How to Track Donations Received for Other Organizations

Wondering how to handle donations received for other organizations in QuickBooks?

Many churches and other nonprofits collect
money for other organizations like a food bank or Habitat for Humanity.
Tracking these donations and assuring the payments are made to the receiving
organization takes a few extra steps.

First, you will want to set up an Item with Service as the type called Pass
Through Donations (or something similar). It should be linked to an Income Account in the revenue area (Outreach or Pass Through Funding, perhaps). If you are receiving the donations
through a fundraiser or cash not from a particular donor, set up a Customer named for the other
organization (i.e. Food Bank). If the money is received from a donor, use their name instead.

Enter the donations as you normally would, but
set the item to the Pass Through Donation.
If you are collecting for several different organizations, set up sub-items to track by organizations. After
all of the donations for are entered, run a Sales by Item report for the time period of the donations to see
the total dollars owed to the receiving organization.

You
will now set up an Item with Service as the type called Pass Through Payments linked to an Expense Account-Payments of Donations to Others or Pass Through Donation.
Set up any sub-items for any multiple organization to match the ones you set up above.

Next, go to the Vendor Center and set up the
receiving organization as a Vendor.It
cannot be the same as the Customer name, so simply add a "v" after
the organization's name. Enter a bill for the amount of the donations (from the
Sales by Item report) and charge it to the Pass
Through Payments item or related sub-item. The check can then be printed as
usual.

Update:

I originally wrote this thinking of churches wanting to track their outreach donations for management purposes.  But be aware that if you are a nonprofit with reporting requirements, accounting principles may require you to treat this as a liability, not a contribution.  If so, you will set up the Pass Through Donation item linked to an Accrued Liability account instead of an income account. When you pay the receiving organization, use the same Pass Through Donation item on the write checks screen. This will bring the liability account to zero once the organization is paid.  Check with your accountant to see which way you should record the pass through donations.