World Vision posts pro forma adjustment which drops combined total revenue for 2008 and 2009 by 11.5% and cuts combined GIK revenue by 34.6%

World Vision has posted their 2012 financial information. You can find the information on this page. The audited financial statements are here.

Included on that page is another document, Charity Navigator Disclosures. This contains their pro forma disclosure of what changes World Vision believes would have been made to the 2008 and 2009 financial statements if the requirements for SFAS 157 had been applied for those years.

We will leave aside for the moment the opinion of some, including me, that implementing SFAS 157 should have had no impact on the valuation of 500 mg mebendazole, since it is illegal to distribute that medicine in the United States both before and after SFAS 157 went into effect.

The pro forma calculation reduces GIK revenue by $143M in 2008 and $126M in 2009. World vision disclosed in their 2010 CFO’s letter that the 2010 revenue would have been $140M higher using the valuation amounts in place earlier. That amount for 2010 is repeated in the disclosure memo.

The pro forma calculation reduces GIK revenue by 30.5% in 2009 and 39.1% in 2008. Total contributions drop by 10.3% in 2009 and 12.9% in 2008.

Timing

I don’t know when the pro forma memo was posted. I have the impression it was in the last month or two. On the other hand, the metadata on the PDF document shows the file was created on October 12, 2012.

The disclosed adjustments

Here are the disclosed pro forma adjustments in the World Vision memo. All amounts in millions:

  

 FY 08  FY 08  FY 08
 audited  estimated  proforma
 change
Noncash contributions       527,927    384,639    143,288
 Total contributions    1,113,918    970,630    143,288
 Total revenue    1,125,604    982,316    143,288
 program service expense       978,648    835,360    143,288
 total expense    1,127,845    984,557    143,288
 FY 09  FY 09  FY 09
 audited  estimated  pro forma
 change
 Noncash contributions          619,259       493,186        126,073
 Total contributions       1,214,420    1,088,347        126,073
 Total revenue       1,221,383    1,095,310        126,073
 program service expense       1,065,937       939,864        126,073
 total expense       1,205,887    1,079,814        126,073

 

2009 and 2008 amounts as audited and with pro forma adjustments.

I cannot reconcile the disclosed amounts in the memo with the audited financials. There is a $16.7M difference in the 2008 total revenue and $2M in 2009.  Thus, I will use the audited amounts.

Here are key amounts for 2010, 2009, and 2008 incorporating the pro forma adjustments already mentioned.

2010:

 

WV 10 proforma

2009:

WV 09 proforma

2008:

WV 08 proforma

Retrospective evaluation of my previous estimate

On December 28, 2011, I posted Impact of changing rules for determining fair value (SFAS 157) on GIK of NPOs.

In that post I took the disclosed impact on World Vision’s 2010 financial statements from the revised valuation methodology and extrapolated back to the impact on the 2009 financial statements.

Now that we are 14 months down the road and have an official estimate of the impact, it is worthwhile to review my comments back then. (Auditors call this a retrospective review.)

I estimated GIK revenue would drop by $148M, which would be 35.8%. The new pro forma amount is a decline of $126M, or 30.5% of GIK.

Here’s a comparison of my estimate 14 months ago with the current World Vision pro forma.

First, my estimate in late 2011:

WV my estimate

Second, the current pro forma from World Vision in early 2013:

WV estimate

You can compare them yourself to see how close or far I was.

Combined impact on 2009 and 2008

In my headline, I reference the combined impact on 2008 and 2009. Could have mentioned the combined impact is over a quarter billion, especially since that seems to be the range of most adjustments to GIK amounts that have been in the headlines lately.

Instead I used a longer and more detailed headline. Hey, I’m a full-time accountant and a very part-time reporter.

Here’s my calculation:

WV combined

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: