4 Tips to Leverage In-Kind Donations for Nonprofit Success

Nonprofit supporters like to have multiple options when it comes to engaging with your organization, from contributing financially to volunteering to advocating for your cause. Offering a wide range of involvement opportunities helps your nonprofit appeal to a wider audience, leading to increased supporter acquisition, satisfaction, and retention.

One highly effective but often overlooked opportunity to engage donors in your organization’s work is by collecting in-kind gifts. Jitasa’s guide to in-kind donations defines these contributions as “any and all non-monetary donations to nonprofits or causes. They refer to the transfer of any assets, usually goods or services, to your organization from an individual, company, or other nonprofit.”

In this guide, we’ll cover four tips to help your nonprofit make the most of in-kind donations for its mission, including how to:

  1. Craft Compelling In-Kind Donation Requests
  2. Develop a Gift Acceptance Policy
  3. Properly Record and Report In-Kind Contributions
  4. Acknowledge and Appreciate In-Kind Donors

Before implementing these tips, always consider why your nonprofit needs in-kind donations. If you’re asking for goods, are you looking for supplies to serve your beneficiaries or items to sell at your next fundraising auction? What gaps exist in your organization’s professional expertise that could benefit from donated services? The answers to these questions will guide every aspect of your strategy, especially how you approach requesting in-kind donations—let’s begin there!

1. Craft Compelling In-Kind Donation Requests

The same general rule applies to in-kind donation asks as appeals for monetary gifts: the higher in value the requested contribution is, the more individualized your solicitation process should be.

For high-value goods and specialized services, craft personalized solicitation letters to the individual donors or corporate sponsors who would be best equipped to provide those items. 

Winspire’s donation request guide recommends including the following elements in each of your letters:

  • Your nonprofit’s branding (logo, color scheme, writing style, etc.) to make the request look professional and establish its credibility.
  • Storytelling to hook the reader and engage them emotionally in your cause.
  • Mission information so it’s clear how their contributions will make a difference.
  • A specific ask or call to action for the potential donor.
  • Donor recognition and benefits to let them know what’s in it for them if they contribute.
  • Gift return instructions, including a location, date, and point of contact.

If you’re asking for small, inexpensive in-kind donations, multi-channel mass marketing will allow you to reach as many potential supporters as possible. Leverage channels like your nonprofit’s website, social media, email newsletter, and digital ads to execute this strategy. While your calls to action in these communications will be more general, you should still include the other listed elements of a donation request as appropriate.

slo food bank customer story memoryfox brown bag2. Develop a Gift Acceptance Policy

Imagine you work for a food pantry that relies on in-kind donations of nonperishable food to serve its community. Most of the time, your supporters contribute canned and packaged goods that you can easily give away to your grateful beneficiaries.

But one day, a donor brings in a big crate of food, saying they’ve just finished organizing their kitchen cupboards and want to donate the food they likely won’t eat to a good cause. As you sort through their contribution, you realize that nearly all of the boxes have been opened and the canned goods are past their expiration dates, making the food unsafe to give away. How do you turn down this well-meaning donor’s gift without seeming ungrateful?

The answer is to implement a gift acceptance policy for your nonprofit. This essential financial guideline outlines the types of contributions (both monetary and in-kind) that your organization can and can’t accept, as well as the conditions under which you’ll accept each donation. For the food pantry in our example, it would be wise to include a clause in the gift acceptance policy that all contributions of food must be unopened and not expired.

Backing up your rejection of an unusable in-kind donation with an official policy can lessen its blow by showing donors that you recognize their good intentions. Plus, if you publicize your gift acceptance guidelines, your donors will be more prepared to give in-kind gifts that will be helpful for your mission. 

3. Properly Record and Report In-Kind Contributions

To maintain effective accounting practices, your nonprofit needs to record and report its in-kind contributions. However, the process of doing so is slightly different from monetary donations—here is how it works:

  • Determine the gift’s fair market value (FMV). This is the price you would have paid for a donated item if you had purchased it on the open market. You can usually find the FMV of goods through online research—for example, if someone donated a brand-new MacBook to your organization, the FMV would be the full retail price listed on Apple’s website for that model. For donated services, ask the provider what they would charge their clients for a comparable project and use that number as the FMV.
  • Record the FMV as a debit and a credit. Although you need to note that you’ve received a gift for reporting purposes, in-kind donations result in a net zero gain in cash for your organization, so its record in your accounting software should reflect this.
  • Report in-kind donations on your nonprofit’s annual tax return. Add the credit values of in-kind donations into your organization’s revenue from contributions, gifts, and grants. Then record this number in the designated spot on the full Form 990, Form 990-EZ, or Form 990-PF (Form 990-N doesn’t include this line item). The IRS requires additional forms for certain types of in-kind gifts, such as vehicles and artwork, so make sure to file those along with your tax return if applicable.

Correctly accounting for and reporting your nonprofit’s in-kind donations isn’t just important for legal compliance. It also promotes internal accountability and external transparency by creating a complete, accurate record of how your organization uses its resources to further its mission.

4. Acknowledge and Appreciate In-Kind Donors

Donor stewardship is just as important with in-kind donations as with monetary gifts. After all, in-kind donors are also invaluable to your nonprofit’s mission, so they should be recognized as such!

Like with financial donors, ensure the level of appreciation you show an in-kind donor aligns with the size of their contribution. For instance, a thank-you email would be sufficient for an individual supporter who donated one case of canned cat food to your animal shelter. However, an attorney who contributed several thousand dollars’ worth of pro bono legal services to your organization would deserve greater recognition, such as a handwritten card and gift basket or an invitation to a donor appreciation dinner.

No matter how you recognize your in-kind donors, issue a gift acknowledgment letter to each of them so they can claim their contributions as tax deductible. It should include your nonprofit’s name and employer identification number (EIN), a description of the gift, and the date you received it. However, the IRS prohibits nonprofits from providing the value of an in-kind donation in its acknowledgment letter—instead, leave space for the donor to fill it in themselves.

When collected and managed strategically, in-kind donations benefit both your nonprofit and its donors. You receive the exact items you need more quickly and with less effort than if you purchased them yourself, and you can put the funding you would have spent on those goods or services toward other areas of your organization’s budget. At the same time, donors receive additional flexibility in supporting your nonprofit and can more easily see the tangible impacts of their gifts on your mission.

memoryfox guest author jon osterburg jitasa

About the Author

Jon Osterburg
Position, Company

Jon Osterburg has spent the last nine years helping more than 100 nonprofits around the world with their finances as a leader at Jitasa, an accounting firm that offers bookkeeping and accounting services to not for profit organizations.