can a non-profit show unpaid pledges as assets?

It may depend on state law, but generally pledges to charities are the only promises of gifts that are legally enforceable. As such I don't see any reason not to show them as assets, unless there is some doubt they will, in fact, be paid.

Stu

"jack" wrote

The larger charities generally show them as assets but fully disclose the historical collectibility in the notes.

Smaller charities do not report those, mostly for ease of accounting. Generally they get reported to the board though.

Often times how it's handled for the books depends on how the charity handles it's pledges. Some account for them as receivables and send out invoice looking things.

As far as I know, pledges to charities are NOT an exception to the general rule that promises of gifts are NOT legally enforceable. Maybe you're state is different.

In that case there was a quid pro quo, naming of a football stadium. Also, it was an action against the estate of the person who had made the pledge before kicking the bucket. The case seems to have revolved around whether the decedent was competent to have made the pledge. IOW, the heirs were trying to defeat the intent of the decedent and failed.

I'm not persuaded that a California resident after having made a promise of a gift could not successfully renege on that promise.

I'd always heard that was the rule, but never had the need to research it. After looking into it more, it turns out you're right. The courts are pretty quick to find consideration when it comes to charities, however. If a pledge is made knowing others are being asked to contribute to the same purpose, the court hold that, sort of like third party beneficiaries, a pledge becomes enforceable for that reason alone.

Stu

Stuart is right. We learned it in law school, and I am not going to do your legal research for you.

Agreed.

That is a legal question, not a tax question (de je vous).

While my legal knowledge is limited to passing the Business Law section of the CPA Exam, my "guess" is that during the lifetime of a person making a pledge, he/she would have affirmative defenses to revoke the pledge. However, it is my opinion with near certainty that unless he/she was preparing to revoke the pledge at the time of death, the estate would be unable to raise these defenses.

Considering Bill's an Accountant, I'm an Auditor, and Stu is an Attorney, I have to side with Stu. This is in spite of the fact that, unlike Bill and myself, Stu does not have the benefit of a Chapel Hill education. ;)

Dick

Pretty good opinion.

You may have noticed that I did spend some time to research this a bit more - yes I have better things to do but I feel like procrastinating at the moment. The California courts actually do agree with Bill in concept, though in practice their definition of "consideration" for gifts to charity is considerably broader than in other cases, and they can generally find some reason to enforce a pledge.

Stu

This is covered under GAAP (Generally Accepted Accounting Practices) for Not-for-Profits. A Not-For-Profit is required to show pledges due with the fiscal year as Current Assets and pledges that will be due as Long-Term Assets. In the case of Long-Term Assets a contra-account for Uncollectible Pledges is required. If a currently due pledge is uncollectible, it must be added to both long-term pledges and the contra-account.

This is required for written pledges and is not allowed for verbal pledges.

Dick

Stuart Bronstein wrote: ...

Seems like I recall a case with an (Ivy League maybe?) school a while back where they donor won although I'm not sure whether the suit actually went to trial or the university/endowment association backed off owing to the criticism received from the action...

I believe that case involved a substantial gift to be used for a specific purpose, and the school just blew off the specific purpose.

"Gil Faver" > promise of a gift could not successfully renege on that promise.

as always, it is more complicated that a simple yes or no.

"Gil Faver" wrote

Thanks, that's so interesting!

Stu

Gil Faver wrote: ...

Sounds familiar when you mention it...

On a side note I've (at least so far) reneged on a "pledge" to the school from which I received a degree owing to when they called for the drive I asked for a pledge card to be mailed and I'd consider the amount and timing having just taken a mostly unplanned early retirement owing so finances were still pretty much up in the air. What they did was enter it into their records as a committed pledge of a particular amount which is not what I said I'd do...hence, so far they've gotten nothing (although they have promoted my major professor to President which has improved their standing so I've been thinking of softening my stance :) )...

Of course, not enough $$ involved here they're going to come after me w/ legals, but it is somewhat annoying to have the routine invoices continue to come for a pledge I didn't actually make. Hmmmm....that starts to get the bile flowing again--who _will_ win in the end: altruism or spite? :)

I vote for spite. Actually, if you speak to them (somebody with a head on their shoulders) and explain their egregious behavior, you would be doing them a favor. Spite PLUS altruism. And no cash out of pocket. A triple.

On Jun 19, 4:54 pm, "Gil Faver" > promise of a gift could not successfully renege on that promise.

I just love those "I know something you don't know" answers. Well, I learned just the opposite in my undergraduate commercial law class -- something about consideration in the chapter on contracts.

I haven't heard anything about William & Mary going to court to get the money pledged by people who reneged over the cross in Wren Chapel dust up. There were significant dollars involved (7+ figures to the left of the decimal point) unlike the next example.

And, VCU didn't come after me when I changed employers and thus stopped having amounts pledged to them withheld from my paycheck.

But maybe Virginia law is different or maybe Virginia institutions have better sense than to try to enforce unfulfilled monetary pledges.

Well, I am persuaded that if I win the lottery (the BIG one, not one of those piddling scratch off games) I will be using a highly skilled and knowledgable attorney to help craft any charitable pledges I make. If I'm going to be treated like I've received consideration for simply pledging money then I, by God, am going to get some consideration.

Actually they are both right. If you still have your contract law text book, you can look it up. Stu is citing the case of Davis who pledged $150K to his alma mater and they named the football stadium after him. That's the quid pro quo. Upon his death eight months later, his heirs wanted to renege.

Stu later mentions that California Courts are predisposed to enforcing pledges even when they lack consideration.

For those who are unaware, a William & Mary alum withdrew a $12M pledge after then President Nichol had the Cross in Wren Chapel removed so that the Chapel would be "a welcoming place for people of all faiths". Nichol is no longer President, the Cross is now displayed on least Sundays, and there are some elected officals is VA who are very pi$$ed off about this. As for taking this to Court, it happened about a year and a half ago and I am certain the Board of the University is engaged in diplomacy with the alum.

Did VCU give you consideration for the pledge? Did VCU take significant financial measures in reliance on your pledge?

Going back to Contract Law, even verbal contracts are binding when one party relies upon it to their financial detriment.

Neither is likely correct.

Dick