There are a few basic steps involved:
- Calculate the spending rate for each fund
- Review, approve or adjust the calculated amount for each fund
- Create journal entries to transfer the spending amount from one fund balance to another
Spending Policy Code : This is an alternate access to the code table found in the Fund > File Maintenance menu. If your spending rate needs to be changed, then you would adjust the percentage in this table.
Spending Policy Calculations: See How do I calculate spending policy? for information on using this option. This is where you would calculate the individual spending amounts for each fund. You have an option to export the data so it can be reviewed in excel or approved. If you desire, you can click the create spending policy menu item and this will place the calculated value into the cash requirement field on the fund record and in the fundsummary record for the chosen fiscal year.
Cash Requirement Report: Use this report to check the accuracy of the imported spending policies, the manually adjusted ones, or the calculated ones. Basically this report shows you what is in the system and what values will be used in the Create journal entry process further down the menu.
Manually Adjust Spending Policy Amounts:
- This process can be used to enter in spending policy amounts.
- It can be used to modify individual fund values that had been calculated and created ( in the above Spending Policy Calculation utility).
- It can be used to modify imported spending numbers (imported in the utility mentioned below).
Spending Policy Imports: This process can be used to import spending policy amounts for some or all of the funds involved in the spending policy process. The spreadsheet contains two columns - one for fundid and another for the spending amount. The spreadsheet could come from an export of the spending calculation performed using the other utility on the menu. This output could have been reviewed, modified and approved by the board. It might be more expedient to import the values from the approved spreadsheet vs re-running the calculation and manually reviewing the results against the board approved numbers. If no modifications were suggested by the board, rerunning the calculation and creating the spending policy from that output is typically easier, but the import is available if you need it.
Create Recurring, GL or Budget Entries: This process is used to actually move the spending numbers into the GL so that the approved amounts are transferred into the available to grant fund balance. For foundations using a standard 3 fund balance system, the entry made will debit a T2 transfer account and credit a T3 transfer account. Rarely are recurring or budget entries made. 95% of the foundations create journal entries now.
As indicated above, the general process is to calculate the spending numbers, review the suggested amounts, make sure the approved amounts are in FIMS and then create journal entries. The various utilities on the spending policy menu allow you to use whichever method works best with the process flow in your foundation. Some foundations will run the calculation, create the spending policy and immediately create journal entries and post them. Others will run the calculation and export the values to a spreadsheet and review the suggested amounts to make sure principle isn't invaded. Perhaps at this step the board will review and approve the values. You then have the option to rerun the calculation and modify a few fund amounts using the manually adjust tool or else use the import process to bring in the values. You can cycle back around using the manual adjust, calculation and import utilities to populate the amounts in FIMS. Typically you would run the cash requirement report after modifications are made so that a final review or confirmation of the total spending amount for all funds can be performed. When the amounts are correct, journals are created.
One thing to remember is that the cash requirement field on the fund 1 tab reflects the current year's spending amount based on the calculation edit or import. Unless you have posted journal entries as well, you will not see the value moving an amount between the fund balances on the fund balance tab or in the fund balance report. The available to spend will not reflect the new spending authorization unless journals are created. The creation and posting of the journal entries is the most frequently forgotten step.
These values are also retained in the fundsummary history table associated with the policy year. They are put in this table when you import, run the calculation and create spending policy from the menu item or manually adjust the amount. The fund statement export will export this value in the fndstat data file.