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GIK Best Practices. Cameron Calabrese, Food for the Hungry Benjamin, Menenberg , World Vision Susan Talbot, World Concern John Van Drunen, ECFA Gary Wybenga, Medical Teams International. Why Pursue Best Practices?. We have a higher purpose than others…shouldn’t we have a higher standard? - PowerPoint PPT Presentation
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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 157How to value a GIK donationRecommended 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 wholesaleNPOs 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 inventoryOrganizations should proactively establish
systems to track and report inventoryOption 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 valueA specific donation inventoryVerification of donation provided from the
donorDocumentation of the end-use or transfer of
donation
Generally 7 yearsConditions/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 effortsCompare 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
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