Guidance for Gifts in Kind

Contributions made to nonprofits don’t always take the form of cash; you might receive a donation of non-financial assets. These are called gifts in kind, and they have their own reporting requirements — including a new standard now in effect. (And as a bonus, they can also help you with matching requirements!)

What qualifies as gifts in kind?

The most common type of gifts in kind is tangible goods. For example:

• A home for domestic abuse survivors receives clothing and household goods for its residents.
• A breakfast restaurant donates leftover bagels from the day to a homeless shelter.
• A youth center accepts equipment from a local sports team.

Gifts in kind can also be services, such as a free meeting space or time volunteered for administrative tasks. Professional services fall under this umbrella as well. An attorney might provide free legal advice, or an accountant could volunteer as a nonprofit’s treasurer.

Someone might also gift your nonprofit with stocks, bonds or mutual funds. Though they might be perceived as monetary items since their cash value is easily determined, they have historically been considered gifts in kind.

Note that other factors also play a role in determining whether a donation is in kind in accordance with generally accepted accounting procedures (GAAP). The gift should be something your organization would typically buy for itself. (If that sporting equipment mentioned above is donated to the home for domestic abuse survivors, for example, it wouldn’t be considered a gift in kind.)

Gifts in kind also can’t have any restrictions on use imposed by the donor. Additionally, volunteer hours must fall under a specialized skill applied to the task the volunteer performs.

The Matching Requirement Bonus

Gifts in kind do more than serve a specific need for your nonprofit. They might also count toward your matching requirements for grants that require you to put up funds of your own to “match” grant funds received. Whether or not gifts in kind qualify toward matching calculations is determined by the specific donor and not GAAP. So be sure to check with whoever provides your grant to see if your gifts in kind count.

What do I need to know about reporting these donations?

Gifts in kind have specific reporting requirements that were recently updated by the Financial Accounting Standards Board (FASB). Such donations must now be included on your financial statement as a separate line item in your statement of activities, where previously they were included with cash contributions and other financial assets. (Note that under this standard, donated stocks are considered financial assets and do not fall within the scope of this guidance). This new standard was established with ASU No. 2020-07, which affects June 30, 2022 year .

You must also state what you did with the donation in order to attribute it correctly. For example, your homeless shelter received those leftover bagels from a breakfast restaurant. Did you provide them to residents as part of a meal, or were they served at a staff meeting? Were donated clothes meant for residents to use, or are you selling them in your thrift shop? If you’ve monetized any gifts in kind, you have to disclose the programs or activities in which you used them.

Finally, make sure you record the gifts in kind your nonprofit receives using fair market value. For tangible goods, you can determine this by researching its price in today’s market. Sale listings and quotes from the donor’s competitors can give you some baseline comparisons. For services rendered, look up salary figures for positions that perform the work being done. Whatever method you use, make sure you document it on your financial statements.

Gifts in kind are accounted for differently on the IRS form 990 than they are in GAAP financial statements. For 990 purposes, gifts in kind only include donations of goods and stocks. Donated services or use of facilities are not reported on Form 990 as revenue and expenses. However, they are reported as revenue and expenses in GAAP financial statements.

Failure to properly recognize and report gifts in kind can subject you to penalties and possible fines. Having a nonprofit CPA in your corner will help you better understand and comply with regulations.

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