Updated: Jun 19, 2019
Volunteers like the ones pictured above from the Salvation Army are the lifeblood of nonprofit organizations. Where does the value of volunteer hours come from? We know charities can’t live without volunteers. Volunteer hours provide valuable human capital. Certain types of volunteer hours can even be booked as revenue on your financial statements. And, volunteers also tend to donate at higher levels. And, did you know, volunteer power-by-the-hour can be leveraged as match in most grant programs? What is volunteer time worth? Is a doctor’s donated hour the same as a data entry clerk’s? And, why does it matter?
What makes volunteer time the hour of power? We’re talking about the power to leverage more grant funding by making a higher matching contribution. If you don’t put a value on volunteer time, you’re missing a key piece of the fundraising puzzle. And this one is pretty easy to measure! The gold standard for valuing volunteer labor is: The Independent Sector’s Value of Volunteer Time. When writing a grant proposal follow these steps:
Find out if the funder accepts in-kind matching contributions (as opposed to cash only match).Estimate how many volunteer hours will go into the project (be conservative; it is far, far better to under promise and over deliver!).Put a value on the volunteer time using the Independent Sector’s site (this assumes you’re using general labor – if your project involves a donation of professional services such as accountants, attorneys, appraisers, or craftsmen then see the next segment below).Add the in-kind matching contribution as a line item to your proposal budget.Document the volunteer time with time sheets signed off by the organization.
Demonstrating to potential donors and funders your nonprofit’s substance, stature, and community dedication to your cause is so important. An all-volunteer organization has an incredible resource of free labor. Accounting professionals (like the blogger here) knows, FAS 116 and FASB, Accounting Standards Update 2013-06, Not-for-Profit Entities (Topic 958) (April 2013) generally doesn’t allow non-professional volunteer hours to be booked as revenue on the financial statements. BUT, the value of volunteer hours can be used in annual reports, marketing materials, and, of course, in proposals for grant funding.
Defined as services requiring specialized skills provided by accountants, attorneys, carpenters, doctors, electricians, nurses, plumbers, teachers, and other professionals and craftsmen.Booked as revenue on financial statements IF the professional contributed their specialized skills (donated service), AND the organization would have otherwise had to pay for the service.May be reflected as in-kind grant match on financial and performance reports.Defined for Independent Sector purposes as: non-management, non-agricultural workers.Not booked as revenue on financial statements, BUT may be reflected in annual reports, marketing materials, etc.May be reflected as in-kind grant match on financial and performance reports.
So what? So, when a doctor, attorney, accountant, plumber, or anyone with a specialized skill volunteers, the value of his/her work is based on the volunteer hours of work actually done – NOT on the individual’s earning power. In other words, if a doctor is painting a fence, or an electrician is sorting groceries, he/she is not performing their specialized skill for the nonprofit. The value of that hour is the value of general unskilled labor and is not counted as revenue. However, if the doctor is performing his/her specialized skills for the nonprofit (i.e., treating sick children as part of the charity’s mission), the cost the nonprofit would otherwise pay for the doctor’s services is recorded as revenue on the books.
Lessons here: Don’t forget about the value of in-kind donated services when applying for grant funding or recording revenue on your books! Matching funds are required by grantors more and more (especially government), and, even when not required, showing the value of your human resources is very persuasive. Volunteer time or donated services can be a great source of your cost-share.