Discussion:Managing Nonprofit Restricted Funds

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Accounting Questions --> Managing Nonprofit Restricted Funds


Shadow free (talk|edits) said:

13 September 2013
I'm a tax professional, but I also volunteer as a bookkeeper for a small church (cash basis, calendar year) that provided disaster relief efforts following hurricane Sandy. My question: Is it acceptable for a nonprofit to release temporarily restricted funds donated during the current year to satisfy expenses incurred during a prior year?

Example: During 2012, $2,000 was spent for disaster relief, and $1,000 in restricted donations were released in satisfaction, leaving a zero restricted asset balance. The additional $1,000 shortfall was paid from unrestricted funds. In 2013, an additional $1,000 was disbursed for disaster relief, and $2,000 in restricted donations were received. After releasing $1,000 of restricted funds, a $1,000 restricted balance remains.

I've been told that it's ok to release those funds to offset the unrestricted amount disbursed in the prior year. Although the purpose is served, I question if this treatment is appropriate because it seems to violate the matching principle. Thus far my research reveals nothing specific about this topic. Maybe I know just enough about nonprofit accounting to get me in trouble, and appreciate any guidance you can offer.

Shadow free (talk|edits) said:

13 September 2013
PS: My conclusion is also based on Wiley's "Not-for-Profit GAAP": "Current restricted contributions are contributions that can be used to meet the current expenses of the organization, ..."

Natalie (talk|edits) said:

September 17, 2013
Is it acceptable for a nonprofit to release temporarily restricted funds donated during the current year to satisfy expenses incurred during a prior year? Yes, as far as I know that would be okay, unless the church stated that the donations would be used for future expenditures.

". . . violate the matching principle." Because of the revenue recognition policies for nonprofit organizations, i.e., contributions recognized when received, revenue and expenses may not match.

To join in on this discussion, you must first log in.
Personal tools