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Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 355
Experience:  Former IRS Revenue Agent
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We are non profit, 501c3 religious organization under and

Customer Question

We are non profit, 501c3 religious organization under and umbrella of like organizations although we all are separate, like Methodist Churches are separate with own tax id. We do pay a fee to Director of umbrella.
The director of umbrella wants to run a capital campaign for retreat center which will be built in California.
What kind of account should we hold the money? Can any of that account be used to pay a fund raiser? What can the account be used for? How does taxing work?
Submitted: 18 days ago.
Category: Finance
Expert:  Dr. Fiona Chen replied 17 days ago.

Dear Customer,

Q1. What kind of account should we hold the money?

This should be a trust account under liability.

Q2. Can any of that account be used to pay a fund raiser?

Supposedly, yes. But it is not an accounting decision. It is between your division and the director of umbrella and also depends on your chapter agreement. Also, the fund raised should pay for your administrative cost. It should be a %. But this may not set well with the donors in your church. So, how this can happen, say from a reduction of your annual fees to the umbrella church or they paying you for a fee to participate in the fund raising may be another way to compensate you.

But this charge cannot happen without their permission and authorization. Otherwise, we can get ourselves into trouble.

Q3 What can the account be used for?

It is a trust fund account. It is recorded as debit cash, credit trust fund to record fund received from church members, then, debit trust fund and credit cash when you transfer the money to the umbrella.

Q4. How does taxing work?

Other than the portion after obtaining permission to transfer to your organization, none of the fund raised is counted towards your revenue. However, it should be explained in the financial statement as footnote.

Please feel free to follow up.

Regards,

Fiona

Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP