A response to accounting for donations-in-kind for non-profits

When we think of the COVID crisis in India, we don’t have accounting headaches front-of-mind.

In response to the shortage of oxygen and medicines, NGOs have been fundraising. They have successfully raised donations both in funds and in-kind, for distribution to beneficiaries or hospitals. Accounting for donations-in-kind has always been tricky for non-profits in the absence of internationally applicable guidance.

The IFR4NPO Guidance won’t be ready until 2025, so in the meantime, Tejas Merh Desai IFR4NPO Advisor and co-founder of India’s Non-Profit Finance Network, has this advice for sector practitioners.

Use a separate revenue account for the in-kind income. But record the expense side in its functional expense/asset account, just as if you had purchased it.
Use the price that 'would be received or paid in an orderly transaction between market participants'.
Keep separate records and make disclosures in the financials about the number of items received and distributed.

Specific to India:

In-kind donations are not eligible for 80G deductions.
FCRA restrictions are applicable to in-kind donations. NGOs without FCRA registration cannot accept in-kind donations from foreign sources.

Thank you Tejas Merh Desai for sharing your advice, you can see more information on IFR4NPOs consultation on accounting for donations-in-kind here.

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A response to accounting for donations-in-kind for non-profits

Tejas Merh Desai, Founder Avkaash, Curator of Non Profit Finance Network India

Specific to India: