, it was found that there was insufficient money in AMFA:YM for all the expenses, so Budget funds need to be used to cover the shortfall.


The real problem is that the original check should have never been written from the other category without sufficient funds. It only takes a second to verify the amount available in any category.

aebrown wrote: If the clerk simply changes the category for some portion of the expense from AMFA:YM to Budget:Young Men, then he has essentially unilaterally decided to spend Budget money without the bishop's approval.


The guiding principle is: "All expenses must be approved (in writing) by the bishop". The Bishop then relies on the Finance Clerk to ensure funds are coming out of the proper expense category. This include making the proper corrections when needed. It not necessary for the Bishop the determine what category/account the funds come out of.

aebrown wrote:So in my opinion, this approach would create an audit exception, unless the bishop somehow gives his written approval for the category change.


If the auditor wants to be that critical then thats a hit I will gladly take.

aebrown wrote:That could be done with some additional form that documents the category change and includes the bishop's signature, which would be attached to the documentation for the original expense.


It could be. But I don't think its necessary as the Bishop has already approve the expense. The clerk is only correcting a clerical error, and documentation for the reason is recorded in the MLS. The Bishop has enough to do without having to sign one more unnecessary form

aebrown wrote:Of course, if a separate check is written to cover the shortfall, the normal approval process and paper trail will clearly satisfy all audit requirements.


If this was to happen in my ward the only paper tail you will have is the check stub with the purpose for the check, the donation slip, with the bishops and clerks signature on MLS generated Expense Report.

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Postby dannykos » Fri Jan 20, 2012 5:50 pm

Gary_Miller wrote:It not necessary for the Bishop the determine what category/account the funds come out of.


Well I can't let that one slide through without a comment.

While I understand what you're saying - the Bishop is ultimately responsible for all the finances within the ward, including the record keeping and audit. Please don't think for one minute that a bishop would be happy to have a finance clerk make decisions such as whether funds should come from an Other Account or LUBA funds. The source of those funds are completely different, and as such the justification for their use is different too.

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Postby jdlessley » Fri Jan 20, 2012 7:57 pm

Gary_Miller wrote:The real problem is that the original check should have never been written from the other category without sufficient funds.
This is a broad statement that is inaccurate. There is no restriction preventing the "Other" category or any AMFA sub-category from ever having a negative balance. The purpose of the AMFA sub-categories is to collect funds for a specified purpose. CHQ has not, to date, specified when funds must be collected for an AMFA event. Rather it is up to the bishop to decide the best approach for the benefit of the members. We have AMFA sub-categories go negative for a period of time after the event has occurred. The members contribute as they can to meet their obligation.

The situation described by the OP does not go into the details of the situation. What I suspect may have happened is that there were insufficient funds in the AMFA sub-category to cover the check yet contributions from members after the event occurred were expected. This happens with youth summer camps. Not all families can contribute the full amount before the event but can meet their obligation some time later. It is possible that while the members had planned to contribute there may be intervening circumstances that prevented them from doing so.

Another scenario is that the actual cost of an activity was not the amount anticipated when the funds were being collected. At the time the check had to be written for the disbursement not all members who had contributed could contribute their additional share. Again circumstances may have intervened for some members who could not contribute the additional amount required.

I have described only two scenarios. There are others possible.

To say that a check should not be written when there was insufficient funds in the AMFA sub-category imposes a restriction that is not necessary and could exclude some members from participating in faith building activities. If your ward or your stake leadership imposes such a restriction that is your leadership's decision. Your opinion as to how the "Other" account or AMFA sub-accounts should be managed is not in accordance with any Church guidance I have been able to find. As far as I can tell the guidance provided by the Church for the "Other" account is being followed by the OP.

There is information in the wiki for the Other category. There is no mention of a restriction the category may never have a negative balance.

The discussion started by the OP was how to correct the deficiency in the AMFA. Others have provided acceptable solutions. Any discussion stating that writing a check for an amount greater than the balance of the AMFA sub-category is just an opinion and not Church policy. It may be good practice to try to have all members contribute to the AMFA sub-category prior to the disbursement of the funds from the category for the event. In my experience that cannot always happen and still give the opportunity to all members to participate in the event.
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Gary_Miller
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Postby Gary_Miller » Sat Jan 21, 2012 9:12 am

dannykos wrote: Well I can't let that one slide through without a comment.

While I understand what you're saying - the Bishop is ultimately responsible for all the finances within the ward, including the record keeping and audit.


However the Bishop relies on his clerks to keep accurate and up-to-date records. This includes making sure expenses come out of the proper account and expense categories, and making all corrections necessary do to clerical mistakes.


dannykos wrote: Please don't think for one minute that a bishop would be happy to have a finance clerk make decisions such as whether funds should come from an Other Account or LUBA funds. The source of those funds are completely different, and as such the justification for their use is different too.


The decision (Made by the Bishop) on what to do with the funds was made months earlier at the time when it was decided to make a subcategory in the other account. The Bishop relies on his clerk to know this and to take the expense from the proper account.

While the Bishop has over all responsibility, the finance clerk (if he is doing his job correctly) is the expert when it comes to ward finances which includes knowing what account the funds should come out of. The clerk should know what funds are being collected in the other account and what their purpose is for. So that when a request comes in to pay for the long term Camp, and money is being place in the other account for that purpose, the clerk knows where to take the money from.

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Postby Gary_Miller » Sat Jan 21, 2012 10:31 am

JD Lessley, To allow any account to carry a deficit is not sound accounting principles, and to suggest that its OK in some instances is just plan wrong. While its possible to have a deficit in the "Other Account" does not mean its an acceptable policy, its considered a problem. And the guidelines state that problems should be resolved "quickly and correctly" before they "can become difficult" to resolve. The guidelines then tell us how to correct a deficit.

"How to deal with deficits

If there is a deficit of funds in an "Other" subcategory, and the deficit results from money owed by members, collect the money from the members, and deposit it. If the money cannot be collected, or if the deficit does not result from money owed by members, bring the subcategory to zero by transferring funds from a budget subcategory. However, please note that if the deficit results from a clerical error or a returned check, you should correct the original problem rather than covering the error with budget funds. To transfer funds from a budget subcategory to an "Other" subcategory, print a check from the appropriate budget subcategory payable to the unit. Then deposit the check into the "Other" subcategory using a Tithing and Other Offerings slip in the name of the unit. Make sure that you make the deposit in the appropriate "Other" subcategory so that it will clear to zero."


There are also guidelines on how to correct incorrect postings.

"How to deal with incorrect postings

Sometimes an activity is mistakenly paid for using budget funds even though funds were collected and designated for the activity in the "Other" category. To correct this error you can change the category of the check:

  • In MLS, from the Finances screen, go to View/Update Expenses
  • Find the incorrectly written check, and click on the check number link to edit it
  • Change the category as needed
  • Save the change
  • Make sure you do a Send/Receive to transmit the corrected information to the Administrative Office.
Or you can write a compensating check and deposit in the ward's account:

  • Print a check payable to the ward from the appropriate "Other" subcategory.
  • Fill out a Tithing and Other Offerings slip in the name of the ward, cross out "Other" on the slip, and write in the name of the budget subcategory and the amount of the check.
  • Record the deposit in MLS to the proper budget subcategory.
  • File the white copy of the donation slip with one check stub and the expense information, and file the yellow copy and the other check stub with the donation information.
  • Deposit the check at the bank using normal procedures."


Never does the guidelines state that its OK to carry a "Debt". A negative balance in an account is a "Debt" and it should be corrected "quickly and correctly".


The statement I made

Image Originally Posted by Gary_Miller Image
The real problem is that the original check should have never been written from the other category without sufficient funds.

and the procedures I gave the OP for correcting the problem, are not only within church policy and guidelines as I understand them. But they are also within sound Accounting Principles as well as Gospel Principles.

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aebrown
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Postby aebrown » Sat Jan 21, 2012 10:47 am

Gary_Miller wrote:The proper audit trail would come from the reason for the change in the MLS and on a MLS generated Finance transaction report.


If I were auditing a unit that followed this practice, I would not consider this to be a sufficient audit trail. As an auditor is following the instructions for the audit, he will review the documentation for the check as originally written. That will show the bishop's authorization for that expense. But if the actual final expense is charged to a different category, and there is no indication of this on the documentation covered in the audit, I would consider that to be a problem.

There needs to be something connected to the original expense that shows the change in category. An audit "trail" has to be left that enables the auditor to work from the original documentation. The two elements you mentioned are not even part of the audit (of course an auditor is free to examine any documents, but those elements are not mentioned in the audit instructions at all).
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Postby aebrown » Sat Jan 21, 2012 10:52 am

jdlessley wrote:There is no restriction preventing the "Other" category or any AMFA sub-category from ever having a negative balance.


Gary_Miller wrote:To allow any account to carry a deficit is not sound accounting principles, and to suggest that its OK in some instances is just plan wrong.


I think these two statements are not actually in disagreement, and they are talking past each other. Jdlessley is correct that there is no restriction that prevents ever having a negative balance; Gary_Miller is correct that to carry a deficit is not within sound accounting principles.

There may be minor disagreements as to how promptly a deficit must be corrected, but clearly the guidelines anticipate that deficits may occur within the normal course of events, and deficits do need to be corrected. I would hope that we can agree on those basic principles and not get hung up on absolute positions on relatively unimportant details. I'm sure there's really much more agreement than disagreement on this matter.
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Gary_Miller
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Postby Gary_Miller » Sat Jan 21, 2012 12:16 pm

aebrown, in review of the audit form an auditor would never know if the category was changed unless he looked at the transaction in MLSs.

The audit worksheet only addresses if the expense was approved, has proper documentation, were unspent funds redeposited, and did the payment match the support documents. Its not concerned with what category the expense was placed against.

Categories are only there as a tool the unit uses to allocation budget dollars to organizations. With the exception that MLS requires a category to issue a check, the church is not concerned with what category an expense is place in. A unit could put everything in administration and it would not be wrong. Crazy but not wrong.

As the Finance Clerk, I have developed many subcategories under each organization in MLS do to the fact that I want to track costs based on activities for future budget purposes. Although the organizations have a list of the categories for their organization they don't always know what category to use. So its up to me to make sure that the expense is place in the proper category. For instance the RS is responsible for purchasing flowers for the chapel, so it would stand to reason that the flowers would be charge to the RS budget. However, this would be incorrect in our unit as this expense is charged to the Miscellaneous category under a subcategory of chapel flowers, not against the RS budget.

The point is it up-to the Finance Clerk to make sure the expenses are placed against the correct category in the system and often the Organization President and even the Bishop has no idea what the proper category would be. There may even be times when the expense does not fall under any of the existing subcategory, and a new subcategory may need to be created.

The Bishop is to busy to have to worry about these type of details, thats why he has clerks.


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