Recap of known state and federal interest in medical GIK

December 7, 2018, 9:29 am

Superior court facade in downtown Los Angeles, California. Image courtesy of Adobe Stock.

There are a number of state and federal actions visible for financial reporting by charities. Focus of the efforts currently is valuation of GIK and the impact of those valuations on fund raising appeals. Perhaps a recap of those efforts will provide some helpful context to the charity community.

Update: End of this post describes the change in accounting over the last seven years in terms of how to value meds that legally may not be distributed in the U.S.  Hint: a 180 degree change.

Today is the 9th day of out of 15 days scheduled for hearings on the California AG’s cease and desist order (C&DO) for MAP International (MAP), Food for the Poor (FftP), and Catholic Medical Mission Board (CMMB).

Here is the list of publicly visible Attorneys General who are focusing on financial statements of the large medical GIK charities:

California:

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What it costs to deal with a major IRS audit. Case study from Food for the Hungry.

July 2, 2015, 8:35 am

The IRS took serious exception to the methodology used by Food for the Hungry in preparing its tax return for the fiscal year ending September 30, 2008. The IRS audit of that 990 ran for years.

On March 24, 2014, the ministry announced the IRS closed their audit. The ministry says it did not have to file an amended return but did agree to change the way that it was accounting for gifts in kind.

A summary of the issues as I described them on 6/3/14:

  • 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.

Now that tax returns are available through the 2014 fiscal year, we can see enough 990s to develop a case study about how much it costs to respond to a major challenge from the IRS.

Why the big deal?

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IRS closes audit of Food for the Hungry’s 2008 tax return

June 3, 2014, 6:52 pm

On March 24, 2014, Food for the Hungry issued this press release:

Food for the Hungry’s 2007 Tax Return Audit ResolvedIRS 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.”

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Update to case study of legal and accounting costs during a major multi-year IRS audit

May 28, 2014, 7:08 am

Update: The IRS has closed the audit.

The 2013 990 tax return and audited financial statements for Food for the Hungry (FH) are hot off the press and available at their website.

I previously discussed the costs incurred by Food for the Hungry to address their audit from the IRS. See previous post: Case study of legal and accounting costs during major IRS audit.

I am looking at that situation because this audit is of interest to the wider non-profit community and it is also a case study of the costs involved in a major dispute.

Try to stay out of court

Here are two posts on the whole idea of avoiding litigation:

Update of costs

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Case study of legal and accounting costs during major IRS audit

February 19, 2014, 9:36 am

Update 2/19, 6 p.m. – Earlier today I received a reply from Food for the Hungry sharing some background information with me.  They will look at this post in more detail and get back to me.  I will share with readers whatever additional information the organization wishes to share.

Update:  IRS audit has been resolved.

A charity going through a major dispute with the IRS has incurred a lot of costs dealing with an audit.

After seeing two sets of financial statements and 990s that were restated last fall (yes, yes, I’m a little slow on the uptake), I thought about checking to see if the Food for the Hungry financials have been restated. Checked the New York AG web site and didn’t see any revisions.

I would like to use the Food for the Hungry financial statements as a case study of the costs incurred from getting involved in a tax or legal dispute.

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

May 29, 2013, 7:42 pm

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. Read the rest of this entry »


Arizona Republic is looking at GIK valuation issues

September 10, 2012, 7:05 am

The Arizona Republic published three articles Sunday examining valuation issues for pharmaceutical GIKs at Food for the Hungry and Breast Cancer Society. They have joined the growing list of media outlets that have noticed issues in donated meds.

The articles, all by Robert Anglen, are: Read the rest of this entry »