The 501 S(c)ene

The latest view on not-for-profit accounting issues

Donated Services

Volunteer time (or donated services) is only recorded as revenue and expense in the financial statements if the services create or add value to a non-financial asset (such as construction services provided to a building) or if the services meet all of the following three criteria:

  1. The services require specialized skills
  2. The services are provided by individuals who possess the specialized skills required
  3. The services would typically need to be purchased if not donated

The specialized skills include skills provided by individuals such as accountants, bankers, electricians, doctors and nurses, or teachers. An indication that skills are specialized is that the individual is required to possess a license or certification to provide the services, and the services require technical tools or equipment used with a higher level of proficiency than the general public. If an individual with specialized skills provides volunteer services that do not require those skills, the volunteer services should not be recorded in the financial statements. An example of this would be an attorney providing volunteer services coordinating a special event. Because the services are not legal in nature, they would not qualify to be recorded even though the lawyer possessed specialized skills.

Regardless of whether it qualifies to be recorded in the financial statements or not, volunteer time carries a high level of value to nonprofit organizations. The NonProfitTimes reports that total volunteer time provided to U.S. nonprofits in 2015 is expected to be valued at $188 billion. This amount is based on a calculation of 7.9 billion hours of volunteer service provided by 62.8 million Americans with an estimated average hourly wage of $23.56.

The full article is available here.

By Paul Biggs