Case Studies in Not-for-Profit Accounting and Auditing

Chapter 7 CONTRIBUTED SERVICES

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

• Identify the criteria when contributed services should be recorded and disclosed.
• Determine how contributed services should be recorded.

TECHNICAL BACKGROUND INFORMATION

Many not-for-profit entities depend on volunteers for a variety of functions. Some contributed services should be recognized in the financial statements as illustrated in the following:

Contributed services should be reported as contribution revenue and as assets or expenses only if

• the services create or enhance a nonfinancial asset (for example, a building), or
• all three of the following apply:
  • The services require specialized skills. (Some examples of specialized skills are accounting, financial, educational, construction, electrical, legal, and medical.)
  • The services are provided by individuals with those skills.
  • The services would typically need to be purchased by the organization if they had not been contributed.

Just because an individual has a specialized skill does not mean that the skill meets the criteria to be reported. For example, a CPA may volunteer for an organization in a position that does not require his or her CPA skills, create, or enhance a nonfinancial asset. Therefore, this contributed service would not be reported in the financial statements. However, for example, if the CPA contributes his or her services to a position that requires those skills, and ...