Guidance on valuing medical GIKs in the 2011 NPO Audit Risk Alert

June 4, 2012, 8:44 am

The issue of determining fair value of donated pharmaceuticals has been quiet for a little while. I’ve not seen much discussion of mebendazole on the ‘net lately.  Perhaps it is safe to venture back into the waters.

I’d like to mention some of the accounting guidance that is around and provide a few comments.

The AICPA’s 2011 Not-for-Profit Entities Industry Developments Audit Risk Alert contains a two-page discussion of valuing gifts-in-kind (GIK).  SOme key paragraphs are quoted below along with my comments.

This is not an exhaustive discussion of the issue and is not a position paper.

This is intended to further the conversation on valuing GIKs, especially for people who don’t keep copies of the audit risk alerts on their nightstand for leisure reading. (You may now roll your eyes in pity for those of us who enjoy reading such things.)

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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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Unintended consequences – – how much harm can doing good cause?

December 30, 2011, 8:52 am

What in the world is Swedow?

In writing about GIK and deworming meds, I’ve learned some fancy words, like Albendazole, Mebendazole and Swedow.  I’ve also started reading discussions in places I usually don’t go.

For example, Good Intentions are not enough is a great blog written by Saundra Schimmelpfennig.  She has lots of posts about the complexities of doing foreign aid well.

While visiting that site, I read a guest post by Juanita Rilling:  Compassion on Sale

She has a sobering discussion of the unintended waste of sending drinking water as part of humanitarian relief. Read the rest of this entry »

Impact of changing rules for determining fair value (SFAS 157) on GIK of NPOs

December 28, 2011, 10:29 am

Wow. When I started blogging about GIK valuations, I knew there was a major issue, but didn’t quite grasp how big it really is.

The beginning point of my discussion was a Forbes article, by William P. Barrett: Donated Pills Make Some Charities Look Too Good on Paper. In this post I will look at the impact of a change in accounting rules on the valuation of GIKs.

Additional background

Several articles by Caroline Preston in The Chronicle of Philanthropy outline the issues.  One deworming medicine, Mebendazole, seems to be the biggest issue. In her article Aid Charities’ Accounting Practices Draw Criticism, she quantifies the significance of that one med: Read the rest of this entry »

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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