We received a foundation grant in the amount of 1 million dollars that covers three years of activities for one of our programs. Our auditor says that we have to record the entire amount in the current year. This doesn’t make sense. Why do we have to record the whole amount in the current year? Shouldn’t we record 1/3 of the grant in each of the three years?

Your auditor is correct if the grant has the following elements:
1. The grant is a unrestricted (i.e. without donor restrictions)
2. There are no conditions that have to first be met in order to receive the grant
3. The grant is not an expense reimbursement grant

If everything above applies then you record 1/3 of the grant in the current year as “Without Donor Restrictions” (i.e. unrestricted) and record 2/3 of the grant in the current year as “With Donor Restrictions” (i.e. temporarily restricted).

• This reply was modified 6 years, 1 month ago by advisoryboard.