A not-for-profit organization received a gift of $460,000 with purpose restrictions in 2008. In 2009 funds were expended for the purpose outlined in the gift, however, it was not possible to determine whether the restricted funds or unrestricted funds were used. The presumption should be:

Question

Quizplus · Accepted Answer

The general presumption is that restricted funds should be used first before any unrestricted funds. This is based on the principle that the donor's intent in making the gift was to fund a specific purpose, and therefore the organization should honor that intent by using the restricted funds first. If it is not possible to determine whether the restricted funds or unrestricted funds were used, then the presumption is that the restricted funds would have been used first, unless there is evidence to the contrary.

A Not-For-Profit Organization Received a Gift of $460,000 with Purpose