Food for the Hungry adjusts 990 amounts for valuation of GIK

August 28, 2012, 11:41 pm

Food for the Hungry has prepared pro forma revisions to its 990s for 2007, 2008, and 2009. They are following the suggestion of Charity Navigators to revise the 990 amounts to reflect what would have been reported if the valuations used in 2010 had been applied in prior years. Previous post discussed that briefly.

You can find the revised amounts at their website by clicking the “about us” tab and then clicking the “Finances” tab.

At the bottom of the page you can find the downloadable audit reports and 990s for the last three years. Under the “Charity navigator exhibits” heading you can find an attestation letter from the audit committee here and the restated pro forma amounts for 2005 through 2009 here.  The letter is in PDF format while the pro forma amounts are in an Excel spreadsheet.

I have not had time to analyze the numbers, let alone ponder the implications. Just wanted to get this information out, since it is very fresh. The letter from the audit committee chair is dated August 22.

Here is the total revenue amount, as reported on the 990 and as recalculated on a pro forma basis. The ’07, ’08, and ’09 amounts are from the template. I pulled the ’10 amounts from the tax return. The amount of revision is calculated along with the changed amount as a percentage of reported revenue. Read the rest of this entry »

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There is more to the IRS audit report on Food for the Hungry than is yet visible

April 23, 2012, 7:00 am

CharityWatch has an article discussing the IRS audit report on Food for the Hungry – – View Through the Looking Glass.

One sentence background – the IRS claims that Food for the Hungry substantially overstated the valuation of donated medicine in their 2008 tax return.

I’ve mentioned the report here and here.  I’ve been talking about the valuation of deworming meds, especially mebendazole, for several months.

The CharityWatch discussion provides a bit more information from the report that has been discussed publicly. It looks to me like there is more to be revealed.

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Time to talk about GIK issues again

February 24, 2012, 2:57 pm

In the midst of a discussion of GIK valuation issues in December and January that I thought was taking place within the nonprofit community, news surfaced that the IRS had finished an audit which identified major concerns about the same issue.  I discussed that here and here.

I’ve held off on more discussion to see how many more shoes were going to drop.  Haven’t been too many – the Better Business Bureau and Charity Navigator are paying attention.

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Comments from others on the IRS audit of Food for the Hungry

February 2, 2012, 3:34 pm

A few comments and observations are starting to appear about the IRS audit of Food for the Hungry. Here are a few I’ve seen:

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Valuation of deworming gets more complicated – the IRS gets involved

January 31, 2012, 11:07 am

It’s not just two big-time reporters and this teeny-tiny blog looking at the mebendazole issue anymore. 

It is now obvious that the IRS has been paying attention for quite some time.  On Monday their involvement hit the papers.

Two articles appeared:

William P. Barrett, from Forbes magazine, posted  IRS Audit: Big Charity Filed Misleading Tax Return

Caroline Preston, of The Chronicle of Philanthropy posted IRS Levies Fine on Food for the Hungry Over Drug Valuations.

If you have any interest in the issue of valuing GIK meds, you will want to read both articles.

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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 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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