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February 14, 2010

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[Editorial Note: The following text is from an email sent to me by a reader in response to the above post. The author of it did not want his/her name used, but did ok my posting the message here as a comment (they are on the way back to Haiti now and couldn't post it directly). I lightly edited the email, per their request. I hope these very insightful and thoughtful comments spark more discussion. -Doug]

"I would like to share some some knowledge and observations related to the amount of assistance coming forward related to Haiti. I am on the board of a US based non-profit which has worked in Haiti for many years and is involved in the relief effort.

1. Medical Teams/Other Volunteers: I would have to guess the value of the vast majority of volunteer medical staff going to Haiti (as well as many other volunteers, e.g., search and rescue, food distribution) is not being accounted for anywhere in the statistics seen. This would include both the value of volunteer labor and their direct expenses (air, ground, food) for which they paid personally. Thousands of volunteers have gone down and many more will in the coming weeks, little of which is being paid for by governments, international agencies, or the NGOs who may be coordinating their assistance. I would imagine the value of this is already in the tens of millions. While this is not cash which can be spent on relief, it is relief which does not have to be paid for with cash.

2. Multiple Counting: There will be massive double and even triple counting of assistance provided. There is nothing nefarious or intentionally misleading in all this. It is simply a fact of how each entity reports and then how someone consolidates from all these entities. For example, our non-profit received a check from another non-profit which had funds for emergency relief but no capacity to deliver aid to Haiti. We used this money to purchase goods and deliver them to Haiti. We then have partners in Haiti (Haitian and foreign NGOs) with projects on the ground through whom we distributed these goods. Thus, at the end of the day, it could be that if one added up what all three levels report as to the the assistance provided, instead of a hypothetical $50,000, it might be $150,000 and none of us would be wrong in reporting what we did.

Another example is the securing of in-kind meds for shipment to Haiti, often from non-profits who specialize in securing meds from the drug companies so these companies do not have to deal with hundreds of NGOs. Again, there can be double, triple, and even quadruple counting of what was donated (the drug company, the specializing NGO, our NGO, and who we might move through in Haiti). Of course, there are many instances where this does not happen, e.g., an individual gives us cash, we spend that cash directly in Haiti or buy somthing and it goes directly to the needy individual, school or whatever in Haiti. Unfortunately, unless one works through all this just as one must in order to calculate GDP, there is no way to avoid significant inflation of the amount of assistance being provided. Someone should probably do some sampling so that a deflator can be used so assistance numbers are more realistic on a macro-level.

3. Overhead: What also must be factored out of assistance levels is the overhead required to secure funding and administer distribution. While some entities do this better than others (some are under 5% while some can exceed 20%) and while these are generally legitimate costs, they inflate the amount of money which appears to actually be available to feed, shelter, care for victims and to rebuild.

So again, just as in the preceding section, this amount should be factored out in some way so that there is a better sense of the actual money available to do the needed work in Haiti.

4. In-Kind Valuation: Organizations use very different ways to value what is provided to them in in-kind. I know one NGO which uses half the retail price. Some use the wholesale price. Others use the retail price arguing that this is what people would have to pay if they bought the product on the open market.

Generally, the feeling is that the in-kind numbers are inflated, again not because of anything nefarious but because retail is often used and bulk meds etc can be secured for much less than retail. (Or generics could have been used but if brand drugs are donated, then that is the price being reported but the benefit is no greater than if the generic had been "purchased" by the recipient in Haiti.)

5. You asked about in-kind vs. cash. I am certain how this is handled is all over the road for each NGO, government, and international agency. For example, so far we are receiving about $5 in in-kind for each $1 in cash received with some of that cash going to ship the in-kind. I have no idea as to whether this is typical or not. I do know one NGO that has taken nothing in in-kind as they are not a first responder but have received over $1 million in contributions. For some of the big food shippers, it is possible that they may have in-kind to cash ratios of 15-20 to 1. The good thing about this accounting problem, unlike some of the other problems cited above, is that it is easy for organizations to report how much is in-kind and how much cash as this is required in their tax reporting.

I know none of this really helps us get to where we want to be. However, these thoughts might help us to better structure the discussion and work towards a model for reporting which could provide more realistic numbers of assistance actually provided.

The problem, of course, is that each organization wants to show what a wonderful job it is doing. Thus, they like to report the big number rather than their value-added number. In fact when value added is looked at, those percentages of overhead-to-delivered services start looking even worse than they often now do. Ours would definitely go above 5%. Again, this is not necessarily bad. It just means that there is not as much aid floating around out there as is often assumed.

Good luck,

Anonymous"

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