In Part One of this series, we learned that a fund transfer represents a reallocation of liquid assets from one fund to another. We also learned about the four main situations in which funds are transferred, and how to record a fund transfer in IconCMO. In Part Two, we turn our attention to account transfers and how a transaction for this type of transfer can be created or modified.

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Account Transfers

An account transfer is the process of changing the allocation of dollars to an alternate account.  In IconCMO, journal entries can be created in GENERAL-LEDGER : GL : Journal Entries. They can be modified in GENERAL-LEDGER : GL : GL-Register.

An example of an account transfer might be the transfer of money from the church’s savings account to its checking account. A new journal transaction will be needed for this transfer. To create it, we’ll go to GENERAL-LEDGER : GL : Journal Entries. As we create the necessary entries for this transaction, keep in mind that the first three fields, General Journal Memo, Transaction Date, and Fund are entered once for an entire journal transaction. Whatever these three fields contain prior to posting is what will be used for the entire transaction. In this example, we’ll enter “Transfer to checking” in the General Journal Memo field, the appropriate date in the Transaction Date field (NOTE: clicking on the box for the Transaction Date will pop the calendar tool) and select “General Fund” for the Fund. For the credit side of the transaction, we’ll select an Account Type of “Assets”, select “Savings” for the account, enter the credit amount of the transfer and verify/change the Line Item Memo. Once the data entry for this part of the transaction has been completed, clicking the Save button will add this information to the journal entry listing area in the lower portion of the window, as seen in Figure 1.

The debit side of the transaction is very similar, except this time we choose the checking account as the account and enter the debit amount. After clicking the Save button, the entry is added to the journal entry listing area, as seen in Figure 2. Once you’ve verified the entries as being correct, clicking the Post Entry button will post the transaction to the General Ledger.

An example of modifying a transaction to allocate dollars to a different account might be to designate a different expense account from the one used in the original transaction. Let’s say that Church ABC issued a check, and the transaction debited an expense account called “General Building Maintenance.” Later on, it is determined that a different expense account called “General Grounds Maintenance” should have been debited instead. The original transaction entry is shown in Figure 3.

The change needed can be easily made by noting two specific pieces of information, the Journal Type and the Journal Number. In this case, the Journal Type is “Check” and the Journal Number is “12.” Using this information, we can go into GENERAL-LEDGER : GL : GL-Register and make the necessary changes. Once in the GL Register, we can set the “Transaction Type” to “Check” and the journal number in the “Jrnl No.” box in the lower-left area to “12.” Clicking the Find button causes the transaction we are interested in to be displayed as the first entry in the transactions listing area of the window, as seen in Figure 4.

Next, click on the transaction date of the journal entry to open the transaction. Once in the transaction, we can make the expense account correction by clicking the Change Account Assignment button in the lower-right area of the window.

Once the “Change Account Allocation” window is open, you will see two dropdowns. From the “Select an Account” dropdown, choose the account to transfer from (you should see it in the dropdown list). You will notice that the original dollar amount of the transaction appears in the “Original Amount” field automatically. In the “To Account” dropdown, select the expense account to reallocate dollars to. In the “Amount Reallocated” field, you can enter either the full amount or any partial amount of transaction dollars. In this case, we will reallocate the entire $50.

After you click the Save button, a confirmation message will pop up to let you know the transaction is complete. When you return to the transaction window, you’ll see the newly-created journal entries, along with the original entries. We have now reallocated the $50 expense from the “General Building Maintenance” expense account to the “General Grounds Maintenance” expense account.

Fund transfers and account transfers are often necessary transactions in any non-profit organization’s financial activities.  It’s important to understand the difference between a fund transfer and an account transfer, and how you can perform them in IconCMO. In this first of our two-part series, we will explore fund transfers.

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Fund Transfers

A fund allocates and tracks money for a specific purpose. A fund transfer represents a reallocation of liquid assets from one fund to another. There are four main situations in which funds are transferred:

1.  Interfund Loan: Money is transferred with the expectation that it will be repaid. The fund making the loan has a bank account credited and an Interfund Receivable account debited, while the receiving fund has a bank account debited and an Interfund Payable account credited. When the money is repaid (only with a Interfund Payment transaction), the transaction is reversed.

2.  Interfund Transfers: Money is transferred without the expectation that it will be repaid. For example, the General Fund may provide a monthly subsidy to the Youth Fund to help them support their activities. The bank account from the fund that is doing the subsidizing is credited and an operating transfer account called “Transfers Out” is debited. The receiving fund has the bank account debited and an operating transfer account called “Transfers In” is credited. Both the “Transfers In” and “Transfers Out” accounts are of account type “Other Financial Sources-Uses” and category type “Operating Transfers.” Figure 1 shows the posting of such a transaction, while Figure 2 shows the resulting entries in the general ledger.

3.  Interfund Payment: This is a repayment of an Interfund Loan. A fund was given money via an Interfund Loan and wants to repay it. This transaction will clear the Interfund Payable account from the fund having the loan and it will clear the Interfund Receivable account from the fund making the loan.

4.  A fund is closed: A fund with a net asset value is being closed out.

Because Restricted and Temporarily Restricted funds are donor-restricted for specific use, money should not be moved out of these types of funds using Interfund Transfers or Interfund Loans. When money is transferred, it is always done within bank account types.

According to GAAP guidelines, money cannot be transferred into revenue or out of expense accounts, since by definition a transfer is neither revenue nor an expense.

Interfund Loans and Interfund Payments are reported on the Statement of Financial Position (Balance Sheet). Interfund Transfers are reported at the bottom of the Statement of Activity report.

Form Operations

In IconCMO, the fund transfer tool is accessed by selecting General-Ledger : Funds : Fund Transfer.

• Enter the dollar amount being transferred and choose the type of transaction. Interfund loans are transfers that are expected to be paid back. Interfund transfers are not expected to be repaid. Interfund payments repay an Interfund Loan. The amount entered must be a positive value.
• Select the “From Fund” and the “To Fund” funds. Again, keep in mind that the “From Fund” cannot be a restricted or temporarily restricted fund.
• Select the bank account identifying where the money resides. Normally, the “Transfer To” account will be the same as the “Bank Account To Use”, however, by choosing a different bank account the system will automatically credit the “Bank From” account and debit the “Transfer To” account. This provides the additional benefit of transferring money from one fund to another and from one account to another within a single transaction.
• When all information has been entered, press the “Post” button. Using the bank account selected, the “From Fund” will be reduced by the amount entered, while the “To Fund” will be increased by the amount entered. The fund dollars will be transferred, even though there may be insufficient dollars in the “From” fund. Account balances will not be affected unless you are also transferring the money to a different account.

One thing you cannot do with the fund transfer tool is perform a transfer of dollars between accounts using the same fund as both the “From Fund” and the “To Fund.” You can, however, perform such an account transfer using the journal entry tool. Next time, we’ll take a look at account transfers.