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  • Endowment Loan

    We are NFP. We have been granted a short term loan on our endowment. How would I record this aside from transferring the cash from the endowment to the operating fund. Would I reduce the net assets perpetual in nature and report a corresponding current liability for the loan amount?

  • #2
    First a few questions, since I am not clear about what is meant by "a short term loan on our endowment".
    • Were restricted net assets reclassified as unrestricted net assets?
    • Were assets set aside as endowments reclassified as available for operations?
    • Were funds actually transferred to some person or entity outside the corporation?
    • Was the "short term loan on our endowment" approved by the board of directors?
    • Was the transaction compatible with the organization's written policy of the treatment of endowments?
    • How do you classify endowments in the equity section of your Statement of Financial Condition (Balance Sheet)?

    An overly-simplified equity section of the Balance Sheet would be something like:

    Net Assets
    Restricted Net Assets
    Unrestricted Net Assets
    Endowments
    Board Reserve
    Available for Operations
    Total Net Assets
    Lorin Browning, Ph. D.
    Fellow -- National Tax Practice Institute
    lorin@lorinbrowning.com

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