Nonprofit recognition of grant revenue

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#1
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I volunteer as a treasurer of a nonprofit (not my area in my field of accounting). We received a grant of $50,000 from a University. We received $25,000 in 2020. The CPA who does our compilation told me that I had to report the entire $50,000 in 2020. I researched this and based on my reading of the grant, it is possible that we might not receive the 2nd $25,000, they might approve of projects that we propose but there is always a possibility that they might not feel it's a fit. I have contacted the University to confirm that we will receive the 2nd payment even if we were to start on a different project. Has anyone dealt with this issue?
 

#2
sjrcpa  
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jomichal wrote:The CPA who does our compilation told me that I had to report the entire $50,000 in 2020.

Report on the financial statements or on the 990?
Are they GAAP financials? There have been revenue recognition changes under GAAP. I have taken some training in this but I'm a tax person not audit.
Part of it hinges on the likelihood you'll receive the entire $50K.
 

#3
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I have not looked it up on GAAP lately since I have largely stopped doing work for non-profits (I only do one private foundation at this point and it is all tax basis), but I know the requirement used to be based on having a reasonable expectation of receiving the grant without restrictions = accrue grant income and a receivable in year the recipient is notified of the award.

If there are not any restrictions imposed that could hinder receiving the funds, then it is fully accrued in year you become aware of it. If there are limitations or specific requirements that must be met each period (conditional), you do not have reasonable expectation for receiving the full amount and instead record it as income when received.

Check the specific language of the award letter/letter of intent/whatever you want to call it since that is really all you can fall back on for determining if it is conditional or not (never rely on what an individual says--it needs to be based on the award letter!). It sounds like you have reason to believe the non-profit may not be eligible for the second payment, and if that is true based on it being a conditional award, then the CPA either does not have knowledge of the terms of the award or is incorrect on how to handle it.

If anything is accrued, also make sure you record it as unrestricted, temporarily restricted, or permanently restricted.
 

#4
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Thank you for your quick replies. I was able to reach the organization granting the funds. Much to my surprise, they are sending us the 2nd payment in June. I was concerned because we have not made any progress on the proposed program since last 7/1. However, starting a new program involving a social worker was not possible this year. The language of the grant does mention some specific areas including fulfilling our mission, and of course all our programs relate to that. The budget for the 2nd year has not been developed and I plan to be more involved asking for specifics. Your responses confirmed what the CPA told me, I am going to recognize the entire $50K in 2020.
 

#5
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Read up on ASU 2014-09, Revenue from Contracts with Customers. Just because they give you the money doesn't mean you have earned the money, therefore, no revenue recognition until earned.

IE, they give you 100,000 to administer a program and its based on expenditures. You take the money, administer the program all year, and spend 90k. You have 90k in revenue and 10k in unearned revenue.

Take a look at the 5 critieria and it will help guide you.
 

#6
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