Endowment funds are comprised of historical gifts (a.k.a. corpus or principal), classified as Permanently Restricted (PR), and accumulated (unappropriated) earnings, classified as Temporarily Restricted. Due to the design of their general ledger systems, some customers have had to track these two portions as separate funds, often using similar GLID numbers to designate that they are related. For example, the Management Chair endowed fund shown below has a GLID of 600005. In their GL system, customers may have a GLID of 600005-01 or 600005PR to designate the Permanently Restricted portion and a GLID of 600005-02 or 600005TR to designate the Temporarily Restricted portion. In Balance, only one GLID is needed for tracking each endowment fund.
How is this beneficial? With only one GLID for each endowment fund, customers have 50% fewer GLIDs to maintain and they don’t have to worry about accidentally posting activity to the wrong portion of the fund. And when a donor asks for their fund balance, it is readily available; the customer does not need to look up two different GLID balances and add them together.
How does it work? The fund above has a net asset classification of “Permanently Restricted” to indicate that it is endowed, however the system will only categorize the historical gifts as permanently restricted and will categorize all other activity (earnings, distributions, etc.) as temporarily restricted.
How do customers reconcile each portion to their GL system? First, we understand that many customers will continue to use their GL as the official subledger, thus will need to post all endowment fund activity to their pairs of separate GLIDs. To facilitate transferring that data from Balance to their GL system, we can program GL exports (journal entries) in their preferred format to ensure that all transactions are posted to the correct corresponding GLIDs.
Once their data has been posted in both systems, customers have many options for ensuring that everything reconciles. The Permanently Restricted Portion is the easiest to reconcile, as it is equivalent to the historical gift balance found on the fund profile screen (see highlight below) and on many reports.
The Temporarily Restricted portion is the difference between the Historical Gift and the Market Value. While this would require doing some quick math when looking at the fund profile screen shot above or the Endowment Transaction Rollforward Report below, there are several reports that break it out for customers.
What reports are available? The FAS 117-1 reporting folder (see screenshot below) contains standard reports that were written for non-for-profit financial statement reporting presentation that had required three net asset classifications: Permanently Restricted, Temporarily Restricted, and Unrestricted. This is where customers can find the reports that break out the different portions of their endowment funds.
Please note that the FASB standards board replaced the FAS 117 reporting requirement with Accounting Standards Update 2016-14 beginning after December 15, 2017. This report complies with the old standard and should not be used for current accounting and audit purposes. Please use this report for periods prior to your organization’s adoption of ASU 2016-14.
The Restriction Summary Report below is a straightforward example of this.
The final column in the 117-1 Report by Fund below is another example. Also note the highlighted types of activity that are reported within each portion of the fund.
The ASU 2016-14 Reports folder (see screenshot below) contains standard reports written to accommodate the accounting standard update from three net asset classifications to two: With Donor Restrictions and Without Donor Restrictions. (These are referred to as FASB types in Balance.) Customers no longer need to consolidate or manipulate their GL data for their audited financial statement presentation; it is already done for them!
On the Endowment Net Asset Rollforward by GLID report below, note that the Management Chair endowed fund is included in the With Donor Restrictions Total.
The Restriction Summary report is another example and offers a different presentation of fund information.
Finally, we also offer many summary reports. The Change in Endowment Net Assets report is a popular one.
