Valuation of deworming meds illustrates the front-page-of-the-newspaper test – part 2

Previous post discussed how we are seeing the front-page-of-the-newspaper test for decision-making play out in the deworming med issue.

Reputational risk

I perceive there is a danger of damaging the reputations of many organizations from the way donated meds are valued. 

The risk is small for all charities. The risk is serious for all relief and development organizations who receive GIK.  The risk is exquisitely high for those organizations who were using high valuations in the past or are doing so now.

I fear that if this issue is not resolved quickly by the nonprofit community, those risks will turn into actual damage.

If the nonprofit community can’t resolve this on its own, others may “assist” us in resolving it. 

I will repeat two comments on the dangers I quoted in my earlier post:

Of the high values, Mr. Luke Hingson, of Brother’s Brother Foundation, said:

The integrity of international charities is weakened by this.

A similar comment from Mr. Michael Hanlon, Institute for Health Metrics and Evaluation at the University of Washington:

For the long-term health of the philanthropic sector, it is crucial to root out and eliminate this practice.

What media are following this story?

Here’s a list of the media sources looking at this issue that I’m aware of, with a link to one of their reports:

• Forbes magazine – Donated Pills Make Some Charities Look Too Good On Paper
• Chronicle of Philanthropy – Aid Charities Accounting Practices Draw Criticism
• Arizona Republic – Call 12: Food for the Hungry faces IRS scrutiny
• Pittsburgh Tribune-Review  –  Charities’ methods of valuing donations called into question.
• Anderson Cooper, of CNN – Charities accused of overvaluing donations

In addition, the watchdog organizations are looking at the issue:

• American Institute of Philanthropy –  The Alice in Wonderland World of Charity Valuation. (article seems to have gone offline)
• Charity Navigators – Watchdogs Zero In on Charity Drug Valuations

I’ll make a wild guess that other reporters are working on stories. I doubt any of the above reporters have dropped the issue.

What is the overlap of their audiences with the donor base?

The organizations being discussed are predominantly faith-based NPOs with a heavy concentration in what would broadly be defined as the evangelical community. There is one NPO from the Islamic faith tradition.

I would guess that there are relatively few donors to those evangelical organizations who read Forbes or Chronicle of Philanthropy. Because of the nation-wide reach of most R&D NPOs, few of their donors would read a newspaper in Arizona or Pittsburgh. I’ll go out on a limb and guess there is a really small number of donors to evangelical organizations who are in Mr. Cooper’s audience.

So at this point, for the organizations getting all this unwanted attention there are probably only a few donors who are aware of that attention.

What if that changes?

That’s where the danger is.

What if the Wall Street Journal, or Los Angeles Times or Washington Post pick up on this story? What if Christianity Today or some of the other magazines in the CTI system run a feature article?

What if the IRS has other audits in process, as vague rumors suggest? What if several state AGs take some serious enforcement action?

If the story keeps expanding, a vastly larger number of donors could be reading the story in their newspaper.

As I said in my very first post on this issue, I think it’s time to clean up the accounting. 

Before we see more newspaper articles.