A trip to the bond market can come with an accounting surprise for some charities.
Advisers told the Financial Accounting Standards Board on March 19, 2026, that nonprofits issuing certain public debt can find themselves swept into public-entity reporting rules under U.S. GAAP, triggering earlier adoption dates, broader disclosures and added compliance costs.
“I would agree that there is some confusion out there,” said Sheryl Madden, deputy CFO and controller of The Kresge Foundation, at a meeting of FASB’s Not-for-Profit Advisory Committee.
Madden said nonprofits may assume they are outside the tougher framework, only to find that issuing public conduit debt, such as a public bond, “could then flip into the reporting requirements of a public entity” — bringing broader disclosures and earlier effective dates for new accounting standards than their nonprofit peers face.
The distinction is technical but consequential. Nonprofits are excluded from the definition of a public business entity under U.S. GAAP. But depending on whether their securities are available to the general public or trade publicly, some can still be treated as public entities for certain reporting purposes.
For organizations issuing debt for the first time, Madden said, “the research component is a bit overwhelmingly administrative.”
She said a public tax-exempt bond does not automatically produce that result. “Even if you issue a public tax-exempt bond, it may not necessarily result in becoming a public entity,” Madden said, because the trigger is “whether or not the securities are available to the general public or are trading publicly.”
Among nonprofits that commonly use bond financing are healthcare systems, senior-living and assisted-living organizations, colleges and universities, private and charter schools, cultural institutions such as museums and libraries, and community groups like YMCAs and community centers.
Where the Rules Get Murky
Auditors on the panel said they still spend substantial time walking clients through the distinctions.
“There is confusion because of the closeness in public business entity and public entity,” said Dawn Stark, partner at Plante Moran. She added that “there’s still confusion within the marketplace.”
Stark said nonprofits with conduit debt can struggle to determine which effective date applies when standards use different terminology, leaving some organizations on faster adoption timelines than otherwise similar peers.
For users of financial statements, the issue is less about whether adoption comes sooner or later than whether it happens consistently. Robert Dobbins, managing director at S&P Global Ratings, said comparability suffers when similar issuers adopt standards on different schedules. “The more often everyone is on the same timeframe in which they’re adopting the changes, the better,” he said.
Dobbins said ratings analysts often compare like issuers with like issuers — for example, not-for-profit healthcare organizations against other not-for-profit healthcare organizations — making inconsistent adoption timelines particularly unhelpful.
Fixing the Framework
Some committee members urged FASB to simplify the framework. Madden said “the definitions should be clarified,” or “perhaps just all not-for-profits in general should be scoped out of the definition, regardless of whatever type of debt that they issue.”
Rebecca Bloch, associate professor of accounting and vice chair at Fairfield University, said the problem extends beyond compliance costs. “Having multiple definitions certainly increases the complexity,” she said, which “will impact the decision usefulness for users.”
The discussion left FASB with a clear message: for some nonprofits, entering the bond market can bring accounting consequences they did not expect, and the rules around when that happens remain too murky.
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