Nonprofit organizations collect many different types of support from donors, which are not always cash gifts. When an organization receives gifts of goods or services, it may lead to questions. How and when do gifts in-kind get recorded?
What are gifts in-kind?
Gifts in-kind are donations of tangible and intangible individual property and contributions of services made to a nonprofit. Tangible gifts-in kind include clothing, furniture, equipment, inventory, supplies and many other things. Intangible gifts in-kind include contributions of advertising, patents, royalties and copyrights. Gifts in-kind can also include things like discounted rent and services provided such as legal, accounting, plumbing, nursing, physicians and other professional services.
When are gifts in-kind recognized?
In general, gifts in-kind are recorded when a donor provides the item unconditionally and without receiving anything in return. There are also special rules for when (and if) donated services are recorded.
How are gifts in-kind recorded and valued?
Gifts in-kind are recorded at fair value as contribution revenue and an asset or expense in the time received. Unconditional promises to give noncash items are also required to be recorded as contribution revenue in the time the promise is made even though the organization may not receive the asset or benefit until a future time. In this case, a corresponding asset would be recorded when the contribution is made and expensed in the time benefitted.
The fair value of a tangible asset, such as supplies, can be determined by using the price you would pay on an open market for the item. For example, if a donor gives a carton of pens, the organization could obtain the price for a similar carton of pens from an office supply store to record the value of the contribution and related expense.
The fair value of services received could be attained by determining the normal hourly rate for the service. For example, if a CPA donates eight hours for accounting services, and his normal hourly rate is $150, then your organization would record $1,200 of contribution revenue and professional fees expense. However, there are certain considerations that could affect this, such as the type of experience needed for the types of services performed.
Are in-kind gifts reported on the 990?
In-kind contributions of tangible property are reported on the 990. In-kind gifts of property are reported as gifts, grants or contributions. If an organization receives more than $25,000 in noncash contributions or receives contributions of art, historical treasures or other similar assets, then the Organization must also complete Schedule M.
In-kind donations of services are not reported on Form 990, but the value of those services is shown as reconciling items on Schedule D if the organization had an audit.
By Maria Basinski