In-Kind Donations Accounting and Reporting for Nonprofits

Original Article by CFO Selections, cited below

Summary by Simply the Basics

First, let’s begin to outline what qualifies as In-kind and what does not qualify.

In-Kind

• Goods/Property: computer, office furniture, medical supplies, food, copyrights, patents, as well as items that can be used in fundraisers or auctions.

• Professional Service: legal, accounting, videography, web design, etc.

• Creation of an asset: If a group of volunteers creates an asset it may qualify, such as building a home for families with limited income.

• Other: meeting space, storage, printing, etc.

Not In-Kind

• Goods or services that your organization wouldn’t have otherwise purchased. For example, if a musician donates their service to an event but you don’t typically engage musicians to perform.

• Volunteer hours that are not providing a specialized skill (such as legal). If a volunteer is supporting check-in or sorting, this does not qualify.

Accounting and reporting your in-kind donations correctly is of the utmost importance due to how much nonprofits may rely on these items to be successful in their mission. Many organizations are also subject to Generally Accepted Accounting Principles (GAAP) and annual audits so you will want to create a detailed and robust tracking.

When to record

Record an in-kind donation as soon as the donor provides the gift and should be recorded within the period they are received.

How to value

Record your donations according to “fair value.”

How you determine the value of your in-kind donation will depend on the type of donation:

-For products, like computers, figure out what your organization would have paid for the goods on the open market had they not been donated. 
- Track the hours of professional services donated to your organization.
- Contact the donor and ask them to place a value on the in-kind services. 

How to acknowledge the gift

Always say thank you! Additionally, there are some obligations by the IRS:

• Donors should be provided a written acknowledgment or bank record from the organization so they may claim a tax deduction.

• Donors must have written acknowledgment for any donation of $250 or more.

Continue reading “In-Kind Donations Accounting and Reporting for Nonprofits” for some examples of what to include in your acknowledgment and the consequences of poor reporting.

Kimball, T. (2020, February 24). In-Kind Donations Accounting and Reporting for Nonprofits. https://www.cfoselections.com/perspective/in-kind-donations-accounting-and-reporting-for-nonprofits