post retirement payments

[pccoffice]

Over the years we have had several treasurers using pc+. When paying the investment company for the pastor's retirement, some have been posted to the retirement liability account, and some to the retirement expense account. This has caused a lot of confusion as to where the payment should be posted.
Where should we post the payment?

[NeilZ]

Over the years we have had several treasurers using pc+. When paying the investment company for the pastor's retirement, some have been posted to the retirement liability account, and some to the retirement expense account. This has caused a lot of confusion as to where the payment should be posted.
Where should we post the payment?

OK .. there are two answers to this, one if using the Payroll Module, and one if you're not.

Payroll Module:

You should have a PAY ITEM setup for the Pastor's retirement funds. This is an EMPLOYER LIABILITY type of Pay Item. On the pay item you will see two accounts listed. The Liability account should be a 2000-series account, which probably shows up as the Retirement Liability account, and an Expense account which will normally be a 5000- series account which you'll have listed as the Retirement Expense account.

When the Payroll is processed, the system will move the amount as entered in the Retirement Pay Item on the Maintain List of Employees PAY ITEM tab, from the expense account to the liability account. When a check is written to send funds to the retirement fund, you would use the normal checking account for the CREDIT and the LIABILITY account as the DEBIT. If you have Payroll setup properly, all you would need to do is use the Create Accounts Payable Entries function under Payroll, select the VENDOR code for the retirement fund, select the payroll dates listed for the payment (usually the current or previous month's paydates) and it will create the check/manual check for you.

Non Payroll Module:

You would just write the check using the standard checking account as the CREDIT, and the Retirement Expense account as the DEBIT.

Does this help ??

[pccoffice]

We have paid the payments from accounts payable, but depending on the treasurer, it has been posted either to the expense account or the liability account. We were unaware of the option to pay from the payroll module. The retirement payable liability account is growing on the balance sheet. The payroll taxes payable is also growing on the balance sheet. Is this normal? This back and forth has been going on for years. How do we get this straightened out?

[NeilZ]

We have paid the payments from accounts payable, but depending on the treasurer, it has been posted either to the expense account or the liability account. We were unaware of the option to pay from the payroll module. The retirement payable liability account is growing on the balance sheet. The payroll taxes payable is also growing on the balance sheet. Is this normal? This back and forth has been going on for years. How do we get this straightened out?

1. The reason the liability is growing, is that the previous treasurer/bookkeepers wrote the check using the expense account instead of the liability account.

2. The expense account is growing. Well, this is a normal thing as its an expense. The problem is that it was being hit TWICE for the retirement expense. Once by the Payroll module when payroll was run, and then again by the treasurer/bookkeeper who paid directly from the expense account instead of the liability account.

How to fix:
Disclaimer: - I am not an accountant. The suggestions I make come from years of using Powerchurch, and a lot of trial and error. Always do a backup of the Accounting files using the Powerchurch backup utility prior to doing any suggestion to allow you to restore back in case the result is not what was expected.

First off, I suspect that there are funds in the liability account from the previous year or years. The easiest way to fix this is to move those previous year's funds to the Unrestricted Net Assets. DO An ACCOUNTING FILES backup first!!

1. Go to the Payroll Module's Create Accounts Payable Entries for Deductions function. In the VENDOR pull down list, fin. Enter d the vendor you have setup to send retirement funds to.

2. Once selected, a list of CHECK DATES will appear. Click onthe CLEAR ALL button, then go through the list and select those dates that are from 2016 and earlier if necessary.

3. Select the MANUAL CHECK radio button, and enter a date and some reference. Click on the OK button. A small pop up will appear telling you that a manual check was created in the Accounts Payable for an amount. WRITE DOWN that amount. You'll need it later.

4. Head over to the Accounts Payable - Maintain Manual Checks function. Find the check that was created, then DELETE IT. You're not paying anyone, you're going to be returning committed funds back to Net Assets in the next step.

5. Head over to Fund Accounting - Enter Transactions function. Enter a reference like - Release Liab Funds, and a Transaction Desc: move from liab to assets. For the first line enter the NET ASSET fund for your operations fund (usually 01-3110-000 which is the PCPlus default) Enter the amount you recorded in step 3 in the CREDIT column. The second line will the the account number for the Retirement LIABILITY account, the amount should appear in the DEBIT column when you tab over to it. In the Memo block for the transaction enter as much detail as you can for audit trail purposes. I'd explain that this is to clear previous years retirement payments in the liability account that were not accessed at that time. SAVE the transaction.

Now to clear this years payments/amounts. See next post.

[NeilZ]

Now that we've cleared out previous year's transactions, we need to adjust this year's liability and expenses. This will be different than the previous actions because frankly, trying to clear up the previous year or years worth of liability & expenses is more of a hassle than it is worth. You've already reported those numbers to the congregation (I'm assuming) and changing stuff now will only confuse the issue. However, if you really need to correct those previous years, remember, you can only go back up to 18 months, and if you've already closed December 2015, you can't go back to adjust it. Best move forward and correct this year for the future. (again, I'm not an accountant. If you want professional advice you need to find an accountant who understands church FUND ACCOUNTING).

Before you begin ... I forgot to say this in the previous post - Run a CASH MANAGEMENT Report. This will show the amount in the Retirement Liability. Then run a CHANGES IN EQUITY report for May. Print both off.

1. We need to see if the liability account was accessed at all this year to pay retirement. So head to Fund Accounting -> Reports - Fund Accounting. Select the Selected Transactions Report.
a) On the report selections criteria screen, enter the Accounting Fund number if you have more than one accounting fund (usually its '01'), if you only have one fund, you can leave it blank.
b) Enter the Major Account number for the Retirement Liability account in the FROM block, and repeat that in the TO block.
c) For the months select January 2017 as the FROM, and May 2017 as the TO
d) Change the SORT to DATE
e) Click on OK.

The report that appears will show CREDITS to the account for every paycheck (at least it should). If anything was paid out, you'll see a DEBIT with the check number and the date of the check. At the end of the report, you'll see a total. The difference between the DEBITS and the CREDITS is the amount that will need to be returned to the EXPENSE ACCOUNT. So, take the amount in the DEBIT total, and subtract it from the CREDIT total. I'm going to assume that the current retirement payment has been made already. If not, then subtract the normal payment from the previous results. This should leave the amount for retirement in the liability account.

So if your Credits were $3950.00, and your Debits were 950.00, then the result would be $3000.00. If you haven't paid the retirement for last month yet, then subtract that from the result. So if the payment is $650, then the amount you need to return to the expense account would be $2350.00. Again, write this down.

2. We now need to clear out the extra entries for this year in the Payroll Create Accounts Payable Entires ... function. So basically do what I have listed in the previous post as steps 1 thru 4. If you've paid retirement already, then select all the listed dates. If you haven't leave the dates for May UNCHECKED and select the rest. Don't forget to do that step 4, you really don't want to leave that manual check in the system.

3. Now we need to adjust the liability& expense funds. Head over to Fund Accounting - Enter Transactions function. Enter a reference like - Return Liab to Exp, and a Transaction Desc: return to expense . For the first line enter the EXPENSE ACCOUNT number for the Retirement Expense. Enter the amount you recorded in step 1 in the CREDIT column. The second line will the the account number for the Retirement LIABILITY account, the amount should appear in the DEBIT column when you tab over to it. In the Memo block for the transaction enter as much detail as you can for audit trail purposes. I'd explain that this is to clear this year's retirement payments in the liability account that were not accessed. SAVE the transaction.

4. Do another BACKUP of the Accounting Files using the Powerchurch Backup utility.

5. Post both transactions in Funds Accounting. I'm going to assume you're posting these in June. If you're posting in May, change the months in the next steps.

6. Run an Income & Expense Report for the PREVIOUS month (May ?) print that off. Then run the report for June. On both reports include the YTD total column. Compare the May to the June, you'll see that the Retirement Expense report for June will be lower than in May.

7. Run a CASH Management report and print this off. Compare the previous one to this report. This will now reflect that the funds in the Liability were returned to the appropriate accounts. Then run a CHANGES IN EQUITY for June. You should see an increase in the Unrestricted Net Assets of the amount returned to Expense for this year, as well as the amount returned to Net Assets from the previous years.

Finally, to verify everything is OK in the liability account. Head to Funds Accounting -> Setup -> Chart of Accounts. Locate the Retirement Liability account and select it. Click on the DETAILS button, and then go to the ACTIVITY tab. You should see that the CREDIT listed equal the DEBITS and the following months show a Beginning Balance of ZERO. However, if you have not yet paid the retirement amount for the previous month, you should see an End Balance showing an amount of the next retirement payment.

In future, you can now use the Payroll Create Accounts Payable Entries for Deductions function to create checks for this as well as Payroll Taxes, etc.

Again, if the result does not turn out as expected, RESTORE from the Powerchurch Accounting Files backup you made in the beginning.

Let us know how it turns out.

[pccoffice]

Thanks for the advice. I'll let you know how it turns out.