CharityWatch REPORT
Issued April 2017

CharityWatch Analysts perform an in-depth analysis of charities' audited financial statements and IRS tax filings, and often review other documents such as state filings, annual reports, and fundraising contracts during their evaluations. Below are select notes that CharityWatch believes may be of interest to donors.

Any time an Analysts' Note refers to a charity's Audited Financial Statements or IRS tax form, CharityWatch encourages interested donors to obtain a copy of the referenced documents so that they may view the information in context. Please contact the charity directly to request a copy of any referenced document. Charity tax forms and audits may also be obtained from a number of online databases. For a list of sources, please visit our LINKS page.

According to the CARE USA tax filing for the fiscal year ending June 30, 2016, CARE reports a "Significant Diversion of Organization Assets" as follows (IRS Form 990, Schedule O re: Form 990, Part VI, Line 5):

"CARE discovered what appeared to be financial anomalies in one of its Africa country offices in September, 2015. CARE immediately formed an investigation team to look deeply into the concerns. The investigation was fully supported by management and legal counsel to ensure it was handled consistent with CARE's high standards. Over the course of a detailed investigation, CARE discovered a series of fraudulent payments occurring over a number of years that had remained undiscovered due to active concealment and certain internal control weaknesses that have since been corrected. Those areas that have been strengthened include greater controls over checks and wire transfer forms, timely bank reconciliations, strengthened financial system account maintenance, and more rigorous transaction review and approvals. The staff person suspected of being responsible was immediately suspended, and later fired, arrested and jailed, and others determined to have knowledge of suspicious activities were terminated. In total, extensive analysis resulted in a determination of losses to fraud in the amount of approximately $468,000. Impacted restricted donors were advised and fraudulent expenditures refunded; those costs that could not conclusively be determined as fraud were also refunded. CARE is deeply committed to its core values of transformation, integrity, diversity, equality and excellence, and places donor trust as among its highest imperatives -- the lessons learned from this episode has [sic] informed comprehensive internal control improvements and management practices."
CharityWatch's rating of CARE USA is based on the financial activities of the 501(c)(3) public charity, tax ID# 13-1685039.

According to CARE's consolidated audit (Note 1, Organization):

"CARE USA is a member of CARE International, an umbrella organization that coordinates the program activities of the CARE International member organizations. In the regular course of its operations, CARE USA makes certain grants to CARE International and its member organizations and receives certain funding from members of CARE International."

CARE USA's subsidiaries, which are consolidated in the CARE USA audited financial statements for the fiscal year-ended June 30, 2016, are not included in CharityWatch's rating of CARE. According to the CARE consolidated audit (Note 1), these subsidiaries include:
(1) Access Africa Fund, LLC, an investment company formed "to enable sub-Saharan micro-finance institutions to expand financial services by making debt and equity investments;"
(2) CARE Enterprises, LLC, a for-profit "business venture started by CARE to bridge the gap between demand and supply that exists between formal markets and many of the world's poorest communities;"
(3) CARE Action Now, a 501(c)(4) non-profit "operating exclusively for the purpose of educating the public, legislative, executive, and judiciary policy-makers on the appropriate and sustainable provision of relief, rehabilitation, and development to underprivileged people;"
(4) CARE India Trust, a non-profit operating in India, "primarily engaged in administering health and nutrition programs funded by the Indian government;"
(5) SEEDFINANCE Corporation, a for-profit located in the Philippines that "was engaged in providing micro-credit loans," but which is no longer active and has filed for liquidation; and
(6) MOFAD, a non-profit in Afghanistan that is currently non-operational.
According to the CARE USA tax filing for the fiscal year ending June 30, 2016, CARE received donated in-kind goods valued at approximately $41.8 million in fiscal 2016, of which approximately $40.6 million consisted of donated food inventory (IRS Form 990, Schedule M).

[Note: CharityWatch generally excludes the value of in-kind (non-cash) donations of goods and services from its calculations of Program % and Cost to Raise $100. More information on how grades are calculated and the treatment of in-kind donations can be found by clicking on "About CharityWatch" from the navigation bar and then clicking on "Criteria & Methodology".]
According to the CARE USA consolidated audit of June 30, 2016 (Note 7, Conditional Pledges):

"Pledges are recognized as revenue when the donor makes a promise to give unconditionally. CARE USA had $52.0 million and $51.3 million of conditional pledges at June 30, 2016 and 2015, respectively. The future payments are conditional on meeting the milestones established in the pledge agreement. These pledges are utilized for sexual, reproductive and maternal health, food and nutrition security and resilience against climate change, women's economic empowerment and emergency relief efforts."
According to the CARE USA consolidated audit of June 30, 2016 (Note 13, Commitments and Other Matters):

"CARE USA has committed to provide funding to CARE Peru in the aggregate amount of $24 million. This commitment is to be paid from fiscal years 2012 through 2034 in accordance with CARE USA and CARE Peru framework agreement payment terms. The commitment is conditional upon CARE Peru meeting agreed-upon program expenditures, which has not occurred to date. CARE USA made cumulative contributions of $5.8 million and $4.7 million respectively, as of June 30, 2016 and 2015."
According to the CARE USA consolidated audit of June 30, 2016 (Note 15, Contingencies):

"Management is aware of approximately $3.9 million in questioned costs resulting from various audits, of which $3.4 million is currently under appeal. The US Agency for International Development (USAID) is reviewing supporting documentation submitted by management to clear these questioned costs. CARE USA has $2.5 million and $3.7 million accrued for questioned and disallowed costs as of June 30, 2016 and 2015, respectively. Based on prior experience, CARE USA believes that costs ultimately disallowed, if any, would not materially affect its consolidated financial position."

"The Government of Bolivia has served CARE USA with tax claims of approximately $21.8 million for the commercial sale and distribution of commodities during the calendar years 2002 - 2007. CARE USA has filed lawsuits in Bolivia contesting the validity of these claims. A lower court ruled in CARE USA's favor on two lawsuits, and the Supreme Court in Bolivia affirmed one of the lower court decisions in July, 2016. Although the outcome of this matter is currently not determinable, management is monitoring the situation closely. No estimate can be made of the possible range of loss, if any."

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