Underfunded and Overfunded Projects

Ministries often solicit funds for a specific project, such as a building campaign. For accounting purposes, contributions made in response to such solicitations are temporarily restricted for the specific project. Sometimes ministries receive too little support, so the ministry may decide against initiating the project. Less frequently, too many contributions may be received for a project resulting in overfunding. Seldom does an appeal raise just the right amount of donations for a particular project or purpose. 

What should a ministry do if donations received for a specific project are insufficient to complete the project or exceed the project need? Consider the following options:

  • When the amount of donations received is less than the amount needed, the ministry may choose to supplement the donations received with other funds or limit the amount spent on the project to the amount of donations received.
  • Inform givers of the funding shortfall or overfunding and ask if the donations may be used for another project within the scope of the ministry’s program (if the givers do not concur with the ministry’s suggestion, the donations should be refunded).
  • Inform givers of the funding shortfall or overfunding and suggest that donations be forwarded to another ministry who may fulfill the giver’s intentions (if the givers do not concur with the ministry’s suggestion, the donations should be refunded).

Sometimes it is not possible to identify all of the givers to a certain project. If the amount related to the unidentified givers is significant, a ministry should review the matter with legal counsel.

A ministry can often avoid underfunding or overfunding by carefully planning the fundraising appeal. Projecting giver response can help the ministry avoid making too broad an appeal for a specific project or purpose. Carefully wording the fundraising appeal to inform the giver how any excess funds will be used will negate the need to return a donation at a later date.

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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