Non-profit / charity / fund accounting, example help, please

[Mike or Penny Novack]

Dale Alspach wrote:

>The only case I am aware of where funds given are a liability occurs when
>you receive funds that are actually to be spent by someone else or on
>behalf of someone else. 
>  
>
I thought what was being discussed was "restricted funds"

Let's use a concrete example that would fit one of the organizations for 
which I keep the books. An aging board member, upon retiring for the 
board, made a large donation dedicated to a future part project (the 
organization had not yet reached this stage). Now in fact he did NOT 
formally restrict these funds so I didn't have to do it by the liability 
method. But let's suppose he had.

Donation $5000 for the inoculation, testing, and roguing out the non 
resistant trees.

At this point the organization is still at the stage of breeding and 
planting trees. None of them are yet old enough to be infected with the 
blight (inoculation) to find out which ones are carrying partial 
resistance. So this donation, while money in our bank account, isn't 
really "ours" yet, not money we can use. So there would also be set up a 
liability for the same amount called "donor restricted funds".

Years go by and we reach this next phase. We hire an intern to help 
inoculate and evaluate tree. OK, that's an expense that qualifies 
according to the terms of the restricted donation. So in addition to the 
normal transaction paying the intern, that same amount may be 
transferred from
"donor restricted funds" to "funds released from restriction"  (from 
liability to income).
 
For another example, we might have received a grant, $5000 for deer 
fencing around our orchards. So far I haven't had to deal with grants 
where the money was received in advance, but if I did would have to 
carry a liability for the amount until the grant was "earned" (in this 
case, spent on deer fencing)

I would be very surprised if Habitat for Humanity does not receive 
grants or other donor restricted donations.


Michael