Approved by: Board of Trustees
History: Issued             -- March 14, 2002
Revised            --
Last Reviewed --
Related Policies: Revenue Recognition
Additional References:
Responsible Official: Vice President for Finance and Treasurer tel. 202-319-5606

I. Introduction


Generally accepted accounting principles require the University to classify funds based on the restrictions provided by the donor. These classifications may be unrestricted, temporarily restricted, or permanently restricted. Donor restrictions should be in writing to ensure proper treatment.

This policy applies to the accounting for all funds received by the University as donations.


II. Net Asset Classifications


Classifications are based upon restrictions on the uses of the funds received from the donor(s) providing the funds.

Unrestricted Net Assets are those net assets whose use is not restricted by donors, even though their use may be limited in other respects, such as by University or contract designation.

Temporarily Restricted Net Assets are those net assets whose use are limited by donors to either a specified purpose or a later date. Pledges receivable are considered to be temporarily restricted because of an inference that uncollected amounts are intended for future periods.

Permanently Restricted Net Assets are those net assets whose use are restricted in perpetuity, such as endowments.


III. Income on Temporarily and Permanently Restricted Funds


Income on Temporarily and Permanently Restricted Net Assets is unrestricted unless the donor has stipulated that income on these funds have restrictions in the purpose of their use or on the time in which they can be used.


IV. Release of Restrictions


Restrictions on the use of net assets are deemed met when an amount equal to the gift has been expended for the purpose stipulated by the donor or when the time period specified by the donor has been completed.

V. Examples


1. Unrestricted


  • Funds given to the University for undergraduate scholarships will be considered unrestricted because the University regularly provides scholarships to undergraduates and so reasonably expects that those funds shall be expended as part of normal operations.

2. Temporarily Restricted

  • Funds provided to build a building. Funds are temporarily restricted until the construction is completed and the building is placed in service.
  • Funds provided for scholarships for Undergraduate Engineers from the Diocese of Pittsburgh. Since there is no way to ensure that every year an undergraduate engineer from that diocese will be awarded a scholarship, the funds are temporarily restricted.

3. Permanently Restricted:


  • Funds given to a perpetual endowment where only the earnings of the funds can be used for scholarships and the corpus of the gift cannot be invaded.