Mercy Ships & Affiliates

UPDATE 7/23/26: CharityWatch notes that in July 2026 Mercy Ships & Affiliates responded to our request for additional information related to concerns we identified in its 2024 financial reporting. However, our review of the information provided raised more questions than it answered.  

Functional Allocation of Contractor Spending

CharityWatch requested additional information from the charity about contractor expenses reported in its 2024 tax filing, which the charity described in 990 Part VII, Section B, as "Mail Solicitations." Schedule G of the charity's 2024 tax filing refers to a $21.3 million reimbursement to a vendor related to "direct fundraising expenses such as printing and mailing." Our concern, based on our review of the charity's financial reporting, is that millions of dollars of fundraising expenses appeared to be allocated to program services. 

CharityWatch requested a breakout from the Organization reflecting how these funds were allocated within its 2024 IRS tax Form 990, Part IX, Statement of Functional Expenses. The charity provided additional information to CharityWatch confirming our suspicions that it had, in fact, allocated large portions of these fundraising expenses to program in its 2024 tax filing. 

In addition, the charity provided information to CharityWatch stating that it had capitalized millions of dollars worth of fundraising-related expenses on its balance sheet as prepaid expenses.  However, the balances reflected in the prepaid expense accounts of the charity's IRS Form 990 and audited financial statements as of 12/31/2024 were not large enough to include the fundraising expenses in question. 

Given these reporting anomalies, CharityWatch does not have confidence in our ability to rely on the charity's 2024 financial reporting for purposes of computing a meaningful rating of the organization based on that year. 

CharityWatch is unable to provide a letter grade rating for Mercy Ships & Affiliates at this time due to our specific concerns about the Organization's financial reporting. For this reason we have assigned it a "?" rating for its 2024 fiscal year based on our analysis of the organization's IRS Tax Form 990 and audited financial statements for that period. CharityWatch is concerned that the charity could be including certain fundraising expenses in its reported program expenses in its IRS Form 990 and consolidated audited financial statements.

CharityWatch contacted the Organization on March 24, 2026, via email and U.S. mail with questions about its financial reporting for its fiscal year ended December 31, 2024. 

CharityWatch requested a general breakout of services rendered in relation to the $22,031,579 of reported Other Professional Fees (line 11g) allocated to program expense per IRS Form 990, Part IX, Statement of Functional Expenses. Specifically, CharityWatch asked for:

• The types of services provided (e.g., legal, communications, research, consulting, IT, fundraising campaign support, etc.) 
• The approximate dollar amounts allocated to each service category
• Whether any payments were made to professional fundraising companies or third-party development vendors, even if not reported under “Professional Fundraising Services”
• An indication of whether any of these expenses included any joint costs or fundraising components

Additionally, CharityWatch requested a general breakout of services rendered in relation to the $22,792,746 and $3,969,703 paid to "Full Hearts" and "Mindwize Marketing," respectively, for "Mail Solicitations" per IRS Form 990, Part VII, Section B (Independent Contractors). Specifically, CharityWatch asked for:

• The types of services provided (e.g., legal, communications, research, consulting, IT, fundraising campaign support, etc.) along with approximate dollar amounts allocated to each service category
• A breakout displaying how this amount was allocated across functional expense categories in IRS Form 990, Part IX, Statement of Functional Expenses
• Whether any payments were made to professional fundraising companies or third-party development vendors, even if not reported under “Professional Fundraising Services”
• An indication of whether any of these expenses included any joint costs or fundraising components
  •  Per IRS Form 990, Part IX, Statement of Functional Expenses, line 26: "Joint Costs: Complete this line only if the organization reported in column (B) joint costs from a combined educational campaign and fundraising solicitation. Check here [box] if following SOP 98-2 (ASC 958-720)."

As of the date of this note, April 13, 2026, we have not yet received a response. If the Organization provides an adequate response to the above questions in the future, CharityWatch may update the Organization's fiscal 2024 rating at that time.

CharityWatch's most recent letter grade rating of Mercy Ships & Affiliates was a "B" on our "A+" to "F" rating scale based on our analysis of its fiscal 2021 IRS Form 990 and consolidated audited financial statements.