By Rachel Goodrich, Manager at Blue & Co.
As the year winds down, donors often get into the giving spirit, and many organizations experience an uptick in contributions. These gifts may come as a few large donations or many smaller ones that collectively make a significant impact. Either way, the influx of support can feel like Santa himself dropped them off to help drive your mission forward!
Under Generally Accepted Accounting Principles (GAAP) accounting standards, donations are categorized into two main buckets: contributions with donor restrictions and contributions without donor restrictions. Understanding these categories is essential for accurate financial reporting and compliance.
Without Donor Restrictions
These are contributions that the organization can use at its discretion to support any aspect of its mission. They offer the greatest flexibility but are often the most challenging to fundraise; think of them as that popular present that sells out quickly during the holidays!
With Donor Restrictions
These donations come with specific limitations imposed by the donor. Restrictions may include:
- Purpose restrictions: Funds designated for a specific program or initiative.
- Time restrictions: Funds to be used during a particular period.
- Endowments: Resources that must be maintained in perpetuity.
You can think of these as presents purchased from a wishlist; there’s little room to deviate without prior approval.
Supporting Your Team
We all know that fundraising teams (Santa’s elves!) play a crucial role in securing these gifts. To help your accounting and development teams stay aligned and audit-ready, we’ve included a Donor Documentation Checklist to ensure you stay on your auditor’s “nice list.”
If you have questions or need clarification, don’t hesitate to reach out to your Blue & Co. service team. We’re here to help keep your organization compliant and your mission moving forward.
Wishing you a joyful season filled with warmth, family, and friends!
