PSK CPA

Endowment Fund Disclosures

In the past year or two, Texas and many other states, have enacted a version of a new model institutional funds act (UPMIFA). In response, the Financial Accounting Standards Board issued a staff position paper (FAS 117-1) in August 2008. It applies to not-for-profit organizations (including churches) beginning with 2008 year-ends. Many are completely unaware of this new pronouncement which addresses net asset classification as well as enhanced (financial statement) disclosures. In addition to disclosure of more details about endowment activities, the organization must disclose in the notes to its financial statements information about:

1. its governing board's interpretation of the laws pertaining to the endowments,

2. investment policies, and

3. spending policies and how they relate to the organization's investment policies.

In light of the recent securities markets doldrums, many funds have deficiencies that require disclosure as well (not related to new pronouncement, but according to FAS 124.)

The FASB staff position paper is available on line: http://www.fasb.org/pdf/fsp_fas117-1.pdf 

Also, in Texas, UPMIFA is technically Chapter 163 of the Texas Property Code: http://www.statutes.legis.state.tx.us/SOTWDocs/PR/htm/PR.163.htm

Coffee Shops

Does your church have a coffee shop?  Many churches have found that coffee shops are a great way to increase fellowship at their churches.  Often times, PSK is asked about the tax and accounting issues that come along with coffee shops.  These are great questions!  Nonprofit organizations can be taxed on dollars that are earned from activities that are not related to their tax-exempt purpose.  So, is selling coffee supportive of the church's tax-exempt status?

The IRS has some specific rules regarding coffee shops run by churches.  If the shop is run by volunteers and the purpose of the shop is to provide a format for church members to congregate and have religious discussions, then the shop supports the exempt purpose of the church and income would not be taxable.  If the church's coffee shop is attempting to compete with Starbucks, then there could be some tax ramifications.  Whether or not that income is taxable, it is a good idea to code all coffee shop activity separate general ledger accounts, one account for income and another account for expenses.

Contact PSK if you have specific questions about your church's coffee shop!