Month: June 2013

Guest post – Unintended consequence: the pressure for ‘good’ overhead ratios creates pressure to get GIK

The following guest post was submitted to me by a reader. As with other guest posts, this is his/her opinion and does not represent the opinion or experiences of his/her employer. It also does not represent my opinion.

I wrote the headline. I hope it captures the tone of the post.

For your consideration:

The more and more that I hear about the “controversy” over pharma values, the more and more it shows the completely unnecessary overreliance on overhead rates as a mean of valuing charities. Think about some of the issues that arise from the use of overhead rates:

  1. Charities feel pressure to increase revenue (Charity Navigator expects 10% a year growth in addition to low overhead and high net assets)
  2. Charities may get into a donation that can quickly boost revenue without adding fundraising cost (like GIK, or dewormers)
  3. Charities forgo donations when they no longer provide high enough revenue (charities now are using far less dewormers because they no longer have high revenue value)

What does this mean?

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Jim Ulvog

Internal control, 5th century version

(cross-post from my other blog, Attestation Update.)

Here is an illustration of internal control, a specific mention of “checks and balance”, and the goal of internal control from the 5th century:

From the Fourth Ecumenical Council in 449 A.D.: “As we have learned, in some churches, the bishops administer the material goods of the church without a treasurer; it has seemed right and proper that every church with a bishop should also have a treasurer taken from the clergy who will administer the church’s goods with advice of his own bishop. In this way the administration of the church will not be without checks and balances, the goods of the church will not be dissipated, and the priesthood will be free from all suspicion.”

The quote was listed at LinkedIn by a former colleague, Jennifer Perez, CPA.

That’s too good of an explanation of internal control to let pass without quoting it and making some comments.

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Jim Ulvog

Mebendazole: red herring or presenting problem?

Is 500mg mebendazole a red herring or a way to focus discussion on many issues surrounding GIK valuation?

GIK Valuation: The issues not being discussed is a guest post on this blog. The author starts his/her post by saying the discussion of 500 mg mebendazole is distracting us from the real issues, which are much more serious.

From Dictionary.com

Red Herring: something intended to divert attention from the real problem or matter at hand; a misleading clue.

The author and I disagree on the role of 500mb mebendazole.

I think the author’s point is that focusing on mebendazole distracts us from other issues.

I believe it is this specific med that is generating a disproportionate amount of GIK revenue. I perceive a very material portion of GIK revenue in the sector went away when this one med was revalued at the time SFAS 157 went into effect.  My guess is that a material portion of the remaining GIK revenue in the sector would go away if that one med were valued at something similar to the price on the international market.

I also think that talking about just one medicine allows us to see a host of other issues. If the NPO community can resolve the issue arising from a discussion of mebendazole, I think that most of the other issues regarding GIK valuation would fall into place.

Once we get beyond whether mebendazole is a red herring or a presenting problem, the author and I are in agreement on quite a few issues.

Issues for discussion

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Jim Ulvog