GIK Best PracticesCameron Calabrese, Food for the Hungry

Benjamin, Menenberg, World VisionSusan Talbot, World Concern

John Van Drunen, ECFAGary Wybenga, Medical Teams International

Why Pursue Best Practices?We have a higher purpose than others…

shouldn’t we have a higher standard?

Being above reproach

Setting the tone

Collaborating with one another

Gift Acceptance PolicyPurpose

Protect the interest of donor, charity, and the cause.

Ensure gifts provide maximum benefitsEncourage donors to make gifts without

encumbering their own or the organizations resources

Optimize opportunities to secure gifts from individuals to causes without compromising or endangering the reputation of the charity

General GuidelinesNot inconsistent with exempt purposeIrrevocable gifts – donor financial jeopardy?Any gift presented without approval is not

received until determined to be in the donor’s best interest

Key staff are notified of any potential giftDonor legal counsel?Donor privacyThrough reviewProfessional advice

General GuidelinesDonor capacity?IRS conforming acknowledgementInvestment considerations evaluated

separatelyNo finder’s feesAny written instruments properly

reviewedDeal with specific guidelines for different

kinds of property

Valuation IssuesScope of presentation

Highlights of FAS 157

How to value a GIK donation

Recommended sources for further research

Valuation IssuesHighlights of FAS 157Definition of fair value

“the price that would be received to sell an asset…in an orderly transaction between market participants at the measurement date” (ASC 820-10-35-2)

Exit market conceptMarket participants, principal market

Reciprocal versus non-reciprocal transactions (FAS 116)

Input levels – majority of GIK donations will use level 2 inputs (i.e., “like-kind” values)

Valuation IssuesHow to Value a GIK DonationWholesale versus retail – most NPOs will typically

use wholesale values due to quantities of GIK goods received

“Like-kind” valuationHow to determine a “like-kind” value?

Average of 5-7 published prices* If published prices are retail values, may need to

adjust to wholesale

NPOs have a responsibility to independently ascertain a donation’s value; cannot rely solely on donor-provided value

* This number of sources is a guideline only and is not a prescription from AERDO

Valuation IssuesRecommended sources for further researchPrimary SourceFAS 157 (now included within Topic 820 in FASB

Codification)

Secondary SourcesFAS 116 (now included within Topic 958-605 in FASB

Codification)

AERDO StandardsUnofficial FASB response to NPO Letter –

October 2008AICPA NPO Guide

End Use ReportingDo we discuss both our final reports and

the fields’ final reports (macro and micro)?Techniques to obtain the reports donors

desperately want – no magic bulletMedia reportingTime constraintsPersonal storiesThe dangers of scale

GIK DisclosuresFinancial statements should disclose

information about the valuation, source, and use of GIK. The basis and method for valuing donated GIK should be disclosed in an organization's financial statements.

Appendix C – sample. Make a spreadsheet using categories as columns.

Preparing this helped in completing the 990.

Excel Spreadsheet to Track GIKSHIP DATE

INVOICE DATE INV

990 REGIONCOUNTRY

CON-SIGNEE

TYPE OFCOMMODIT

YTYPE OFDONOR QTY

Value

Each

Total AWP Valu

eMetho

d

# BENE

F

                       

10/2/2009

10/2/2009

62679

Africa/Kenya WC Food WFP      FMV  

10/25/2009

10/28/2009

62680

Africa/Somalia WC

Medical Supplies

Nonprofit      FMV  

11/5/2009

11/7/2009

62681

Africa/Sudan WR

School Supplies

Individual      FMV  

11/16/2009

11/19/2009

62682

Africa/Sudan WC Clothing

For Profit      FMV  

11/20/2009

11/25/2009

62683

Africa/Kenya WC

Pharma-ceuticals

For Profit      FMV  

    # of gifts                  

0.00 0

InventoryScope of presentation

AERDO recommendations for inventory

Assigning value to inventory on-hand

InventoryAERDO recommendations for inventory

Organizations should proactively establish systems to track and report inventory

Option 1 – GIK recognized on date of donation as Revenue and Inventory. When GIK is expended in programs, record expense and reduction of inventory.

Option 2 – GIK revenue and expense recognized on date of donation. Make a year-end adjustment to recognize NPO’s inventory by reducing expenses and increasing inventory.

InventoryAssigning value to inventory on-handExample: NPO receives 10 donations of 10

pallets each of t-shirts during the year; at year-end, 20 pallets of t-shirts remain in inventory – how to value these 20 pallets?

Alternative A – tie directly to donation value Very accurate, but NPOs may lack ability to track

GIK by each donation from revenue to inventory Alternative B – calculate average pallet (or other

inventory metric) values based on all donations received during the year, and assign average pallet values to remaining inventory

Reasonably accurate, uses fewer resources; consider materiality

Records RetentionAERDO standard 4.9 requires the retention

of GIK documents Documentation of product value

A specific donation inventory

Verification of donation provided from the donor

Documentation of the end-use or transfer of donation

Generally 7 years

Conditions/restrictions – 7 years after expended

Processing FeesAERDO Standard 6

Service fees related to GIK transactions must not be based upon the value of those gifts but should reflect the expenses incurred to administrate, process, warehouse, manage, and handle the GIK provided

Donor IntentEstablish systems to adequately track

donor-restricted gifts and related expenses

Apply overhead charges to restricted gifts based on cost analyses only

Stewardship PhilosophyMaintain systems to provide project

reports, including financial data and measurable results

Regularly determine if donor-restricted net assets have been used for operational purposes

Provide adequate due diligence for funds (cash & noncash).

Fraud prevention efforts

Compare solicitations and philosophy

Pass-ThroughNote revenue recognition aspects of

AERDO standard five

Expend all donor-restricted gifts under the discretion and control of the organization, avoiding all earmarked gifts, and clearly communicate these policies to donors.

Deputized Fund-RaisingTerminology

Clearly communicate to donors

Clearly communicate to workers

Discretion and control

Keep clear which property belongs to the organization

Donor PrivacyHow is donor information used?

Who is it shared with?

Removal process

Communicate a policy

GIK Best PracticesCameron Calabrese, Food for the Hungry

Benjamin, Menenberg, World VisionSusan Talbot, World Concern

John Van Drunen, ECFAGary Wybenga, Medical Teams International