AERDO Interagency GIK Standards,
January 1999

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Appendix A - Glossary

Agency Relationship: This type of relationship arises when a donor and an organization or two organizations consent that one shall act for the benefit, and under the direction, of the other. (See agent and principal).

Agent: An individual or organization authorized by a principal to perform duties in fulfillment of obligations made or agreed to by the principal. (See principal and agency relationship).

Broker: An agent who negotiates either the receipt or placement of a GIK for a principal. A fee or commission may or may not be charged. A broker may or may not take possession of a GIK.

End-Use Agency: The organization that is the ultimate or final user of a GIK within the U.S. or overseas or provides a GIK to an overseas user.

Fair Market Value: The maximum price which would be agreed upon by a seller willing to sell, who does not have to sell and a buyer willing to buy, but who does not have to buy, where both have reasonable knowledge of the facts. This would be an arms-length transaction.

Fair Value: "Estimated realizable values in cash transactions of the same or similar assets, quoted market price, independent appraisals, . . . and other available evidence." Given the quantities donated, normally this would approximate wholesale price (not retail price paid by an individual consumer). Remember, the non-profit is primarily concerned with the usability of GIK products within their own programs, rather than with the income from the sale of products. Therefore, both usability and marketability are joint considerations in determining fair value.

Gift-In-Kind (GIK): Goods and services usually received as excess product, services or inventory from corporations and other private donors. For the purpose of these proposed standards, gifts-in-kind do not include governmental food commodities, real property, or appreciable personal property. The purpose of gifts-in-kind is to assist an organization in carrying out the purpose for which it was organized.

Handling Charge: A fee charged by a non-profit or for-profit organization related to the procurement and/or processing of GIK donations for other non-profit organizations. (See also Service Fee)

Impaired or Encumbered Value: The value of an item determined by any of the valuation methods, but then reduced because the item has some restriction or condition limiting its usability or utility.

Intermediary Agency: A non-profit or for-profit organization that procures or transfers GIK between parties who generally do not take physical possession or handle the GIK. An intermediary agency may or may not charge a handling fee or commission.

Letter of Acknowledgement: Letter written by a recipient organization to the non-profit organization that provided the donation. This Letter should contain all the information contained in a letter of receipt, but should also contain information on how the donation will be used.

Letter of Donation: Letter written by the donor to acknowledge that a donation is being made. The letter includes a detailed description of the products being donated, the quantity donated, condition of products, and estimated fair value of products. The estimated fair value should include the basis (retail, wholesale, etc.) the valuation is based upon. This letter would also indicate any restrictions placed upon the gift, including special IRS code 170(e)(3) restrictions, if applicable. This is different from a letter of transfer in that a letter of donation is written by an original donor, and a letter of transfer is written by an organization who may have received the original donation.

Letter of Extension: Letter from the manufacturer of a GIK with a "best if used by" or expiration date that states the GIK is still good or usable to a specific date beyond the "best if used by" or expiration date.

Letter of Receipt: Letter written by the receiving organization to acknowledge the donation of the donor. The Letter includes the date of receipt, detailed description of the products being donated, quantity donated, and condition of products. The estimated fair value should include the basis (retail, wholesale, etc.) the valuation is based upon. This letter would also indicate any restrictions placed upon the gift by the donor, including special IRS code 170(e)(3) restrictions, if applicable. This letter should also inform the donor of how the gift is intended to be used by the receiving organization.

Letter of Transfer: Letter written by a non-profit organization when it donates GIK to another non-profit organization. The Letter includes a detailed description of the products being donated, quantity donated, condition of products, and estimated fair value of products. The estimated fair value should include the basis (retail, wholesale, etc.) the valuation is based upon. This letter would also indicate any restrictions placed upon the gift by the donor, including special IRS code 170(e)(3) restrictions, if applicable. This letter should also inform the organization of how the gift should be used. This is different from a letter of donation. A letter of donation is written by an original donor, and a letter of transfer is written by an organization that was not the original donor. Through a letter of transfer, a receiving organization would know it is not the original recipient of a donation.

Operational Agency: A recognized 501(c)(3) organization that has a physical presence in the region/country where GIK are received and utilized in such programs.

Original Donation: A donation made by a manufacturer, seller, or initial distributor to a non-profit organization.

Partnership: An association of two or more organizations working together to procure, possess, or distribute a particular GIK. Each partner may or may not take possession of the GIK or add value to it. This may or may not be a legal or contractual agreement. See the chart on page 12 for some of the factors to use to determine if a partnership exists.

"Pass Through": A GIK that is accepted from someone other than the original donor and is donated to another organization which is not the end-user of a GIK in which possession is not taken before being donated to another organization. A "pass through" organization may or may not add value to the to the GIK.

Possession: Having ownership (risk of loss) and ability to control use of a GIK donation. Possession may include either actual physical possession (through delivery) or constructive possession (such as receiving a paper title).

Principal: The person or organization that is first responsible for the fulfillment of an obligation and may authorize others (agents) to work on their behalf. Either a donor or a recipient organization may be a principal.

Retail Value: The price of an item in the market where it is most commonly sold to the public or ultimate end-user.

Service Agency: A recognized 501(c)(3) organization that has as part of its mandate or mission to supply or support humanitarian, relief, or development programs through the procurement, shipping, or distribution of GIK.

Service Fee: A fee charged by a non-profit or for-profit organization related to the procurement and/or processing of GIK donations for other non-profit organizations.

Value and Valuation: Value is the monetary worth of a gift-in-kind at a specific time, and valuation is the act of determining that monetary value. Depending upon the valuation process, there are several different types of values which could include fair market value, appraised value, retail value, wholesale value, list price, impaired value, and probably many other values.

Wholesale Value: The price of an item in the market where it is most commonly sold from by its initial manufacturer or producer to a buyer who will ultimately sell the item to the public or final end-user.

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