Nonprofit GPS

Your Personal Navigation System Through Not-for-Profit Accounting Issues

Comments

  1. Cindy says:

    We are a small nonprofit that receives donations of used vehicles. Some of these are placed with low-income wage earners via a program where they pay a $500 program fee plus applicable title/tag/registration fees. Others are sold on our sales lot, while others are taken directly to the recycler where we receive a small sum. My question is how do we account for these donations in Quickbooks. I’ve been told to credit an income account: Gifts In Kind Vehicles and debit and expense account: Donated Vehicle Expense. This just doesn’t feel right since the donations are an asset until they are disposed of. So in the explanation above, the expense isn’t hitting the books until the car is disposed of…correct?

    • admin says:

      It is sometimes difficult to answer a question from an organization that we are not familiar with, as sometimes, a deeper knowledge of the organization and its operations could lead to a different response. We advise that you engage and consult with an accountant who is knowledgeable in nonprofit accounting to ensure accuracy. Also, please note that there are various tax filings to be aware of when vehicle donations are received and there could be other considerations with these types of transactions from both an accounting and tax perspective that a paid professional could help you with. We would recommend that you engage and consult with a professional who can provide you with information on this. With that said, in general, contributions of either cash or non-cash items should be booked as contribution revenue. Contributions of non-cash items should be recorded as revenue at fair value. A corresponding expense should be booked when the item received is used by the organization. A corresponding asset should be booked should be booked if the asset is held by the organization. You would have to consider as to whether or not you have inventory, which will depend on the nature of the operations of the organization. Your tax exempt mission should also be considered in this determination. Again, I would recommend that you engage and seek the advice of a professional as you may have multiple accounting and tax considerations in this scenario you have explained.

      Thank you for your interest in our blog!

      Colette Kamps, CPA

    • Renz Marty says:

      Hi, I would like to ask if there’s a written basis (i.e. accounting standards, IFRS preferably or US GAAP) regarding the above recognition of gift-in-kinds in the donee’s books? thanks.

    • admin says:

      Hello Marty –

      Thank you for your interest in our blog!

      To answer your question, the requirement for nonprofit organizations to record gifts-in-kind at fair value is included in U.S. GAAP. The accounting rules for recording agency transactions is also included in U.S. GAAP. It may be helpful to refer to the AICPA’s Audit & Accounting Guide for Nonprofits.

      Colette Kamps, CPA