Distinguishing Between "Promises" and "Intentions" to GiveTax Professionals' Resource
May 30, 2012 — 1,702 views
The nonprofit sector can be a difficult environment for accountants, as donations are not always given as promised by donors. In most instances, pledges are given to an organization in one of two ways - as a promise to give or an intention to give. While the goal of each method is to facilitate a contribution to a nonprofit, no actual money may ever change hands. These pledges can be verified through oral communications, written agreements or pledge cards.
Promises to give are unique agreements by donors to submit cash to an organization at a future date. When an organization receives this type of pledge, it can record the resulting revenue by a debit to contributions receivable or a credit to contribute revenue. The accounting phase of this process is the most problematic. It can be hard to discern between unconditional promises to give and intentions to give. An actual donation is very different than a promised contribution, so it's important for organization leaders to understand how to capitalize on promises and file the proper receipts.
How to know if it's just intention to give
• If the donor uses passive words like "hope" or "plan" when communicating an intention to give, the contribution might not show up on time.
• When pledges are not written down, and it is unclear if the contributor plans to follow up in the future, the oral agreement is likely an intention to give, rather than a promise.
• If payments are due, but no money has been received, nonprofits may need to look elsewhere for contributions, as such pledges were most likely intended but not definite.
How to make sure contributions materialize
• When working to file a promise to give, officials need to use actionable wording to encourage people to follow through with their agreements.
• It may also be worthwhile to calculate intentions to give in a separate budget than actual promises, so if money never shows up, the future of the nonprofit won't be in jeopardy.
• While it may be best practice and therefore seem obvious, sending appreciative notes to donors should never be overlooked.
Operating successfully can be difficult for nonprofits if they rely too heavily on intentions that never result in actual donations. Therefore, it may be more sustainable to calculate contributions received when working to build up revenue, and actively engage with those who intend to give in separate, unique ways.