Nonprofits receive donations through many channels, and not all of them come directly from the donor. When a third party collects contributions on your behalf, the accounting gets more complicated. You need to know exactly when to record the revenue, how to value it, and who is responsible for acknowledging the gift. Our team has … Read more
Yes, a nonprofit can count pledges as fundraising revenue, but only when those pledges meet specific conditions under FASB ASC 958. If a donor makes an unconditional promise to give, your organization must recognize that pledge as contribution revenue in the period the commitment is made, even if the cash arrives months or years later. … Read more
Discovering that your organization has spent donor-restricted money on the wrong purpose is one of the most stressful moments a nonprofit leader can face. Maybe a new executive director redirected grant dollars to cover payroll, or perhaps a bookkeeper commingled restricted and unrestricted accounts without realizing the consequences. Whatever happened, the question becomes urgent: how … Read more
When a nonprofit spends restricted funds incorrectly, the organization faces IRS excise taxes, possible loss of 501c3 tax-exempt status, donor lawsuits demanding repayment, state attorney general actions, and lasting reputational damage that can shut down future fundraising. In over a decade working with nonprofit finance teams, I have seen well-meaning organizations trigger six-figure penalties simply … Read more
Can a nonprofit borrow from restricted funds? The short answer is no, not from donor-restricted funds, but yes in limited circumstances from board-designated funds, and only with strict documentation. I have worked with nonprofit finance teams for years, and I have watched well-meaning executives pressure staff to “just move the money” from restricted accounts during … Read more
Nonprofit accounting has its share of confusing concepts, but few cause as much head-scratching as refundable advances. I have talked with dozens of nonprofit bookkeepers and CFOs who wrestle with the same question: when a grant lands in the bank account but comes with strings attached, do you record it as revenue or a liability? … Read more
Grant revenue should be recognized by a nonprofit when the grant is unconditional, or once any conditional barriers have been met. This is the simple answer, but applying it correctly requires working through the right tests. I have walked nonprofit finance teams through this decision dozens of times over the past decade. The rules come … Read more
If you have ever stared at a grant agreement and wondered whether to record it as a refundable advance, deferred revenue, or contribution revenue, you are not alone. The distinction between a conditional contribution vs restricted contribution trips up nonprofit accountants, controllers, and CPA exam candidates every year. I have worked through dozens of these … Read more
A conditional contribution is a donation, grant, or promise to give that comes with requirements the nonprofit must meet before it can keep the funds. Under nonprofit accounting rules (ASC 958 and ASU 2018-08), the gift must clear two specific hurdles: a performance barrier and a right of return. If both exist, the nonprofit records … Read more
Generally, no – a board cannot unilaterally remove a donor restriction. Donor restrictions are legally binding under the Uniform Prudent Management of Institutional Funds Act (UPMIFA) and can only be released through three narrow pathways: written donor consent, court approval, or specific state exceptions for small, older funds. This guide explains exactly when and how … Read more