The 501 S(c)ene

The latest view on not-for-profit accounting issues

A Little-Known Element on the Form 990

If your nonprofit organization regularly solicits and receives multi-year promises to give, you most likely occasionally have the situation where a promise that was made in a past year becomes uncollectible. Where does this write-off or loss get reported on the Form 990? As a reduction in contribution income on the Statement of Revenue (Part VIII)? As “bad debt expense” on the Statement of Functional Expenses (Part IX)? The answer to these latter 2 questions is “no”. Any losses from writing off promises to give from prior years, as well as any refunds of contributions from prior years, should be reported only as an “other change” in the Reconciliation of Net Assets (Part XI) of the Form 990. This “other change” in net assets should also be described on Schedule O.

Schedule A is another schedule to consider with this situation. On line 1 of Part II and Part III (depending on which part you are required to complete) of Schedule A, you report the total amount of gifts, grants and contributions for each of the last 5 years. If you had a write-off or loss of a promise to give that had been promised/recorded in a prior year, you should reduce the amount on line 1 in the column that pertains to the year the promise was originally made. By doing this, you are correctly reducing your public support percentage calculation. So for Schedule A, the rules are different – you do actually reduce the revenue reported here, but be sure to do so in the correct column for the correct year. If the promise that you are writing off was promised more than 5 years ago, you would not have an adjustment on Schedule A.

By Colette Kamps, CPA