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Accounting for Grant Restrictions and Grant Conditions 

April 25, 2024

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Being awarded a new grant is exciting news for any organization, but properly accounting for grant restrictions and conditions is essential to the accurate financial reporting of any organization. Here is what you need to consider:

Determine whether the Grant is Conditional or Unconditional

Are there performance barriers that need to be overcome prior to receiving the funds? Or if the funding is received in advance, are there return (claw-back) provisions if certain conditions are not met? If so, the grant is most likely conditional, and revenues would be recognized as the conditions are met. Any funds received in advance of meeting conditions would be recorded as refundable advances. Absent any conditions, unconditional grants are recognized as revenues when the written unconditional promise to give is received (in most cases the letter of award).

Be Mindful of Specific Restrictions

There is a chance that unconditional grants may contain embedded restrictions limiting the use of the funds. A restriction differs from a condition as there is not a specific performance barrier or right of return but rather an overall specified purpose (or time period) restricting the use of the funds. Restricted grants are still recorded as revenues when the written unconditional promise to give is received, however, they are presented as net assets with donor restrictions until used for the restricted purpose (or specific time period has passed).

Interested in more information? Tune into our webinar!

Clark, Schaefer, Hackett & Co. is hosting a free webinar on

Thursday, May 23, 2024 at 1PM EST

Our presenters will cover this topic in more depth along with topics such as accounting for conditional grants and grant budgeting. Please join us to learn more about these topics and see if calculating an indirect cost rate could be a major win for your organization.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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