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Attorney General Becerra has proudly sponsored Assembly Bill 1181 to tackle lack of transparency and improper valuation of gift-in-kind-donations
SACRAMENTO – California Attorney General Xavier Becerra filed a lawsuit against a charitable organization, Aid for Starving Children. The lawsuit alleges that Aid for Starving Children improperly reported inflated revenue on its financial reports by valuing donated pharmaceutical drugs using U.S. drug prices when it never had possession or control over the drugs. While Aid for Starving Children informed its donors that its charitable program worked to feed starving children and their families, in reality, its main program service consisted of shipping donated pharmaceuticals abroad, and the majority of these drugs did not benefit starving children. By inflating the value of the pharmaceutical donations, potential donors were misled into believing a greater percentage of their cash donations would go towards feeding starving children, when in fact most of the money went towards fundraising and overhead expenses.
Attorney General Becerra is committed to protecting donors and honest charities. This year, Attorney General Becerra has proudly sponsored Assembly Bill 1181, to tackle the lack of transparency in the valuation and reporting of non-cash, gift-in-kind donations.
“We are taking action against Aid for Starving Children because our investigation determined that the charity does little of what its name suggests,” said Attorney General Becerra. “California donors and honest charities deserve transparency. Assembly Bill 1181 is a necessary and promising first step to ensure transparency in the reporting and valuation of non-cash donations to protect donors, and to promote a level playing field among charities operating in California. My office is committed to protecting generous donors from the harm caused by misleading accounting gimmicks. We will continue to hold unscrupulous charities accountable.”
The complaint alleges that Aid for Starving Children was able to deceive donors into believing that from May 2011 to April of 2018, it had raised $105 million in revenue to support its charitable program of assisting starving children, but that amount included $97.4 million in improperly valued pharmaceuticals. Less than $1.3 million of the cash donations received were used to feed starving children. The complaint alleges that Aid for Starving Children was accepting pharmaceutical drugs that treat diseases such as dementia and high cholesterol, illnesses not commonly associated with starving children. It also alleges that Aid for Starving Children paid a for-profit company to procure the donations of pharmaceutical drugs, locate international organizations to receive them, and then to ship those goods overseas on the charity’s behalf. Even though all pharmaceutical drugs were shipped overseas, Aid for Starving Children used U.S. drug prices to report their value as revenue on its financial reports.
Assembly Bill 1181 was introduced by Assembly Member Monique Limon, and it is aimed at promoting transparency in the reporting and fair valuation of non-cash donations. It will further promote an equal playing field among charities operating in California. The legislation would require charities operating in California to consider donor restrictions in valuing their non-cash donations. For example, if a pharmaceutical company restricts drugs so that they cannot be used in the U.S., charities should not value these donated drugs using U.S. prices.
A copy of the complaint is available here. More information on Assembly Bill 1181 can be found here.