By Amy Rybar Menefee, CPA, CFE, Business Assurance & Advisory Services | Not-for-Profit Team
Valuing Volunteer Hours Assists Nonprofits with Compliance and Strategic Planning
What is the value of a volunteer hour?
According to a report by IndependentSector.org, a volunteer hour is worth about 27 dollars. According to the Corporation for National and Community Service’s 2018 Volunteering in America report, Americans volunteered almost 7 billion hours in 2018. That means that the total value of American’s volunteer hours was about 189 billion dollars in economic value. This statistic, coupled with Financial Accounting Standards Board’s (“FASB’s”) new ASU 2020-07 on Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, begs the question, “how should our not-for-profit be handling valuation of volunteer hours?”
Recognizing Nonprofit Volunteer Services under GAAP
Under generally accepted accounting principles (“GAAP”), services that are contributed by nonaffiliates of a not-for-profit organization generally should be recognized at fair value as contributions if they create or enhance a nonfinancial asset OR if they require specialized skills and are provided by individuals who possess those specialized skills and would need to be purchased if not contributed. Some examples include attorneys, CPAs, doctors, nurses…but what if you have volunteers that come in once a week to file papers or walk dogs or organize supplies? Although these type of volunteer hours are not recognized on the face of an organization’s financial statements, volunteer involvement demonstrates that the community is invested in the organization and its mission, and, as established in our first paragraph, volunteer hours hold great value!
What Volunteer Data should a Not-for-profit Track?
For internal purposes, it is a best practice to have certain data on volunteers available including:
- What have volunteers accomplished at your organization?
- How many clients do they support?
- How many activities do they lead?
- What demographics are represented in your volunteer workforce and do they reflect the diversity of the community?
- What do volunteers say about your organization?
- How has involving volunteers created partnerships with other organizations whether not-for-profit, corporate or government?
- How many volunteers are also financial contributors?
- Have your volunteers come up with innovative ideas that your organization has implemented and have improved processes or services?
- Have volunteers introduced you to new communities you weren’t reaching before?
Knowing the answers to these questions can help your nonprofit in its strategic planning to understand how crucial volunteers are to the success and operations of the organization itself, and if this is an area of emphasis for the organization that may warrant staffing specifically dedicated to volunteers, such as a volunteer coordinator.
In addition, your nonprofit should decide whether it should disclose, in the notes to its financial statements, annual report, website, newsletter, or other places, the number and estimated value of volunteer hours each year.
So the short story is that if you look at the face of a not-for-profit organization’s financial statements, you will not see the value of non-specialized volunteer hours in the numbers, but the long story is that the effect of those volunteer hours are in the numbers and the numbers are, in many organizations, very much affected by those non-specialized volunteer hours. Use your volunteers to help share your organization’s story, move your organization forward and pitch in when a need arises, and, don’t forget to appreciate them!
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.