Month: October 2012

3 more Q&As on a church paying for services – do you see a pattern of answers saying payments are normally taxable and typically to an employee?

If you do a bit of research on paying people being compensation or whether to treat them as employee or independent contractor, you will see an obvious trend in the discussions.  

If someone is providing services to your church and you pay them, there is usually going to be some taxable income.  It is fairly unusual for those services to be in the category of independent contractor.  

Corey Pfaffe has three more Q&A discussions posted at MinistryCPA blog.  All deal with whether amounts paid to a person for services are taxable and whether such payments should be reported on a W-2 as an employee or on a 1099 as an independent contractor: (more…)

Jim Ulvog

What should you capitalize along with the contract price of the equipment you just bought?

“All expenditures incurred in acquiring the equipment and preparing it for use,”

is the very short answer from Danny Oertle in his post at Nonprofit GPS, Not-for-Profit Organizations Acquiring New Fixed Assets – What Should You Capitalize?

(more…)

Jim Ulvog

How do you account for the free months in a long-term lease?

Mission: Accountable explains how in their post Got Free Rent?

The post walks through a good example and gives the journal entries that would be recorded during the first, free months and then the entry over the remaining term.

The same concepts would apply if the free months occurred at some other point during the lease.

It’s a clear, helpful example. Check it out.

Jim Ulvog

Time to un-mis-educate donors about what efficiency looks like

The phrase un-mis-educate is coined by “J” in a post, Rethinking Efficiency, at AidSpeak.

J suggests one of the reasons NPOs (NGOs for my international readers) are under so much pressure on overhead ratios is that NPOs have spent a generation mis-educating donors that organization X is better than Y because 90% or 98% of donations to X go to program services.

I agree.

J says that NPOs need to undo the mis-education, thus the need to un-mis-educate donors.  I think that is a great turn of phrase.

(more…)

Jim Ulvog

Other media sources looking at Breast Cancer Society

I did a quick search on the ‘net before starting to research the 990s of Breast Cancer Society of Mesa, Arizona. Found out that a few researchers have been looking at their finances in addition to the Chronicle of Philanthropy.

If you are following the GIK meds issue, you might be interested in these reports:

First, ABC15 in Phoenix, Arizona has a print article in May 2012 – Questions about Valley Breast cancer charity, where donation money is really used. They also have an on-air segment that doesn’t go into as much detail. There is an on-camera interview with the CEO in the video report.

(more…)

Jim Ulvog

Parody versus satire – one is okay and the other can get you in trouble. Gangnam Style video as a teaching tool.

What’s the difference between parody and satire? Which one violates someone’s intellectual property rights?

Umm. I have no idea.

Or at least I didn’t until I read a newsletter from Gammon and Grange, which pointed to Kenneth Liu’s guest post at Forbes:  Parodies of Rap Artist Psy’s Gangnam Style Are Fun. But Are They Legal?

Mr. Liu explains the difference in the context of an amazingly popular video, “Oppa Gangnam Style” and the spoofs that have been made of it.

If I now understand the distinction, (more…)

Jim Ulvog

Always remember that anything you post in social media could one day be revealed to the world

Today’s lesson is that no matter how you set your Facebook settings, someone else could reveal your membership in groups.  Remember every day that anything you post in a social media space could eventually become public.

Say, for example, you are out-of-the-closet at college but your parents don’t know. You join a choir and the choir director announces your membership in a group whose very name announces your sexual orientation.  The public announcement of your membership to all of your Facebook friends is the first thing your parents know of your previous secret.

That’s the very short version of the story in the Wall Street Journal – When the Most Personal Secrets Get Outed on Facebook.

You are not the customer

(more…)

Jim Ulvog

Philanthropy 400 list is published

The Chronicle of Philanthropy has published their 2012 edition of Philanthropy 400, a list of the largest NPOs in terms of the amounts raised from private sources. The list, here, is behind a paywall. It was also in the e-mail version sent out over the weekend and will be in the paper copy.

An accompanying article discusses the GIK at a few more charities:  Gifts of Medicine and Food Fuel Growth But Draw Regulatory Scrutiny

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Jim Ulvog

Valuation of deworming meds illustrates the front-page-of-the-newspaper test – part 2

Previous post discussed how we are seeing the front-page-of-the-newspaper test for decision-making play out in the deworming med issue.

Reputational risk

I perceive there is a danger of damaging the reputations of many organizations from the way donated meds are valued. 

(more…)

Jim Ulvog

Valuation of deworming meds illustrates the front-page-of-the-newspaper test – part 1

“How will this look on the front page of the newspaper?”

That is a helpful way to evaluate decisions.

When you are trying to figure out what’s the right thing to do, ponder for a moment how your decision will look if you read about it on the front page of your local newspaper.

If you are going to look really bad, then maybe, just maybe, you might be making a bad decision.  I mentioned this in a post some time ago.

We are seeing this illustrated live with the issue of valuing deworming medicines. Mebendazole is in the news!

Newspaper test in action

(more…)

Jim Ulvog

6 better questions to ask an NPO than “what’s your overhead?”

Looking at the ‘overhead ratio’ is a lousy way to evaluate the effectiveness of a charity.

Once you understand that concept, you are left wondering what else to look at when considering whether to donate.

Dóchas Network offers six great questions to ask instead of looking at overhead. (more…)

Jim Ulvog

Another newspaper focuses on valuation of deworming medicine – provides some great quotes

Bill Zlatos, from the Pittsburgh Tribune-Review has a superb article out:  Charities’ methods of valuing donations called into question.

If you are following this issue, you should go read the article.

Mr. Zlatos has been talking to a lot of people and has a lot of great comments. Here are some of the best news-making quotes. I’ll have more to say on these ideas over the next few days.

Reputational risk

(more…)

Jim Ulvog

Views of my cartoons at YouTube increasing

Last year I created two cartoons about internal controls for local churches. Those cartoons are featured on my other blog, Once Upon Internal Control.

Views on YouTube for all my cartoons have been running about 50 a week during 2012. For reasons I cannot detect, the traffic on the two main cartoons has surged.

In three weeks, there were 363 viewings of part 1.  In those same three weeks, part 2 was watched 108 times.

Total views to date for part 1 are 2,030 and for part 2 are 385.

Each cartoon runs about 8 minutes.  Here are the cartoons – –

Bank reconciliations and offering count procedures:

[youtube=http://www.youtube.com/watch?v=1qeibzgSemY]

Good procedures protect from false accusations:

[youtube=http://www.youtube.com/watch?v=7KESsI04-XY]

(Cross-post from Once Upon Internal Control.)

Jim Ulvog

What is a bargain purchase? Part 2

Previous post described how the accounting literature defines a bargain purchase.

This post will give an example.

Let’s say a friend of your organization is a real estate investor who has a small building available and would like to provide it to the organization. The building is not in the nice, high-rent downtown area but is still in a very average area of one of the outlying suburbs. The benefactor can’t afford to make this space available for free, because there are property taxes and other costs involved. So the benefactor offers the space to the organization at a price of $10,000 per year.

The property would nicely meet the needs of the organization, so you snap up the offer and move in. What are the accounting entries?

(more…)

Jim Ulvog