Which is More Valuable: In-Kind or Cash Gifts?

A colleague recently asked which was more valuable to a charity – when someone makes an in-kind gift or when they write check? The most common “in-kind” gift is a contribution of a tangible item such as when you donate canned goods to a food pantry. A check, of course, is just another form of cold, hard cash.

While I certainly was willing to begin pontificating on yet another topic, it seemed smarter to talk with the charities that actually receive large amounts of both in-kind and cash contributions. What you find is that while they are deeply appreciative of in-kind contributions, a gift of a comparable amount of cash almost always allows them to better serve their clients.

The first challenge of in-kind gifts is simply one of storage. HELP of Door County often receives contributions of used clothing and furniture. These items are then offered to survivors of domestic violence as they leave an abusive situation and set up a new home of their own. While these in-kind contributions are welcomed, the challenge is figuring out where to put all this stuff. “We are a small organization that has limited storage capacity,” says Ursula Bunnell, Executive Director of HELP of Door County.

The problem is exacerbated when the donated items are perishable. “Sometimes we get a huge supply of apples, sweet corn, potatoes which we need to store until we have enough clients to give them to,” says Estella Huff, Director of Operations of Feed and Clothe My People & Thrift Store. Huff’s operation installed a large walk-in refrigerator and freezer to allow them to keep perishables longer, but there are costs associated with this practice.

“Just in Time” is a common business philosophy that says excessive inventory is waste. Corporations recognize that there are substantial carry costs associated with storing and maintaining a large inventory. So companies use these strategies to ensure that the inventory arrives only when they have need for it and not a minute sooner. Thus the name, “Just in Time.”

When you’re Feed and Clothe My People, however, and someone brings in 50 frozen turkeys they just bought from the grocery store, you accept that gift regardless of your carrying costs even if Thanksgiving is still three months away. While Huff is quick to say that she is deeply grateful for gifts of frozen turkeys, a cash contribution undoubtedly removes the costs associated with storing those turkeys. With a cash contribution, charities can operate more like a for-profit business and buy the items they need exactly when they need them.

Another great challenge of in-kind gifts is that the charity has no way to control what they will receive. The Community Clinic of Door County accepts in-kind gifts of medical supplies and surplus prescription medications. Laura Moeller, the Clinic’s Executive Director, is very thankful for the community’s generosity, but she notes that these kinds of contributions often do not align with what their clients’ need.

With many gifts of prescription drugs, Moeller says that often “they are of no use because they are either very close to their expiration date, or they are for some obscure medical condition for which we don’t see patients.”

“People stop by with crutches, knee braces, arm and wrists splints,” says Moeller, “But we aren’t an ER room and don’t deal with broken bones, so we would never stock those items.”

Bunnell says that at HELP “often donors will donate used clothing, furniture, hygiene products, cleaning supplies, and other items that are not suitable to hand out” because of sanitary requirements.

Unfortunately, the charities incur costs associated with in-kind gifts, even if the donated item is ultimately determined to be unusable. “We have plenty of storage in our warehouse, but the problem that occurs is receiving a large quantity of miscellaneous items [such as] soup, sardines, vegetables, cake mix, salad dressing,” says Sandi Soik, Lakeshore CAP’s Director for Door and Kewaunee Counties. “All these items must be sorted, checked for spoilage [and] expiration dates.”

Every executive director stresses that they are deeply appreciative of in-kind gifts, and they celebrate the spirit of generosity behind them. They want to make sure that the community knows they are not complaining in any way. After all, living in a generous community that wants to donate all kinds of items to charity is a pretty good problem to have!

But the simple truth is that a gift of a comparable amount of cash is almost always more valuable than the in-kind gift. Our local charities have developed some very creative ways to maximize the impact of your cash contributions. Lakeshore CAP, for instance, purchases food in bulk from a national network of food pantries at a cost of a mere 19 cents a pound. The Community Clinic purchases prescription drugs at cost through a large health care provider that enjoys a deep volume discount. The clinic also set up a partnership so that it can get its lab work done at cost. Charities like these are relentless at seeking out ways to squeeze more impact out of every dollar they receive.

Gifts of cash help the organizations avoid the carrying costs associated with storing and maintaining an inventory of donated items. Cash also allows the charities to purchase only the items they need exactly when they need them. Almost nothing goes to waste.

It’s often said that charities should operate more like a business. The next time you make a gift to charity, recall that sage old bit of business wisdom and remind yourself that “cash is king!”

This column by Bret Bicoy originally appeared in the Peninsula Pulse on August 16, 2012.

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