# Generating Draft Transactions

As a manager at a nonprofit, I need the ability to have staff propose draft

transactions that are not added to the books official until approved.

As a bookkeeper, I'd like the ability to set up and review draft transactions

before officially adding them to the books, so I can see if they were entered

correctly.

It should be possible to view any [[reports|GeneratingReports]] or other

system information as if the draft transactions have been applied, via some

configurable option.

handle accounting tracking of income and expenses for specific projects, or

funds.

In fiscal sponsors, these funds are typically classified by auditors and/or

accountants as "temporarily restricted assets", and spending of the assets

are governed by a fiscal sponsorship agreement

([[see examples below|FundAccounting#Other_Resources]]).

## Fund Report

The "fund report" is a shorthand name for a Temporarily Restricted Net Assets

Report.  This report shows the temporarily restricted income, expenses and

assets.  (An example of such a report can be found on page 6 of

[Conservancy's FY 2011 Audited Financial statement](http://sfconservancy.org/docs/conservancy_independent-audit_fy-2011.pdf).)

## Subset of the Books

Ultimately, any account system that truly supports fiscal sponsorship must

provide all functions, reports, editing, interaction and viewing to allow a

user to view a "subset" of the books that are specific to any given fund.  In

essence, the books of a fiscal sponsoring org are proper superset of all the

books of its projects.

Thus, an individual project contributor wants to:

- View the books for that project as an independent set, unencumbered by

  transactions for other projects.

- [[Generate reports|GeneratingReports]] for that project's financial

  data, and have those reports only include data specific to that project.

The non-profit administrators want to:

- View the entire set of books for the organization, treating all income,

  expenses, and assets as belonging to the entire org, and only seeing the

  differences treating the project funds merely as "temporarily restricted

  assets".

- Be able to perform operations that span the entire books, such as

  reconciling bank accounts that are contain funds temporarily restricted for

  different projects.

## Other Resources

### Examples of Fiscal Sponsorship Agreements

- [Software Freedom Conservancy's fiscal sponsorship agreement template](http://sfconservancy.org/members/apply/ConservancyFSATemplate.pdf)

- [Insight Center for Community Economic Development fiscal sponsorship agreement](http://www.google.com/url?q=http://www.insightcced.org/uploads/publications/legal/721.pdf&sa=U&ei=4UR6UuCONNSrkQfz5YDYCw&ved=0CCAQFjAC&usg=AFQjCNG8usFKh8jSdMM9cG1SAOVUb2Neig)

More about [fiscal sponsors from the National Council of Non-Profits](http://www.councilofnonprofits.org/resources/resources-topic/fundraising/fiscal-sponsors).

# Supporting Multiple Currencies

Most modern accounting systems offer some sort of support for multiple

currencies, but the details of how it is done matter greatly, as lack of

flexibility in how multiple currencies are supported can render the feature

useless to some organizations.

There are roughly two operating modes that I've observed in use by non-profit

organizations.

## A "One Native Currency" Organization

In the USA at least, and perhaps elsewhere, the native currency to the

location of the entity is treated as the "one true currency" (which the USA

IRS calls your "functional currency") of the organization.  Specifically in

the USA, the IRS makes

[the following recommendation regarding currency conversion](http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Foreign-Currency-and-Currency-Exchange-Rates):

> Make all … determinations in your functional currency.  If your

> functional currency is the U.S. dollar, you must immediately translate into

> dollars all items of income, expense, etc. (including taxes), that you

> receive, pay, or accrue in a foreign currency and that will affect

> computation of your income tax.

(While this advice is specifically in the "small businesses" section of the

IRS website, it can be reasonably assumed that the IRS would apply a similar

rule to non-profits.)

As such, the accounting system that supports multi-currency should allow for

the handling of this rule.  Most non-profits simply do the currency

calculation "off book" and enter the USD determination into the system.  What

[Conservancy](https://sfconservancy.org) does, which probably makes sense for

our system, is to store a fixated rate, based on the prevailing exchange rate

for the currency on the date of the transaction.  (Conservancy, which

currently uses Ledger-CLI, uses Ledger-CLI's

[fixated prices feature](http://www.ledger-cli.org/3.0/doc/ledger3.html#Fixated-prices-and-costs)

# Tracking Documentation on Accounting Transactions

While [[double entry accounting|UseCases/DoubleEntryAccounting]] transactions

are the heart of any accounting system, auditors and managers need the

ability to dig down and determine what contracts, invoices, receipts or other

backup documentation relate to a given accounting document.

An adequate accounting system should provide easy link-up between

double-entry accounting transactions and the documentation that relates to

the transactions.  For example,

[[expense reports and reimbursement requests|UseCases/ReimbursementRequest]]

often have a myriad of receipts and invoices associated with them.

[[Handling contractors|UseCases/ContractorsAndContracts]] has similar types

of backup documentation.

Ideally, the system should allow the exploration of and linkage to

documentation in both directions.  It should be trivial to answer questions

   * I have this receipt/invoice from our document repository.  Which

     accounting transactions relate to this receipt?  Has the transaction

     been [[reimbursed|UseCases/ReimbursementRequest]]?

   * Looking at this invoice, can I see the transaction where it was accrued

     and paid?

   * Show me a list of invoices that haven't been paid, with links to those

     invoices.

   * Who approved this expense or payment?  Show me the email where they

     approved it.