Seattle-area charities turned 2-cent pills into $10.64 pills

Usually in this space I inflict upon the world my perceptions about being New To Seattle. But in this post I’m going to highlight a long story of mine with interesting Seattle-area connections that appears in the new (December 19) issue of Forbes magazine, my main journalistic day job since 1987.

The Forbes story is about how deworming medicine improves the physical health of poor people abroad as well as the financial appearance of charities at home.  As you might imagine, since it’s in Forbes, a business magazine, the story deals with a lot of catchy financial angles. To read the story in its entirety, click here. Trust me, you won’t be bored.

The online headline: “Donated Pills Make Some Charities Look Too Good On Paper.” The more punny headline in the magazine: “Magic Pills, Magical Accounting.”

The highly effective deworming pills, mainly mebendazole and albendazole, fight intestinal parasites that can cause starvation and death. The story is about how some charities around the country accept donated pills that can be bought on world markets for 2 cents each but then put them on their books for as much as $16.25. The 81,000% mark-up makes the charities seem bigger and more financially efficient than they actually are.

One nonprofit prominently mentioned in the story is Crista Ministries, which has a Seattle postal address but is located north of town in Shoreline. From a leafy campus that once housed a tuberculosis sanatorium, Crista runs what amounts to a nonprofit conglomerate. Separate ministries operate schools, retirement communities, radio stations and a giant foreign aid program run under the name of World Concern. Since 2005, Crista has been on the annual Forbes list of the 200 largest U.S. charities–which I also put together–as measured by the amount of gifts received.

But not this year.

For it turns out that of the $85 million that Crista listed in contributions, $63 million were millions of 2-cent deworming pills valued as high as $10.64 a pill–a 53,000% markup. Marked to real value, that $85 million falls to $23 million, way below the cut-off for the Forbes list.

South of town, in Federal Way, an even larger faith-based charity, World Vision, also handles a huge number of 2-cent deworming pills. In 2009 it used the same $10.64 value, 53,000% markup as Crista Ministries. But World Vision was a little quicker to see more of the light than Crista. (But would you expect anything else from a charity whose name contains the word “vision”?) For its latest financials, World Vision dropped the per-pill valuation to $2–still a 9,900% markup but a lot lower than 53,000%. World Vision managed to stay on the Forbes list and near the top, too, at No. 9.

Representatives of Crista and World Vision say they were just following industry standard accounting rules–you can read more about that issue in my story–but are re-examining their valuation practices. A Crista spokesman told me in an email before the story was published that he and his colleagues were unaware of any nonprofit that valued deworming pills at just a few cents per pill. They won’t be able to say that now. My story specifically cited one charity, the United States Fund for UNICEF, that booked pills at  just 2.6 cents each, and two others that used values of less than 4 cents a pill.

Although not mentioned in the Forbes story because it was way too small, one other Seattle charity I am aware of played the pump-up-the-deworming-pill-valuation game. Pilgrim Africa, which lists an address on Aurora Ave N. in Seattle’s Fremont neighborhood, filed a federal tax return for 2009 that listed nearly $12 million in donations received. All but $1 million of that were 3.2 million of those 2-cent deworming pills valued at an average price of $3.27 each. That’s a 16,000% markup–clearly ridiculous but still the lowest I know of for any  Puget Sound charity in 2009.

Fascinating area, this Seattle.

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