Participants in short term mission trips are often called upon to help raise their own funds. In almost every case, churches want to know how much a specific mission trip participant has earned toward his/her trip. Additionally, they want to take donations online to help each participant reach their mission trip goals.

The easiest way to get the proper reporting out of church management software like Fellowship One is to configure a "sub fund" for each trip participant. This is simply a mechanism to understand how close/far each participant is from the mission trip goal. However, many churches see this as controversial and risky. They don't want to "officially" track this information for fear of compromising the charitable veracity of the gift, and they steer clear of any solution that involves a formal tracking of the contributions. However, this fear is not warranted and is usually driven by a lack of understanding of the real issues.

From a tax perspective, the important things to consider are:

1. In order for the contribution to be tax deductible, the short term mission trip must be an approved effort by the church.  Occasionally we run into circumstances where the church collects funds for a church member who is doing their own mission work, as opposed to participating the a mission effort of the church.  For example, a church member wants to go on a mission trip that’s sponsored by another church or another organization. 

2. Donor’s can designate funds for a specific individual, but in order for the contribution to be tax deductible, the church must have ultimate control/discretion as to how the money is spent.  A simple solution is to include a note or paragraph in the user document that specifically states that if an individual receives more funds than needed, the excess will be used by the church to support the mission.  This is important language.  Donors can’t expect to get their money back if the individual they are contributing towards exceeds their individual funding requirements, or even if that individual decides to back out of the trip. The gift is made to the church, or specifically towards the trip, but not the individual. That is the key.

From an accounting perspective, the considerations are different.

1. We advise church’s to have a separate GL account (not fund!) for each program’s revenue and expenses.  Churches often net receipts and disbursements together so the only thing that shows on their trial balance is the net amount.  This method is not in accordance with the accounting rules, but more importantly, the church needs to be able to see how much a program truly cost as opposed to only knowing the net result.

2. Sub accounts provide another alternative. If a church does not want to have a separate GL account for the revenues and expenses, then there is reporting power in the utilization of sub-accounts. A church can have a GL department for "Haiti Mission," for example, and then have a sub account for the receipts and another sub account on the GL for the disbursements. 

3. Lastly, subsidiary ledgers can provide the detail needed for internal reporting, without necessarily tracking that detail at the GL level. Church management software (like Fellowship One) is a good example of how a subsidiary ledger can help track the contributions for the individual participants.  Sub accounts on the GL for each individual participant is not practical or advisable, but subsidiary ledgers help meet this need effectively.

The rules for benevolence are a bit stickier than missions.  But that's a another topic…

Does your church struggle with the accounting rules for mission contributions? What other problems have you faced?  Join the conversation by commenting below.