Donor-imposed condition definition
/What is a Donor-Imposed Condition?
A donor-imposed condition is a requirement attached to a contribution that depends on the occurrence of a specified future event. Until the condition is satisfied, the recipient organization does not have full control over the donated assets. If the condition is not met, the donor may require the return of the contribution. In some cases, the condition may also eliminate the donor’s obligation to provide promised assets. These conditions are commonly used by donors to ensure that their contributions are used for specific purposes or outcomes.
Examples of Donor-Imposed Conditions
Here are several examples of donor-imposed conditions:
Project-specific use. A donor stipulates that a $1 million donation must be used for an upgrade to a museum. If the upgrade is not done, then the funds are to be returned.
Matching requirement. A donor contributes $5 million, on the condition that the receiving nonprofit finds other donors to match the funds. Any funds not matched must be returned to the donor.
Challenge grant. The recipient organization only receives a $500,000 donation if it receives at least $2 million from other sources. If not, then the donor does not issue the funds.
Geographic condition. A donor will only issue a $200,000 donation to a school lunch program if all of the funds are used at schools within a specific city.
Time-specific use. A nonprofit must use the entire amount of a $10 million donation within three years, or else any remaining funds must be returned to the donor.
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FAQs
Can a donation be both conditional and restricted?
A donation can be both conditional and restricted. This occurs when a donor sets a condition that must be met before the organization can access the funds, and once met, imposes a restriction on how the funds must be used. In such cases, the donation is initially recorded as a liability and only recognized as restricted revenue after the condition is satisfied.