In Sideways Transfers - A Shell Game to Avoid, I said that sideways transfers run the risk of being illegal. But they are also destructive to the budget process and they make clarity on the financial summary impossible. Plus, they are not necessary, because there are much better ways to handle shortages in individual local funds.
There is a legitimate place for transfers, such as making transfers from “Church Budget” to zero out large negative ending balances. And to be clear, transferring money from “Church Budget” to other local funds is not a “Sideways Transfer.”
NOTE: A “Sideways Transfer” is when you make a transfer from a local fund that is not “Church Budget,” to another local fund that is not “Church Budget.” Taking money from a local fund that “has too much” and moving it to another local fund that “needs it.” Any time you make that kind of transfer, you are losing the origin of those offerings or allocations – where they came from and their original purpose.
Another variation (sometimes called “random posting”) is to make a purchase that should be posted to a certain local fund (like “Hospitality”), but because Hospitality has no money in it, the board looks for an unrelated local fund (like “VBS”) that does have money in it and tells you to post the purchase to that fund.
In addition to being illegal, once these kinds of transactions are recorded, your spending records for the month and year are unreliable. You don’t know, from the reports, how much was spent on Hospitality or VBS. And since accurate budgeting for next year relies on knowing how much you spent from each local fund this year, making next year’s budget will be difficult.
It would be like having your kids swap out the labels on your pantry canned goods and then trying to plan a meal based on what you have on hand, when you can’t tell what you have on hand!
Here are some simple rules that will keep this from happening, and will help create clarity in your reports.
How does this create clarity?
A reminder: All of this needs to have board approval. If you want to change the way your church has been doing allocations or budgeting, go to them with a plan and ask their permission.
If at some point the board asks you to do something that you believe is against policy, ask them for time to contact an auditor and make sure. Be respectful. Give reasons and provide reasonable alternatives. And if they still vote it, that is ok. Contact your auditor to discuss the issue.
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The original version of this page was provided to Jewel by the Georgia-Cumberland Conference Audit Team. Created by Linda McCabe.