Using Sage Intacct to Track Restricted Net Assets: Part 1

Do you have complicated workpapers to track restricted revenue and releases? At year-end audit time, do you scramble to reconcile and enter manual journal entries to allocate between net assets with and without donor restrictions? Wouldn't it be great to have a system automate this work? If you answered yes to any of these, keep reading!

In a previous blog, Using Your System to Track Restricted Net Assets, we discussed recommendations for system set up, accounting processes, and the impact on financial reporting. Explore how powerful Sage Intacct can be in transforming this process.

Sage Intacct set up

Setting up restrictions on a separate dimension from your general ledger accounts and your grant dimension creates a streamlined approach to tracking net assets. Leveraging dimensions, you technically only need one net asset account and one revenue account, instead of multiple accounts for every type of restriction. This will allow you to tag applicable revenue initially against a grant as restricted.

The associated expenses can be tagged as unrestricted. That way, when the time comes, you only have to release the revenue restriction. Purpose based revenue restrictions can easily be moved from restricted to unrestricted revenue to match qualified expense based on a particular time period in an automated manner.

We often see the Class dimension used and renamed to set up restrictions as shown here:

You can also require the use of the restriction dimension on all general ledger accounts, which will prevent transactions from posting without a restriction dimension tagged. This will accurately split your change in net assets between restricted and unrestricted.

Enabling dimension requirements is done on the General Ledger account by checking the box next to each required dimension as shown here:

If you have many GL accounts you need to update required dimensions for, consider using an import template. Find more helpful tips and tricks on Sage Intacct imports or learn about the new Beta Import Tool for GL updates.

Accounting process

When recording receipts, you can tag any restricted revenues. Then, ideally monthly, you can review grant related expenses to release any restrictions. You can use a single "Release from Restriction" revenue account to handle the simple reclass.

In this example below, the revenue received for Grant #1 is tagged as revenue “With Donor Restrictions.”

We then tag any expenses, like the below Accounts Payable bill, for Grant #1 as “Without Donor Restriction.”

Finally, we can post a manual journal entry to release the restriction. Watch for part two of our blog where we discuss options to further automate the restriction release, such as querying grants for related expenses each month and having this journal entry be automatically created.

In the restriction release entry, the same general ledger account and grant dimension are used on both sides of the entry. By creating a debit to “With Donor Restriction” and a credit to “Without Donor Restriction,” we simply move the revenue from restricted to unrestricted for the grant.

Financial reporting

With proper set up and transaction processes, you can easily generate a variety of financial reports. When you record restricted revenue, your restricted net assets will increase. As you book revenue releases, your restricted net assets will decrease. Here are some examples of reports that can be produced:

Notice how you can expand by the dimension in the rows or columns of your reports. In the Statement of Financial Position, for example, you can expand net assets and create a separate row for each restriction dimension. In a previous blog, Mastering Sage Intacct Financial Reports: Structure, we walk through the steps for expanding rows by a dimension.

The Statement of Activities shows the restriction dimensions in the columns. In Mastering Sage Intacct Financial Reports: Configuration, we discuss how to expand your columns by dimension.

What’s next?

If you need assistance with Sage Intacct set up and/or transaction processes, reach out to us. Subscribe to the blog to be notified when the next installment in our series is available. In that blog, we’ll walk through the options for automating the release from restriction journal entry.