During our August nonprofit workshop, our nonprofit team shared the latest in accounting and tax updates, as well as insights from AICPA’s recently revised Audit & Accounting Guide for Not-for-Profit Entities. We posed various questions during our workshop and over the next few blog postings, we will share the answers to those questions.
Q. Can permanent restrictions be changed?
A. Restrictions on permanent endowments can be modified or released in two ways:
- Donor consent
- Court approval
Court approval covers situations where the donor is no longer living or contactable, and requires a situation where the purpose of the permanent endowment has become unlawful, impracticable, impossible to achieve or wasteful (for example where the purpose of the endowment is to fund a particular disease that has been wiped out, such as smallpox), or where due to unanticipated circumstances a modification will further the purposes of the fund.
And a reminder, when a nonprofit accepts a restricted contribution, it accepts a fiduciary responsibility to use the gift for the purposes for which it is given.