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Home / Articles / Not-for-Profits and Gift Card Donations: Bookkeeping Best Practices

Not-for-Profits and Gift Card Donations: Bookkeeping Best Practices

June 6, 2024

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Gift card donations can be a valuable source of support for not-for-profit organizations, providing flexibility and resources to further their missions. Managing these contributions effectively, however, requires careful consideration and adherence to proper bookkeeping practices.

Understanding the Nature of Gift Card Donations

Gift cards are treated similarly to cash donations, allowing NFPs the freedom to use them for various purposes aligned with their mission. Whether received from individuals, businesses, or other entities, gift cards represent a valuable form of support. NFPs must establish clear policies and procedures for handling these contributions, however, to ensure transparency, accountability, and compliance with legal requirements.

Key Considerations and Best Practices

Gift Card Recordkeeping

Just like with cash donations, it’s crucial for NFPs to maintain a log of all gift card donations. This log should include details such as the donor’s information, the amount or value of the gift card, any restrictions on its use specified by the donor, and the intended purpose if applicable.

Secure Storage

Ensure that gift cards are stored securely to prevent loss or unauthorized use. Designate a location or system to safeguard these valuable assets, so they are available when you are ready to use them.

Usage Policies

Establish clear guidelines on how gift card donations should be used within the organization. Whether they’re intended for guests, staff incentives, or specific programs, having predefined policies helps prevent misuse and ensures alignment with donor intentions.

Authorization Procedures

Implement a process for obtaining leadership approval before utilizing gift cards. Requiring sign-offs or documentation indicating the purpose of each expenditure can help ensure accountability and transparency.

Reconciliation and Reporting

Regularly reconcile the balance and activity of gift cards with the information logged in your accounting software. This practice helps maintain accurate records and provides insights into the organization’s financial health.

In-Kind Contributions and Fair Valuation

In addition to gift cards, NFPs often receive in-kind contributions in the form of goods or services. Estimating the fair value of these contributions is essential for proper bookkeeping and financial reporting. While resources like Goodwill’s donation valuation guide can offer guidance, organizations may need to research or assess the market value of donated items, especially for larger contributions.

Accurate Bookkeeping Is Critical

Properly recording gift card donations and in-kind contributions not only ensures compliance with accounting standards but also helps reflect an organization’s financial stewardship. By accurately documenting these transactions, NFPs demonstrate transparency to stakeholders, including donors, grantors, and regulatory agencies.

Consequences of Inadequate Bookkeeping

Failure to maintain accurate records of gift card donations and in-kind contributions can have several implications for NFPs. Inaccurate financial reporting may lead to misrepresentation of the organization’s financial position, impacting donor trust and potentially exposing the organization to regulatory scrutiny.

Keep the Gift Cards Coming

Gift card donations offer valuable support to not-for-profit organizations, but don’t overlook the best practices around effective management of these donations. By implementing clear policies, documenting transactions accurately, and maintaining transparency, NFPs can maximize the impact of gift card contributions while ensuring compliance and accountability. Clark Schaefer Hackett remains committed to assisting NFPs in navigating these financial challenges and achieving their mission-driven goals.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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