Operation Compassion amended its IRS Form 990 for the four years of 2008-2011. We went back and looked at every single donation and evaluated them for accuracy for those years. In analyzing them, we corrected a mistake in value from our partners, one in 2008 and one in 2011.
While analyzing every GIK donation for accuracy of GIK value and fixing the mistakes of 2008 and 2011, the reduction for those four years was less than 4% of $930 million. Operation Compassion has never used GIK value to offset non-profit expense and in the last six years has operated with less than 1% overhead.
The IRS does not offer any guidelines for posting GIK value except for Fair Market Value (FMV). Operation Compassion reduces the retail product value starting at 40% in accounting FMV based on quality of the GIK. In some instances, the GIK value is as low as 20% of the retail value. Since we were amending the 990’s for these four years, it was decided to adopt the guidelines of Accord (formerly known as AREDO) for counting GIK and eliminate too many charities from claiming the same GIK (AERDO Standard 3.5).
Accord (AERDO) Guidelines
Accord (AERDO) Standards serve to raise the bar of ethics in the industry so that by transparency and integrity, members are able to increase the level of donor and end-user trust in the way donations are received, distributed and recorded.
Accord (AERDO) Standards serve to establish best practices in the receipt and distribution of GIK, to do no harm to local markets, to enhance rather than deter community development and to build beneficial corporate – Non-Profit Organization (NPO) partnerships.
Accord (AERDO) Standards serve to educate and guide NPO staff, including donor relations representatives, accounting and GIK staff to understand the process and purpose of GIK donations.
The number of organizations accepting a GIK donation should be limited to those which have critical roles to fulfill in order to help those in need, prioritizing the best interests of the public over the best interests of the charity. Generally, a GIK donation should not be accepted by an organization if acceptance will result in more NPO’s than necessary recognizing the GIK revenue between the time it is received from the original donor and when it is given to the end-user. This guidance will normally limit the organizations which should recognize revenue to those organizations that either had a direct role in the procurement of the GIK from the original donor or distributed the GIK to the final beneficiary. Any other NPO receiving GIK as a donation recipient should only accept the donation if it will take physical possession of the GIK and add significant value by increasing the utility of the GIK, not simply add value to the GIK transaction by providing storage or transportation (AERDO Standard 5).
Operation Compassion’s GIK Guidelines
- The GIK Received In-House Form is completed upon receipt of non-cash charitable donations such as medical supplies, clothing, shoes, food, hygiene, etc. usually arriving in semi loads. Each GIK Received Form is submitted with the trucking Bill of Lading.
- Some non-profit partners and corporate donors provide GIK values. These values are submitted to Operation Compassion’s GIK office for verification. Some of Operation Compassion donors do not claim any GIK values on their 990’s in an effort to minimize the number of charities claiming the same value for the same product.
- A sample of the products from the GIK Received Form is taken to the Operation Compassion GIK office to obtain the fair market value for the item(s). An internet (Google) search is conducted for the specific product.
- Once the specific item is found, a copy of that webpage is printed out to confirm the product description and image, as well as, the suggested retail price. All values are compared to ensure they are not inflated. In the case of different prices on different websites, the lower/median retail price is taken.
- As Operation Compassion uses wholesale prices or less for their GIK Values, the suggested retail price is discounted to wholesale value on new items (retail price x .60 = 40% off retail value). When, the product is not in retail packaging, close to expiration or slightly damaged, a lower value is applied. Thus, manufacturer’s pricing, close-out, or salvage pricing will be applied to receive an accurate value.
- Once the accurate GIK value is obtained, it is added to an in-house GIK Value spreadsheet for that product. The printed copy which contains the documentation is attached to the GIK Value Form.
- Operation Compassion voluntarily follows the Accord (AREDO) standard that is counted on our 990.
- The GIK Value Committee meets at least weekly and sometimes daily to review valuations to ensure they are current and reasonable. The Committee is a four-member team consisting of the Vice-President of Logistics, Transportation Coordinator, Warehouse Manager and GIK Assistant. The President is consulted as needed to discuss special issues.