Planning For, Securing, and Documenting In-Kind Donations

Overview
Welcome to the e-learning lesson on planning for, securing and documenting in-kind donations. At the end of this lesson, you will be able to identify prospective donors, utilize effective strategies for developing donors, apply techniques to effectively ask for donations, and correctly document and report in-kind donations. The process of securing in-kind donations is built on four important steps identifying donors, asking for the donation, accurate reporting and thanking people for giving. This lesson will e!plore these steps, and will also provide useful tips to enhance your comfort-level going through the process.

In-kind donations are given in goods or services rather than money.

Donations of goods and services can be extremely valuable to nonprofit organizations. For some organizations it is central to the mission of the organization to secure and use donated items and services, and the organizations positive impact depends on those donated services. Although these are often the most welcome kind of donations, organizations should properly advertise their needs, target the most likely donors, and document all items properly to ensure they receive the items they need the most. ome examples of in!kind donations include" Goods

Services

S ace

#ooks $ffice e%uipment

#ookkeeping &opying'printing

&lassroom $ffice

$ffice furniture Food'refreshments (ames or toys &lothes &ar'van

)eeting'office space *rofessional services +accounting, lawyer, etc., )entoring'tutoring -diting'publishing support -vent planning

torage Advertising space

!here are a num"er o# "ene#its #or giving in-kind donations #or donors.
)any donors are drawn to giving in!kind donations rather than money. ome people might be looking to increase their personal storage space, avoid disposal costs, or receive a tax deduction. $thers are interested in reducing waste by finding a new home for the items they no longer use. Finally, many are interested in giving their time doing things such as mentoring, bookkeeping, or helping to organize other in!kind donations. )any people are interested in ensuring that specific items reach members in their own community versus sending money to a national organization. ome organizations are interested in providing in!kind donations for the positive public relations. .hatever the reason, knowing your audience can help you determine how to ask for donations, specify what you need and do not need, and politely decline offers.

$%&P!'( )* Identi#ying In-Kind Donations Desired and +eeded

#efore your organization begins asking for donations, take the time to ask yourself what your organization needs and what you could use. )any organizations create a wish list of in!kind goods and services needed. /his list can be used during meetings, posted at your drop!off location or put in newsletters. A wish list helps to focus donors to identify items they can donate. Do not limit your wish list to only what you think the donor organization can offer. /hink about both large and small organizations and what materials and goods they each have to offer. 0ou might be surprised what they are willing to donate. $ther people willing to donate might be individual community

members like landlords, real!estate agents, artists, professionals, friends or co!workers. Also think about groups such as the local library, or school and parent!teacher organizations. /hese community groups have a wide network of individuals that might be interested in donating. &reating your wish list will help you organize your needs, target the right donors and receive what you need.

$reating a wish list o# the in-kind goods and services your organi,ation needs will hel #ocus your donation outreach.
/here are many benefits to creating a wish list, or a list of desired or needed items. First, you can use the wish list to reach out to local businesses and volunteers, making each re%uest intentional and specific. 1se the list to advertise those needs through a newsletter, website, or by posting a sign at your drop!off center. As you receive items, check them off so that your supporters can see your progress. 0ou dont need to accept every in!kind donation that is offered, as you might create a negative relationship if you accept a product or service that you cannot use. 2f it is a donation that you cant use or do not have the capacity to manage, gracefully decline the offer. ome donations, though well!intentioned, have hidden costs and pose issues such as re%uiring time, money, and personnel to process. /he wish list allows you and the donor to see what is needed and reduces your chances of receiving a donation that you will not use.

It is im ortant to consider "oth large and small organi,ations as otential in-kind donors.
.hile it is important to consider the large, nation!wide companies based in your city or town as potential in!kind donors, before 3umping into what can be a long process with large businesses, think of the small business owners in your community as well. #uild relationships with small business owners and solicit them first. Dont be discouraged by re3ections 4 the more organizations you contact, the more people will get to hear your story. .hen you do decide to ask a large corporation, do your research first. )any corporations have a giving philosophy and process. )ake sure your mission aligns with theirs before you approach them. #oth large and small businesses are affected by your work, as the big organizations often employ the people that you are serving, and the smaller organizations sell products to the people

that you serve. 1nderstanding what drives these organizations to donate will result in a more productive search for support.

!hink a"out individual community mem"ers or grou s

Although large and small companies may provide great %uantities of donations, think about individuals that you may be able to leverage for specific items. For example, landlords or office property owners often need to remove items that tenants leave behind, including furniture, fixtures, and appliances. -stablish a partnership with the individuals so you are the first person they call to get rid of unwanted items. Another idea is library and schools that often refresh their collection of books and may be willing to give away their older or overstocked books to a nonprofit organization. #y networking with people in the community and your own network of friends you might encounter individuals who are interested in helping. )aybe the sister of one of your board members is an accountant and is interested in helping. $r maybe a friend of one of your employees is looking for a community service pro3ect for her class. /here are many people who might be interested in helping, but they 3ust need someone to steer them in the right direction to get started. 0ou can also post wanted advertisements on websites such as www.craigslist.org or www.freecycle.org. #e specific about what youd like and how the donation will help the people that you serve.

$%&P!'( -* Securing In-Kind Donations is .ased on (elationshi .uilding

Asking someone for support through an in!kind donation can be difficult, but most people respond more favorably to an individual conversation rather than a standard newsletter or email campaign. Developing relationships is essential to building a network of donors. 0our network can include friends, business owners, co!workers or community members. 5aving a wide variety of people in your network can expand the different types of in!kind donations. #uilding and establishing strong relationships with a variety of people in your network can help you identify who are the right people to work with when the time comes to make a re%uest for a donation. .hen a relationship has been built and common ground established, asking for a donation will be much easier.

It is much easier to ask #or a donation when you know who you are asking.

/he process for securing an in!kind donation is the same as the process used for securing monetary donations. 6. Develop positive relationships with local businesses and people. /hese relationships are integral to securing a donation. 7. Do your research to determine your target audience. /his is typically made up of the people who care about you and your mission, but might also be an organization or individual looking to get rid of unwanted items. 8. #e prepared. 5ave an introduction to your organization ready to go, and know what you are asking for before the meeting begins. /his is your 9stump speech: to get people interested. ;. Ask. 2ts tough, but you have to do it. <. #e flexible and gracious. 2f someone says your mission does not match their goals, work with them to find a common ground.

2t is much easier to ask for a donation when the person you are asking knows you and shares the values and mission of your organization. Additional information also increases donors interest and support as they learn of the problems they can solve through in!kind donations.

/hen you target the right eo le, it is much easier to develo the relationshi into donations.
)any use the 9A#&: +ability, belief, contact, approach for identifying prospects. /he actual order of importance is 9&!#!A.: First, utilize your existing contacts to determine if there are any prospects. -xpand to the next level in your network= perhaps you have something in common with these people, maybe you both know another donor, or maybe the prospect knows someone in your organization socially or professionally. )any prospects believe in your cause!and a big part of that is being able to see how a gift might affect them, their community, or those they care about. &onsider how you can bring your cause closer to the prospects personal experience. 2n terms of ability, keep in mind that many organizations, groups, or individuals may not be able to provide a large %uantity of items= but rather, many can utilize their abilities to donate time to your organization.

&sking may "e one o# the most di##icult things you can do, "ut it is also the most im ortant.
/he first step to asking for donations is creating a stump speech, which is how you will get your foot in the door. /his includes introducing the organization, laying out the problem to be solved, and possible solutions. /his should be done by individuals who have a passion for the situation with rational and logical communication. 2ndividuals who take on this task should be consistent in their approach and follow the guidelines set forth by the organization. /he approach to solicitation can be %uite varied even though everyone has the same stump speech to work from. First, each person should have an engaging opening to establish common ground. /hey should use open!ended %uestions to discuss the potential donors interest in the organization. /he person asking for donations should always remain faithful to him'herself and the organization using the skills they feel most comfortable with.

$%&P!'( 0* Documenting In-Kind Donations #or 1oursel#, 1our Donors and !he I(S
)any organizations forget to include the 9replacement: value of the in!kind donations they receive in their expense pro3ections. /his means they may find themselves in a tough spot if donations reduce and they are not prepared to cover the additional expense. -stimating the value of donations can be done in a variety of ways including asking the donor, obtaining the current market value or utilizing survey documents to identify the average cost of a service or skill. 2n addition to identifying the current value of the in!kind donation, organizations must systematically apply the depreciation expense of these items to their budget every year. /hese steps are essential to accurately reporting your budget internally, to your board members, your donors and the 2nternal >evenue ervice.

1ou must kee in-kind donations in your "udget.

2n!kind donations may become items that you need to budget for when they are no longer provided in!kind. For example, imagine that an organization receives free office space from a board member early on in their existence, but then the board member is no longer able to afford the costly donation. $ffice space is one of the most costly budget items, and if the organization did not have in!kind donations noted in their budget, they may not be prepared for the large budget 3ump re%uired. 2f the organization had been documenting the in!

kind donation, they would be aware of the market value of that donation and the impact that losing the donation would have on their budget. Additionally, disclosing this information to funders would have helped to reveal the full budget picture. /here are several steps when documenting the value of in!kind donations. /his includes first estimating the value of what was received. /here are many ways to go about doing this and many places that this information needs to be documented. /he value of the donation also needs to be assessed for depreciation or loss of value to accurately budget each year. Finally, the accuracy of documenting in!kind donations will result in more accurate reporting for the 2> .

!here are three laces where the value assigned to an item should "e documented.
/he first is to the donor when you are acknowledging the donation, the second is to the 2> for reporting purposes, and the third is in your organizations budget. /here are also three ways to consider determining the value of an in! kind donation.

0ou can ask the donor for the traditional cost of the donated services and'or goods. 0ou can obtain %uotes from competitors to determine the 9going rate.: 0ou can use a salary survey document to determine the average cost of the skill level needed for the services provided.

As an example of determining value, imagine you receive an in!kind donation of a space for your office. /he office space can be calculated by the per! s%uare!foot value of the building, as determined by a local realtor. For example, at ?7.@@'s%. foot, a donation of classroom space of 6<@ s%uare feet would e%ual ?8@@ per month. An in!kind donation of space can be broken up into smaller units, but each unit cannot be used for more than one program or initiative. -ven if the classroom is used for more than one program, the whole in!kind amount cannot be claimed for each program.

De reciation is the reduced value over time o# tangi"le items.

(oods such as office e%uipment and office furniture depreciate in value over time because of wear, tear, and aging. 2n!kind donations that depreciate in value should be added to your organizations depreciation schedule. An asset

remains on a depreciation schedule until the asset becomes fully depreciated or is discarded. A simple explanation for the process is below. (enerally accepted accounting principles +(AA*, re%uire a rational and systematic approach to depreciation, as well as consistent financial reporting. For more detailed guidance, speak with your accountant. 6. /he first step is to determine the current value of the good. For example, a computer purchased a year ago might have cost ?A<@, but according to a sales representative at a local store that sells the current model of that computer, the current value of the year!old computer is ?;@@. 7. /he second step is to determine the anticipated 9useful life: of the computer. 2n the 1 , tax authorities have given computing hardware a prescribed depreciable life of five years. /he computer was used for one year already, so it has a 9useful life: of four years. /he computer will depreciate in value from ?;@@ to ?@ during those four years. /he resulting ?@ value is because the asset has no residual value or in other words the asset could not be retired or scrapped for any value. /he simplest depreciation schedule is traight Bine Depreciation. /his is when you spread the expenses evenly across an assets depreciable life. For the computer example, this would mean you would claim a ?6@@ +&urrent Calue of ?;@@'1seful Bife of ; D ?6@@, depreciation expense each year for ; years. $ther types of schedules have varying percentages for each year of depreciation.

Documenting the in-kind donations that you receive will ensure that you have the in#ormation needed #or the Internal (evenue Service.
/alk to your accountant to learn more about which donations re%uire documentation, and be consistent with which donations are documented and which are not. )any organizations put together an in!kind form that is a guide to streamline the process of recording, reporting, and acknowledging gifts. 2nformation typically provided on the form to be filled out by the donor includes"

A description of the gift +Eote if the gift is used. 2f so, indicate how old it is and its condition, /he date the gift was received

/he contact information of the donor /he estimated fair market value of the gift and how the value was determined /he name of the staff member who is knowledgeable about the gift pace for any administrative information

Additional information about reporting donations can be found on the 2> .ebsite.

$%&P!'( 2* &cknowledging In-Kind Donations

"!pressing your gratitude and making your donors feel appreciated is the best way to ensure they#ll donate again. $et creative about ways to show your appreciation. This doesn#t have to mean throwing gala events or e!pensive celebrations. %ards, testimonials from people who#ve been positively affected by the donation, or donor recognition in a public forum can be &ust as meaningful.

!hanking your donors is the most e##ective way to get them to give again.
-xpressing gratitude to your donors doesnt have to be hard work if it becomes an organic part of your organizations culture to continually engage and appreciate your supporters. Feep donors in the loopGand personalize communication as much as possible. /his can include mentioning how items will be used today and over time. &onsider the most appropriate ways to stay in touch with donors, which might include"

-mail updates from your top people )eetings with donors to gather feedback Eewsletter updates 5earing a variety of voices +e.g., teachers, artists, doctors, etc., convey in their own words the difference donations have made to them

>emain a vocal presence with your donors. ilence communicates inactivity or a lack of need. /he more personally involved donors are, the fuller their giving is likely to be. *oint out the great stuff that happens when people give.

(emem"er your donors "oth when times are tough and when you have something to cele"rate.
>esearch shows there is a relationship between gift amounts and level of recognition received by donors. Donors who report receiving HsubstantialH recognition for their gifts made larger contributions than those receiving HminimalH or HmoderateH recognition. >ecognizing donors doesnt have to mean giving them a tangible reward= in fact, research indicates that, with token recognition, donors may see their gifts more as transactions. (iving a donor more personal recognition can help them understand how their contribution impacts an organizations work. 2n turn, that may help move a donor toward making larger philanthropic gifts. >emember" your supporters are your fan clubI As one donor says, H$ur chances of being Jheroes are few and far between in lifeGit feels good to be needed here.H 0ou can help empower donors by listening to them. ometimes donors dream big, and many are willing to make a significant investment if given the opportunity.

Summary
'sing the information and tools within this lesson, you can begin generating prospective donors, a wish list and opening the doors to effective and ongoing donor development. (emember to find ways to personalize all stages of the giving process for your supporters)from the time you make your first contact, to the donation itself, to the celebration of your group#s success. Thank you for taking the time to learn about in-kind donations.

For #urther in#ormation and additional resources, lease see the #ollowing*
o

2n!Find Donations" 5idden Assets for 0our $rganization. A >esource (uide. http"''www.dhss.mo.gov'Adolescent5ealth'2nFindDonations.pdf Foundation &enter" Fre%uently Asked Kuestions 4 5ow can 2 find sources of in!kind giftsL http"''foundationcenter.org'getstarted'fa%s'html'inkind.html 2dealist.org" Fundraising" 2n!Find Donations http"''www.idealist.org'tools'fundraising.htmlMsec7