USA Non Profit town funding

[lohearn63]

Hi. I do the books for a small nonprofit. They have been awarded $7,500 from their local town from the town's "free cash" fund for a specific project. The nonprofit will send the bills to the town and the town will pay them on behalf of the nonprofit from the awarded funds.

The non profit does not view this funding as income to them as they don't receive the money directly and they don't write the checks themselves. They are also not recognizing the related expenses as expenses on their books. I'm thinking that they absolutely need to recognize both the income and expenses (which will "wash" cash wise). The town will undergo a state audit as most towns do in this state, and the non profit also has to report it's non profit finances to the state annually. If the non profit were ever picked for a random audit I can't help but think the state might be like "hey, where are those town funds on your books".

But I've not encountered this situation before so I'm looking for some feedback.

 

[BIG E]

You are totally correct.
There's a line on Form 990 (whichever version is used) that specifically is used to report government grants, and program services are listed as expenses.
What you need to determine is IF the non-profit entity is REQUIRED to file a form with the State Charities Bureau. Each state varies in its rules 501(c)(3) vs. non 501(c)(3) non-profit organizations.

 

[lohearn63]

Thank you for responding. Yes, this state requites all charities to file with them annually. The non profit in question was organized to protect a natural environment this is technically owned by the state and is located in the town that the group is receiving their funding from. It is an open space that is open and available for any member of the public to enjoy.