Previous post gave background on the 2017 and 2018 nonprofit audit risk alerts from the AICPA. The timing and contents of the 2018 alert were discussed. The small discussion of GIK in the 2017 risk alert was quoted.
This post continues with some comments on the 2018 edition and then a long quote from that document.
You might want to read the previous comments for background to this post. Also might want to get a fresh cup of coffee and maybe a snack. This will be a loooong post.
Not-for-Profit Entities Industry Developments – 2018 / Audit Risk Alert
The 2018 risk alert added extensive discussion of valuing GIK, with a particular focus on pharmaceuticals and even more so for those which have a donor imposed restriction on the use of asset.
Ponder for yourself how this discussion applies to an asset that is restricted for use by any party who gets subsequent possession of the asset at any point during the remainder of the asset’s life. Keep in mind, meds have to be destroyed at their expiration date.
Quite simply, for the meds under discussion the restriction on the asset lasts as long as the asset lasts, regardless of who has the asset.
Also ponder the materiality level of the valuation when my impression is the AG seems to be claiming there is something in the range of a 10:1 ratio of US prices to international prices. From the few examples provided by the AG in its complaint, I infer that ratio may apply to just about all donated GIK.
Think back to the days when millions of doses of mebendazole were being booked by so many charities. Back then the ratio of US to international prices for that med was something in the range of 350:1 or even 500:1. (If you don’t believe me, take the $10+ inferred US price per pill which was routinely used to recognize income and divide by 3 cents or 2 cents or less per pill offered by multiple vendors in the international market. One charity was reportedly recognizing revenue at $15+ per pill.)