Financial Tracking & Recordkeeping for Major Products or Purchases

Following is a transcript of this episode of the Two Minute Treasurer’s Tip Podcast from MoneyMinder, with audio/video below.

Welcome to the Two Minute Treasurer’s Tip Podcast. I am your host Cyndi Meuchel and today,
and we’re talking about planning for major projects.

Zach writes: Our group is planning for a playground that we’d like to build in the next 3-5 years. How do we account for that money sitting in our bank account while we save enough to pay for it?

Good one, Zach. You’re right to wonder how this will affect your budgeting because it will, especially if you don’t have a separate account set aside for those funds.

First, let’s address one common misconception. 501(c)(3) organizations do NOT have to deplete their funds each year to show a zero net on their IRS Form 990. Groups can set aside funds for the future use as long as they manage that money appropriately.

If this were our project, we’d start by opening a separate bank account to hold these funds. That way, they don’t get co-mingled with your operating money.

Next, let’s say your group is expecting they’ll need $75,000 to complete the project. You’ll want to add the new project to your budget as a line item or category. If you already have some funds, as in real money, set aside for the playground, you’ll put that number in the budgeted expense column. Additional funds you plan to raise for the playground will go in the budgeted income column. Since you’re growing the funds, you like won’t actually spend anything. That budget expense number is there to indicate how much you have already saved.

At the start of the next financial year, all the money you have raised will be added to that budgeted expense number. It will keep growing until you have enough to pay for the project. Just remember that only funds that have not yet been raised go in the budgeted income column. That’s what you’re hoping to bring in in this particular financial year.

So, there you have it! If you have a question for me, email me at [email protected] so I can address it. My name is Cyndi Meuchel, and this is your Two Minute Treasurer’s Tip for today.

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