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Donated Capital Asset Governmental funds normally do not report capital assets or donated capital assets. If a school district intends to sell rather to keep donated capital assets, revenues may be reported if either of the following conditions is met: a. b. the asset is sold prior to the end of the fiscal year, and the proceeds of the sale are available; or the asset is sold (or the district has entered into a contract to sell the asset) prior to the issuance of the financial statements, and the proceeds of the sale are considered available. If the proceeds of the sale are not considered available, a receivable and a liability for deferred revenue would be recognized in the appropriate governmental fund only at the time the district finally entered into a sales contract. Otherwise, the donated asset should be treated like a capital asset used in the government’s operations until a sale occurs. Example 1: An used vehicle is donated to school district XYZ which sold it for $10,000. The sale occurred before August 31. Below are the appropriated journal entries in governmental fund: Debit Credit General Ledger Account 240 960 Cash on Deposit with County Revenue-Sales of donated vehicle $10,000 $10,000 Example 2: School district XYZ signed an agreement with its buyer to sell a donated building prior to issuance of its financial statements. The estimated sales price was $100,000. Below are the appropriate journal entries: Debit 340 750 Accounts Receivable Deferred Revenue – Sales of Bldg Credit $100,000 $100,000 When building is sold: 240 960 Cash on Deposit with County $100,000 Revenue-Sales of donated Building $100,000 750 340 Deferred Revenue – Sales of Bldg Accounts Receivable $100,000 Donated Assets (not Capital Assets) (Voluntary Nonexchange Transactions) $100,000 Private companies and/or individuals might donate cash or assets (not capital assets) to school districts, the recognition of revenue or deferred revenue and expenditure is required when all eligibility requirements are met or when there are no eligibility requirements. If the donation is announced in advance and the school district believes that the collection is probable, the school district should recognize a receivable and a revenue. Eligibility requirements means conditions or criteria and time period imposed by donors. Example 3: A private individual donated $5,000 cash to a school district to be used at any time, and for any purposes deemed appropriate by the school district. The following journal entries should be recorded: General Ledger Account 240 960 Debit Cash on Deposit with County Revenue – Donations Credit $5,000 $5,000 If the donor announces a year before paying it and the collection is probable, the district should recognize a receivable and a deferred revenue when the donation is announced, as follows: Debit 340 750 Accounts Receivable – Donor Deferred Revenue – Donations Credit $5,000 $5,000 When Cash is Received: 240 960 Cash on Deposit with County Revenue – Donations $5,000 750 340 Deferred Revenue – Donations Accounts Receivable – Donor $5,000 $5,000 $5,000 Example 4: A private individual donated supplies worth $2,000 to a school district to be used at any time and for any purposes deemed appropriate by the school district. Below are the appropriate journal entries: Debit Expenditures – Donated Supplies Revenues – Donated Supplies Credit $2,000 $2,000 Donated Services Payments of salaries and benefits made on behalf of the district’s employees for services rendered to the district, are required to record as revenues and expenditures/expense in the fund receiving the services. The Governmental Accounting, Auditing, and Financial Reporting (GAAFR) recommended that school districts follow FASB statement No.116 for donated services by volunteers, because GAAP is silent on this issue. Per FASB statement No. 116, the recognition of revenue and expense is limited to those services that meet one or the other of the following criteria: the donated service creates or enhances nonfinancial assets (e.g., volunteers improvements to a capital asset); or the donated service requires specialized skills, and is provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation (examples: accountants, architects, doctors, lawyers, etc.) Example 5: Company ABC agrees to provide one half of a school district’s bookkeeper for total amount of $15,000. Below are the appropriate journal entries: General Ledger Account 530 960 Debit Expenditures – Donated Sal./Ben. Revenue – Donated Sal./Ben. Credit $15,000 $15,000 Example 6: An accountant from a private company donates his/her time to work on setting up Medicaid Administrative Match billings. The total time spent on the project was 15 hours. For that type of work, the market rate is $40 per hour. Below are the appropriate journal entries ($40 x 15 hours = $600): Debit 530 960 Expenditures – Donated Services Revenue – Donated Services Credit $600 $600