What would you think about a newspaper that printed a first-person rant on its op-ed page from someone complaining about overreaching law enforcement without mentioning the author had been convicted of murder? Or a magazine that published an article criticizing due diligence in accounting without stating the writer had done the books for Ponzi artist Bernard Madoff? As a reader, isn’t this background you would want to know?
These hypothetical examples aren’t too far off from what in my judgment the editors of the 108-year-old Journal of Accountancy did–or didn’t do–with an article by a top financial manager at the Seattle area’s biggest public charity.
In its August issue, the JofA published an article about the difficulties of valuing of donated goods entitled “Gifts-in-Kind: What Are They Worth?” The subhead was “How to avoid pitfalls of GIK valuation.” The author was described in an accompanying bio as “associate director for financial accounting and operations for World Vision, a relief, development, and advocacy organization that works to fight poverty.”
Here’s my problem with this: Over the past decade World Vision, a faith-based charity headquartered in the Seattle suburb of Federal Way, has been one of the world’s biggest exaggerators of GIK value, especially in the realm of deworming medicines like mebendazole. The charity took pills that cost 2 cents a pop on world markets and reported them on its financial statements as being worth as much as $10.64. That’s a 53,000% exaggeration, which had the effect of making the charity look to would-be cash donors larger and more financially efficient that it really was. World Vision ran into GIK valuation problems with other items, including, memorably, 100,000 misprinted NFL T-shirts sent to Africa that the charity initially said it it would book at $20 each instead of a wholesale-shipping-and-processing value of maybe $2 each.
Many articles have criticized World Vision for various aspects of its GIK operation. Yet there is no specific mention in the JofA piece or the bio of World Vision’s highly controversial practices. The closest thing is a reference in the first sentence to “a number of investigative articles” about GIK. I happen to be the author of some of those articles, for Forbes here and here, and even for New To Seattle, the blog you’re reading right now. This sentence in the JofA article does not state or even imply that World Vision ever has been cited specifically, which it has. In fact, the wording of that sentence, and indeed the entire article, has an innocent, above-the-fray tone, which I suspect is exactly what was intended.
According to a LinkedIn profile, the JofA author has been with World Vision in a variety of accounting posts since 2005, during the period of greatest exaggeration. I think it’s possible the author knows a little more skinny about GIK problems than what was written.
I view this article as nothing more or less than simple marketing and P.R. on the part of World Vision. To me, it’s similar to the ongoing TV ad campaign mounted by national accountancy BDO touting trust and competence while somehow not mentioning that the firm last year paid a $50 million fine after admitting it was part of a criminal fraud to manufacture $6.5 billion in phony tax shelter losses for clients.
But I can’t really blame the author or World Vision for trying to burnish the brand name. Rather, I think fault lies with with the editors of the JofA, which is owned by the American Institute of Certified Public Accountants and is the most influential publication in its field. As it proudly declares on its website, “With 386,000 paid subscribers, the JofA reaches more financial decision makers than all other accounting publications combined.”
Were the JofA editors aware of World Vision’s GIK practices? If so, then why wasn’t more information about this background provided to the readers? If the editors weren’t, why weren’t they? After all, this is the era of free and easy research on the Web. I just searched “World Vision”+GIK+controversy on Google and got 24,000 hits.
Moreover, in the world of nonprofit accounting, pumped-up GIK valuation has been a hot, hot issue. A task force of investigators from assorted state attorney general offices has been digging into this problem for more than a year. The Seattle area has been a bit of a petri dish for GIK enhancement. Besides World Vision, Crista Ministries, Eagle’s Nest Foundation and Pilgrim Africa have engaged in the practice.
Now, World Vision has been working to clean up its accounting act, although the last time I looked closely, the charity was still marking up deworming pills, but not by 53,000%. The charity remains among the country’s 10 largest as measured by private donations received ($825 million in its latest available fiscal year). Most of its gifts were in cash, not goods.
Since my beef is really with the JofA, I queried its editors asking about its professional, ethical and even journalistic obligations to readers. If I hear back, I’ll update this post. Meanwhile, I invite anyone cited here or interested in the issue to post comments below. Please disclose if you’re a murderer or you cooked the books for Bernie Madoff.