Q: We are a relatively young organization that trains persons with developmental disabilities to work in specialty food services. We make a small income from the sale of these specialty foods, but that doesn’t cover our costs. Right now we rely heavily on donated time and supplies to meet our mission. Even our program director/“CEO” volunteers her time.

We are submitting a grant proposal for funds that will help take us to the next level. The funder has asked for an operating budget. Since almost everything is donated, my question is whether it’s legitimate to show the value of the donated time and supplies required for the production of the food items through which our clients gain the skills they need to function independently in society.

 

 

A: It’s not only totally legitimate, it’s the only way a funder will have a true picture of what your expenses really are. (I bet it will show you and your board a thing or two, as well!) What if your program director/“CEO” and suppliers walked away? That donated time and supplies would have to be replaced with paid staff and purchased supplies if the organization was to meet its obligations to your clients and those buying your product. (The necessity of purchasing such services if they were not donated is actually the test the Financial Accounting Standards Board or FASB uses in determining if an organization can list the value of volunteer services on such things as grant applications, financial statements, or annual reports.) Therefore, I would absolutely show the value of both.

The financial value of the supplies is easily determined by making a few calls to your purveyors. If your organization is really that small that you are buying your supplies retail, a simple trip to the store will provide the information you require.

For the cost of staffing, I suggest you use the widely accepted figure calculated each year by Independent Sector for the hourly value of work performed by volunteers. While it might be less than what a program director/“CEO” would make performing similar duties for an organization with a similar mission in your geographical area, it’s a figure with which no one will quibble. The 2013 rate nationally is $22.55 per hour. (This is the latest figure currently available.) Independent Sector also lists the hourly value of volunteer work per state at www.IndependentSector.org. If you want to be more exact, you can reference The Bureau of Labor Statistics, which lists hourly wages by occupation, or nonprofit compensation studies such as those released annually by the Chronicle of Philanthropy and NonProfit Times.

Once you gather all this information, I suggest you use it to create a budget for your own organization for the coming year. Clearly, someday soon your program director/“CEO” will need to start collecting a salary – even if it’s a small one – as should your trainees. And, at some point, you are going to have to start paying for your supplies. A great strategic task for the board would then be to determine how the organization might bring in the funds necessary to cover the expected costs, as well as build a reserve for contingencies.

Good luck!