The board of directors for a nongovernmental not-for-profit organization decided to designate $20,000 each year for the next three years to fund a special research project it was planning to conduct at the end of the three-year period. How would these board-designated resources be reported on the statement of financial position?

• A. Net assets without donor restrictions
• B. Net assets with donor restrictions
• C. Net assets without donor restrictions
• D. Revenue reserves

Answer: (C)

Board-designated resources are internal earmarks, not donor-imposed restrictions. When the board sets aside funds for a future project, those resources are still under the organization’s control and are not restricted by external donors. Therefore they are reported as part of net assets without donor restrictions on the statement of financial position, often described as “board-designated” or “unrestricted” net assets. This designation can be changed by the board, unlike donor-restricted assets. The option describing unrestricted net assets is the correct presentation; “net assets with donor restrictions” would apply only if a donor had imposed restrictions, and “revenue reserves” is not a separate net asset category.