Impact on GIK values form change in accounting rules – Part 4 – A few final observations

January 30, 2012, 9:27 am

Previously I’ve discussed the impact of new accounting rules on valuing of deworming medicine.  Have been looking at Feed the Children financial statements to quantify the impact.

I am not picking on Feed the Children.

I’m using their 2010 financial statements because they have the best disclosures in their financial statements that I’ve seen for the impact, plus there is public information on what per-pill valuation amounts they have been using.  It is to their credit that they have this amount of background available in their financial statements.

It is my guess, just a guess, that the same underlying valuation issues and impact on supporting services ratio that I have described previously here and here, would also be present in the financial information for other organizations that have large volumes of deworming medicine.  If I can find good info, I’ll do some calculations on other sets of financials.

I have a few more observations and then one more set of calculations.

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Impact on GIK values from change in accounting rules – part 3 – change in Feed the Children financials

January 12, 2012, 8:17 am

Previous post quoted disclosures made by Feed the Children in their 2010 audited financial statements. Essence of that note is that deworming medicine valued in the 2009 financial statements at $544M would have been valued at $21M if the 2009 financial statements had used the pricing information that was in use for 2010.

This post will look at the 2008, 2009, and 2010 financial statements through the lens of the two different valuation rates.

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Showing my calculations for impact of FAS 157

January 12, 2012, 8:15 am

Here are the spreadsheets that support my comments in this post. Remember your Algebra teacher telling you to show your work?  Well, here’s my work.  I’ve posted this here to keep the other post a bit less messy.

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Impact on GIK values from change in accounting rules – part 2

January 4, 2012, 9:41 am

Previous post here discussed the impact of changes in valuation of GIK caused by new accounting.  I already discussed World Vision’s financials.  Next I will look at Feed the Children’s financials.

The beginning point of my discussion was a Forbes article, by William P. Barrett: Donated Pills Make Some Charities Look Too Good on Paper.  This series of posts started here.  I hope my observations from a CPA’s perspective will contribute to this growing discussion.

After looking at World Vision’s financials, I looked at the financial statements of several other NPOs trying to figure out the impact of FAS 157 and especially the change in valuation of deworming medicine.

Mr. Barrett has accumulated some good numbers.  I looked at publicly available audited financial statements and 990s available from GuideStar.  I could not get a clear understanding by combining information from his published report with public data to let me get a clear understanding.  Just not quite enough data there to work with.

Then I looked at the Feed the Children website. Kudos to them for making their 2010 financial statements available online, which you can find here.

Wow.  Found some superb information in the footnotes.  Check out this comment in note 2 on page 11, which I will quote at length:

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Gamesmanship in GIK valuations? Part 1

December 16, 2011, 8:31 am

Forbes magazine dives into the nonprofit community’s GIK valuation issue in an article by William P. Barrett, Donated Pills Make Some Charities Look Too Good On Paper. (In print the article had a cooler title – Magic Pill, Magical Accounting)

GIK valuation is difficult and messy.  Before anyone gets mad at me for airing dirty laundry from the NPO community, keep in mind that Forbes has a circulation that is somewhere in the range of, say, one gazillion times larger than this little blog.  The article appears in Forbes magazine guys, and on their website.  Don’t get mad at me.

My point in writing these posts?  The issues we are struggling with in the religious NPO world are getting attention from secular media.  It would be wise for NPOs and auditors to deal with this on our own. Quickly.

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