Article Summary: Accounting and Internal Control Considerations for Cryptocurrency Donations
As cryptocurrency donations become more common, not for profit organizations should evaluate whether their governance, documentation, and safeguards are ready before accepting digital assets. The article highlights accounting changes under ASU 2023 08 and practical internal control, valuation, and custody considerations.
- ASU 2023 08: Qualifying crypto assets are measured at fair value with changes recognized in net income and enhanced disclosures, effective for fiscal years beginning after December 15, 2024.
- Control structure: Update controls for authorization, segregation of duties, reconciliation, and policy/control alignment before activity becomes frequent or material.
- Valuation & custody: Set approved pricing sources, valuation timing, verifiable documentation, and clear custody/access controls to support audit and oversight expectations.
As cryptocurrency donations become more common across the not for profit sector, organizations are increasingly focused on whether they can accept digital assets, often before fully considering whether they are prepared to govern them.
Acceptance of digital assets as donations introduces accounting, internal control, and oversight considerations that extend well beyond initial recognition and valuation. For many organizations, the more significant challenge is ensuring that appropriate safeguards, documentation, and governance structures are in place before digital assets are received.
Accounting Considerations
Issued in December 2023, ASU 2023 08, Accounting for and Disclosure of Crypto Assets, requires qualifying crypto assets to be measured at fair value with changes recognized in net income and enhanced disclosures, effective for fiscal years beginning after December 15, 2024.
For not for profit organizations that accept, or are considering accepting, cryptocurrency, the guidance reflects that accounting effects extend beyond the point of receipt and are closely linked to operational processes, including related controls.
Internal Control Structure
Since digital assets do not behave like cash or traditional noncash contributions, accepting cryptocurrency donations could require updates to existing internal controls. Without thoughtful integration of the atypical risks of cryptocurrency into the control environment, organizations can introduce gaps in monitoring that are not immediately apparent. Evaluating whether existing control frameworks adequately address crypto-related risks will likely identify weaknesses and prompt the creation of targeted controls. Organizations should undertake this internal control evaluation before cryptocurrency donation activity becomes frequent or material.
Key considerations include:
- Authorization and segregation of duties – Defined approval, execution, and recording responsibilities for cryptocurrency transactions, including conversion to cash
- Reconciliation and oversight – Regular confirmation that recorded cryptocurrency balances and activity match wallet or custodian records, with independent review
- Policy and control alignment – Consistency between cryptocurrency practices and existing finance and internal control policies
Valuation and Documentation
Accurate valuation of cryptocurrency donations requires reliable, independently verifiable data. Informal or delayed documentation is often insufficient for audit and financial reporting purposes. Establishing clear, consistently applied documentation standards helps ensure that valuation controls are repeatable, supportable, and aligned with financial reporting and oversight expectations.
Key considerations include:
- Approved pricing sources – Use of reliable, consistently applied exchanges or valuation sources
- Valuation timing – Clear determination of the date and time control of the asset should be obtained
- Verifiable documentation – Retention of independent pricing data sufficient to support audit and reporting requirements
Custody and Safeguarding
Unlike traditional bank accounts, digital assets may be held through third party providers or organization controlled wallets, each with distinct control implications. Understanding how and where cryptocurrency is held, and how access and authority are established and monitored, is essential to evaluating whether custody arrangements align with the organization’s broader risk management and oversight framework.
Key considerations include:
- Custody structure – Use of third-party processors, custodial exchanges, or organization-controlled wallets, and how each structure allocates risk and responsibility
- Access and control – How access to wallets, credentials, and private keys is restricted and periodically reviewed
- Cybersecurity readiness – Ability to detect, respond to, and recover from theft, credential compromise, or other cyber incidents involving digital assets
Looking Ahead
As cryptocurrency donations continue to evolve, not for profit organizations should anticipate increased scrutiny around how digital assets are valued, safeguarded, and governed. What might begin as an occasional donation can quickly introduce expanded oversight considerations, as activity grows and requirements continue to change.
About Schneider Downs Not-for-Profit Services
Our Not-for-Profit industry group is committed to providing exceptional service and expertise to a community of clients who serve our regions tirelessly each day. We provide valuable insight to not-for-profit organizations of all sizes and their boards through our assurance, tax, advisory and technology consulting services and not-for-profit fund accounting software.
To learn more, visit our Not-for-Profit Industry Group page.
