InterAction: NGO Transparency Standards

Members Approve New NGO Transparency Standards and Guidance on Pharmaceutical Gifts-in-Kind Valuation

February 21, 2019

By Carolyn Aeby, InterAction. This post was originally published on InterAction’s site.

To become a member of InterAction, non-governmental organizations (NGOs) must comply with a thorough vetting process before applications are approved by the InterAction Board of Directors.  In addition to providing documents demonstrating good governance and financial practices, organizations must also provide three reference letters and attest compliance with InterAction Standards, also known as Private Voluntary Organization (PVO) Standards.

The PVO Standards were first written in 1992 to ensure and strengthen public confidence in the integrity, quality and effectiveness of member organizations and their programs.   The Standards have been amended over time and remain the operational and ethical code of conduct for InterAction and its member organizations.  Every two years, member organizations are asked to review the Standards and re-certify compliance.

In 2017, InterAction, its board and member CEOs made a commitment to further enhance NGO transparency and accountability. Over the next year, extensive research was conducted including literature reviews, international standards analysis, one on one interviews with evaluation experts, CEOs and non-profit monitoring organizations. Numerous stakeholder focus groups were also held.

The result was the formal adoption of three recommended outcomes measurement standards during a Special Meeting of Members this past December.  The approved standards are designed around the framework of monitoring and evaluation, accountability and learning, and transparency and responsiveness.  Given the breadth of NGO members, the InterAction Standards allow organizations to define what specific, measurable, and realistic objectives related to the organizational mission will be set. The new Standards also state that members will maintain and implement an evaluation policy with the results to be used for learning, improvement, and sharing with the board of directors for additional accountability. Lastly, the monitoring and evaluation practices will allow for community participation, partner and beneficiary feedback, and stakeholder involvement. The standards are intended to be used as a whole, as many of the constitutive principles are interrelated. Definitions and implementation details are provided in technical notes provided to avoid excessive complexity in the standards themselves.

“The outcome measurement standards are intended to be feasible for InterAction’s diverse membership, but to also include ‘stretch’ provisions that will move the association’s members forward,” InterAction’s CEO, Sam Worthington said. “This is a great first step for our community to communicate that we are accountable and transparent with our program participants, donors and boards.”

Pertaining to a smaller group of members but representing more than $2 billion dollars in pharmaceutical gifts-in-kind (GIK) donations, InterAction members also approved a recommended methodology utilizing a decision tree and a list of valuation sources to assist nonprofit organizations in determining the financial valuation of donated pharmaceutical produces received in pursuit of their missions.

With support from InterAction members, Partnership for Quality Medical Donations (PQMD) and other interested parties, the first of its kind decision tree and supporting list of valuation sources noted is intended to help organizations determine whether a product can be considered a donation and the product’s domestic or international value.

The steps outlined are intended to help organizations to select an approach to recording GIK donations in their financial statements that is fair, appropriate and aligned with Internal Revenue Service requirements, Financial Accounting Standards Board (FASB) guidance, and Generally Accepted Accounting Principles (GAAP). Additionally, the methodology serves as the basis for InterAction’s NGO Standards related to valuation of donated goods.

“The purpose of the methodology is to guide decision-making by an individual organization,” said Michael Nyenhuis, CEO of Americares. “Ultimately, each organization is responsible to determine the valuation it records based on its own professional judgement and in consultation with its auditors.” However, to ensure a consistent approach in recording donations in their financial statements, the methodology is based on the American Institute of Certified Public Account’s (AICPA) guidance related to gifts-in-kind valuation.

The outcome measurement standards will apply to all members and will be measured in the next self-certification process completed by members in 2020.  The pharmaceutical methodology is available now and will also be measured with members who accept donations in the next self-certification process as well.

The new standards can be found on InterAction’s website. For more information, please contact Carolyn Aeby, Vice President of Membership and Public Engagement at caeby@interaction.org.