Volunteers and Financial Reporting Requirements by Sherri Rose, CPA Nonprofit Auditor

Volunteers are an integral part of many nonprofit organizations. Some organizations depend on their very survival by incorporating volunteers. Since volunteers are non-paid staff, does your organization consider including in the financial statements the value of their contribution?

As a nonprofit auditor, I have guidance to follow on recording the value of services performed by volunteers. The guidelines require that the fair value of donated services be recognized in the financial statements if the services create or enhance a nonfinancial asset; or, they require specialized skills, are provided by individuals possessing those skills, and the organization would typically need to purchase those services if not provided by donation.

The contributed services are reported as contribution revenue with the offset to the appropriate expense account. The guidance further states contributed services that do not meet the above criteria should not be recognized.

Many nonprofit organizations have substantial volunteer hours by numerous volunteers. Even though the services may not meet the criteria for inclusion in the financial statements; the organization may still wish to track the hours for inclusion in the notes to the financial statements. The organization should consider having the volunteers maintain time sheets. The value of the service should be assigned to the position not the individuals performing the task. For example, a surgeon who contributes time putting a roof on a house would be assigned an hourly rate for a roofer, not a surgeon.

The note disclosure would include not just the amount of volunteer hours but a dollar amount as well. This could be an impressive figure for potential donors.

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