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.
allenjpl
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Postby allenjpl » Thu May 10, 2012 9:42 pm

aebrown wrote: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.


I know this is somewhat old, but let me say this: if the negative balance is great enough, you will receive a email from CHQ Accounting very soon after the overdraft directing you to fix the issue. Possibly more than one email.

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Postby waynecooke » Sun Jun 10, 2012 9:37 pm

In the past our ward has had a problem with being able to collect "after the fact". The had book says that the first choice for activities such as Scout and Girl's camps is to pay those expenses out of the Budget of the Ward. That is why those category amounts were increased. If there is not enough in the Budget, then and only then should other monies be used. We just had that happen in our Girls Camp. So, what we did was to write two checks. One out of the "Girl's Camp" account which took that account down to zero, then a second check out of the Young Women's budget account. If and when the additional funds were received from the other girls going, we would replace the funds taken out of the Budget account. That way there was no "transferring" of funds. It was very clean.

That is the way we have handled it for the past couple of years. It works for us.

That way we never have to worry about getting "nastygrams" from CHQ for an overdrawn "other" account

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Postby jdlessley » Sun Jun 10, 2012 10:48 pm

waynecooke wrote:So, what we did was to write two checks. One out of the "Girl's Camp" account which took that account down to zero, then a second check out of the Young Women's budget account.
MLS permits writing a single check from multiple categories. Doing so saves on printing multiple checks disbursed to a single payee.

waynecooke wrote:If and when the additional funds were received from the other girls going, we would replace the funds taken out of the Budget account. That way there was no "transferring" of funds. It was very clean.
This may appear clean but it is not a proper procedure for budget categories.

The first issue is that deposits from authorized member-financed activities donations are not to be made into budget categories. Even though MLS is programmed to accept deposits to budget categories it is for return of excess advance disbursements, a return of budget funds from other Church units for expenses paid on their behalf, and other similar budget transactions. Deposits from members for authorized member-financed activities are only to be deposited into an Other:AFMA category.

The second issue is if there were sufficient budget funds to fund the camps, then why are you collecting funds from members?

Both of these are practices an auditor should question if he notices it. Since they are not audit checklist items he may not notice it. But that does not mean it is an acceptable practice and in accordance with Church policies and procedures.

The Other:AMFA category is there for the very purpose of collecting funds from members for a specified activity or event. This is so budget categories are not used for this purpose. It keeps the funds separate for proper accounting.
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Postby aebrown » Mon Jun 11, 2012 9:00 am

jdlessley wrote:The second issue is if there were sufficient budget funds to fund the camps, then why are you collecting funds from members?


I agree with your discussion of the first issue, but I don't see how this second issue is necessarily a problem. For example, a camp might be held in July. There might be some budget funds available at that point, that could be used instead of AMFA funds from the YW attending the camp. But since we do annual budgeting, it's entirely possible that those budget funds are "available" at that point, but are actually designated for other planned activities later in the year. It seems clear that waynecooke understands that Budget funds are used for camps if they are sufficient, so I see no reason to assume that his ward is requesting members to pay for camp when Budget funds can cover the camp expense (and the other budgeted expenses for the year).
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Postby jdlessley » Mon Jun 11, 2012 11:45 am

aebrown wrote:I agree with your discussion of the first issue, but I don't see how this second issue is necessarily a problem.
Thinking about it after some sleep, you're correct. I was looking at it from the perspective of an auditor who sees the payment from a budget category and thinks there must have been sufficient budget funds if they were used. This doesn't consider that the budget funds were borrowed from the budget category.

It is the deposits from the members into the budget category that is not procedurally correct. When trying to keep Other:AMFA categories from going negative it would be appropriate to use budget funds. Budget funds would be used anyway at a later date to correct the deficiency in the Other:AMFA category should all the funds for the activity/event not be collected. When funds are collected from members to pay for the camp, or any AMFA, they must be deposited into the appropriate Other:AMFA category. Once the funds are collected that can be collected, a check is written from the Other:AMFA category and deposited into the budget category from which funds were borrowed.
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Postby wrigjef » Sat Jun 16, 2012 9:20 pm

Units in our stake were advised by our regional audit trainer to use other funds, designated for camp or other authorized activity, prior to dipping into the budget for the same purpose. The reason being that too many units use budget funds first and wind up with left over other funds when the activity costs less then expected. The goal (at least for us) is not to have excess other funds carry over from year to year.

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Postby Gary_Miller » Sat Jun 16, 2012 10:24 pm

jdlessley wrote: Once the funds are collected that can be collected, a check is written from the Other:AMFA category and deposited into the budget category from which funds were borrowed.


Its much more simpler. All that is needed is to do a catagory correction to the check that was written with the funds comming out of the Other: AMFA catagory.

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Postby jngarr » Sun Aug 12, 2012 4:19 pm

Bro Brown (Administrator), I see what most are saying in this thread re: it's often ok to transfer from Budget to Other. One person even quoted some instructions (but didn't give a link.) However, aren't we missing the forest for the trees? CHI is clear (and it makes sense given prior IRS rulings) that my contributions to budget are tax deductible by me. However, my contributions to Other are not and they do NOT show up on my annual offerings statement. (The reason: I receive or a member of my family can receive direct and personal benefit for my payment to Other.) Thus, I you transfer my tax deductible dollars (Budget) into and mix with non-tax deductible dollars (Other), then you have just used your accounts to funnel and allow me a tax deduction on my payments that are not tax deductible. (This was the whole point the Church negotiated with the IRS to allow missionary fundings to be deductible, ie, I no longer give dollar for dollar directly to my son.)

It seems to me the transfer from Budget to Other may not be a problem in MLS, but the IRS could have a huge problem with it. Because you are placing on my 1099 as deductible, funds that you then transfer to a non-deductible account.

Has this come up before with church HQ? Or say Church Tax Dept?

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Postby russellhltn » Sun Aug 12, 2012 4:24 pm

jngarr wrote:CHI is clear (and it makes sense given prior IRS rulings) that my contributions to budget are tax deductible by me.


Nope. Since donations are not allowed in budget, there is no way to get a tax deductible donation in there. It's expected that any income into budget is just a reimbursement.

If you want a tax deduction, you'll have to donate to tithing, fast offering or some of the other valid donation categories.

There was a time when donations to budget were tax-deductible, but that was back when units were expected to raise their own operating funds. It hasn't been that way for several years now. At least not in the US. I suppose some countries could be different, but I don't think so.
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Postby jdlessley » Sun Aug 12, 2012 5:46 pm

jngarr wrote:CHI is clear (and it makes sense given prior IRS rulings) that my contributions to budget are tax deductible by me. However, my contributions to Other are not and they do NOT show up on my annual offerings statement.
The Handbook does not make any statements about donations/contributions to the Other category as being tax deductible or not. Whether they are or not depends on circumstances. It is not possible for the church to know what those circumstances are and therefore they do not include those amounts on the tax valid statement. Individuals should consult their tax professional as to whether any donations made to any Other category may receive tax favored status. There are situations in which the donations may receive tax favored status (tax deductible). But for the most part, in my experience, donations to the Other category do not meet the requirements for tax favored treatment.
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