6.5 Items involving in-kind contributions

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The CFI expects eligible items involving in-kind contributions to be reported at fair market value. It is the responsibility of institutions to ensure that the fair market value reported to the CFI for such items is reasonable.

Institutions may request consideration of an in-kind contribution by suppliers but should not ask for a specific amount or percentage, since this is to be provided by the supplier on a voluntary basis. The CFI does not endorse the procurement of infrastructure that results in an overestimation of the value of the item and of the in-kind contribution. Institutions must exercise careful judgment, recognizing the risk of overestimation in certain instances, and ensure that in-kind contributions reported to the CFI are real and properly valued.

The CFI reserves the right to make the final determination of eligibility and value for items involving in-kind contributions, to disallow expenditures and to reduce the CFI award. To avoid a situation where these items may later be deemed ineligible or incorrectly valued, we encourage institutions to contact us early in the process if they foresee a problem in complying with the guidelines.

6.5.1 Definitions

Fair market value (eligible cost): The agreed-upon price in an open and unrestricted market between knowledgeable and willing parties dealing at arm’s length who are fully informed and not compelled to transact. The fair market value is the price an institution would be expected to pay in such circumstances after normal and educational discounts but prior to any discount offered as a contribution toward a CFI-funded project.

Normal discount: The discount a supplier would normally offer to an institution, taking into consideration factors such as the institution’s current volume of transactions and location. A discount for early settlement or for settlement in cash is considered to be a normal discount.

Educational discount: The discount offered to an institution due to its educational status.

Net selling price: The cash consideration paid or payable by an institution.

Eligible in-kind contribution: A non-monetary resource that an external partner offers as a contribution toward a CFI-funded project. It may include the value, in whole or in part, of eligible capital items or non-capital items that are needed to bring the infrastructure into service. The eligible in-kind contribution is equal to the fair market value of the item less the net selling price (if any).

6.5.2 Valuation of items involving in-kind contributions and documentation requirements

The CFI recognizes eligible items involving in-kind contributions at their fair market value at the time of transfer of ownership to the institution, assuming this value can be reasonably determined and supported by documentation. In some cases, the fair market value of the item is known. In other cases, the value must be assessed using commonly accepted methods (e.g., depreciated value). For datasets that are not otherwise sold to third parties, institutions can report only the incremental cost to customize the dataset. Similarly, for one-of-a-kind items not regularly sold, institutions should report only the incremental manufacturing cost, unless a fair market value can be reasonably established.

If the institution records in-kind contributions at fair market value in its audited financial statements, the CFI will accept the fair market value and supporting documentation deemed reasonable by an external auditor. For contributions by external partners that are treated as charitable donations for income tax purposes, the CFI will accept fair market values deemed acceptable by the Canada Revenue Agency. It is the responsibility of institutions to ensure that the fair market value reported to the CFI for items involving in-kind contributions is reasonable. Institutions must take into account the substance of each transaction and assess whether the amount of the in-kind contribution is reasonable under the given circumstances. Institutions should contact the CFI if they are unable to establish the fair market value of an item involving an in-kind contribution.

In-kind contributions from suppliers

To help establish the fair market value of an item involving an in-kind contribution, the institution should obtain confirmation from the supplier of the price that would have normally been charged to the institution for the item or service (i.e., the price after normal and educational discounts but before any discount offered as a contribution toward the CFI-funded project). This confirmation could be included in a quotation, competitive bid document, invoice or letter. The institution should also consider other readily available information such as, for example:

  • Other bids that have been received as part of a competitive bid process and that provide useful market comparisons
  • The cash consideration paid in a previous purchase of the same (or similar) infrastructure item where the purchase was not related to a CFI-funded project and did not involve an in-kind contribution
  • The institution’s experience with a supplier’s discount structure.

Appropriate documentation should be retained to support the fair market value.

Items involving in-kind contributions in excess of $500,000

A higher level of due diligence is required if the in-kind contribution is significant. For all items involving an in-kind contribution in excess of $500,000, institutions must corroborate the price confirmed by the contributor or the supplier with other sources of information and formally assess the fair market value. This may involve, for example, performing a market comparison, a comparison with previous purchases at the institution or by other institutions or an appraisal. It is possible that the information required to perform the assessment may not be readily available at the institution.

For these items, institutions must provide to the CFI prior to award finalization a description of the valuation method used or expected to be used. It must also forward to the CFI the fair market value assessment for these items prior to the transfer of ownership to the institution or once the transfer of ownership has been completed. Institutions should seek the expertise of its purchasing or supply management departments, as well as those departments that are responsible for the assessment of the valuation of in-kind donations. The fair market value assessment should be reviewed and approved by the head of one of these departments. Institutions should keep all supporting documentation for this assessment (e.g., bids, invoices for similar purchases) on file for audit purposes so that it is available upon request.

The CFI will perform a high-level review of the assessment and ensure that the methodology used by the institution appears reasonable. However, the CFI will not seek to validate the data elements during this review. Any concerns regarding the methodology will be communicated to the institution. For a sample of projects selected for audit, the CFI will perform procedures at a later date to validate facts and elements included in the assessment. If a third-party appraisal is required, the institution must contact the CFI. The CFI will coordinate and pay for a selection of appraisals, based on its risk-based approach. The CFI will only pay for an appraisal if no alternative valuation method is available.

Consult our Resources to apply and manage your award page to find:

  • Fair market value assessment guide: Includes examples of methods that can be used to assess fair market value and circumstances where an appraisal may be required
  • Competitive bid process guide: For items involving in-kind contributions provided by suppliers, important considerations for the competitive bid process and examples of acceptable bid evaluations, including a fair market value assessment

6.5.3 Reporting of items involving in-kind contributions

For items involving in-kind contributions, the eligible cost to be reported to the CFI is the fair market value after discounts (including normal and educational discounts, see 6.5.1 Definitions), but before the in-kind contribution.

Figure 3: Calculating the eligible cost of items involving in-kind contributions

List price

$500

Normal discount

($20)

Educational discount

($80)

Price after normal and educational discounts/
Fair market value (eligible cost)

$400

Discount offered as a contribution toward the CFI-funded project (eligible in-kind contribution)

($100)

Net selling price (cash consideration)

$300

Taxes associated with the cash portion of an item involving an in-kind contribution, net of any rebate received, can be included in the eligible cost reported to the CFI. Taxes must not be calculated and reported for the portion of the item considered an in-kind contribution.