Nonprofit Edition (FASB ASC 958)

How to set up a 501(c)(3) organization in Kantivo, track donor-restricted gifts, allocate functional expenses, and produce the four required nonprofit financial statements.

Nonprofit Edition feature: Donor restriction tracking, functional expense allocation, and the FASB 958 report suite require a Nonprofit Edition license (Nonprofit Pro, Nonprofit Enterprise, Accountant Nonprofit, or Firm Nonprofit). The 30-day free trial includes the full feature set.

Overview

Kantivo Nonprofit Edition activates when a company's reporting standard is set to fasb_958. Once activated, the company gets a nonprofit chart of accounts, a Donor-Restricted Funds page in the sidebar, a Nonprofit Reports page, and standard-aware terminology throughout the UI (Equity becomes Net Assets, Income Statement becomes Statement of Activities, etc.).

The features described on this page only appear for companies with reporting standard set to FASB ASC 958. Standard GAAP and IFRS companies keep their existing behavior — switching between standards is per-company, not global.

Setting Up a Nonprofit Company

From the sidebar, open Settings → Companies → Add New Company (or use Setup Wizard for first-time setup)
Fill in the company name and EIN as usual
For Reporting Standard, pick Nonprofit (FASB ASC 958)
Leave Create default chart of accounts checked — this seeds the 35-account nonprofit COA
Save

Already created your company under GAAP? Open Settings → Company Profile and change the reporting standard to Nonprofit (FASB ASC 958). The terminology swaps and nonprofit sidebar items will appear after the next page refresh. You'll need to add the Net Assets equity accounts manually (or import the nonprofit COA template).

Net Asset Classifications

FASB ASC 958 requires that nonprofit equity be classified into three categories. Kantivo seeds these as separate equity accounts on new nonprofit companies:

Classification	Account #	When to use
Without Donor Restrictions	3000	General operating funds. Anything not earmarked by a donor.
With Donor Restrictions — Temporary	3100	Purpose-restricted or time-restricted gifts that will be released when the condition is met.
With Donor Restrictions — Permanent	3200	Endowment principal that must be held in perpetuity. Only investment earnings on the principal are spendable.

The Statement of Financial Position automatically presents these as separate subtotals under the Net Assets section.

Restriction Types

When a donor places a restriction on a gift, that restriction falls into one of three types:

Purpose-restricted — the donor specified what the gift is for (e.g. "for the new building fund," "for the youth scholarship program"). Released when the restricted activity occurs.
Time-restricted — the donor specified when the gift may be used (e.g. "for fiscal year 2027," "release in equal quarterly amounts over five years"). Released as time passes.
Permanently restricted — endowment principal. The principal stays restricted forever; only investment earnings on the principal can be spent (and even those earnings may carry purpose restrictions).

Creating a Donor Restriction

From the sidebar, open Donor-Restricted Funds
Click + New Donor Restriction
Fill in:
- Name — short, descriptive (e.g. "Capital Campaign — Walk-In Refrigerator")
- Restriction Type — purpose, time, or permanent
- Donor Name (optional) — for tracking which donor or grantor placed the restriction
- Original Amount (optional) — the full gift amount; tracks released vs. remaining
- Release Condition (optional) — a short note describing what would have to happen for the restriction to be released
- Description (optional) — longer narrative for the audit file
Save

The restriction now appears in your list with status Active. You can edit metadata at any time; the original amount, released amount, and status are managed by the system after the restriction has activity.

Tagging Transactions to a Restriction

For the Statement of Activities to split revenue correctly across the three net asset columns, every restricted donation transaction or invoice must be tagged to its corresponding donor restriction.

From the Invoice modal:

When creating a customer invoice, the Donor Restriction dropdown appears below the line items. Pick the restriction this invoice corresponds to. Leave blank for unrestricted contributions.

From the General Journal modal:

When recording a manual journal entry (e.g. for a directly-deposited restricted gift), the Donor Restriction dropdown appears in the header section. Pick the restriction; the system records the tag on the transaction record.

Best practice: If a single deposit covers multiple restrictions, split it into separate transactions — one per restriction. The Statement of Activities cannot split a single transaction across multiple restriction columns.

Releasing a Restriction

When the condition that triggered a restriction is satisfied (project completed, time elapsed, milestone reached), you release the restricted funds. The release reclassifies the released amount from temporarily restricted net assets to unrestricted net assets via the standard FASB 958 reclassification journal entry.

From the Donor-Restricted Funds page, find the restriction
Click Release
Enter:
- Amount to Release — can be partial; cannot exceed remaining balance
- Release Date — defaults to today
- Notes (optional) — describe what condition was met
Click Release

The system auto-posts this journal entry:

Dr Net Assets With Donor Restrictions — Temporary (account 3100)
Cr Net Assets Released from Restrictions (account 4900)

The transaction is tagged to the restriction, so the Statement of Activities shows it as a reclassification line — positive in the Without Donor Restrictions column, negative in the With Donor Restrictions Temporary column. The two amounts net to zero across columns; total revenue is unchanged.

When the released amount equals (or rounds to within $0.01 of) the original amount, the restriction status flips to Fully Released. You can no longer release additional amounts; the restriction stays in your history for audit reference.

Functional Expenses — What & Why

FASB ASC 958 requires nonprofits to report expenses by both natural class (Salaries, Rent, Office Supplies, etc.) and functional class (Program Services, Management & General, Fundraising). The Statement of Functional Expenses presents both views as a matrix.

Form 990 filers must complete this matrix every year, so getting the functional classification right at transaction time saves significant audit prep work.

Functional Class	What it covers
Program Services	Costs that directly further the mission — program staff salaries, program supplies, direct beneficiary assistance, program travel.
Management & General	Overhead — executive salaries (the portion not allocated to program work), accounting and audit fees, board expenses, general office occupancy, insurance.
Fundraising	Cost of soliciting donations — fundraising event costs, donor database subscriptions, fundraising staff salaries, direct mail.

Assigning Functional Classification to an Account

Functional classification is set on the account itself, not on individual transactions. This is the right model because the same expense category (Salaries) typically maps to a single function — once you set "Program Salaries" as Program and "Management Salaries" as Management & General, every transaction posted to those accounts inherits the classification.

Open Chart of Accounts
Click + New Account (or edit an existing expense account)
Set the Account Type to Expense, Cost of Goods Sold, or Other Expense
The Functional Classification dropdown appears below — pick Program, Management & General, Fundraising, or None
Save

What about shared expenses? Rent and utilities often need to be allocated across multiple functional classes. The simplest approach is to create separate accounts for each function (e.g. "Program Occupancy" and "Office Occupancy") and split the recurring expense between them at posting time. Nonprofit Enterprise adds advanced allocation rules for automatically splitting an expense across multiple functions on a fixed percentage.

Statement of Activities

The nonprofit equivalent of the Income Statement. Found at Nonprofit Reports → Statement of Activities.

Structure:

Columns: Without Donor Restrictions, With Donor Restrictions (Temporary), With Donor Restrictions (Permanent), Total
Revenue section — each revenue account split into the column matching the donor restriction it was tagged to
Net Assets Released from Restrictions — the reclassification line; positive in unrestricted, negative in temporary, nets to zero total
Expense section — grouped by functional classification (Program / M&G / Fundraising / Unclassified); always shown in the unrestricted column
Change in Net Assets — per-column total at the bottom

If any expense rows show in the "Unclassified" subgroup, that's a signal to fix the functional classification on those accounts before audit.

Statement of Functional Expenses

Matrix view of expenses by natural class (rows) and functional class (columns). Found at Nonprofit Reports → Statement of Functional Expenses.

Each expense account appears as a row. The dollar amount appears in exactly one functional column based on the account's classification — Program, Management & General, Fundraising, or Unclassified. The Total column sums across the row.

Column totals at the bottom should reconcile to the expense totals on the Statement of Activities. If they don't, check that no expense activity exists outside the period or that no Year-End Close transactions are slipping into the numbers.

Statement of Financial Position

The nonprofit Balance Sheet. Found at Nonprofit Reports → Statement of Financial Position.

Assets and Liabilities sections work identically to the standard Balance Sheet. The Net Assets section automatically splits into:

Without Donor Restrictions
With Donor Restrictions — Temporary
With Donor Restrictions — Permanent

Each subsection lists the matching equity accounts (typically 3000, 3100, 3200 from the seeded COA) plus a current-year change line that rolls the year-to-date activity for that net asset class. The change line works the same way the standard Balance Sheet rolls year-to-date Net Income into Retained Earnings — visible mid-year before the formal Year-End Close has run.

The footer displays whether the report is balanced (Total Assets = Total Liabilities and Net Assets). If imbalanced, a red warning surfaces the dollar difference for investigation.

Schedule of Net Assets by Restriction

A disclosure-quality supporting schedule. Found at Nonprofit Reports → Schedule of Net Assets by Restriction.

Each active restriction gets a row listing its original amount, released-to-date amount, remaining balance, donor, and release condition. Restrictions are grouped by type (Purpose / Time / Permanent) with subtotals; a grand total summarizes overall restricted-fund position. This is the schedule your auditor will request to support the Net Assets balances on the Statement of Financial Position.

Funds Available for Release

A worklist surfacing active purpose- and time-restricted funds with releasable balances. Found at Nonprofit Reports → Funds Available for Release.

This is a review queue, not an auto-release. Each row shows the restriction's release condition; your team reviews whether the condition is satisfied and clicks Release if so. No releases happen without human approval. Permanently restricted funds never appear here (their principal is never releasable).

Need to migrate from QuickBooks Nonprofit? Kantivo's QuickBooks import will bring across your customers, vendors, and transaction history. Once imported, switch the company's reporting standard to FASB ASC 958, then manually reclassify your equity balances into the three Net Assets accounts. Contact support if you'd like a guided migration.