The 501 S(c)ene

The latest view on not-for-profit accounting issues

What to remember about recording contributions

There are a lot of different aspects to remember about recording contributions. Here is a bullet pointed refresher for you to refer to:

Don’t miss: Electronically filing your forms 1023 and 1023EZ

  • Contributions can be restricted for a certain purpose (e.g. to purchase computers) or restricted to a specific time period (e.g., a multi-year promise to give).
  • Restricted contributions are closed out to “net assets with donor restrictions” and remain in that balance until the restrictions are released.
  • The Organization should have a process or system for tracking restricted contributions and releases of restrictions.
  • Unconditional contribution income should be recorded in full upon the promise or award of the donation, even if it was awarded on the last day of the year to be used for the next fiscal year (this would be a time restriction).
  • Conditional contribution income should not be recorded until the conditions are substantially met (until the “barrier” is overcome). A contribution is conditional if it has both a barrier to overcome and also a right of return of the funding (i.e., the organization is not entitled to the funding until the barrier is overcome).
  • Conditional promises to give are not recorded but are required to be disclosed in footnotes to your audited financial statements.
  • A grant may be either a contribution or an exchange transaction. It is a contribution if the funding sources does not directly receive a benefit from the payment. A public or community benefit would not be considered directly received by the payer source.
  • A cost-reimbursement grant is usually a conditional contribution where the conditions to be met would be the incurring of eligible expenses.
  • If a promise is received from a table sponsor or attendee for a special event that won’t occur until the next fiscal year, the amount should not be recognized in income until the next fiscal year as the contribution portion of the amount would be conditioned on the event taking place and the exchange transaction portion of the amount would not yet be earned. If the amount is paid in advance of the event, it would be recorded as a deferred conditional contribution. An exception to this would be if the Organization has a specific agreement with the sponsor/attendee that they will make their payment regardless of the event taking place.
  • Noncash donations of tangible property should be recorded as contribution income at the fair value of the item and as either an expense or capitalizable item (or possible reversal of debt).
  • Noncash donations of services should only be recognized as contribution income at fair value in one of two situations:
    • The service is provided by a professional and would otherwise have to be purchased
    • The services are provided to enhance or create a non-financial asset (e.g., to build a playground)

The above list is not all-inclusive but covers the most common types of transactions that nonprofit organizations encounter. Please contact your Henry+Horne nonprofit adviser with any questions.

Colette Kamps, CPA