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We are about to implement a more formal pro bono attorney program within our Legal Center to be able to meet the overwhelming needs of our clients.  We would like some input about showing these in kind services on our financial statements.

We could be talking about a large dollar value for these volunteer services and I am not sure if it would skew our bottom line revenue to include all of this.  I understand from our auditor that we have a choice about whether to include it or not.  Do you have thoughts on this?

I will accept your auditor's statement that you have a choice of how to account for pro bono time on your financial statements.  If you do so, you will include the value of the volunteer time as income, and as an equal expense.  The figures will not be included in your statement of revenue and expense on your Form 990 tax return, however, and you will have to use the section on the Form 990 that reconciles the financial statements to show the differences.  Therefore, the question is how you want your financial statements to appear, whether you are a larger or smaller organization.

From a strictly PR point of view, I think it looks better to say that you deal with a whole lot of clients for very little actual out-of-pocket costs, and then promote the value the volunteer time as the huge benefit you are able obtain for the public with such a small cash expenditure. You can promote the multiplier value of your cash, and perhaps attract more actual funds from people wanting to get a bigger bang for the buck.   I would be reluctant to use financials that make you appear to be a whole lot bigger than you actually are when considered from the cash involved but I am sure that others can take a different view on the impression you want your figures give.

Comments from our Readers

No. --A.M. via e-mail.

I had a client's property tax exemption denied by the IL Department of Revenue on grounds that the organization was too commercial.  It published educational materials about breastfeeding that were distributed all over the world.  We did a study of the volunteer time provided by physicians, nurses, educators and lactation consultants, and the result changed.  It can be important to regulatory bodies that you document volunteer time in this way. --K.V. via e-mail

This is an excellent point, and we have used the same technique to obtain exemptions for state taxes in Pennsylvania.  I did not mean to suggest that the time should not be tracked and calculated.  On the contrary, it ought to be calculated and promoted as the additional value brought to the community with such small out-of-pocket expenditures, even further justifying cash contributions (and tax exempt status). --Don Kramer

11/3/2009

Article Archives >> To the Point

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