Looking at the ‘overhead ratio’ is a lousy way to evaluate the effectiveness of a charity.
Once you understand that concept, you are left wondering what else to look at when considering whether to donate.
Dóchas Network offers six great questions to ask instead of looking at overhead. (more…)
Bill Zlatos, from the Pittsburgh Tribune-Review has a superb article out: Charities’ methods of valuing donations called into question.
If you are following this issue, you should go read the article.
Mr. Zlatos has been talking to a lot of people and has a lot of great comments. Here are some of the best news-making quotes. I’ll have more to say on these ideas over the next few days.
Reputational risk
Last year I created two cartoons about internal controls for local churches. Those cartoons are featured on my other blog, Once Upon Internal Control.
Views on YouTube for all my cartoons have been running about 50 a week during 2012. For reasons I cannot detect, the traffic on the two main cartoons has surged.
In three weeks, there were 363 viewings of part 1. In those same three weeks, part 2 was watched 108 times.
Total views to date for part 1 are 2,030 and for part 2 are 385.
Each cartoon runs about 8 minutes. Here are the cartoons – –
Bank reconciliations and offering count procedures:
[youtube=http://www.youtube.com/watch?v=1qeibzgSemY]
Good procedures protect from false accusations:
[youtube=http://www.youtube.com/watch?v=7KESsI04-XY]
(Cross-post from Once Upon Internal Control.)
Previous post described how the accounting literature defines a bargain purchase.
This post will give an example.
Let’s say a friend of your organization is a real estate investor who has a small building available and would like to provide it to the organization. The building is not in the nice, high-rent downtown area but is still in a very average area of one of the outlying suburbs. The benefactor can’t afford to make this space available for free, because there are property taxes and other costs involved. So the benefactor offers the space to the organization at a price of $10,000 per year.
The property would nicely meet the needs of the organization, so you snap up the offer and move in. What are the accounting entries?
I think it’s about time to talk about bargain purchases and review what the accounting literature has to say.
“That’ll be exciting,” I hear you say.
I know, I know. This is cool stuff.
Bottom line
The core issue is fair value: what is the fair value of the goods or services received? The second point is the contribution component is the difference between fair value and the amount paid for the goods or services.
An article in Forbes by William Barrett reports that Islamic Relief USA Says Drug Donations Fell 91%.
Since I’m an accountant, I’ll comment on a couple of the things I observed in the financial statements. If you are interested in this issue, you really should check out the full article.
This is the final post in a series that has looked at the 2011 financial statements for Blessings International as an opportunity to see where the donated GIK issues show up in an R&D NPO’s financials.
Again, the goal is not to focus attention on this particular organization, but to look at the impact of donated GIK on the financial statements.
You can download a copy of the full 990 and audited financial statements for the last 3 years from the organizations website, located here. Give them credit for making three years of reports easily available. Most NPOs only put 1 year on their website.
What would the financials look like without the GIK?
Let’s do some number crunching.
In a cover letter to the financial statements on the organization’s website, the president says:
This series of posts looks at the issues surrounding valuation of GIK medication in the nonprofit community that have been getting attention lately by seeing how those issues present themselves in one set of financial statements.
See the first post in this series for tips on downloading a copy of the full 990 and audited financial statements.
I just checked their website today and found it is up and operating. You can find their last 3 audited financial statements here and the last three 990s here.
The 2011 financial statements have the cover letter from Dr. Harder indicating the ministry will use cost for 2012.
Kudos to the organization for making the reports for the last three years easily available on their website.
As I’ve mentioned before, the goal is to see a live set of financials that lets us see the issues, not to pick on any particular NPO.
Supplemental schedule
If it feels like the recovery that started over 3 years ago isn’t really going anywhere, there’s a reason you might be thinking that.
This is a graph of the percentage of the population that is employed. The exact description is civilian employment as a percent of the population. That means what proportion of the population is employed.
Check it out:
Sometimes a large donor will want to avoid being listed on the schedule B attachment to Form 990. Even though schedule B is not disclosable to the public, some donors worry there is a risk of becoming known. Can you accommodate that request from donors?
This series of posts looks at the issues surrounding valuation of GIK medication in the nonprofit community that have been getting attention lately. We are looking at how those issues can be seen in one specific set of financial statements.
See the first post in this series for ideas on downloading a copy of the full 990 and audited financial statements.
This post continues a discussion of note 3 regarding valuation of purchased meds. See previous post for text of the note.
Note 3 – continued discussion
As mentioned earlier, Note 1 says the “bulk” of medicines were purchased from two overseas suppliers.
Note 3 indicates the
..majority of the value of the Ministry’s pharmaceutical products are not legally permissible to be sold in the United States..
Standard Chartered signed a consent decree with the New York Department of Financial Services on September 21. The signed agreement, which you can read here, acknowledges about $250 billion of wires in approximately 59,000 transactions were “repaired” with the intent of hiding whose money was involved. By way, there is a previous enforcement action that didn’t detect any problem, which tells me this is a repeat violation.
Current settlement
The Wall Street Journal report StanChart Formalizes Settlement in Iran Case describes the settlement. The line that caught my interest is:
Standard Chartered, which contested the allegations when they were filed last month, acknowledged misconduct tied to 59,000 transactions totaling about $250 billion.
This series of posts looks at the issues surrounding valuation of GIK medication in the nonprofit community that have been getting attention lately. The 2011 financial statements for Blessings International illustrate these issues. This series of posts show how those issues appear in one set of financial statements.
See the first post in this series for ideas how to download a copy of the full 990 and audited financial statements.
Notes to the financial statements – continued observations
The final item I will quote at length is note 3, which describes the valuation of donated meds.
Kudos again to Blessings International for spelling this out clearly. My guess is that we would see similar issues, explanations, and general relationships in many other financial statements if all organizations were as clear as Blessings International.
By the way, this is a great description of current valuation methodologies in use today. Considering the topic, it is also reasonably concise. (more…)
Previous post discussed explained that is a major point by Mr. Dan Pallotta in two articles he wrote:
His main point is the excessive focus we as a society have evaluating organizations based on their “overhead” ratios and our intolerance for NPOs paying market salaries. The unintended consequence is that we are restricting organizations from getting the money to have the full impact they could realize.
Action plan
This series of posts looks at the issues surrounding valuation of GIK medication in the nonprofit community that have been getting attention lately. The 2011 financial statements for Blessings International illustrate these issues. This series show how those issues appear in one set of financial statements.
See the first post in this series for suggestions on how to download a copy of the full 990 and audited financial statements.
Statement of activity
The statement of activity is presented on the “pancake” method, which means that all of the unrestricted activity is listed first followed by the temporarily restricted items. To find out the amount of total revenue requires doing some math. Total revenue for 2011 is $61.25M (calculated as $3.36 plus $57.82 plus $0.07). Total revenue for 2010 is $39.0.
Donated meds are $57.8 in 2011, which is 94.4% of total revenue.