Article 4 Volume13 April 30, 2022
Religious organizations, including churches, need to be mindful of how building and missionary fund donations are used
Building Fund Donations
There are a lot of churches raising money for building funds. But there is no formal plan in place to build anything. In some cases, it is something that was discussed as long as 30 years or more ago but nothing formal ever happened. In some cases, an architect is called in to draw up the plan. Money is raised and after a few years, the whole plan is abandoned. Sometimes more than $100,000 is raised and put in a building fund, and in some cases just maintained in the general fund and used for whatever is deemed necessary.
Can they do that? Well, this is not something for IRS ruling but is probable contingent on how state law rules apply to such matters. Many charities get around such laws by stating that the funds may be used for other purposes. However, that statement has to be made when or before the funds are collected.
What can the donors do? The donors can request that their donations be returned. There is a cy pres doctrine that allows charities to use funds as nearly as possible for the purpose given if circumstances have changed to the extent that the original intent is impractical. But such a ruling would have to go through a court or Attorney General and not a non-profit board.
Why would a donor want his or her money back? Well, they liked the idea that was advertised but not the decided use of their donation. In many cases, the donations are probably treated as general fund donations.
I would recommend that churches have a Building Fund Account in their church accounts ledger. Then within that account have an account dedicated to special donations. Let's say the account has $5,000 from the General Fund and $8,000 from a special donor. The accountant needs $7,000 for a special need that is not related to building the specific object that the $8,000 was donated. So, how much money is available for him to use? You are right if you said $5,000. The $8,000 must be used for the purpose that it was donated.
Missionary Fund Donations
The same principles above apply to funds raised for missionary funds. Often these donations are commingled with other funds and no distinctions are made in the use of the money.
For example, Mrs. Wycova donated $25,000 to be used only for the sick and shut-in. The church had a shortfall on a non-missionary matter. Mrs. Fargo, the church accountant, decided it was okay to use $6,000 of Mrs. Wycova's donations. Was she right? No, she wasn't.
Summary
This presentation was just to pass along some information on church bookkeeping and accounting. Many people believe that it does not matter how the books are kept or how the money is spent as long as it is accounted for on the books. On the contrary, there are laws and rules for nonprofit accounting for churches and religious organizations. However, many, if not most, settle for the mom-and-pop storekeeping method of accounting. I recognizeC it is what it is.
The opinions and suggestions made in this article were strictly those of Grady E. Bryant, Sr based on his knowledge and experience. It is not intended to be a mandate for you to follow without consulting your accountant or attorney. and doing your own research.
Copyright 2022 by Grady E. Bryant Sr. All rights reserved.
