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Tips and Tricks for In-Kind Donations

by CK Senior Manager, Emily Cook

Many non-profit organizations and private schools benefit from donations of goods and services that are vital to fulfill their mission. With the holiday season in full swing your organization or school could be receiving special donations soon. In order to capture the value of these non-cash contributions and ensure your records accurately reflect the cost of running your organization, it is important to include these donations in your financial statements. However, identifying, valuing and recording non-cash donations can be a bit tricky. Here are five brief pointers to help you.

  • What is an in-kind donation? An in-kind donation refers to non-cash gifts of goods or services that would need to be purchased if not provided by the contribution. These donations must a) create or enhance non-financial assets or b) require specialized skills and be provided by individuals possessing those skills. The organization must also have discretion over the use or distribution of these goods or services.
  • How do I value in-kind donations? In-Kind donations should be recorded at the fair market value at the date of donation. An easy way to find values of supplies and equipment is to search the internet. Professional service firms or facility owners can typically provide an estimate of the value of donated services. It is important to keep records to substantiate the estimated fair value recorded in your financial statements.
  • How do I record in-kind donations? In-Kind donations should be recorded as in-kind revenue and offset by the appropriate asset or expense on the date of receipt. Donated assets should be depreciated based on the remaining life of the asset at the date of donation.
  • Should I budget for in-kind donations? If you have a reasonable idea of what goods and services will be donated throughout the year, you should include the in-kind revenue and related expenses in your budget.
  • Are there required financial statement disclosures regarding in-kind donations? Financial statement notes should include the nature and fair value of the goods and services received and the valuation method used.

By recording in-kind donations and the related expenses or assets, you will increase the accuracy of your financial statements and better illustrate the resources needed to fulfill your mission. The SST team has served non-profit and educational organizations for over 25 years, and if you have questions or would like more information on in-kind contributions or other financial reporting topics, please contact me at ecook@sstcpa.com or 214.274.3941.