An open letter to the evangelical nonprofit community receiving GIK meds

Dear brothers and sisters in Christ:

The accounting for donated pharmaceuticals has been poor for a number of years. 

The valuations are not supportable by accounting rules either before or after SFAS 157 went into effect. 

Paying a handling fee roughly comparable to available open market price lists sure makes the donations look like purchases.  Fair value does not involve using a valuation in the U.S. for meds that can’t be legally sold here.  A reference book that is known to not reflect actual market prices is not a reasonable basis for determining fair value.  

People outside the evangelical NPO community are starting to notice.

The front-page-of-the-newspaper test is showing regularly that the explanations are not believable for people who look at things from a non-accounting perspective.

Both the IRS and the state AGs are very troubled by the accounting that is in place.  They are considering the accounting theory in their assessments.

Valuing mebendazole at $10.54 a pill is not a way to live life above reproach. Five dollars doesn’t work either. Changing to $1.30 or $1.50 at a time when the pressure is on doesn’t look like above reproach either.

It is well past time to clean up the valuation of donated meds.  The time is rapidly running out.

If the ministry community does not get its house in order, others will do it for you.

The IRS is already pursuing one organization, Food for the Hungry.  The IRS is claiming their valuations were intended to deceive donors.

Forbes has reported that widespread rumors suggest there is a coordinated enforcement effort underway from the state AGs.

An assistant AG confirmed there are several AGs working together.  This AG also put the fraud word in play. Forbes quotes her:

Korsmo, the New Mexico official, flatly calls GIK overvaluation “fraud.”

The timing is getting urgent. The article’s author says there are…

widespread rumors in the charitable sector that shoes are about to drop.

I don’t know what “about to drop” means. For any government agency that has twenty rules to follow just to buy a ticket to fly to a coordination meeting, that could be months or quarters from now.  Add in the extra time to coordinate anything between agencies from multiple states means it could take a really long time.  On the other hand, something may happen soon.

I’ve been sensing something in the wind for a while.  I’m very concerned the amount of scrutiny on valuing GIK is only going to increase.  I’m worried what this will mean for the R&D charities in particular and the NPO community in general.

I don’t know what it will take to correct the accounting, but there is still time.  I hope you use the time wisely.

The advantage that charities have is they can move quicker than government agencies.  NPOs can make decisions and revise policies faster. The charity community could change GIK accounting and make things right before the government agencies take action.

This isn’t going to be a pleasant process.  I’m sure there will be some pain.  Okay, okay, there’s gonna’ be a lot of pain. 

Just as a wild guess, I think it will be more unpleasant and far more painful if outsiders force change.  Merely consider the headlines if either the IRS or AGs take broad actions.

Please remember the source of your strength and the power behind your ministry.  God is big enough and powerful enough to carry you through. 

I don’t need to mention all the bible verses that come to mind. You have them memorized.

Please change the accounting on your own before others force change on you.

In Christ,

Jim Ulvog