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Recording Donated Equity upon the Receipt of Tangible Fixed Asset Donations of Material Value - Appendices

APPENDIX I

NCUA TECHNICAL ASSISTANCE GRANTS (TAGs)

Evidence of promise made?

Yes, evidence of a promise to give is the formal grant award letter from OSCUI.

Conditions?

Conditions are stated in the award letter.

  1. Credit union must not commit to, contract for, procure or purchase the goods or services for which they are requesting the grant, prior to receiving written approval from NCUA for the grant.
  2. Credit union must request reimbursement for grant fund awards expended within the commitment period designated by NCUA, or request an extension of the commitment period, otherwise the grant award will be forfeited.
  3. The grant funds must be used for the purpose stated in OSCUI’s grant award letter.

Receipt of promised asset?

Receipt of the promised asset (cash reimbursement) occurs when conditions are met, i.e., grant approval, expenditure, submission of receipts and supporting documentation, etc.

Illustrative Entries -- NCUA TAGs

  1. When award letter is received, but before incurring qualifying expenses, meeting of additional conditions, or disbursement of funds, there is no entry. Note: Funds are not distributed in advance of conditions being met, so no Refundable Advance entry
  2. When the award letter has been received and qualifying expenses have been incurred but conditions (such as submitting documentation for reimbursement) have not otherwise been met, nor funds disbursed, the following entries apply:

    Assumptions are: (1) pre-approval was correctly obtained, (2) qualifying expenses were incurred, (3) timeframes were properly adhered to, and (4) the possibility of not submitting claim and related documentation within the required timeframe is remote, i.e., conditions are substantially met.

    Note: A common form of conditional promise to give is one in which the promisee must incur certain qualifying expenses (or costs) before the promise becomes unconditional. The promise should be recognized to the extent qualifying expenses are incurred. [C67.809, Q&A.116/117 #8]

    1. Debit Expense: $5,000
    2. Credit Account Payable or Cash: $5,000
    3. Debit Grant Contribution Receivable: $5,000
    4. Credit Income from TAGs: $5,000
  3. When conditions are met (documented claim submitted meeting all terms and conditions), and OSCUI reimburses the credit union, the following entry applies:
    1. Debit Cash: $5,000
    2. Credit Grant Contribution Receivable: $5,000
  4. If the credit union misapplied this RAP (recognized income pre-maturely) or failed to meet the terms and conditions of the TAGs in any way such that the TAG grant will not be disbursed, i.e., even after expenditures have been made and income recorded, income reversal entry:
    1. Debit Income from TAGs: $5,000
    2. Credit Grant Contribution Receivable: $5,000

APPENDIX II

NATIONAL FEDERATION OF COMMUNITY DEVELOPMENT CREDIT UNIONS (NFCDCU) GRANTS

Evidence of promise made?

Yes, formal agreement signed by both parties.

Conditions?

Specific terms and conditions of NFCDCU grants vary depending on the credit union’s application request and management’s intended use of the funds. Typically, grant awards are divided into two portions.

The first portion is provided to the credit union at the time the grant application is approved by the NFCDCU’s capitalization committee.

The remainder of the award would be provided to the credit union after one or two years, depending on whether the credit union achieves the performance standards documented in the grant application and written grant agreement.

Once it is disbursed it cannot be recalled. Equity grants may only be used to build capital (net worth) and cannot be used to offset operating losses in the period (calendar year) disbursed.

Receipt of promised asset?

Partial disbursement; Other funds held back & conditional.

Illustrative Entries – NFCDCU Equity Grants

Funds disbursed cannot be recalled per agreement (unconditional transfer), so income is recognized.

  1. When the NFCDCU and the credit union sign the agreement and the funds are initially disbursed (e.g., $10,000 equity award with $4,000 disbursed):
    • Debit Cash: $4,000
    • Credit Income from Equity Grant: $4,000

    Funds disbursed cannot be recalled per agreement (unconditional transfer), so income is recognized.

  2. When the NFCDCU’s Capitalization Committee reviews the credit union’s performance in light of the agreement’s performance goals and agrees to disburse the additional $6,000 of funds. (Note: Funds are not distributed in advance of conditions being met, so no income recognition or Refundable Advance entry.)

    • Debit Grant Contributions Receivable (or Cash) $6,000
    • Credit Income from Equity Grant $6,000 

    Disbursement of funds after the initial award is at the Capitalization Committee’s discretion (conditional), so no income recognition until the Committee’s decision is final.

  3. When the NFCDCU disburses the funds:

    • Debit Cash: $6,000
    • Credit Grant Contributions Receivable: $6,000

    If the Capitalization Committee notifies the credit union of its decision in #2 and disburses the funds simultaneously, then entry #2 and #3 would be combined without need of the “Grant Contributions Receivable” step.

APPENDIX III

NATIONAL CREDIT UNION FOUNDATION (NCUF) GRANTS

Evidence of promise made?

Yes, formal agreement signed by both parties.

Conditions?

The formal Grant Agreement outlines the grant disbursement terms and the specific terms and conditions of the grant.

The Foundation disburses the grant in three payments, as stipulated in the Grant Agreement. The Foundation will issue the first grant payment to the grantee upon receipt of the signed Grant Agreement. Two additional grant payments will be disbursed after receipt of satisfactory Progress and Final Reports documenting accomplishments towards the project success measures as outlined in the Application and Grant Agreement.

All grantees are required to submit a Progress Report during the grant period and a Final Report at the conclusion of the period. The reports must specifically address the success measures for the project that were outlined in the Application and codified in the Grant Agreement. Grant payments will be based on satisfactory progress on the project as described in the reports.

Receipt of promised asset?

Funds in three disbursements; First disbursement at award.

Illustrative Entries – NCUF Equity Grants

  1. When the NCUF and the credit union sign the agreement and one third of the funds are initially disbursed (e.g., $9,000 equity award with $3,000 disbursed):
    • Debit Cash: $3,000
    • Credit Income from NCUF Grant: $3,000 
  2. When the NCUF Grant Reviewer or Review Committee reviews progress reports and goal achievements in light of the grant terms and conditions and decides to release another payment.
    • Debit Cash: $3,000
    • Credit Income from NCUF Grant: $3,000
    • Disbursement of funds is at the NCUF’s discretion (conditional), so no income recognition until the final NCUF decision.
  3. When the NCUF Grant Reviewer or Review Committee reviews progress reports and goal achievements in light of the grant terms and conditions and decides to release the final payment.
    • Debit Cash: $3,000
    • Credit Income from NCUF Grant: $3,000
    • Disbursement of funds is at the NCUF’s discretion (conditional), so no income recognition until the final NCUF decision.
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