Forbes recently reported that the nonprofit organization, Operation Compassion, will likely revise downward its reported revenues over four years by as much as $250 million. The restatement is due to the valuation of its gifts-in-kind (GIK).
This has been an area of controversy and scrutiny for quite some time, especially within organizations providing services overseas through the donations of medicines, medical supplies, clothing and other items, because they receive a significant portion of their revenues from these GIK. Overvaluation of these items may make an organization seem much larger and more efficient with its resources than it actually is.
GIK that can be used in the organization’s programs or sold should be recorded at fair value. When making an assessment of fair value, the organization should consider the quality of the items, as well as the quantity received. Any discounts (including quantity discounts) that could be received by the NPO if it was purchasing the items should be factored into the assessment.