Embed Doc
Copy Link
Readcast
Collections

CommentGo Back

Download

Headache #10 - Tracking Volunteer Time

By Dennis Walsh CPACan you imagine our nonprofit sector without its millions of volunteers contributing theirtime and talent? Without philanthropic minded people offering more than financialsupport, much of our sector would simply collapse in a vacuum of human capital. It is asimple truth that much of this volunteer effort escapes measurement or goes unnoticedaltogether. The board member who regularly goes out of her way to make personalappeals to prospective donors or the couple helping in response to an impromptu call forextra help cleaning up after the annual banquet are two common examples of this silentarmy in action.From the bottom of the organization to the top and across all program and managementactivities, the effect of volunteer service is integral to the ongoing performance of mostnonprofit missions. While it is not reasonable to expect that an organization can captureand measure the full impact of volunteer effort, the purpose of this article is to introducesome issues to help guide you in deciding under what circumstances it is desirable ornecessary to track and report the service of your volunteers. Armed with this knowledge,the headache of tracking volunteer time can quickly turn to the pleasant realization of anopportunity to recognize and build on your vital volunteer resources.Why track volunteer time?People volunteer for various reasons, but whatever their motivation, most share a needfor appreciation. Volunteers are people and people need their strokes. Volunteers needto be recognized at program events, in your newsletter and annual report, on yourwebsite, and at organizational gatherings. The return to the organization for the minimalresources needed to express gratitude is huge, while the failure to recognize volunteerservice can be demoralizing, result in increased volunteer attrition, and hurt missioneffectiveness.One of the best ways to ensure that volunteers don’t go unrecognized is to implement asystem to record donated service at the time received. This will provide a means tocapture volunteer effort for the important management purposes set forth below, lessenthe likelihood that volunteer effort falls through the cracks unnoticed, and provide ameans to help identify and objectively rank volunteer service deserving of specialrecognition.In addition, funders and other stakeholders need to know who’s with the program.Prospective grantors and other donors need a complete representation of resourcesavailable to your nonprofit, particularly for organizations that depend more heavily onvolunteers. As you compete with other worthy missions for financial resources, it’s up toyou to show that you’re adequately staffed to get the job done. Unless volunteer data isincluded with fundraising proposals, financial statements, and other documentsdescribing your organization and activities, donors and other stakeholders will have an

incomplete picture of your available resources and how you will be able to accomplishyour mission.Also, certain grants may stipulate that the nonprofit must match a percentage of grantfunds, and that the value of volunteer time may qualify toward satisfaction of the matchrequirement. In this case you’ll need sufficient documentation of qualifying volunteertime that is appropriately valued. The North Carolina Office of State Auditor hasdeveloped a samplevolunteer time sheetthat meets the state documentation requirementsfor applicable government grants. This worksheet should also be suitable forsubstantiating volunteer service for the various purposes addressed in this article.However, you should seek the help of appropriate advisors in determining any additionaldata you may need to accumulate specific to your organization.Your accounting software should include features that enable you to easily input datafrom volunteer time sheets and generate reports useful for the management of volunteerresources. Using relatively low cost accounting software such as

QuickBooks Premier

Microsoft Office Accounting

, or

Microsoft Excel

, you can create reports to measure,manage, and recognize volunteer service. You can filter data by criteria such as daterange, activity, volunteer class, individual, time contributed, or combinations of suchcriteria.In addition to summarizing volunteer input for organizational reports and financialstatement preparation, you will have the information needed to more efficiently allocatelimited human resources, volunteer and paid staff alike, in planning for upcomingprograms and special events. This will also be of aid in preparing the annual financialbudget. You’ll be in a better position to forecast paid staff needs by more accuratelypredicting complementing volunteer resources, based on your documented experience.Documenting volunteer activity may be important from a legal standpoint as well. NorthCarolina law provides immunity for nonprofits and volunteers in cases of nonvehicularcivil liability when the volunteer acted reasonably and in good faith under thecircumstances, except to the extent liability insurance covers volunteer negligence. Inspite of this general rule of immunity, volunteers may be considered agents of thenonprofit and their negligence can bind the organization in certain situations. Requiringthe contemporaneous completion of volunteer time sheets has the added advantage of creating a basic record of activity that may become important evidence in defending anaction for alleged volunteer misconduct.When is volunteer service recognized in the financial statements?Generally accepted accounting principles (GAAP), which must be followed by your CPAin the compilation, review, or audit of financial statements available to outsiders,provides specific guidance on the measurement and reporting of volunteer service.Statement of Financial Accounting Standards (SFAS) No. 116, Accounting forContributions Received and Contributions Made, states in relevant part: “Contributionsof services are recognized only if the services received (a) create or enhance non-

financial assets or (b) require specialized skills, are provided by individuals possessingthose skills, and would typically need to be purchased if not provided by donation.”The first part of this requirement, to create or enhance non-financial assets, speaks tosituations where an asset, that is, property owned by your nonprofit, is created orimproved in whole or in part through volunteer effort. A common example would be theconstruction of a facility with a volunteer workforce, regardless of whether skilled orunskilled labor is involved. Although you may wish to track volunteer input for otherreasons discussed herein, the accounting rules provide a simpler optional alternative totracking and valuing such donated service to be included as part of the cost of thefinished asset.Specifically, SFAS 116 provides that such services may be measured by referring toeither the fair value of the services received or the fair value of the asset or of the assetenhancement resulting from the services. In other words, you may value and report thecontributed service as the difference between the fair value (e.g. appraised market value)of the finished asset and the out of pocket costs incurred in its creation. You wouldrecord the asset at fair value on your books and recognize this difference, representing theimputed value of the volunteer effort, as revenue from donated services.The second criterion for recognizing donated services in the financial statements requiresa decision as to whether the services are of a specialized nature and of a type that wouldhave been typically purchased were it not for the donation. SFAS 116 provides that“Services requiring specialized skills are provided by accountants, architects, carpenters,doctors, electricians, lawyers, nurses, plumbers, teachers, and other professionals andcraftsmen.”Donated services that meet this requirement are reported on your statement of activitiesas a component of revenue, and as a separate expense. The theory is that the organizationreceived both a contribution and incurred an expense in the nature of the serviceprovided. Without this treatment, both the revenue and expense of the nonprofit wouldbe understated.To illustrate, audit services contributed by a CPA clearly meet the specializedrequirement and would be recognized as donated revenue with an accompanying expensefor accounting fees, assuming the organization would have otherwise contracted for anaudit. In essence, the accounting rules treat this event no differently than had the CPAmade a cash donation in the amount of the audit fee and the nonprofit later remitted thesame amount to the accountant in payment for the audit service. By contrast, thedonation of cleaning services would not meet the specialized service criteria even if suchservices would have been purchased were it not for the donation. Each contribution mustbe evaluated based on the facts of the situation.SFAS 116 also encourages organizations to disclose the fair value of contributed servicesreceived but not recognized as revenues if practical. This provides an opportunity torecognize the contributed cleaning services not qualifying for reporting as revenue in the