Conservation Easements and Coastal Protection – A Case of Environmental Accountability

Abstract

North Carolina Coastal Federation was formed in 1982 by eight grassroots groups to provide vision for long-term management of the coastal environment, and to facilitate citizen action in defense of coastal resources. The Federation’s mission was to “empower coastal residents and visitors from all walks of life to protect and restore the water quality and critically important natural habitats of the N.C. coast.” Since those humble beginnings in the living room of Todd Miller, the founder and executive director, the Federation had grown to about 30 employees in three regional offices, with an annual budget of about $2 million. Areas of past and current policy focus included wetland preservation and restoration, environmental education for all ages, prevention of stormwater runoff, regulation of hardened shorelines, and land-use planning throughout the coastal zone.

Management and accounting in a large 501(c)(3) (non-profit) environmental organization presented challenges unlike those in ordinary for-profit businesses. One area of special concern was that of Conservation Easements. The Easements were voluntary, perpetual, legal restrictions on land use that prevented development on the affected property. These Easements were donated to a non-profit organization; the donating landowner would have received a tax deduction for the charitable contribution, and the organization acquired an asset the value of which was exceedingly difficult to determine, and which may have changed in uncertain ways over time.

Another special challenge was that of in-kind gifts. The Federation had received gifts of motor vehicles, boats, and a large house (that had to be moved from the land where it sat). Many of these assets were retained only long enough to be sold or re-gifted to other groups or government agencies. Correct accounting for these items (especially the house) presented difficult issues in terms of both categorization and valuation of those that were not sold.

This case will help students understand the unique challenges of financial reporting for charitable organizations, with specific attention given to Conservation Easements and donations in kind. The case is appropriate for accounting courses studying non-profit organizations, broader courses in non-profit management, tax accounting for individuals, courses in environmental economics and for strategy courses that include a non-profit assignment.