During our August nonprofit workshop, our nonprofit team shared the latest in accounting and tax updates, as well as insights from AICPA’s recently revised Audit & Accounting Guide for Not-for-Profit Entities. We posed various questions during our workshop and over the next few blog postings, we will share the answers to those questions.

Q. When is a challenge grant considered met? For example, assume a nonprofit receives a challenge grant from a donor to raise $1 million by December 31, 2013. If successful, the donor will match the funds raised with an additional $1 million. Further assume that the nonprofit raises the full $1 million by the time the audited financial statements are issued in September 2013. Can the nonprofit recognize a proportional share of the matching contribution for its June 30, 2013 year end?

A. No. The fact that the challenge was met after year-end is a type of subsequent event that provides evidence about facts and circumstances that did not exist at the date of the financial statements. At year-end the condition was not met and the fact that it was met subsequent to year-end should not result in an adjustment to the June 30, 2013 financial statements.

Q. Can a donor impose restrictions on otherwise unrestricted net assets?

A. Yes. Assume the generous donor in the example above pledges to contribute $1 million to fund a permanent endowment if the nonprofit will match the pledge with $1 million of its own funds. In this situation, if the Board accepts the donor’s conditions, then a $2 million permanent endowment will be created, and $1 million of the nonprofit’s previously unrestricted funds will be reclassified to permanently restricted.

Q. Is a bequest receivable time restricted?

A. Check out our next ‘Exploring the World of Contributions’ blog posting for the answer…