Lesson 6.6 – Recording In-Kind Donations

Welcome to Lesson 6.6! Nonprofits frequently receive valuable contributions that are not in the form of cash or checks. These gifts in-kind (or In-Kind Donations) represent charitable gifts of goods (like food, computers, or auction prizes), services (like donated legal or accounting work), or assets (like rent-free facilities).

Because these donations have financial value, the Financial Accounting Standards Board (FASB-116) and GAAP regulations require nonprofits to assign a fair market value to the contribution and record it in their financial system.

In this lesson, we will explore the unique accounting principles behind in-kind tracking in FastFund and how to properly enter these transactions.

1. The In-Kind Transfer Holding Account

Before entering an in-kind gift, it is important to understand how FastFund handles the accounting. Unlike a cash donation that goes into your Undeposited Funds account, FastFund uses a special control account called the In-Kind Transfer account.

This acts as a temporary asset holding account. When you record the donation, the system debits the In-Kind Transfer account and credits the revenue account linked to the specific Gift designation. Later, on a monthly basis, your accounting team will do a journal entry to reclassify the balance in the In-Kind Transfer account to the appropriate expense account (e.g., In-Kind Goods Expense or In-Kind Services Expense) to properly match the revenue with the expense.

2. Entering an In-Kind Contribution

The data entry screen for an in-kind donation is nearly identical to a standard cash gift, making it easy to learn.

Steps to Record the Transaction:

1. Navigate to Transactions on the Main Menu, and under the DONATIONS section, click In-Kind Contributions.
2. The Account field will automatically default to your In-Kind Contribution control account.
3. Donor: Select the constituent who made the donation. If they are not in your database, you can click the drop-down and use the quick-add feature to create their record on the fly.
4. Date & Reference: Enter the date of the contribution. Since there is no check number, if you do not use pre-printed receipts, Araize recommends using a reference format like “IK” followed by a number (e.g., IK-99).
5. Amount: Enter the determined fair market value of the goods or services. The Deductible field will automatically auto-fill with this total amount.
6. Memo: Enter a brief description of the gift, such as “Donated legal services” or “Auction prize,” which will appear in the donor’s transaction history.

3. Assigning the Appeal and Gift

Just like a cash donation, you must link the in-kind value to the specific event or motivation that drove the gift.

1. Select the Appeal from the drop-down list.
2. Select the specific Gift designation. If the required gift is not in the drop-down, you can click the Link Gifts text link to instantly attach an available gift to the appeal.
3. Add a Gift Memo on the distribution line to provide further details (e.g., “Taylormade Golf Driver” or “Round of golf for 2”).
4. If the donation value needs to be split across multiple designations, simply press the Tab key to generate a second distribution line and allocate the amounts accordingly.

4. Adding Attachments for Audit Trails

When dealing with in-kind contributions, you often receive appraisals, letters of valuation, or invoices showing the value of donated services. FastFund allows you to attach these digital files directly to the transaction for a complete audit trail.

In the Attachment area, click Browse, select your PDF or image file, and click Open. The file name will appear, and once the transaction is saved, anyone reviewing the record can click the link to view the supporting documentation.

5. Saving and Receipt Options

Before saving, review the Options checkboxes at the top right of the screen. You can select Print or Email to queue a donor receipt.

Once complete, click SAVE & NEW to post the transaction and clear the screen for your next entry, or SAVE to simply lock in the current record.