< Back to Thought Leadership

Unveiling the Dynamics of Donor-Restricted Contributions

By Greg Jackson, CPA, Principal at Blue & Co.

Many not-for-profit organizations rely on public support (grants and contributions) to finance their mission. When that public support includes donor-restricted grants and contributions, those restricted amounts must be reported and accounted for in accordance with the related restrictions attached to the funds.

When recording a donor-restricted grant or contribution, the organization must first determine whether it is a restriction that expires by the passage of time or one that can be removed by the actions of the organization, or a contribution that is restricted in perpetuity.

Types of Donor-Restrictions: Expiration vs. Perpetuity

Contributions that are restricted in perpetuity are funds contributed to the organization whose principal, or corpus cannot be touched. The income that is earned on the principal amount can be used according to the donors wishes.

Contributions that have donor-imposed restrictions that expire by the passage of time or can be removed by the actions of the organization are contributions subject to donor stipulations for specific operating purposes or time restrictions.

Examples of Donor-Restricted Contributions

Let’s look at some common illustrations of these concepts.

A contribution from a donor that is restricted for the construction of a playground can only be used on that project (unless permission is subsequently provided by the donor) and is an example of a donor restriction for a specific operating purpose.

A contribution from a donor that is restricted to provide support for a particular period of time or year is an example of a contribution restricted by a time restriction.

Additionally, some donor contributions that do not contain a specific time or purpose restriction are considered implicitly restricted by their nature. For example, if an organization receives a donor pledge for a certain amount payable over multiple years, the contribution is considered restricted until the funds are received.

The above are just a few examples of the types of donor-restricted contributions. If you have any questions regarding whether a contribution is restricted, please contact your local Blue & Co. advisor.

Wage Index Timeline: Mid-Year Update and Looking into 2025

As we head into the second half of the 2024 calendar year and the start of 2025, there are a few major dates that you need to be aware of […]

Learn More
Blue & Co., LLC Welcomes Wayne Little to the Firm | Wayne Little headshot

Blue & Co., LLC Welcomes Wayne Little to the Firm

CARMEL, Ind. (July 19, 2024) – Blue & Co., LLC is proud to announce that Wayne Little has joined the Louisville office of Blue & Co. as a principal. Little […]

Learn More
research and development

Manufacturers: It’s Time to Rethink Your R&D Tax Strategy

By Stephen Stringer, CPA, Director and Amy Sandlin, CPA, Senior Manager at Blue & Co. LLC News of incredible technological advancement and the rapid pace at which it is changing […]

Learn More