Myesha Kind is the executive director of HOPE (Homes, Opportunity, and Peace for Everyone). HOPE is a non-profit organization with two key mandates. First, it provides food and shelter to the homeless. Second, it attempts to educate the public and lobby government for programs to assist the homeless.

Myesha is preparing her organization’s year-end financial statements, and several issues have arisen. She has approached you, as a professional accountant, for advice on how to address these issues. She informs you that HOPE has a December 31 year-end and uses the deferral method for accounting for contributions.

1. HOPE received a $100,000 donation on December 3 from a wealthy benefactor. The donor clearly did not expect the monies to be spent in the current year and did not impose any restrictions on the funds. HOPE also did not have the time to spend the unexpected funds. These monies, if recognized in the current year, would likely create a sizable surplus. Myesha would like to know if they can be considered restricted for financial reporting purposes so that they could be recognized in the following year, when they will be spent.

2. HOPE has an endowment fund, the income of which is used to fund its soup kitchen. As part of its fundraising efforts, HOPE started targeting wealthy seniors two years ago and requesting their support of this program. The promotional material by HOPE has indicated that all bequests received by the organization will automatically be used to fund the soup kitchen endowment fund unless otherwise specified by the donor. The fundraising effort has been very successful, as HOPE has already received six bequests that specifically directed funds to the soup kitchen endowment fund. Recntly, HOPE received a significant bequest ($200,000), but there were no specific directions on how the funds were to be used. Myesha would like to know if she can
record the donation as an endowment contribution.

3. In June of the current year, HOPE received a $10,000 contribution that was restricted to funding HOPE’s government lobbying program. HOPE had already budgeted sufficient funds ($17,000) for the program and used these operating funds to pay for the program in the current year. Myesha would like to know if she can defer the $10,000 until next year, when it will be used.

4. HOPE had planned on launching an educational campaign early in the following year on the problems faced by homeless youth and had received a $50,000 donation from one of its past directors specifically to fund the campaign. At its most recent board meeting, in early December, the board decided not to proceed with the campaign because another organization had initiated a similar campaign. Myesha contacted the donor to let her know of the board’s decision and the donor indicated that she was willing to let HOPE keep the donation. Myesha would like to know what the implications are for HOPE’s year-end financial statements.

Required
Prepare a report addressing Myesha Kind’s concerns.