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GAAP For Non-Profits › Specific Financial Statement Items

Is it a restricted contribution?

A contribution may be explicitly or implicitly restricted.

Often the purpose of a contribution is noted by the donor, either by way of a letter or through completing instructions on a form produced by the receiving organization.

A restriction in a donation may be implicit. The organization may host a fundraising event in aid of certain program and explain that any donations received will go to such and such a program; the restriction of these donations is therefore implied. The nature of the donation may also imply that there is a restriction, for example a donation of land would imply there is a capital restriction.

Government funding may also contain explicit or implicit restrictions. There may be restrictions on how the funding is to be used. The funding may be based on the organization’s operating budget, or there may be requirements that unspent money be returned. Also the funding may be for a specific period.

Some maintain that since the use of all charitable donations is restricted by trust law, all donation revenue should be accounted for as restricted revenue. The CICA Handbook does not specifically addressed this issue. We are currently of the view that the external restrictions contemplated in the Handbook are contractual and not statutory in nature. However, we would encourage any charitable organization that wishes to recognize the "restricted" nature of charitable donations, particularly where there may be concerns in meeting the charitable disbursement quota.