If you are one of those people who glaze over when someone mentions “in-kind,” don’t fret – you are NOT alone! There seems to be a lot of confusion around what an in-kind donation is, and how to make it work properly in a grant budget. You don’t need to avoid the topic, or skirt the matter in your grant budget, or WORSE YET – let them work AGAINST you! In-kind donations are a good thing!
They are, in short, donations of value that are not cash.
This means an in-kind donation can take the form of:
- time (as in, from your board or other volunteers),
- goods (as in, waived rental fees or purchase price for items), or
- services (meaning free/donated labor, for example when the tent people comp or discount your tent set-up). [“Services” are taxed differently than the donated time in bullet #1, if that helps.]
An in-kind donation is different than when someone bequeaths you real estate (for instance), insofar as an in-kind donation goes directly toward program (or fundraising event) costs. It’s not something you would otherwise sell to help pay for your event or program.
Figure the value of the goods, services, or time by getting the fair market value of what was donated. For goods and services, you can accomplish this by simply asking your (usually corporate) donor (since they should get a tax receipt for the donation, you will need this figure anyway). For donations of time, go online to get the standard hourly wage for the volunteer time that’s being donated. Is it a lawyer that’s doing legal work that’s being donated? Or is that lawyer tearing tickets at the gate of an event? They each will have different rates. Multiply the rate for the work being done by the number of hours donated, and you have that volunteer’s in-kind donation value.
Accounting for in-kind donations in your grant budget is a far simpler matter than many people realize. Once you have done your figuring for the value of all those in-kind goods and services, you simply add them to both your Income AND Expenses, to make them zero out! Is your mind officially blown? Because of the nature of these donations, your agency doesn’t gain OR lose financially, you simply get to add that “value” to your program’s bottom line, but also negate it so it doesn’t tip the scales.
For an extreme illustration:
If most of your program is being performed by a group of volunteers, in a donated space, with donated food and beverage, the COST of the program would not be almost ZERO! That same program would need paid staff, and rented space, and purchased F&B in a real-world situation, to be replicated. So it stands to reason you need to account for ALL the “VALUE” of all that’s being donated, in-kind! You are not, in this instance, paying for any of it, so that’s why the VALUE of the time, goods, and services should live in both Income and Expense when you lay out your grant budget.
I hope that helps unlock the mystery of In-Kind for you all! I would love to know if you are still confused! Send me a comment and let me know. Thanks for reading along! Look for my next installment on Budget Narratives next month.
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