In June 2018, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) that clarifies and revises how a non-profit organization may account for “contributions of cash and other assets received” from an external entity. It is meant to reduce “diversity in practice” and improve guidance as to whether a transfer of assets is a contribution or an exchange transaction.
Based on this guidance, the Office of the Controller at Emerson College has determined that certain awards that were previously classified as “grants” or “agreements” may now be classified as contributions, and accounted for as “conditional (or restricted) gifts”. The basis for this is the FASB’s contention that, unlike an exchange transaction (e.g. a fixed-price service contract), contributions are not contingent on a specified level of service, identified number of units of output, or a specific outcome. They nonetheless may still contain stipulations previously associated with grants, including:
- A finite award period/period of performance
- Narrative progress and final reports
- Cost restrictions
- The requirement to return any unspent funds at the end of the award period.
In contrast, an “unrestricted gift” does not include any such requirements.
While the College is modifying how it classifies and records the revenue from contributions, the change in classification does not negate whatever requirements a sponsor may include in an award’s terms and conditions. Accordingly, the Provost and Vice President for Academic Affairs has stipulated that restricted gifts shall continue to be managed by the College with the same oversight and accounting standards that were applied when they were deemed grants or contracts. Specifically, this means the following:
- With the exception of contributions received by ArtsEmerson (which operates independently of the College’s academic departments), contributions that are identified as “restricted gifts” will still be managed in the same fashion as when they were labeled “grants.” The Office of Research and Creative Scholarship will continue to monitor expenses, advise on restrictions, and assist faculty with purchases, reimbursements, and compliance.
- Unrestricted gifts will be the sole responsibility of the recipient and their department.
- Consistent with the lifecycle process for funded faculty projects, ORCS will request a gift worktag (under the “Spendable – Former Grants” Workday hierarchy) for new awards, and facilitate the uploading of a spendable line item budget with the Budget Office.
- All revenue received by the College for restricted gifts/contributions will be recorded in Raiser’s Edge by the Office of Institutional Advancement.
- All awards received from federal, state, or local governmental agencies, regardless of FASB guidance, will continue to be classified as “grants,” and managed accordingly.
For more information on this guidance, please contact ORCS at orcs@emerson.edu. Details on the FASB’s updated guidance may be found here.
