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Donated Services and Gifts-in-Kind
By Sandra Strelka, CPA
For many non-profit organizations the donations you receive throughout the year aren't just coming in the form of cash. Donations can also come in the form of donated services or gifts-in-kind and depending on the specific donation, the value they hold must be recorded on your books.
Donated services are required to be recorded in the financial statements if they either (a) create or enhance a nonfinancial asset or (b) require specialized skills and would need to be purchased if not provided by donation. An organization may construct a new building, which is considered a nonfinancial asset. Services may be donated from architects and engineers, along with other volunteers. Both the value of the donated services requiring specialized skills and those not requiring such skills should be capitalized as a cost of construction. Materiality should be considered. In some cases, it is not cost effective to record and determine the value, as the value is deemed to be immaterial.
Services that typically require specialized skills are provided by accountants, attorneys, architects, physicians, nurses, teachers, carpenters, electricians, plumbers and other professionals and craftsmen. Donated professional services such as these should be recorded at fair value, as contribution revenue, provided they would need to be purchased if they were not donated. For example, a homeless shelter may have a volunteer nurse available one day a week. This would be considered a specialized skill; however, if the organization would not purchase these services if they were not donated, a contribution would not be recorded.
Some contributions are referred to as gifts-in-kind. These consist of donated goods or other non-monetary items, such as materials, equipment and supplies. They may also refer to some less common things such as advertising space, radio ads, television airtime, and billboards. Any of these items that are contributed to the organization that can be used or sold should be measured at fair value and recognized as contributions when received.
Before accepting a non-cash contribution, consider whether your organization's mission will be aided by such a contribution. Some donors offer to contribute items that they have been unable to sell themselves in order to take a charitable giving tax deduction. It's a good idea for your organization to adopt a gift acceptance policy outlining what your organization is willing to accept and who is responsible for accepting or declining gifts.
Maintain a record of these donations throughout the year for ease in preparing annual financial statements. If you have any questions on recording donations of services or gifts-in-kind, give us a call.
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WKMR Not-For-Profit Services
At Winter, Kloman, Moter & Repp S.C., our not-for-profit team provides quality audit, accounting, tax, and consulting services to a variety of not-for-profit agencies, government funded businesses, private foundations, and assorted charitable organizations. Our experienced team has helped many not-for-profit organizations throughout Southeastern Wisconsin grow and thrive including:
- Human Service Agencies
- Cultural & Arts Organizations
- Charitable & Religious Organizations
- Educational & Day Care Institutions
- Professional & Trade Associations
- Assisted Living Facilities
- HUD/WHEDA Housing Projects
- Government-funded For-Profit Businesses
We concentrate on helping you best manage public or donated funds, analyzing how to get the most from your resources and helping you implement your plans to stretch every dollar. Our team of professionals understands your complex financial reporting needs, and will help you to accurately report your finances in an understandable way. We provide the independent audit and accounting services required by many of your funding sources by taking a value-added approach, implementing ever-changing tax reporting requirements, providing information technology consulting, and working with every aspect of your organization to support your success.
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