GIK Best Practices

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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 HungryBenjamin, Menenberg, World VisionSusan Talbot, World ConcernJohn Van Drunen, ECFAGary Wybenga, Medical Teams International

Why Pursue Best Practices?We have a higher purpose than othersshouldnt we have a higher standard?Being above reproachSetting the toneCollaborating with one another

Gift Acceptance PolicyPurposeProtect the interest of donor, charity, and the cause.Ensure gifts provide maximum benefitsEncourage donors to make gifts without encumbering their own or the organizations resourcesOptimize 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 donors best interestKey staff are notified of any potential giftDonor legal counsel?Donor privacyThrough reviewProfessional advice

General GuidelinesDonor capacity?IRS conforming acknowledgementInvestment considerations evaluated separatelyNo finders feesAny written instruments properly reviewedDeal with specific guidelines for different kinds of property

Valuation IssuesScope of presentationHighlights 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 assetin an orderly transaction between market participants at the measurement date (ASC 820-10-35-2) Exit market conceptMarket participants, principal marketReciprocal 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 receivedLike-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 donations 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 DATEINVOICE DATEINV990 REGIONCOUNTRYCON-SIGNEETYPE OFCOMMODITYTYPE OFDONORQTYValue EachTotal AWP ValueMethod# BENEF 10/2/200910/2/200962679Africa/KenyaWCFoodWFPFMV10/25/200910/28/200962680Africa/SomaliaWCMedical SuppliesNonprofitFMV11/5/200911/7/200962681Africa/SudanWRSchool SuppliesIndividualFMV11/16/200911/19/200962682Africa/SudanWCClothingFor ProfitFMV11/20/200911/25/200962683Africa/KenyaWCPharma-ceuticalsFor ProfitFMV# of gifts0.000

InventoryScope of presentationAERDO recommendations for inventoryAssigning 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 NPOs 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 valueVery accurate, but NPOs may lack ability to track GIK by each donation from revenue to inventoryAlternative B calculate average pallet (or other inventory metric) values based on all donations received during the year, and assign average pallet values to remaining inventoryReasonably 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 donationGenerally 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 expensesApply overhead charges to restricted gifts based on cost analyses only

Stewardship PhilosophyMaintain systems to provide project reports, including financial data and measurable resultsRegularly determine if donor-restricted net assets have been used for operational purposesProvide adequate due diligence for funds (cash & noncash).Fraud prevention effortsCompare solicitations and philosophy

Pass-ThroughNote revenue recognition aspects of AERDO standard fiveExpend 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 donorsClearly communicate to workersDiscretion and controlKeep clear which property belongs to the organization

Donor PrivacyHow is donor information used?Who is it shared with?Removal processCommunicate a policy

GIK Best PracticesCameron Calabrese, Food for the HungryBenjamin, Menenberg, World VisionSusan Talbot, World ConcernJohn Van Drunen, ECFAGary Wybenga, Medical Teams International