Documenting in-kind contributions
Abstract
Developing an effective financial management system can be a challenge for national service program directors. Understanding financial management responsibilities and the fundamental concepts of national service budgets will help program directors streamline their work. Especially problematic is the issue of in-kind contributions; donated goods and services must be as carefully tracked and monitored in the same manner as cash donations. This effective practice, shared by Walker and Company, LLP, at the 2006 Financial Management Institute held in San Diego, CA, outlines the necessary steps for proper documentation of in-kind contributions.
Issue
In-kind contributions (non-cash transactions in the form of goods or services) are not always carefully documented by national service participants. Many rules and regulations apply to national service providers, and the varied components of maintaining a successful budget can be cumbersome if not properly understood. National service organizations are subject to audits; and when financial reporting is incomplete or delinquent costs may be questioned.
Action
- Develop an effective financial management system from the outset that maintains individual accounts for both federal and grantee share that report expenses consistent with the format of the program budget.
- Determine the value of in-kind contributions such as, services, material, equipment, building, and land. To decide the appropriate value of goods or services, consider what the cost would be if the goods or services were not donated and needed to be purchased.
- Recognize that in-kind contributions include any non-cash donation including corporate loaned executives; meetings held in donated spaces; government or college interns and/or fellows; corporations or municipalities that donate supplies for projects; landlords who donate space or discount rent.
- Document in-kind contributions using the same standards as other expenditures.
- Record in-kind contributions as both revenues and expenses in the General Ledger and all Corporation for National and Community Service financial reports.
- Provide the donor with a receipt and have them sign it. It should include the donor's name, date of donation, description of the item or service, and the estimated value. Keep a copy of the donor's receipt for your files.
- Retain financial records for three years from the date of submission of the final Financial Status Report.
- Goods and services that have been correctly documented and that are necessary to accomplish the program's goals and activities may be used as a match.
- Volunteer exception for match: the value of direct community services performed by volunteers does not count as match.
Context
National service providers are required to submit financial reports to both the Corporation for National and Community Service and their host organization.
Outcome
- National service providers who establish an effective financial accounting system and set up appropriate accounts from the outset are more organized and better equipped to deal with reporting issues.
- National service providers who understand the guidelines for reporting in-kind contributions are less likely to experience improper reporting consequences, such as disfavor from the host organization or questioned costs during an audit.
- Once financial reporting responsibilities are adequately met, organizations can expend greater energy and resources on achieving goals.
Evidence
National service providers who accurately report in-kind contributions experience more successful overall financial management and have an easier time meeting their matching requirements.
Posted On
April 4, 2002For More Information
Related Practices
Related sites
MAP: The Management Assistance Program for Nonprofits
