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Holiday Promises to Give

The holiday season is known as the time for giving, and who better to give to than your favorite non-profit organization.

These year-end contributions may not come in the form of cash as expected, but rather as a promise from a contributor to give in the future.

As a non-profit, how does your organization account for these promised contributions?

The timing of revenue recognition is tied to the date of the commitment. Therefore, when a donor promises to give cash or other assets in the future, a promise to give should be recorded along with the corresponding revenue at the time of the promise, as long as it is reasonable. When considering reasonableness of promises to give, consider what you know about the donor. Have they donated in the past? Are they able to afford the amount promised? Does the donor intend to follow through with their gift? Knowing your donors will allow you to determine if the promise is in fact reasonable and will be received by your organization in the future.

Also consider having your promises to give properly documented. This could be in the form of written agreements, award letters, emails, or pledge cards.

No matter the form, the documentation should include:

  • Donor’s name, address, and telephone number
  • Amount of the promise
  • Date of the promise
  • Type and amount of assets to be received
  • Any conditions placed on the contribution

Having the proper documentation, ensures that your organization will correctly report your contribution revenue for the year.

If the promise is given orally, there must be verifiable evidence in order to be in accordance with generally accepted accounting principles. Consider contacting the donor through a letter or other written documentation that includes the above specified items in order to keep the proper documentation on file.

Beware of intentions during the holiday season!

Intentions to give are not considered promises to give and unlike promises are not recorded as receivables. They are simply the plans of the donor. Indications of intentions may be using phrases or words such as “we plan to give,” “hope,” or “may.”  Other indication of intentions are the donor being unclear as to the amount or date of the gift, not confirming the intention in writing, or the donor has not publicly announced a large gift. Although it may be difficult to determine a promise to give from an intention to give, the distinction is an important part of correctly recording contribution revenue.

Recording the promises to give and revenue are the easy part. Now go out and get those holiday contributions!

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