3.1 Financial Auditing

Global Hand and its members endorse the InterAction network’s GIK-specific Standards (the AERDO GIK Standards). Global Hand is seeking, however, to apply the embedded principles in a broader, international context, as the AERDO GIK Standards were written specifically for US based non-profit GIK organisations.

The following is designed to be read in light of Principles, and Cross-referential Issues.

Information Sources? Please see our Reference Material to read, in full, those documents from which our draft standards are drawn. Feedback? We would be grateful to hear from you if you have:
  • Relevant resources
  • Comments or suggestions or stories
  • Stories of product unwisely/wisely placed.

Please email us at enquiries@globalhand.org

3.1 Financial auditing

Interagency Humanitarian Product Administration Standards – Global Hand Introduction

Global Hand and its members endorse the InterAction network’s GIK-specific Standards (the AERDO GIK Standards). We support the principles upon which these AERDO GIK Standards (STANDARDS) are based. We are committed to following these principles, and to carrying out their implication where applicable to our work and region. For background information, complete text of the STANDARDS and guidelines for their application, please refer to the GH standards.

While written specifically for US based non-profit GIK organisations, the AERDO Standards are based on principles that are relevant to agencies involved in handling humanitarian product worldwide. However, these STANDARDS, as written, have originated in a North American context to meet the stringent requirements of USA authorities, such as the Internal Revenue Service (IRS) and the American Institute of Certified Public Accountants. They have been developed under a financial regime where accounting principles require that audited Annual Financial Statements include non cash donations and non cash expenditures as an integral part of those reports.

Global Hand is seeking, however, to apply the embedded principles in a broader, international context. The AERDO STANDARDS are aimed at non-profit organisations that handle gifts-in-kind. Global Hand is seeking standards (GH STANDARDS) that can be applied to a broad range of humanitarian agencies, including those in micro-enterprise development and small to medium enterprise and those involved in the ‘trade and aid’ industry. The GH STANDARDS must allow for the use of both donated and purchased humanitarian product.

GLOBAL HAND Interagency Humanitarian Product Administration Standards

Compliance with Agency Mission: All humanitarian product (HP), whether donated or purchased, must be used in furtherance of the mission, purpose, and program objectives of the receiving Agency and its affiliates.

Product Appropriateness

Each Agency shall have established written policies and procedures for screening HP prior to acceptance from the supplier. The policies and procedures shall also govern utilisation of the product and shall ensure cultural, social, and programmatic appropriateness. No outdated products manufactured for human consumption should be accepted or shipped. Dating on product should be sufficient to secure, accept, value, distribute and dispense to intended individual recipients prior to the expiration date.

Valuation Recording Practices

HP donations are to be valued at their fair value as of the date of donation. While the valuation of HP purchased is clearly related to the sum paid for the product, subsequent events may require recording adjustment to Fair Value.

  • Fair Value: HP donations are to be valued based upon estimated realisable 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). While the Agency is primarily concerned with the usability of HP products within its own programs, both usability and marketability are joint considerations in determining fair value.
  • Product Encumbrances: Donations or purchases of HP that are impaired or encumbered by restrictions or considerations that limit their usability must be valued less than HP that is not impaired. The reduction in value must reflect the seriousness of the impairment, encumbrance or other restriction. If the reduction of value is for a HP already in inventory (whether donated or purchased), the expense must be offset against revenue.
  • If there is no reasonable or sufficient basis to determine the value of a HP donation, no value should be recorded as revenue.

Required Documentation

All HP recorded as revenue by an Agency must have proper documentation relating to product value, inventory, verification of receipt, and record of end-use or transfer.

  • Product Value: Documentation of product value must be made either by the supplier or donor or through other externally verifiable sources, and must include the method/basis used for valuing the HP (e.g., retail, wholesale, other).
  • Inventory of Humanitarian Product: The best and most desirable inventory documentation is a list from the supplier or donor of the HP, details of which should include product description(s), quantity, and total value. If this is not available, it would be acceptable to have an inventory listing prepared by the recipient Agency including the above information.
  • Verification of Receipt: Recipient Agencies must have written documentation verifying the receipt of the HP, including the date of receipt, product description, and quantity.
  • Documentation of End-Use or Transfer: Agencies must have documentation of the final disbursement, end-use, or transfer of a given HP donation. In instances where a supplying Agency donates a material amount of product to another Agency, the supplying Agency should obtain written verification from the organisation to whom they are transferring products that their organisation adheres to the HP standards as set forth in this document. A verification of receipt from the recipient Agency should also be obtained, including an indication of the program(s) in which the product will be used. In addition, the donor Agency should obtain documentation from the recipient Agency as to how the product was eventually used. In instances where no report is provided by the recipient Agency, the donor Agency must show that a reasonable effort was made to obtain same. If a complete end-use report cannot be obtained, the donor Agency should seriously review whether continued activity is appropriate with the recipient Agency. In instances where an Agency utilises a donation within its internal programs, documentation should consist of shipping documents or other appropriate records of disbursement or end-use.
  • Records Retention: Documentation on the final disbursement, end-use, or transfer of a given HP should be retained by the non-profit for a reasonable period after final disbursement, end-use, or transfer of the product by that Agency. This retention period is suggested as being a minimum of two years, more if regulation or law deem the documents to be part of the Agency’s formal accounting records.

Recognition of Revenue and Expense

Generally accepted accounting principles govern the timing and recorded values of HP purchased. The principles therefore have direct impact on the audited Financial Statements.

However, in countries where agencies are further required to include non cash donations (including HP) and non cash expenditures as an integral part of audited Annual Financial Statements, or in other situations where an agency voluntarily chooses to prepare figures that include values of non cash donations in kind, special care is necessary to ensure integrity of reporting in and across the HP industry. Under these circumstances, it is generally only the Agency that takes possession of a HP donation from the original donor or which takes possession as the end use agency may record the value of the Agency donation as revenue. Organisations which partner or co-operate in the use of a HP donation should only record the value of the HP products which they bring to the partnership, add to the partnership, or utilise from the partnership.

Even where actual financial statements are not involved, care should be taken to eliminate overstatement of activity or Agency contribution in terms of HP.

Service Fees

Service fees related to HP donations must be based on administrative, warehousing, or other similar costs incurred in the receipt and distribution of HP.


The basis and method for valuing donated or purchased HP should be disclosed in an Agency’s audited financial statements. The financial statement should also contain a disclosure of the amount of HP used by the Agency in its own programs and the amount of HP donated or sold to other Agencies. Additionally, for HP donated to other Agencies, the amount of HP for which physical possession was taken and the amount which was shipped directly from the donor to other Agencies should be disclosed. Agencies are also encouraged to disclose the value of HP which was not recorded in the financial statements, but for which the Agency facilitated in the procurement and/or use.

See InterAction’s PVO Standards and AERDO’s GIK Standards for further detail.