logo
Donate
    • Membership
    • Donate
  • Social Justice
    • Racial Justice
    • Climate Justice
    • Disability Justice
    • Economic Justice
    • Health Justice
    • Immigration
    • LGBTQ+
  • Civic News
  • Nonprofit Leadership
    • Board Governance
    • Equity-Centered Management
    • Finances
    • Fundraising
    • Human Resources
    • Organizational Culture
    • Philanthropy
    • Power Dynamics
    • Strategic Planning
    • Technology
  • CONTENT TYPES
  • Leading Edge Membership
  • Newsletters
  • Webinars

Nonprofit Accounting and the Deplorable Practice of Overvaluing

Ruth McCambridge
September 10, 2012

X

September 8, 2012; Source: Tucscon Citizen

Two Arizona-based nonprofits are under scrutiny for their accounting practices. Food for the Hungry and the Breast Cancer Society (BCS) are among the largest nonprofits in Arizona. According to the Tucson Citizen, Internal Revenue Service (IRS) records document “$4.1 million in vaccines that the Breast Cancer Society says it gave to Ghana, Africa. The administrator of the Ghana program said Friday that the Breast Cancer Society has nothing to do with the vaccines.” The Breast Cancer Society claimed that it gave, according to the Tucson Citizen, “$38 million last year in grants, medicine and other supplies to deliver direct help to those suffering from the disease,” but the Better Business Bureau (BB) and the American Institute of Philanthropy say that the Breast Cancer Society uses in-kind donations, including medicines, to suggest to cash donors that it is financially efficient while most of the money it raises is, they say, devoted to administrative and fundraising costs.

Sign up for our free newsletters

Subscribe to NPQ's newsletters to have our top stories delivered directly to your inbox.

By signing up, you agree to our privacy policy and terms of use, and to receive messages from NPQ and our partners.

One of the practices in question is the alleged paper transfer of donations from one charity to another with no goods physically changing hands. This ends up in the same goods being recorded as revenue and program expenditures in multiple agencies. As the Tucson Citizen explains, “In exchange for a shipping or processing fee, one charity will transfer the gifts-in-kind to another charity on paper. On paper, the gifts-in-kind are worth millions. The charities will book the entire value of the gifts-in-kind as revenue and then record it as a ‘donation’ when it is sent to another agency.” In this way, a charity could spend a paltry few thousand dollars but wind up looking like it “donated” millions of dollars of gifts-in-kind. Very often, there is no physical transfer of the gift. It is all done on paper. Why bother? The increases recorded in donations and program expenses end up bringing their administrative expenses into a ration that would pass muster with watchdog agencies. President James Reynolds II of the Breast Cancer Society reportedly wrote in e-mails Friday that BCS “strives for excellence in reporting our activities in accordance with generally accepted accounting principles.”

As for Food for the Hungry, the Tucson Citizen reports that it claims that it spent “$83 million in 2010 on disaster relief and long-term development projects.” But the IRS has found that Food for the Hungry overvalued the medicine it gave away “to mislead the public in order to raise more funds.” And it imposed a fine of $50,000 for that misrepresention. Food for the Hungry is disputing the audit findings. The alleged practice in question is the buying of medicines or other goods as program expenditures at a fraction of what one claims they are worth. According to this article, “Records also show that Food for the Hungry paid pennies apiece for pills that it once reported were worth more than $10 each. The charity now reports the pills are worth about $1.54 each. The non-profit’s own website indicates the pills can be purchased for 5 cents.”

Charity Navigator recently sent letters out warning nonprofits to report the value of gifts-in-kind differently if they don’t want to face the possiblility of a downgraded ranking. –Ruth McCambridge

About the author
Ruth McCambridge

Ruth is Editor Emerita of the Nonprofit Quarterly. Her background includes forty-five years of experience in nonprofits, primarily in organizations that mix grassroots community work with policy change. Beginning in the mid-1980s, Ruth spent a decade at the Boston Foundation, developing and implementing capacity building programs and advocating for grantmaking attention to constituent involvement.

More about: AccountabilityEquity-Centered ManagementFinancial ManagementNonprofit News

Our Voices Are Our Power.

Journalism, nonprofits, and multiracial democracy are under attack. At NPQ, we fight back by sharing stories and essential insights from nonprofit leaders and workers—and we pay every contributor.

Can you help us protect nonprofit voices?

Your support keeps truth alive when it matters most.
Every single dollar makes a difference.

Donate now
logo logo logo logo logo
See comments

You might also like
Conservatives Attack Nonprofits on Capitol Hill
Isaiah Thompson
Learning from a Near-Death Experience: How to Survive a Budget Crisis
Donnie Maclurcan
Merging Missions: Starting with Relationships and Shared Authority
Hoang Murphy
Scaling Impact: How Mergers Can Advance Housing in Communities
Priya Jayachandran
Beyond Shared Vision: Building a Collaborative Road Map
Michael Anderson
Why Legal Fear Shouldn’t Drive DEI Decisions: What Leaders Need to Know
Jennifer Johnson

Upcoming Webinars

Group Created with Sketch.
June 26th, 2:00 pm ET

From Performance Management to Mutual Commitment

Fostering a Culture of Joyful Accountability

Register
Group Created with Sketch.
July 24th, 2:00 pm ET

Organizing in Divided Times

The Relational Infrastructure We Need to Protect Democracy

Register

    
You might also like
Conservatives Attack Nonprofits on Capitol Hill
Isaiah Thompson
A drawing of interlocking gears inside of two connected human heads, likely part of a mechanical system.
Learning from a Near-Death Experience: How to Survive a...
Donnie Maclurcan
Glass-paneled exterior of the Microsoft building.
Microsoft Axes Free 365 Software for Nonprofits
Isaiah Thompson

Like what you see?

Subscribe to the NPQ newsletter to have our top stories delivered directly to your inbox.

See our newsletters

By signing up, you agree to our privacy policy and terms of use, and to receive messages from NPQ and our partners.

  • About
  • Advertise
  • Careers
  • Contact
  • Copyright
  • Donate
  • Editorial Policy
  • Funders
  • Submissions

We are using cookies to give you the best experience on our website.

 

Non Profit News | Nonprofit Quarterly
Powered by  GDPR Cookie Compliance
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

Strictly Necessary Cookies

Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.