Hi all, my name is Alice and this is the first time I post here - my question is about 'receipt of restricted assets - cash' Say your organization gets a restricted donation for $10000 to be spent only on a specific program. Out of that, say the donor allows your organization to retain 10% as a management fee for internal costs. Accordingly, the expenses on the restricted program can go only up to $9000, and this is the balance you want to see in the project in FE. To give you a couple of more details, your organization a) has a series of accounts for revenue/expenses for restricted donations and one for unrestricted ones (respectively 2-yyyy restr. and 1-xxxx unrestr. account series) b) uses the project module for restricted as well as unrestricted programs c) does not use timesheets, so the allocation for salary expense is all against our main operating project (office-main) every month d) has one single checking account to deposit restricted revenue/ pay restricted expenses from (accordingly the restricted chart of accounts DOES NOT have restricted liabilities/assets accounts, those are only 1-xxxx accounts) and e) has a bunch of accounts (liability accounts) that are 'due to/from restricted-unrestricted' accounts, that are automatically engaged by the system when I handle restricted transactions when I post so that the releases from restrictions are kept clean How would you account for that 10% in Financial Edge if you don't pay invoices/salaries out of that? I originally did what BBaud support recommended (using a 1-xxxx revenue account for the 10%, and a 2-yyyy for the remaining restricted portion) - the auditors were not pleased with that and so I had to bring the entire 100% donation under a 2-yyyy revenue account and stick that under the same restricted project. Now as you understand I have a restricted project available balance for $10000, which is NOT what I want because I need the balance available to be $9000. Any recommendations/suggestions/questions welcome you can also drop me an email at [Email Removed] thanks a lot! Alice

In our case we recognize all restricted revenue in fund 2 -Temp Restricted and do a release from restriction for the portion that is not restricted. [i]--- Edited at 8/7/2007 9:22:26 AM by Annie Juarez[/i] [i]--- Edited at 8/7/2007 9:23:01 AM by Annie Juarez[/i]

I hope I get your question correctly. We manage several hundred different endowment funds and charge a 1% management fee per year. The way I do it is that we have a project that is our operating project which is unrestricted. So I debit the management fee for the project we are charging the fee to and credit management fee for the operating account. The management fee account is a net zero but we have moved the funds from project to project. If using 1 and 2 class designations you may have to use a 9000 release from restriction transfer account to move from 2 to 1. Of course, I may have completely misread your question and if so I will be happy to try again. I hope this helps. [i]--- Edited at 8/7/2007 9:36:21 AM by Keith Lauderdale[/i]

Alice, Your e-mail is very specific. Our situation doesn't quite match yours. Nevertheless, I will mention it so that you have a different perspective on how organizations handle restricted donations. 1. For our Operating checking account, we use multiple general ledger accounts across two funds for our bank account balance. Thus, we comingle unrestricted and restricted funds in the same bank account, have one bank reconciliation, but we account for cash by fund. This allows us to post Raiser's Edge with an interfund entry for restricted donations, as follows. (Note that we use Raiser's Edge and Financial Edge.) DEBIT Donations Suspense (unrestricted) w/project code CREDIT Unrestricted checking (interfund entry) DEBIT Restricted checking (interfund entry) CREDIT Donations revenue (restricted) w/project code 2. We record all expenses in the unrestricted fund. (We used to record expenses in the restricted fund, but several years ago our auditors advised us that there is no such thing as a restricted expense for GAAP external financial reporting.) In our expense coding, we use project codes to track the funding source for each expense. 3. Monthly we record "net assets released from restricted", which is accounting terminology for transferring restricted donations to the unrestricted fund in the form of equity or fund balance. We have a revenue account called "Net Assets Released from Restriction" in each fund. We record multiple double entries, one for each project code, as follows. (Note that we run a query and export the results to Excel, for all expenses/asset purchases/net assets released entries that have restricted fund project codes on a year-to-date basis. This Excel file becomes the support for the net assets released entry below.) DEBIT Unrestricted checking CREDIT Net assets released from restriction (unrestricted fund) w/project code DEBIT Net assets released from restriction (restricted fund) w/project code CREDIT Restricted checking Thus, we rely on project codes to track our restricted fund activity AND our expenses in the unrestricted fund that are funded by restricted donations. Based on the above accounting, if we were to receive an administrative fee with a restricted donation, we could record a net assets released entry, and attach a copy of the donor's award letter as support showing the 10% administrative fee. More likely, though, we would record interfund revenue and expense to Administrative fee revenue (unrestricted fund) and Administrative fee expense (restricted fund), to better account for this 10% fee (instead of using the Net Assets Released from Restriction accounts). Please note that for our government grants, we do not receive restricted donations. Instead, we receive "exchange transaction revenue", which is common in nonprofit organizations. We record government grant revenue to the unrestricted fund, and we separately record the administrative fee as an interdepartmental charge/credit each month (in the unrestricted fund), as we bill for the administrative fee. Mark Brockman Star of Hope Mission [Email Removed] Mark Brockman Star of Hope Mission [i]--- Edited at 8/7/2007 10:23:27 AM by Mark Brockman[/i] [i]--- Edited at 8/7/2007 10:25:18 AM by Mark Brockman[/i]

I guess the situations are a little different. We pay our investment advisor out of our operating account. We do not specifically allocate that payment to each fund. We simply say we will charge all funds a 1% fee which covers our investment advisor and salaries, etc... When I make the management fee entry, I have an allocation do the following: Debit 1-7550 1% fee Donor project (management fee account) Credit 1-9000 1% fee Donor Project (Net assets released) Debit 2-9000 1% fee Donor Project (Net Assets released) Credit 2-1000 1% fee Donor Project (Cash Account) Then I manually take the total and make the following entry: Credit 1-7550 sum 1% fee operating project (mgt fee acct) Debit 1-1000 sum 1% fee operating project (cash account) Now cash has been moved to my operating project. The donor projects have been reduced, the net assets released is correct and the managment fee in total nets to zero. I am sorry if I didn't help. I hope I gave you some ideas.

Hi Alice. Seems to me you should be able to educate your auditor that the donor did not put a restriction on the $1,000, allowing you to record the $1,000 as unrestricted to your operating project, and $9,000 as restricted to the specific program project. GAAP does allow for restricted donations to be recorded as unrestricted if the restriction will be satisfied in the same fiscal year in which it was created, so this may be a case you can make to the auditors... even though you should not have to if you are allowed to spend your management fee for general operations. If you can't convince them, then you could do something along the following: 2-AAAA-program project - $10,000 debit - cash 2-RRRR-program project - $10,000 credit - donation revenue 2-EEEE-program project - $1,000 debit - fee expense 2-AAAA-program project - $1,000 credit - cash 1-AAAA-operating project - $1,000 debit - cash 1-RRRR-operating project - $1,000 credit - fee revenue The above actually puts an expense into your "restricted" fund, which is not in accordance with GAAP, so what I do for the annual audited/published statements is reflect all the 2-EEEE (restricted expenses) in the unrestricted column, and then show "Net Assets Released from Restrictions" which keeps your funds in balance.

Annie/Keith/Mark, thanks so much to all of you for taking the time to email me back in detail on how you handle these cases. Mark: though as you correctly state we have a different situation, I really do appreciate your thoughts and it does help to have a different perspective nonetheless - as a side issue, I had never thought about charging all expenses out of restricted programs as unrestricted and then dealing with the releases separately on a monthly basis or so, it's a very interesting idea... Keith: thank you too for your thoughts... Trust me I was surprised too the auditors did not like the split revenue approach - I got the impression that before dealing with the released amounts, their first concern was to leave the restricted grant revenue intact and make that match w/ cash receipts... I've already passed all your very helpful recommendations on to the auditors, I will let you know what they say... thanks again! Alice