GIK – gift-in-kind valuation

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

Guest post – GIK Valuation: The issues not being discussed

The following is a guest post submitted to me from a reader. As I read the article, it became obvious that the author is familiar with the issues of the relief and development organizations.  Whether the author is an outside auditor, accountant inside an NPO, or even a medical vendor does not matter. Obviously the comments reflect the author’s opinion and not those of his/her employer.  This also does not reflect my opinion.

Agree or disagree as you wish, here are ideas deserving your careful consideration:

GIK Valuation:  The issues not being discussed

While there are many, if not dozens, of misconceptions and false information floating around pharmaceutical values, GIK values, and NPOs supposed conspiracy to inflate revenues to improve their Charity Navigator rating, I thought I would point out a few things to try to bring the conversation around to the big picture rather than focusing on the quite narrow discussion around non-FDA approved, 500mg mebendazole.

500mg mebendazole is a red herring

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Jim Ulvog

Food for the Hungry financial statements and 990 are available for 2012

The audited financials are available on the finance page of their website here. Their 990 is not yet available on their website but is available at the North Carolina Secretary of State’s website here.

I think the financials were posted in the last few days. The N.C. material has a date stamp of 5/17/13. 

Just a few brief tidbits from the reports. (more…)

Jim Ulvog

Conversation underway on previous guest post

The guest post from Friday is generating some good discussion. If you haven’t looked at that post since it was published, you might enjoy the conversation. Several different people have joined in.

Here is the post:  Guest post – Determining FMV is difficult. Let’s keep in mind the good that is accomplished by donated meds.

Anyone have more thoughts on what’s been said?

Jim Ulvog

Guest post – Determining FMV is difficult. Let’s keep in mind the good that is accomplished by donated meds.

The following is a guest post submitted anonymously. The writer raises some good points and good questions. I’ll post it verbatim except for breaking two large paragraphs into smaller ones for easier reading. I hope the title of the post, written by me, fairly summarizes the ideas. 

One of the cool things about blogging is the ability to provide links to cited sources – if the author would like to forward links for the two quoted sources, I will add them.

Thanks to the author for taking the time to write. Here are his or her thoughts:

(Update 5-31: In case it wasn’t obvious, this post reflects the author’s opinion and not that of his/her employer. It does not reflect my opinion.)

Thank you for providing a space for this conversation. I have studied this specific aspect of researching fair market value (FMV) of donated items in depth. As with any discussion we must ensure that we start with the same definition of fair market value.

Accounting guidelines state that FMV is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To bring it into simpler terms, if I am selling apples and you are looking to buy apples, what price can we agree upon?

There are three points that I would make to start the conversation on the valuation of donated goods.

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Jim Ulvog

Guest post – What about underreporting GIK?

Mr. Jeff Beaumont is a CPA working for a firm that focuses on serving the nonprofit community. His opinions are his own and do not reflect the opinions or positions of his firm in any way. Because he speaks for himself, I won’t identify him or his firm in any more detail. He doesn’t speak for me either.

He has experience as an auditor working on the issues discussed on this blog.  He took me up on my invitation for guest posts, so here is Jeff:

 

by Jeff Beaumont, CPA

There has been quite an amount of discussion, articles, and consideration given to recording gifts in kind.

However, I would like to ask nearly the opposite question: what about organizations that don’t record gifts in kind?

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Jim Ulvog

Other disclosure issues for GIK medicine

Since starting to write about GIK valuation issues, I’ve noticed there are a few disclosure items that don’t seem to be visible in the financial statements of NPOs who receive large volumes of donated medicines. As I have time, I’ll start accumulating examples.

Concentrations – In general, if a line item of a financial statement contains a concentration, that concentration should be disclosed. The concept is one donor or lender or customer or vendor could go away. If loss of one counter-party would adversely impact an organization, the concentration should be visible. For example, if a huge portion of cash contributions come from just a couple of donors, that probably should be disclosed.

Concentration of revenue – (more…)

Jim Ulvog

Call for guest posts on GIK valuation

I’ve noticed a remarkable lack of conversation on the ‘net for the GIK issue from people who think the current methodologies are reasonable and appropriate. Perhaps part of that is the lack of a place to comment.

I’m willing to host guest posts on the GIK valuation issue if someone would be interested in writing something. Rules would be simple. Be professional, no ad hominem attacks, advance the conversation. I will do minimal editing without permission.

Since this is a blog, length is not an issue. Brief or long, your choice.

Since comments are moderated, you could reply to any post and I’ll see it.  Leave a comment and we can start a conversation.

Make up a good nom de plume and leave me a note if you are interested.

Jim Ulvog

World Help revises 2012 report again to say the 2011 numbers were restated again

My compliments to World Help. They have revised their financial statements to disclose the 2011 numbers were revised again.

My hat is off to them for the courage to revise the report.

The newest report can be found at their website here.

Note 12 is new. It is titled Comparative Statements and addresses the second revision of 2011 information.

The note says management restated the 12-31-11 financial statements.

The reason is provided. Quoting, the report says: (more…)

Jim Ulvog

My visit with telemarketer from the Children’s Cancer Recovery Foundation

Children’s Cancer Recovery Foundation (CCRF) is the latest charity to announce the revision of their financial statements.

Chronicle of Philanthropy reported this morning that the organization will revise their 2011 financial statements and 990 for the medicine they received from World Help – Cancer Charity Shrinks Its Revenue.  Mr. Doug Donovan, who wrote the article, indicates there is another donation that CCRF ought to address as well.  You can see CCRF’s announcement at the bottom of this page.

Mr. William Barrett tells of his telemarketing call from CCRF. The call was made by Associated Community Services (ACS). See his blog, New To Seattle, for his experience:  Really? Iffy charity says gift will benefit Seattle hospital. The script for the call he received said a portion of the donation would go to a nearby hospital that he’d not heard of. Some research revealed that hospital actually exists but had changed their name five years earlier.

A bit of research by Mr. Barrett identified the same issues that the Chronicle of Philanthropy has been discussing in their recent articles.

Mr. Barrett mentioned the Chronicle article and CCRF restatement this morning, calling it another shoe dropping in the ongoing issues over valuation. He suggests we may soon have a closet full of shoes – Iffy charity soliciting in Seattle gets more iffy.

Sometime soon I’ll have a series of posts on the accounting concept of joint cost allocation using the CCRF 990 as a case study. Before going into that discussion, it would be helpful to describe my call from ACS

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Jim Ulvog

Accounting ideas in World Help’s revised financial statements

There are some accounting concepts in the most recent financial statements released by World Help that warrant discussion. This post will walk through those items I noticed.

This will be a long post. You might want to get a fresh cup of coffee and settle in.

Efforts to reach out to World Help

I have been asking World Help for their comment for a week and a half. The only reply I have received was when the president’s assistant gave me the e-mail contact for the organization’s outside media consultant. I have sent e-mails to the president’s assistant and the contract media consultant several times and received no replies.

Proper accounting is a broader issue in the R&D community than has been discussed

The focus of conversation on accounting in the relief & development community has been variance power and the valuation of medicine, particularly 500 mg mebendazole.

I perceive there are issues involved in disclosures that haven’t yet been discussed.

In accounting shorthand, the matters I see that have not yet been addressed are disclosures of concentration of contributions, concentration of donors, and estimates with a reasonable possibility of change in the near-term.

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Jim Ulvog

GIK valuation – Things going on behind the scene

Previous posts have discussed an article at Chronicle of Philanthropy: Charity’s Exaggerated Revenue Could Affect Other Groups.

I saw two interesting background comments in the Chronicle’s article that tell me there is more going on than is visible.

The AG task force

The first is a quote from the office of the New Mexico Attorney General: (more…)

Jim Ulvog

Impact on downstream charities from World Help revising their financials

As discussed in an earlier post, World Help has revised the amount of 2011 gift-in-kind contribution from $223.7M to $1.6M. That is a 99.3% reduction.

What is the impact on charities who received GIK from World Help? This question is touched on by Aronson Nonprofit Report blog in their post I discussed here. That issue was discussed at more detail in a long article at Chronicle of Philanthropy: Charity’s Exaggerated Revenue Could Affect Other Groups.

The Chronicle article identifies two specific charities which received donations from World Help: (more…)

Jim Ulvog

Comments from others on World Help’s restatement

Aronson Nonprofit Report has a comment out today on the World Help restatement: Charity Overstate Revenue by $222 Million and You Thought Your Restatement Was Bad.

Middle paragraph:

Once again, we have an issue of claiming value for donated medicine which is an ongoing blight in the nonprofit community, but in this case, the donors say they never gave any donation. The finger-pointing is heated and people are no longer cooperating with the press.

Carol Barnard points out this creates an issue for other NPOs who have received donations from World Help.

If World Help’s GIK has been overstated by 99.3%, it seems like that could have an impact on the valuation used for those who received GIK from them.

Jim Ulvog