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Joined: 01 Jul 2010
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Posted: 06 Oct 2010 at 07:55 | IP Logged  

How do you distinguish an Agency Contribution from a Restricted Contribution??  Becker material states that an Agency contribution is one in which the not-for-profit has little or not discretion as to how it's spent.  The question reads (paraphrased):

Family A lost their house in December.  On December 25, an individual donated money to a not-for-profit in order so that the not-for-profit could purchase furniture for the family.  On january 2, the not-for-profit made the purchase of furniture.  How should the contribution be accounted for at year end?

The answer is that it should be a liability, because Agency contributions are recognized as liabilities due to the fact that the not-for-profit has no control over the spending of the cash.

But how is this different from some of the other possible answers, such as temporarily restricted or permanently restricted contributions??  The whole idea of a restricted contribution is that you must only use it for certain specific expenses stipulated by the donor.

I do not understand how one could determine the difference between an Agency Transaction and a Temporarily/Permanently restricted contribution. 
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Joined: 28 Sep 2009
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Posted: 06 Oct 2010 at 10:38 | IP Logged  

In my understanding, the best way to differ them is to find the beneficiary party. If the receipt party has variance power or has financial interelated with beneficiary, then contribution is classified as contribution revenue. If the receive party don't have the power, classify as liability.
for the example above, the beneficiary party is family A which the donor has restried. If question like that, donor restried the amount as used for purchase furniture, but not named who or which organization, then the contribution could be classfied as restricted net assets.
Therefore, if agency transaction-->liability, others as contribution revenue

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Joined: 27 Sep 2010
Location: United States
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Posted: 06 Oct 2010 at 12:53 | IP Logged  

Think of the agency as a "person" doing what you ordered and has no power to do differently. The agency received the donation to buy furniture for the family. The agency must record the donation as a liability because they are holding it temporarily until the funds are used for purchasing furniture.
Think of it this way: The agency got the money, but then that money is owed to "Furniture Store" for the furniture to be delivered to the family.

Temporarily restricted and permanently restricted are different from agency for the following reason:
Temporarily Restricted: These funds have donor-imposed restrictions that can be fulfilled in one of two ways passage of a defined period of time (time restriction) or by performing defined activities (purpose restriction). These funds most often come from a grant received to operate a specific program or project or individual contributions given with the intent of supporting a particular program or campaign.
Permanently Restricted: These funds are restricted by the donor for a designated purpose or time restriction that will never expire. The intent is that the principle balance of the contribution will remain as an investment forever, and the nonprofit will utilize the interest and investment returns, such as with an endowment.

Try not to dig too deep into the the question as it may make tend to make you stray.
I am using Becker, cross reference F8-67 and F9-44 & F9-46.

Hope this helps
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