Huge Changes to Gift In-Kind Reporting

The Financial Accounting Standards Board Not-For-Profit Advisory Committee just released new information regarding the reporting of non-cash contributions, otherwise known as gift in-kind donations, for not-for-profit entities. All of this is an attempt to increase transparency of how non-financial assets given to nonprofits are used or monetized.

Specifically, it appears that within the next few years nonprofits will have to track and disclose non-cash or gift in-kind totals in different categories. In addition, nonprofits will also have to disclose any restrictions and any value techniques that a nonprofit might use to create or find fair market value.

This might seem like an accounting issue and not a leadership issue, but that would be an incorrect assumption. While it’s probably still wise to issue thank you correspondence with no financial fair market value of a gift in-kind, but rather with a very detailed description of non-monetary donation, the ability to track this on the accounting/database side will become much more critical. In particular, if gifts in-kind are used inside the nonprofit, the reporting mechanisms will be much greater within disclosure requirements and 990 filings.  And if an organization doesn’t have the right “intake forms” and/or procedures for the CRM, they will get caught trying to “recreate” transactions long after their receipt.

Overall, this is probably a pretty good idea. It does create more transparency about gift in-kind donations in that if they’re used internally to offset operations or provide services to end-users, they will be noted separately so everyone can know and understand that relative significance. The sad thing is lots of nonprofits are very small. They don’t have the infrastructure to oversee this level of detail. It will be interesting to see how this is implemented and applied to very small nonprofits, as the organizational and operational burdens may be pretty great depending on gift and kind donation levels.