Tag Archives: Contributions

Conditional Contributions

hurdlerA condition is effectively a barrier that must be overcome before a promised gift becomes a contribution. A part of the definition of a contribution is that it is an unconditional promise to transfer assets to a nonprofit.

I received a question about conditional contributions that went along the lines of “is a contribution conditional if the promised contribution is not paid until the end of the year and the work is completed?” What you could have here is an exchange transaction, and not technically a contribution.

But assuming it is a contribution you can recognize the revenue in two ways depending on the donor/grantor’s instructions. The first would be piecemeal. As you do a portion of the work a portion of the condition of the contribution is met and therefore you can count it as revenue and a receivable. So as you do the work, you recognize a bit of the grant at a time. The second would be to recognize it all at once after the work is done. Once the work is done (the condition is met) then you have a contribution and book the receivable (assuming you do not have the funds yet).

When you get the actual cash does not factor into the discussion in any case, just when you get conformation from the donor that at some point you will be getting the cash.

Contributed Services

Contributed services are professional services that have been donated by someone outside of your organization with specialized skills – such as those provided by doctors, nurses, lawyers or accountants. A rule of thumb I like to apply is that if the person has letters after their name (CPA, JD, etc.) or requires some kind of licensing to do their job (architect, etc.) they can probably provide you contributed services that you (and they) can recognize.

The service must create or enhance a non-financial asset. For example, the organization acquires a graphic designer to create collateral materials to describe fund-raising and development programs. Although the services are provided on a pro bono basis, certain technical expertise is necessary to produce the materials, which would otherwise have been purchased.

Or

The service must require specialized skills. General volunteer services, such as working a booth at a fundraising event, are typically not recognized as contributed services and must be provided by persons possessing those specialized skills, and

Is of the type that typically would be purchased by the nonprofit organization if the service or skills were not donated.

An example of a recognized service would be a lawyer providing necessary legal advice.

What would not be recognized is:

A non-lawyer providing legal advice.

A lawyer providing un-asked for legal advice.

That same lawyer stuffing envelopes for a fundraiser.

Assuming the criteria above have been met, the nonprofit would record contribution revenue for the fair market value (based and invoice from the service provider) of the donated services and also as an expense in the appropriate category.

FASB 116 has the details on the rules for contributed services, click here for a post about both 116 and 117.

Gifts-In-Kind Valuation

Several questions from my trainings have been about non-cash donations and how to value them. The PPC Guide to Contributions has the best guidance out there on the subject and I still highly recommend them, a worthy investment for your nonprofits financial well being.

How do we value food donations for our “Taste Of…” event?

Fair value must be determined. According to SFAS 157, Fair Value Measurements, the fair value is, “the price that would be received to sell an asset or paid transfer of liability in an orderly transaction between market participants at the measurement date. The quoted price for identical assets in an active market is the most reliable evidence.”

For this question, if a restaurant is providing you with 300 deserts, what do they sell the deserts for? If they are catering at your event, what do they normally charge for catering? Those quoted prices (or better yet and invoice) would be what you would use to value the donations.

Can the suggested starting bid on an item to be sold at auction be used as the fair value?

Yes, with exceptions. If a vendor gives you something to auction for your charity event and places a “suggested starting bid” sticker on it, that can be used. But if you have sold similar items before and what they suggest doesn’t match what you have used in the past that suggestion won’t work. Checking other resources on how the item might be valued would also be a good idea.

We have a golf tournament where everything is donated. Donors then buy tickets for the event. Is the whole ticket deductible to the those donors?

From what I can tell it is not. The non-deductible portion of the ticket represents the estimated fair market value of the goods or services received by the donor in return for the contribution. How much would the donor normally have had to pay to play golf at the location? The fact that the nonprofit did not incur any costs for the facility is irrelevant to the benefit received by the donor.

What are some resources for valuing donations?