Documenting Non-cash Donations for Your Not-for-Profit

by | Oct 3, 2022 | PKF Texas - The Entrepreneur's Playbook®, Insight-Post, Not-for-Profit

Is your not-for-profit receiving non-cash donations? New accounting changes and guidance impact how your organization need to present and disclose them. In this episode of PKF Texas – The Entrepreneur’s Playbook®, Audit Director, Nicole Riley, CPA, CFE, shares what organizations need to know.

Jen: This is the PKF Texas – Entrepreneur’s Playbook®. I’m Jen Lemanski, and I’m back again with Nicole Riley an Audit Director and one of our Approachable Advisors™ here at PKF Texas. Nicole, welcome back to The Playbook.

Nicole: Thanks for having me.

What to Know About Disclosing Non-cash Donations

Jen: So, the not-for-profit space. I know a lot of not-for-profits receive donations that are not cash related. And I know there’ve been some accounting changes regarding those types of donations. So, what changes can these not-for-profits expect?

Nicole: So, the first thing to note is that the amount, how you value it, what you record and whether or not you record the item is actually not changing. Everything that has changed is really more about the presentation and the financial statements and the disclosures that are being made.

And the first major big difference is that you have to put donated items or in-kind contributions on a statement of activities. So, you can’t lump it in with contributions anymore, you have to have that separate item. And then in the footnotes, you need to then actually list out the type of items that were donated.

Jen: So, whether it’s art, clothing or something else?

Nicole: Right. You need to have a little bit more of a breakdown of how you got the number that matches but a breakdown of each kind of bucket. And then the other big piece of it is you have to have a policy about whether the organization utilizes the items that they receive in their operations or whether they monetize them or sell them.

So, you have to have a policy, which a lot of organizations don’t. So that’s a little bit of a change, you know; they need to develop that policy. And you have to disclose what your policy is now.

Increased Transparency for Non-cash Donations

Jen: Why did they make these changes?

Nicole: You know, honestly, it’s all about transparency. There’s been quite a few changes in not-for-profit accounting over the last five to 10 years. And the majority of them have all really been around transparency.

It’s important to show the donors a little bit more inside what’s going on with these not-for-profits. A not-for-profit is created and it’s really for the public good, so we want to show the public what the organization is doing and be as transparent as possible to show that they’re doing things right.

Jen: That makes a lot of sense. We’ll have you come back and tell us a little bit more about some other things that are impacting not-for-profits. Sound good?

Nicole: Sounds great.

Jen: This has been another thought leadership production brought to you by PKF Texas – The Entrepreneur’s Playbook®. For more information about this or other topics, visit www.pkftexas.com/NotForProfit. Tune in next week for another chapter.

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