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Gift-in-Kind Financial Impacts

  • 1.  Gift-in-Kind Financial Impacts

    Posted 17 days ago

    FUNDSVCS Community – I have some questions for the group regarding gift-in-kind through a financial lens.

     At my organization, GIK is treated as a net zero transaction.  The revenue from receiving the gift offsets the expense.

     1. In your organization, when a GIK is received, where is the expense recorded?

    • Does the expense impact the fundraising department or the area of the organization that received the benefit?

     2. Does your organization specifically budget for both Revenue and Expense related to GIK tangible item donations?

    Thank you.




    ------------------------------
    Jeff Harris | Manager, Development Data & Reporting
    University Hospitals | Institutional Relations & Development
    10524 Euclid Avenue, Cleveland, OH 44195
    Office 216.844.0473 | Email jeff.harris@uhhospitals.org
    ------------------------------


  • 2.  RE: Gift-in-Kind Financial Impacts

    Posted 17 days ago
    Jeff, the answer depends a lot on the value of the in-kind donation - and whether it will be used for related purposes.

    For example, many institutions will never "book" in-kind donations on the GL unless they are above a certain level.  At NC State, that was $5,000 - but typically only if the donation was going to be retained.

    But even when these gifts do hit the GL, what sort of "expense" are you thinking about?  Certainly, if the donation is going to be retained - such as a computer or vehicle - there will be ongoing expenses.  However, that does not make the donation "net zero."

    I am accustomed to seeing retained GIKs hit the books as pure gift asset revenue.  Any associated expense comes out of the operating fund for that unit.

    Am I missing a process here?

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: Gift-in-Kind Financial Impacts

    Posted 17 days ago
    Jeff, that's what I'm used to seeing for an in-kind donation that you're using. You record the revenue in an in-kind revenue account, and an expense in the functional expense account matching what was donated. Normally, an expense means that you turned fungible cash into some specific good or service. We think of it as spending dollars, but it's also buying office supplies, or electricity, etc. With an in-kind donation, we still got the specific good or services, so we should still record an expense in the functional account, we just didn't pay cash for it. So we record the revenue elsewhere, in an in-kind account, so as not to reduce our cash. The two entries net out, meaning that we didn't lose any cash, but did gain these services.

    In terms of budgeting, expenses are budgeted without distinguishing them as in-kind, since the expense is going to hit the same functional account, regardless of whether you buy the service with cash, or get the service in-kind. On the revenue side, it depends on what you're expecting. If you're regularly soliciting for goods and services for your organization's use, you would project that expected revenue when budgeting. If it's more of an ad hoc situation, you wouldn't budget for it, and when the in-kind donation comes in, it would be budget-relieving, as it is new income that covers a planned expense and frees up cash. 


    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:







  • 4.  RE: Gift-in-Kind Financial Impacts

    Posted 16 days ago
    Thanks for your response Isaac.  You raise a good point about budgeting... I think the team at my organization will discuss potentially projecting the expected revenue while budgeting.  There are many players at the table to get aligned on the same theory.  I appreciate your time.

    ------------------------------
    Jeff Harris | Manager, Development Data & Reporting
    University Hospitals | Institutional Relations & Development
    10524 Euclid Avenue, Cleveland, OH 44195
    Office 216.844.0473 | Email jeff.harris@uhhospitals.org
    ------------------------------



  • 5.  RE: Gift-in-Kind Financial Impacts

    Posted 16 days ago
    Thanks for the response John.  Your comment "any associated expense comes out of the operating fund for that unit" makes sense to me. This topic is debated within my organization specific to budgeting.  The unit that received the tangible items may not have budgeted for the donation and does not want to see an impact to their budget (expense).

    ------------------------------
    Jeff Harris | Manager, Development Data & Reporting
    University Hospitals | Institutional Relations & Development
    10524 Euclid Avenue, Cleveland, OH 44195
    Office 216.844.0473 | Email jeff.harris@uhhospitals.org
    ------------------------------



  • 6.  RE: Gift-in-Kind Financial Impacts

    Posted 16 days ago
    Well, it is hard to win an argument that you want the benefit and not the cost :-).  Of course, this does create an opportunity to ask the donor for an additional gift to cover those costs.

    That said, way back when I was at Duke (20+ years ago) when something like this came up, we "loaned" the first-year expenses to the benefiting department.  We understood that when an unplanned asset hits your books, it can create unplanned expenses.  So, on occasion, the Gift Acceptance Committee would allow the benefitting department to go "into the red" for first-year expenses only.  In year #2, that department would have to cover the arrears (if funds did not otherwise surface), plus the expenses for year 2+.

    John


    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987