How to make the most of your organization’s in-kind contributions

by Joe Wallis, CPA

If your nonprofit organization accepts non-cash donations, you could receive anything from marketing services to nonperishable food items, depending on its mission. These non-cash donations are known as in-kind contributions. Although they may be non-financial gifts, they can still help your organization work towards achieving its goals.

Here are three ways to make the most of nonprofit in-kind contributions.

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What are in-kind contributions?

In-kind contributions could be any goods or services that are provided to your nonprofit organization for free or at a reduced cost. Common in-kind goods include equipment, supplies, and furniture as well as skilled services like photography, website design, marketing, accounting, and legal services.

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“If you could be so in-kind to give to our organization…”

Don’t be afraid to make the ask for in-kinds. If your nonprofit organization has yet to solicit in-kind contributions, consider this: They can be an effective way for your nonprofit to diversify and increase its support.

While a donor may balk at making a $50,000 donation, they might be more willing to donate a skill or good that provides a similar value to your organization. Say, for example, one of your nonprofit’s goals is to build a playground for local children. It might be easier to solicit a donation of equipment from a playground contractor instead of raising the funds for the project.

Remember, it’s OK to request goods or services instead of dollars. You can always ask vendors if they offer any in-kind donations or even discounts on their services.

Involve the community

One of the beauties of nonprofit in-kind contributions is that accepting them can serve to connect your organization with the community.

If your nonprofit accepts donations of goods, consider running a drive or event to encourage community members to donate items. Not only will this bring revenue in your door but it also gives your organization a way to garner support from the community, which can lead to more buzz around its mission.

Record the right way

Despite an in-kind contribution’s status as a non-financial gift, it still must be recorded as revenue on your organization’s books. The accounting for this is generally the same as for cash contributions. In-kind contributions are measured at fair value and recognized as contributions when received. However, determining the fair value may be difficult in some instances.

How to determine fair market value of in-kind contributions

The Financial Accounting Standards Board (FASB) defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” To translate, fair value is what you would pay if you were to purchase the item in the open market.

When measuring the fair value on in-kind contributions there are resources available, such as, online prices, the Salvation Army’s Donation Valuation Guide and IRS Publication 561 Determining the Value of Donated Property.

To reduce the cost of measuring the fair value of in-kind contributions, you can use methods like estimates or average value per pound. However, these methods must be applied consistently and must not cause the fair value approximation to differ materially from a more detailed measurement.

If you’re not keeping track of your organization’s in-kind contributions, you could be underreporting its revenue—and inadvertently creating a headache for your audit.

Bolster your organization’s mission with in-kind contributions

In-kind contributions can be a powerful way for your organization to expand its revenue and resources. If you’re not already, consider incorporating requests for in-kind contributions into your fundraising strategy and brainstorm ways to involve your community.

The nonprofit advisors at Abdo are here to help you with nonprofit financial management, so you can make the most of any non-cash donation your organization receives. We can also guide you through the creation of an in-kind contribution acceptance and recognition process, which can help you better record and track donations.

For more about how we can guide you through the process of soliciting and recording in-kind contributions, contact us today.