General Information
What is a gift?
A gift (or contribution) is a transaction in which an entity makes an unconditional nonreciprocal transfer of assets (i.e. cash, stock, check) to the University without directly receiving equal value in exchange or expecting return of the asset(s).[i]
[i] Not for Profit Organizations, Section 5.03 – Distinguishing Contributions from Other Transactions
What is the difference between an unrestricted gift and a restricted gift?
An unrestricted gift is one where the donor allows the University, School or Unit to determine how best to use the contributions. Unrestricted gifts have no donor restriction and are deposited to fund FD1111.
A restricted gift is one where the donor stipulates when or how the gift may be used. A restricted gift may be permanently restricted or temporarily restricted.
In the case of a permanently restricted gift, the gift itself is not spent but earnings on the gift may be spent for the purpose specified by the donor. Such gifts are generally referred to as endowment gifts. Generally, a gift of $100,000 is necessary to set up a permanently restricted endowment. See Endowment Gifts for more information.
In the case of a temporarily restricted gift, the entire gift may be spent for the purpose specified by the donor. Generally, the contribution or all contributions to the gift must be expected to reach at least $10,000 in order to set up as temporarily restricted. See Restricted Gifts for more information.
If a restricted gift is less than $20,000, the donor should be contacted to discuss available options. An exception may be made for a gift under $20,000 if that gift, when combined with other donor gifts with the same donor restriction, reaches $20,000.
Unrestricted, temporarily restricted, and permanently restricted are terms used to describe the net asset class of the gift.
What are restricted gifts?
The Statement of Financial Accounting Standards (FAS) No. 116 Accounting for Contributions Received and Contributions Made, paragraph 14 defines restricted funds as: “A restriction on an organization’s use of the assets contributed results either from a donor’s explicit stipulation or from circumstances surrounding the receipt of the contribution that make clear the donor’s implicit restriction on use. Restricted support increases permanently restricted net assets or temporarily restricted net assets. Contributions without donor-imposed restrictions shall be reported as unrestricted support that increases unrestricted net assets.”
Who decides what the restriction is on a gift?
The donor is the only one who may place a restriction on a restricted gift. For this reason, unrestricted contributions may not be moved into restricted gifts.
How does the University differentiate between unrestricted and restricted gifts?
The net asset class of the gift (unrestricted, temporarily restricted, or permanently restricted) is generally differentiated as follows:
Unrestricted
- Gift benefits University, School, or Unit as a whole
- Broad expense category (i.e. financial aid, library support, athletics)
- No specific use of gift
Temporarily Restricted
- Gift is for a particular program, faculty position, purpose, or student category
- Gift has a specific time restriction when it may be used
Permanently Restricted
- Gift itself may not be spent, but the earnings on the gift may be spent for a temporarily restricted purpose
Which gifts should be spent first?
Temporarily restricted gifts should always be spent before unrestricted gifts. This gives the University the flexibility to use unrestricted dollars where they are needed most. It is also one of the best ways that the University may honor the donors who gave those dollars.
First Dollar Rule
“If an expense is incurred for a purpose for which both unrestricted and temporarily restricted net assets are available, a donor-imposed restriction is fulfilled to the extent of the expense incurred, unless the expense is for a purpose that is directly attributable to another specific, external source of revenue.” Financial Accounting Standards Board (FASB) (Accounting Standards Codification 958-205-45-11).
What does the First Dollar Rule really mean?
- A department has both restricted gifts and unrestricted funds (e.g., appropriations) in the fiscal year.
- This department has expenses during the fiscal year.
- A presumption is made that the department will use the gift funds first (will code the expenses to the restricted gift.)
What is the difference between a gift and a grant?
Sometimes it is difficult to distinguish between a gift and a grant. If the resource provider is expecting a proprietary benefit of perceived equivalent value in return for the resources provided, the transaction is a grant. If the resource provider does not anticipate anything in return, or if the benefit provided by the institution is primarily a public benefit rather than a proprietary one, then the transaction is a gift.[ii]
[ii] AICPA Audit and Accounting Guide, Not-for-Profit Organizations (NFP Guide)
At Wake Forest University, gifts are processed by the Advancement Office and grants are processed by the Office of Research and Sponsored Programs.
How are gifts received?
All gifts must be processed through the University’s Advancement Office. The Advancement Office uses designation codes – not Workday worktags – to record gifts and will credit the gift to a particular designation code based upon the donor intent. Designation codes are mapped to worktags through a link within the Advancement system. Please contact the Financial Services Gifts Team at giftactg@wfu.edu for specific questions about links between designation codes and worktags.
Where are gifts credited on the general ledger?
Once a gift is processed by the Advancement Office, it will feed to a worktag on the University’s general ledger. Information about specific worktag elements used in Advancement gift feeds is listed below:
Fund
Gifts of stock, cash, check, and credit cards are credited to a particular fund based on their restriction. Gifts of property and other non-cash gifts are credited to the unrestricted fund. Funds that most commonly receive gifts are:
| Fund | Gifts Received |
|---|---|
| FD1111 | Gifts that are free from donor restriction. |
| SPxxxx | Gifts that have a donor restriction but may be spent in their entirety. |
| ENxxxx | Endowment fund gifts. The gifts themselves may not be spent, but the earnings on the gifts may be spent for the donor restriction. The earnings are spent from corresponding ENxxxx using a different fund worktag – FD6100. |
| PGxxxx | Gifts to fund trusts, gift annuities, and other split-interest agreements. The gifts in these funds are not available for University use until the trust or similar agreement terminates. At that point, the funds are distributed in accordance with the donor agreement and are directed to the appropriate restricted or unrestricted fund. |
Cost Center
The cost center that will benefit from a gift is driven by the donor. Situations where a gift may benefit more than one cost center are handled on a case by case basis.
Account (Revenue Category)
Gifts from donors will generally credit one of the following accounts:
| Account | Use |
|---|---|
| 43000 | Fund FDxxxx, SP, and PG funds |
| 43200 | Non-cash gifts to all funds |
| 43100 | Endowment funds that will buy units in the Wake Forest University long-term pool |
| 43201 | Gift-in-kind to all funds |
Program
The program code for a gift will follow the cost center.
Activity
In some instances, an activity code may be used to track gifts. Such codes are handled on a case by case basis.
Location
Location codes are typically not used to track gifts.
When can a gift be used?
When a gift can be used is largely driven by the restriction placed on the gift by the donor. Depending on the restriction, the gift will fall into one of the following net asset classes:
- Permanently Restricted
- Temporarily Restricted
- Unrestricted
Please see the above section for descriptions of each net asset class.