Volunteers are a valuable asset to any nonprofit organization. They help to extend the organization’s reach and impact, while also saving on labor costs. However, accounting for and reporting on the use of volunteers can be a complex process. In this blog post, we’ll explore some best practices for properly accounting for and reporting on the use of volunteers in nonprofit organizations.
- Record volunteer time accurately and consistently.
One of the primary challenges of accounting for volunteer time is accurately tracking and recording the hours worked. Nonprofit organizations can use time tracking software or paper timesheets to document the hours worked by each volunteer. It’s important to ensure that the time is recorded consistently across all volunteers to ensure accuracy and compliance with regulations.
- Value volunteer time in financial statements.
While volunteers do not receive a salary, their contributions have real value to the organization. Nonprofit organizations can include the value of volunteer time in their financial statements as an in-kind contribution. The value of volunteer time can be calculated using hourly wage rates for similar services in the community.
- Separate recognition of donated services.
In addition to volunteer time, nonprofit organizations may also receive donated services from professionals such as lawyers, accountants, or consultants. These donated services should be recognized separately from volunteer time in financial statements. The value of donated services can be recorded at fair market value, based on the rates charged by similar professionals in the community.
- Document volunteer activities and impact.
Nonprofit organizations can enhance their reporting on the use of volunteers by documenting their activities and impact. This can include tracking the number of volunteer hours served, the types of activities performed, and the outcomes achieved. This information can be used to showcase the value of volunteer contributions to the organization and can also be used in grant applications and fundraising efforts.
- Ensure compliance with regulations.
Nonprofit organizations must comply with regulations related to the use of volunteers, including labor laws and tax regulations. Organizations should ensure that volunteers are not performing work that would normally be performed by paid employees, and should also ensure that volunteers are not classified as employees for tax purposes.
In conclusion, properly accounting for and reporting on the use of volunteers is an important aspect of nonprofit accounting. By following best practices for tracking volunteer time, valuing their contributions, separating recognition of donated services, documenting activities and impact, and ensuring compliance with regulations, nonprofit organizations can demonstrate the value of their volunteer programs and enhance transparency and accountability to stakeholders.