Accounting For Pledges Receivable - Capital Campaign

Robert Spokane's Profile

Accounting For Pledges ReceivableQuestion for the Non Profit experts out there about pledges receivable. 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.


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Robert, I am not a NonProfit accounting expert, but I am the (volunteer) CFO for SFSHAKES

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.

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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.

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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.

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Proformative offers 400+ online business courses with free CPE, many on Accounting.

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Keith is absolutley on target. The issue should be stratight forward for the auditor.


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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?

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The accounting is for the net present value of the amounts expected to be ultimately received, which may be less than the pledged amounts. A large portion from employees must be fully disclosed, and carefully considered against third party funding which will provide the income to those employees from which the payments will flow. If most pledges are from employees, the amounts expected to be collected may be very uncertain, and should be reduced to reflect that uncertainty.

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how do I account for a pledge?

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One thing to be aware of is the possible impact on bank covenants. The non-profit I volunteered for had a covenant for the Debt Service Coverage Ratio. The calculation starts with GAAP net income. So by recognizing the pledges all at once the DSC would be gigantic the year of the capital campaign. Future years would be lowered even though there was money coming in. I met with our bankers and explained the accounting rules. Then I convinced them to modify our DSC calculation to use actual contributions received instead of pledges as this more accurately reflected our actual ability to pay our debt.