In kind contributions and co-financing: what evidence is needed

Short answer

How to document in-kind contribution and co-financing in a grant project

Co-financing is the organisation’s own money spent on budget lines and supported by payment documents. In-kind contribution is volunteer work, premises, equipment and pro bono services provided free of charge; it is valued at market rates with an external source: the pay of a comparable employee, rental offers, the provider’s price list. Documents: a volunteer agreement and timesheet of hours, the owner’s letter and a calculation by floor area, an equipment use certificate, a summary statement signed by the director. A contribution funded from another grant is not accepted: that is double funding.

How co-financing differs from an in kind contribution

The donor asks the organisation to show its own contribution, and this is where the confusion starts. These are two different types of contribution, they are supported by different documents, and reporting one in place of the other means the contribution is not accepted.

Co-financing is money. The organisation’s own funds, or funds from another source, spent on the lines of the project budget. They pass through the bank account and have payment documents.
An in kind contribution is not money: volunteer work, premises, equipment, transport or services provided free of charge. They do not pass through the bank account, so they need to be valued.

What a donor accepts as an in kind contribution

Volunteer work. The most common type. It needs a record of hours and a justified rate.
Premises. Owned by the organisation, or provided free of charge by a third party for project events.
Equipment and transport. The organisation’s own equipment used in the project.
Pro bono services. A lawyer, designer or translator who worked free of charge.
Materials. Donated to the organisation, or bought earlier and used in the project.

How to value it

There is one rule: market value, supported by an external source. The organisation’s own view of what something is worth does not count.

Volunteer hours are valued at the rate of an employee doing comparable work. Source: the organisation’s own staff schedule, regional statistics, or two or three job vacancies for the same work. What is valued is the work, not the person, so an hour of a volunteer lawyer and an hour of a volunteer registering participants are worth different amounts.
Premises at the market rent per square metre in that area. Source: two or three current rental offers.
Equipment at the cost of renting similar equipment for the period of use, not at its purchase price.
Pro bono services at the provider’s usual price list, confirmed by a letter or a commercial offer from the provider.

Documents for each type of contribution

Volunteers: a volunteering agreement, a timesheet or record of hours signed by the volunteer, and the rate calculation with a reference to its source.
Premises: a title document or a letter from the owner confirming free use, a calculation by area and days, and evidence of the market rate.
Equipment: a list with inventory numbers, an act of use in the project, and the value calculation.
Services: a letter from the provider confirming the service was free, describing its scope and stating its usual price, and an act.
For all types: a summary statement of the in kind contribution for the period with a total, signed by the head of the organisation.

What a donor will not accept

A contribution paid from another grant. That is double funding, not the organisation’s own contribution.
A valuation without an external source. A figure plucked from the air is not accepted, even if it is modest.
Hours without records. A sentence such as «volunteers worked about two hundred hours» is not evidence.
The cost of work by the organisation’s own staff as an in kind contribution. Their salary is either a project expense or cash co-financing, but not in kind.
Equipment at purchase price where it was only used, not transferred to the project.

What the auditor checks

Whether the contribution required by the agreement was reached, and whether it was recorded throughout the period rather than at the end.
The valuation source for each type of contribution, and whether it is external.
Volunteer timesheets: signatures, dates and the link to project events.
Whether the in kind contribution overlaps with costs funded by the donor or by another grant.
Whether the contribution is shown in the report at the same amount as in the summary statement.

What to do at the start

Find in the agreement the required percentage of contribution and what exactly the donor accepts.
Approve the valuation method by order: which rates, from which sources, who signs.
Start a record of volunteer hours from the first month.
Collect evidence of market rates straight away, while the rental offers and vacancies are still current.

Can the work of the organisation’s own staff count as an in kind contribution

No. Staff work is paid for by the organisation, so it is either a project expense or cash co-financing. An in kind contribution is something nobody paid for: volunteer hours, or premises or a service provided free of charge.

What rate should a volunteer hour be valued at

At the rate of a paid employee who would do the same work. Evidence: the organisation’s own staff schedule, regional statistics, or two or three vacancies with similar duties. The rate is fixed before hours start being recorded, not chosen to reach the required total.

Do premises the organisation rents count

Rented premises are a cash expense, and if the organisation pays for them, that is co-financing, not an in kind contribution. An in kind contribution would be premises the organisation owns, or premises a third party provides free of charge.

What happens if the required percentage of contribution is not reached

The donor usually reduces its funding proportionately, and the difference has to be repaid. That is why the contribution should be counted every month, so that a shortfall is visible in advance and not only in the final report.

If you need a review

Since 2000 we have audited international technical assistance projects, and we see that in kind contributions are most often collected at the end and then not accepted. Tell us what percentage of contribution your donor requires and how you plan to cover it, and we will tell you what to record from the first month. A proposal follows once we have reviewed the assignment.