Month: January 2012

Valuation of deworming gets more complicated – the IRS gets involved

It’s not just two big-time reporters and this teeny-tiny blog looking at the mebendazole issue anymore. 

It is now obvious that the IRS has been paying attention for quite some time.  On Monday their involvement hit the papers.

Two articles appeared:

William P. Barrett, from Forbes magazine, posted  IRS Audit: Big Charity Filed Misleading Tax Return

Caroline Preston, of The Chronicle of Philanthropy posted IRS Levies Fine on Food for the Hungry Over Drug Valuations.

If you have any interest in the issue of valuing GIK meds, you will want to read both articles.

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Jim Ulvog

Graphic that shows the impact of change in GIK valuations

The Chronicle of Philanthropy has a superb graphic that shows the amount of donated mebendazole deworming medicine recorded as contributions in the financial statements of three NPOs before and after applying the change in valuation required by SFAS #157:

Graphic: How Three Nonprofits Value Medications

Jim Ulvog

Impact on GIK values form change in accounting rules – Part 4 – A few final observations

Previously I’ve discussed the impact of new accounting rules on valuing of deworming medicine.  Have been looking at Feed the Children financial statements to quantify the impact.

I am not picking on Feed the Children.

I’m using their 2010 financial statements because they have the best disclosures in their financial statements that I’ve seen for the impact, plus there is public information on what per-pill valuation amounts they have been using.  It is to their credit that they have this amount of background available in their financial statements.

It is my guess, just a guess, that the same underlying valuation issues and impact on supporting services ratio that I have described previously here and here, would also be present in the financial information for other organizations that have large volumes of deworming medicine.  If I can find good info, I’ll do some calculations on other sets of financials.

I have a few more observations and then one more set of calculations.

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Jim Ulvog

10 year anniversary of Ulvog CPA

On January 28, 2002 I hung out my shingle as a one-person CPA firm.  Ten years ago!

That was an exciting and thrilling step for me.  I’ve never had as much fun in my professional life as I have in the last decade.

My hope is that I’ve helped many organizations in the religious non-profit community improve their accounting and accountability.

I’m looking forward to many more years serving the non-profit community.  Looking forward to serving the CPA community as well.  Also looking forward to having even more fun – the next decade will be better than the last!

Jim Ulvog

Why my interest in the Bakken oil field is increasing

For quite a while now I’ve been fascinated by the rapid increase in oil production in the Bakken field in North Dakota. 

Have had a lot of posts on my blog Outrun Change.  Under 1% unemployment in one county. Production graphs that are going vertical.  More oil produced in ND than California. That kind of stuff.

This month my interest level took off like those oil production charts.

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Jim Ulvog

How to emasculate a man and walk away feeling warm and fuzzy – unintended consequences, part 3

In Toxic Charity – How Churches and Charities Hurt Those They Help (and How to Reverse It), Robert Lupton describes the harmful unintended consequences of the way we usually do charity.

In 1981, he moved into the neighborhood where he was serving.  On Christmas Eve, he was visiting the home of some new friends.

Mom, dad, and the kids were anxiously awaiting visitors.  There was one strand of lights on the small artificial tree in the corner.  The nicely dressed people from the suburbs arrived with armfuls of nice presents wrapped so pretty.

In the midst of the unwrapping, the father slipped out of the house.  Later one of the kids asked where he was.  Mom said he had to go to the store.

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Jim Ulvog

Benefit Corporations – new form of incorporating that allows goals other than profits to be priority

The Wall Street Journal discusses ‘benefit corporations’ in their article, With New Law, Profits Take a Back Seat.

This is a traditional for-profit corporation modified to so the entity can have social or environment issues as a priority.  Profit or the interest of stockholders can take a back seat to those self-defined issues.

Why take the benefit corporation approach?

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Jim Ulvog

Reshoring

I have a post on my other blog, Outrun Change, that discusses the reshoring trend.  More companies are bringing their manufacturing back to the U.S. because of changing economics of offshoring.   One challenge in reshoring is improving the skills of American workers so they can use the latest technology.

Reshoring – huge opportunity if we want it and a skill-set challenge we can overcome

Jim Ulvog

Danger for a church in the midst of success – Hubris

In his article When Hubris Comes to Church, Thom Rainer describes the danger to churches of thinking they are the reason for their success, which can lead to pride and arrogance.

He correctly labels this hubris:

Simply defined, hubris means pride or arrogance. It has its origins in Greek tragedy, where an excess of ambition or pride ultimately caused the transgressor’s ruin.

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Jim Ulvog

Impact on GIK values from change in accounting rules – part 3 – change in Feed the Children financials

Previous post quoted disclosures made by Feed the Children in their 2010 audited financial statements. Essence of that note is that deworming medicine valued in the 2009 financial statements at $544M would have been valued at $21M if the 2009 financial statements had used the pricing information that was in use for 2010.

This post will look at the 2008, 2009, and 2010 financial statements through the lens of the two different valuation rates.

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Jim Ulvog

Supreme Court agrees religious protections apply to Christian schools

In a huge ruling today, the Supremes agreed that religious schools may hire and fire ministers of the gospel without being subject to court review of their decisions.

Specifically, a terminated employee who is a ‘minister’ role can not sue such an employer for discrimination.

UPDATE:  After reading a few articles, it looks like this was a much more serious case than I thought. By the time the SCOTUS looked at the case, it may have developed into a general attack on all churches who have any pastors.

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Jim Ulvog

Tax pitfalls for nonprofit organizations, especially paying volunteers

There are lots of places NPOs can get themselves into trouble by violating rules they didn’t know about.

Katie Thomas, CPA, has a great survey of a few places that can cause problems for NPOs in her post, You Don’t Know What You Don’t Know, at the Nonprofit GPS blog. She mentions: (more…)

Jim Ulvog

Impact on GIK values from change in accounting rules – part 2

Previous post here discussed the impact of changes in valuation of GIK caused by new accounting.  I already discussed World Vision’s financials.  Next I will look at Feed the Children’s financials.

The beginning point of my discussion was a Forbes article, by William P. Barrett: Donated Pills Make Some Charities Look Too Good on Paper.  This series of posts started here.  I hope my observations from a CPA’s perspective will contribute to this growing discussion.

After looking at World Vision’s financials, I looked at the financial statements of several other NPOs trying to figure out the impact of FAS 157 and especially the change in valuation of deworming medicine.

Mr. Barrett has accumulated some good numbers.  I looked at publicly available audited financial statements and 990s available from GuideStar.  I could not get a clear understanding by combining information from his published report with public data to let me get a clear understanding.  Just not quite enough data there to work with.

Then I looked at the Feed the Children website. Kudos to them for making their 2010 financial statements available online, which you can find here.

Wow.  Found some superb information in the footnotes.  Check out this comment in note 2 on page 11, which I will quote at length:

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Jim Ulvog

How to create inflation when kindness was intended – unintended consequences 2

A peculiar irony of charity is sometimes you get the unintended consequence of creating problems when you are trying to help someone.

I have several things to say on point. Currently I’m reading Toxic Charity: How the Church Hurt Those They Help and How to Reverse It, by Robert D. Lupton.  Very sobering – $11 on Kindle.

Before I talk about Mr. Lupton’s book (and I’ll have *lots* to say), I wanted to share an experience I had a long time ago.

While working at another CPA firm, I had the incredible, delightful opportunity to do several audits on the overseas operations of a large international NPO.  Their name doesn’t matter, because they are not part of the story.  I have tremendous respect for them and the work they are doing. If you have known me a while, then you know who I am talking about.

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Jim Ulvog