What are the characteristics of conditional and unconditional grants and contributions? How do they impact your nonprofit? Find out here.

What is a conditional contribution?

There are several factors that need to exist in order for a contribution or grant to be classified as conditional.

A conditional contribution must satisfy the following criteria:

• Specific barriers or conditions that must be overcome to earn the contribution
• Right of return (if barrier or condition is not met the organization must return the contribution)

A conditional contribution is recognized as the conditions are met and an unconditional contribution is recognized when the contribution is made.

We regularly get questions like “Can I record the contribution as a conditional grant (liability) so I can shift and recognize the contribution in next fiscal year?”

The answer is “it depends.” The contribution must include the above condition/barrier and a right of return in order to be recorded as a liability vs. revenue.

What counts as a barrier?

Barriers are measurable, performance-related barriers such as:

• The number of individuals served,
• Percentage of services increased;
• Number of meals served, and
• Matching grants stipulating that the organization must raise a specific amount to receive matching grant funds.

Conditional grants may have challenging impacts on budgets because they cannot be recorded as revenue until the conditions are met.

Barriers do not include administrative tasks such as a grant report, signing and returning a grant agreement.

Is that the same thing as a restriction?

No, a restriction details how the donation must be used whereas a condition indicates what an organization must achieve before recognizing the donation as revenue.

What is an unconditional contribution?

When a donor makes a contribution with no conditions or barriers for using the contribution, this is referred to as an unconditional contribution. The organization is free to use the unconditional contribution as they see fit if the contribution is also without donor restrictions.

Wondering if you’ve received a conditional or unconditional contribution? We can help. Reach out to us.