Promises, Pledges, and Receivables - It's all in the Intention

On Tuesday, February, 23, 2010, Donna Wallace of Kerber, Eck, & Braeckel presented the latest GAAP and best practices for Promises, Pledges and Receivables. The first bit of information we learned was that "promises" is the accounting term for what fundraisers call "pledges." The second piece of information we learned was that all donor contributions begin with "intentions." As you can see from reading the bullet points below, this topic is a bit complex and one we will probably re-visit in the future.

Here are some basic key points:

 

• If the donor expresses a plan or hope for future giving, but does not provide further detail, then their communication is an intent to give, and is not booked as a receivable.
• If the donor expresses a clear commitment to donate, either in writing or orally, then their communication can be interpreted as a promise to give and booked as a receivable.
• If the promise to give is based on the performance of a goal, then that promise is a conditional promise to give (not the same as a restriction) and will either be recorded as a receivable and restricted contribution at the time the promise was made, or recorded when the conditions were met, depending upon how likely the conditions will be met.
• If the receipt of the promise depends only on the passage of time or a demand for performance, then the promise may be recorded as a receivable in the period in which it was made.