How to Document Goods and Services Donated to Your Nonprofit

By Stan Hutton and Frances Phillips from Nonprofit Kit For Dummies, 3rd Edition

Some nonprofit organizations benefit from donated goods and services rather than, or in addition to, contributed and earned cash. Suppose, for example, that a local business provides office space for your organization so you don’t have to pay rent, 50 volunteers contribute labor to your organization each week, and a major advertising firm sponsors a free marketing campaign to promote your work. These gifts are called in-kind contributions.

How can you show these valuable resources in your organization’s budget? First, you should make the effort. If you don’t show these contributions, you don’t truly represent the scope of your agency in your budget and you’re underplaying how much the community values its work. On the other hand, mixing the in-kind materials and services with the cash can make following and managing your budget confusing.

So what’s the solution? You can create in-kind subheadings within the budget or summarizing all the in-kind contributions at the end of the cash budget in a separate section.

If you choose to use subheadings and include in-kind items alongside the cash in your budget, don’t forget that when you receive an in-kind good or service, it’s a source of income and when you make use of it, it’s an expense.

You’ll want to keep records of volunteer time if you’re going to include it in your budgets or financial reports.

Generally accepted accounting principles say you should show the value of volunteers’ time in your financial statements if they improved a financial asset of the organization or if the organization needed a task to be performed that required a special skill, the volunteer had that skill, and the nonprofit would have paid for that help if it had not been volunteered.