A congregation is raising money for building improvements, receiving gifts designated for that sole purpose. Is it necessary to hold those gifts in a separate bank account or is it permissible to hold the funds in the church's general checking or savings account and otherwise account for it in its records?
Churches typically receive both general and designated gifts. A third category of gifts--called Permanently Restricted by accountants--is rarely received by churches.
It is not required that these funds be segregated from other cash accounts as long as proper accounting is maintained. Many churches have multiple designated accounts. Maintaining separate bank accounts for each is rarely necessary or even advisable.
If general and designated funds are commingled, the church may wish to establish a reasonable method for allocating any interest or other earnings to unexpended designated fund balances.
Extreme care must be taken to avoid using designated gifts for purchases other than those specified by donors. Some ministries have shown very poor stewardship by overspending their general funds and, effectively, borrowing from designated gift funds with little hope of restoring the cash accounts to their proper level. This obviously discourages donors but may also draw attention from State authorities if a donor files a grievance.