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…

Donella Wilson
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Donella Wilson

CATEGORIES Nonprofit, #BeMore,

Donella Wilson, CPA, leads the Firm’s Nonprofit Practice and has more than 20 years of public accounting experience providing audit, accounting and special project services and works exclusively in the nonprofit sector. A leader in both the nonprofit and accounting communities, Donella was…Learn More