Pledges Receivable - Capital Campaign
Robert Spokane (Internal Auditor, Shelby Residential & Vocational Services, Inc)
Company: Shelby Residential & Vocational Services, Inc
| Mar 17, 2010Robert Spokane
Title: Internal AuditorCompany: Shelby Residential & Vocational Services, Inc
Question for the Non Profit experts out there. I have a client who is in the middle of a Capital Campaign and is getting pledges that span from one to five years, many of which are employees. the client wants to record the present value of all Capital Campaign Pledges at the end of each fiscal year.
My question is how can we accrue Pledges receivable that affects income when there is no legal contract to collect. Just becasue someone pledges a donation does not mean you will ever get it. Does anyone have more detailed information on this issue.
Thanks,
Topics:
Answers
Company: Lyris, Inc.
Robert, I am not a NonProfit accounting expert, but I am the (volunteer) CFO for SFSHAKES.ORG - see http://www.sfshakes.org/about/bios_board.html#taylor
SFAS 116, "Accounting for Contributions Received and Contributions Made", set firm guidelines for pledge accounting.
By including Pledges Receivable on the Balance Sheet, an NPO shows the amount of money it can reasonably expect to receive in the future in pledged contributions.
Unconditional pledges should be recognized in the year they are received, even if the actual contribution will be received in installments over future accounting periods.
The only real complicated issue is one of "value" to be recorded.
A multi-year gift pledge should be recorded at the "net present value" of the gift. Thus, a $50 pledge for five years will result in a pledge receivable of $216 using a 5% discount rate.
We use the following accounts
• Gift Pledge Revenue
• Gift Pledge Receivables - Current
• Allowance for Doubtful Gift Pledge Receivables, Current (credit) balance
• Gift Pledge Receivables - Non-current
• Allowance for Doubtful Gift Pledge Receivables, Non-current (credit) balance
The initial entry would be
Debit Gift Pledge Receivables - Current $ 50
Debit Gift Pledge Receivables - Non-current $166
Credit Gift Pledge Revenue $216
and an appropriate allowance for uncollectible
When collected, then its just a matter of debiting cash, crediting Receivable.
Company: Shelby Residential & Vocational Services, Inc
Thanks for your reply I hope I will get more info. Our auditor is discounting the later years, so that is how he wants to handle this. I hope I can get more details so we can control the calculations.
Company: Lyris, Inc.
Email me at keithdtaylor
earthlink [dot] net if you'd like more information --- I can offer some guidance.
Company:
I haven't seen non-profits record pledges unless there is a written pledge agreement; and technically that agreement should be legally enforceable. Then the future payments are recorded at NPV.
Company: California Scottish Rite Foundation
Keith is absolutley on target. The issue should be stratight forward for the auditor.
Ray
Company: SAAJCC
If a multi-year pledge is booked as income in its entirety in year 1, and then the 5th year pledge doesn't come in, how can you adjust income for past years?