February 6, 2013–How charities value non-cash gifts drew a good deal of attention in the press this year, and most of it was negative. Recently, Good360, the nonprofit leader in product philanthropy, joined Raffa, P.C., Crowell & Moring LLP and CECP to explore the topic of in-kind valuation in a free webinar for both nonprofits and corporations. The recorded webinar can be found here.
Since we weren’t able to answer all the questions during the webinar, we’d like to take this time to recap some of the main takeaways and clarify some of Good360’s common practices. It’s important to highlight that Good360 always consults CECP’s Valuation Guide – it’s a wonderful resource and tool when tough questions arise.
Q: If donation value is not provided by the donor, how do you suggest we figure this out?
A: Donations should be valued considering three factors:
- The price that buyers actually pay for similar property
- Where the donor sells property in a wholesale market, it is inappropriate to value the contribution at the property’s retail sales price?
- Are discounts generally applied?
Time and Place
- Particularly relevant with perishable or dated items, such as food, drugs, and agricultural products
- The value of a quantity of goods exceeding normal retail amounts may be less than the retail value, even where the donor’s “usual market” is retail
Donor-provided fair market value should be used as one input for valuation. Nonprofits have a responsibility to independently determine the fair market value of a particular donation.
Good360 Fair Market Value Process
- Find values for each product in five different active marketplaces
- Remove the highest and lowest values
- Take the average of the three remaining values
- Document everything – website URLs, screen shots, shared location
- Nonprofits have the burden of proof over their procedures their
- At year-end Good360 further evaluates products for a wholesale adjustment for financial statement preparation.
This is what Good360 considers when thinking of valuations and a brief summary of its methodology and process. IT IS NOT LEGAL OR TAX ADVICE NOR DOES IT STATE OR IMPLY THAT IT IS THE ONLY METHODOLOGY TO VALUE DONATIONS.
Q: How do we evaluate food bank donations (canned goods) from the general public?
A: While Good360 does not have experience in valuing perishable donations, it is always important to consider time and place and have a consistent and well documented process.
Q: How do we value volunteer time? Do we need to?
A: The CECP 2013 Valuation Guide includes a section on employee engagement and pro-bono valuation beginning on page 5. In addition, information on generating the cost of volunteer time for “On-Company-Time” volunteering can be found on page 27.
Q: If we get inventory from Good360, do we use the donor value provided or our own valuation system?
A: Donor-provided fair market value should be used as one input for valuation. Nonprofits have a responsibility to independently determine the fair market value of a particular donation.
Q: Please clarify what you mean when you say “be willing to walk away.”
A: Sometimes we turn down a donation because it doesn’t fit our mission objectives or the value of the donation is inconsistent with our ability to support the donated value using our stated criteria. We have been unable to apply our rules to value a product and match the donors stated value and if the donor is adamant about securing that value from us, we have walked away from the donation.
Q: Is it difficult to find reliable market valuation data for foreign markets?
A: The CECP 2013 Valuation Guide includes a section on non-cash giving valuation on page 5. For more detail on valuation in foreign markets, CECP’s report on Developing The Global Guide To What Counts offers detailed global product valuation information on page 28.
Q: When approaching companies for cash donations and grants, never have they mentioned non-cash giving. What is the best way to explore that avenue with companies? Should we be looking at different departments within a company to find out who would be the decision maker for non-cash giving?
A: Each company is unique in how they handle corporate donations for both cash and non-cash giving. We recommend approaching the same decision-maker you interact with for cash donations as a first point of contact to discuss non-cash giving. While these individuals may not be the final decision-maker, they will typically be able to point you in the right direction to explore different opportunities. Prior to reaching out, we recommend evaluating your non-cash needs and capacity to accept product donations or pro-bono services.
Thanks to all who participated in the webinar. If you have further questions, please do not hesitate to email me at Gerald@good360.org