Documenting returned cheque - special circumstances

SOLVED

As a church, we have to be careful about receiving and documenting donations per the CRA's rules for issuing tax receipts.

In December, while I was away for a few weeks, a board member who knew we needed the carpets cleaned, put a cheque in the plate designated for the cleaning.  This was against policy as we have a policy to only accept designated donations for items/funds that we have made an official announcement about.  The discussion about the carpet cleaning had only happened at the board level.

On that particular Sunday and the following day, the cheque was improperly received and deposited.  When I returned in January, I explained, again, our designated gifts policy and that if he wanted a tax receipt for his donation, there was a different procedure that is typically followed.  In this case, the procedure is for the donor to pay for the service, submit the receipt to the church for reimbursement and then return the money back to the church as a general donation.

I wrote him a cheque for the donated amount and from there he followed the above procedure.  So, here I am a few months later and I'm bothered about how this should be properly processed in Sage.  When the donation came in, it went into an account line called "Unreceipted donations - restricted" (because I knew I wasn't going to issue a receipt in 2014 for it).  When I wrote the cheque returning the money, I wrote it against the same account.  However, when he ultimately returned the money, which was less than the original amount because it was the exact amount of the service, the money was credited to "Receipted donations - general."  This means I now have -$1300 showing in the unreceipted donations account for 2015.

Is there a better way to have done this?  As a charity we have to submit a T3010 to the CRA each year accounting for every dollar in and out during the fiscal year and I'm afraid this is going to throw the numbers off for next year's form.

  • 0
    verified answer

    In Sage 50 a designated fund should be in the Net Assets section of the Balance Sheet (Equity Section). The Fund in this case is the Un-receipted donations - restricted. When the donation was returned the cheque would have been drawn against this account and all would have been balanced. When the bill was submitted you would have debited the expense account and credited your bank for the cheque. The new donation would then be a debit to the bank and a credit to receipted donations.

    From your comments it would look like you have the Un-receipted Donations as a revenue account which according to your process was overstated by 1300 in 2014 and will be understated by 1300 in 2015. This is not sufficient to cause major concerns when creating the T3010 form for 2014 or 2015. It is fully explainable.

    A concern should be more with your process regarding the receiving of donations. There was no need to return the donation and in fact according to the CRA you cannot return the donation was it is received. The donation should have been added to your regular donations for the general funds and then the carpet cleaning should have been paid from the general account. With all of my church clients this is the preferred method of dealing with these small items for two reasons. The first is that the donation does not have to match the invoiced amount and you do not have to track the amounts to be sure your receive what is required as then the donation is not truly made of 'free will'. Secondly the invoice would be made in the name of the church and you then can claim the HST/GST rebates allowed for registered charities.

    Hope this helps. If you want to send a private message to discuss further I don't mind helping.

  • 0 in reply to Alwyn

    Thank you so much for not only giving me guidance, but calling me out on my own error. :)  I ended up in this position quite suddenly and with absolutely no background in bookkeeping or accounting or finance of any kind.  My predecessor refused to train me and I have learned that much of what she was willing to tell me was often incorrect.  I have been doing an immense amount of reading and self-educating and the Pastor and I are trying to get things in order as we've learned that our 60+ year old church seems to never have had any policies or guidelines at all for anything.  It's been an interesting journey over the last 16 months and I'm by no means an expert yet nor do I expect to ever be one. :)

  • 0 in reply to Cheryl S.

    Cheryl S.: I have over the past twenty plus years learned that church treasurers are a lonely bunch with very few resources to turn to for advice. I have attempted to increase my expertise and I like nothing more than to share what I have learned. I did not mean to call you out in a negative way but to offer some comments that might help. If you happen to be in the GTA I would even be willing to offer more of my experience to guide you without cost unless we develop a professional relationship. As this no longer applies to Sage 50 specific, although it is the program you are using and it is my program of choice, My contact is [email protected]

  • 0 in reply to Alwyn

    Thank you, Clyde.  I didn't take the advice in a negative manner but in the spirit in which it was intended.  :) Thank you for the offer of further help.  I'm putting your address into my contacts list right now. I am located in northern Ontario, but even if I can just shoot off an email once in awhile when I get confused would be a big help.