On March 24, 2014, Food for the Hungry issued this press release:
Food for the Hungry’s 2007 Tax Return Audit Resolved – IRS acknowledges that FH followed all laws and accounting standards
In the press release the CFO, Barry Gardner, provided the following comment:
“After an exhaustive review lasting 1,030 days, the IRS allowed the 2007 return to stand as originally filed,” said FH Chief Financial Officer Barry Gardner. “Contrary to erroneous press reports in 2012, no fine was ever levied or paid. While FH and the IRS have minor disagreements concerning certain transactions from that period, those transactions were deemed not to require revision of FH’s tax return.”
The references above to the 2007 return actually should have said 2008. That is the year that has been under audit and generated extensive public discussion.
Mr. Gardner confirmed to me today via email that the audit of the 2008 tax year has in fact been closed. He indicated the 2008 tax return will not be amended. He also pointed out the ministry has not paid any fine and has not had any fine levied.
Mr. Gardner also told me, via email, that the IRS did require the ministry to change their accounting for GIK, but a change was already made back in 2010. That would refer to reductions in the valuation of donated items after SFAS #157 (ASC 820) went into effect.
In one sentence (as I understand the picture), the primary issue under audit was whether it was appropriate to value 500 mg mebendazole (which cannot legally be sold in the U.S.) at over $10 per pill when it can be purchased on the international market for one or two cents per pill. Two related issues were variance power and whether amounts paid in relation to a shipment of meds were a handling fee or a purchase price.
FH press releases can be found on this page.
I have discussed the GIK valuation issue extensively on this blog. You can find the Food for the Hungry posts at this tag.
Time to repeat several comments I’ve made before…
Full disclosure: Many years ago, I worked for Capin Crouse, the auditor of FH now and then. My involvement on the audit around 15 or 20 years ago was limited to reviewing the report and workpapers before the audit opinion was released. I have no personal or inside knowledge of the FH accounting for the last 12 years. While I was at Capin, both Mr. Gardner and the current and preceding audit partners on the engagement were colleagues of mine (the partner’s names are not currently in public discussion so won’t be mentioned). Currently I am a competitor to Capin Crouse in providing attestation and tax services to the religious nonprofit community. Filter my comments as you wish.