World Help reduces 2011 revenue by 92.8%

World Help has released their 2012 audited financial statements which you can find on their website at this link.

The total revenue initially reported in the audited financial statements for the 2011 fiscal year was $239.3M (audit opinion dated 3/12/12). In the most recent financial statements, the total revenue for 2011 is $17.3M (audit opinion dated 4/10/13).

That is a reduction of $222.0M, or 92.8% of the amount initially reported.

Contributions of GIK were initially reported at $223.66M for 2011 (3/12/12) and currently reported at $1.62M (audit report date 4/10/13). That is a decline of $222.04M, or 99.3% of the initial amount.

You will notice I mention the date of the audit opinion. That is because the 2012 financial statements contain the second revision of the revenue amounts for 2011. The initial set of financial statements has an audit report date of 3/12/12. The first revision has an audit report date of 11/29/12. The current revision has a date of 4/10/13. I will refer to the three sets of financial statements based on the date of the auditor’s report.

My compliments to management

As you read my comments in this and follow-up posts, please know that I commend the leadership of World Help for their willingness to revise their financial statements as additional information and understanding evolves.

You might at first glance think poorly of an organization that has two sets of revisions to their 2011 financial statements. I look at it differently.

I commend their courage to rapidly address the issues as they develop and their boldness in putting their information out where it can be seen.

You may recall I previously commended the organization for the quickness of revising their financial info. You can see my comments here and here.

So again, kudos to the organization for stepping up to the need to revise their numbers.

Memo to the rest of the NPO community: It is possible to revise prior year financial information. And do so quickly.

Reason for revision

Total revenue declined by $134.9M from the 3/12/12 report to the 11/29/12 report. There was another $87.1M decline in the 4/10/13 report.

The notes to the 11/29/12 financial statements do not identify the reason for the revision. The website did have a comment at the time. The 11/29/12 audit opinion had an emphasis of a matter paragraph referring to Note 11.  In Note 11, there is a comment that revenue and expense were overstated but no explanation of the reason or the amount.

I cannot find an official explanation for the reasons for the second revision of the 2011 statement of activity (that would be the 4/10/13 report). Neither the website nor the 2012 annual report nor the notes to the 2012 financial statements nor the 4/10/13 audit opinion contain a comment about the change. At least I couldn’t find anything.

For a hint of the reasons for the second revision, we need to look at an article in Chronicle of Philanthropy by Caroline Preston – Big Relief Charity Says It Overstated Its Revenue by 1,400%.

It is possible the additional decline is due to some GIK shipments for which the original donors stated that they were unaware of involvement by World Help. Removing the value of those shipments from the 2011 financial statements could be the reason for the additional $87.1M decline. Pending further explanation from the ministry that would be only a guess.

The Chronicle article above says the article went to press before management could provide a reply. I hope there will be a followup article to provide comments from the organization.

Revised financial information

Here is a summary of the statement of activity information from the three sets of financial reports. Amounts are in millions. Different columns are labeled based on the auditor’s report date – M-12 for 3/12/12, N-12 for 11/29/12, and A-13 for 4/10/13. Two rounding errors of 0.1 left uncorrected.

	M-12	N-12	A-13	chg	%
Cash contrib	11.8	11.8	11.8	–	0.0%
GIK contrib	223.7	88.7	1.6	(222)	-99.3%
Cash grant	0.3	0.3	0.3	–	0.0%
GIK grant	3.4	3.4	3.4	–	0.0%
other	0.1	0.1	0.1	–	0.0%
	—–	—–	—–	—–
total revenue	239.4	104.4	17.3	(222)	-92.8%

Functional Allocation

These revisions have a rather substantial impact on the functional allocation of expenses. Here’s the amounts I calculate for 2011:

	M-12	N-12	A-13
program	98.5%	96.7%	79.5%
general & administrative	1.2%	2.6%	16.1%
fundraising	0.3%	0.7%	4.4%
supporting services	1.5%	3.3%	20.5%
total	100.0%	100.0%	100.0%