Sometimes it's difficult to determine whether a payment to a nonprofit is contractual or a contribution.

The presentation of the revenue in the nonprofit's statement of activities will be determined based on the type of payment; contributions may be restricted (e.g. temporarily restricted), but contractual payments will always be presented in the unrestricted portion of the statement of activities. Also contractual payments may result in deferred revenue at year-end while contributions will not.

Nonprofit Name Classification of Amounts to be Received Contract

1 Nonprofit is seeking resources in exchange for Nonprofit's provision of services? 2 Nonprofit is transferring resources/ services in exchange for payment? Yes No

Contribution
Nonprofit solicited a contribution?

Yes

No

Key Factors

Intent of Arrangement

Donor is making a contribution to support Nonprofit's programs?

Purpose of Arrangement

3 Payor pays Nonprofit an amount equal to the value of assets/services provided by Nonprofit.

Donor determines the amount of the payment.

Determining Amount

4 Nonprofit is penalized for nonperformance. Provisions for economic penalties exist beyond the amount of payment. 5 Assets/services are to be delivered to the payor.

Nonprofit is not penalized for nonperformance. Penalties are limited to the return of the unspent amount. Assets/services are to be delivered to individuals or organizations other than the provider.

Penalties Assessed

Delivery of Assets

Conclusion: The arrangement is a: ________________________________________________.

Please answer "contract" or "contribution". The conclusion can be arrived at by determining which classification (i.e. contract or contribution) above has the most "yes" answers.