Three charities file appeal of California AG Cease and Desist order

April 13, 2018, 4:07 pm

Image courtesy of Adobe Stock

With a deadline of April 11 to appeal cease and desist orders from the California Attorney General, MAP International, Food for the Poor, and Catholic Medical Mission Board each filed their appeal on the 10th or 11th.

You may find a PDF copy of the appeals and cease and desist orders at the AG’s website.

The individual appeals may be found at:

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California A.G. files cease & desist order against 3 large charities alleging donated medicine was overvalued

March 20, 2018, 5:00 am

As mentioned previously, the conflict over donated pharmaceuticals has heated up again. It seemed to have faded away over the last couple of years but has now gained renewed visibility.

The California Attorney General has filed cease and desist orders against three large, high-profile charities who received between 70% and 98% of their revenue from medical GIK.

A complaint was filed against another charity for overvaluation of GIK. That charity essentially conceded the accusations in a stipulated settlement, agreeing to terminate the charity’s existence. That action is discussed here.

The three large charities are Food for the Poor, Inc., MAP International, and Catholic Medical Mission Board, Inc.

The cease and desist orders can be found at the AG’s web site:

This is a long post, approaching 2,200 words. Might be worthwhile to get a fresh cup of coffee before diving in.

 

Background

This post will walk through a number of key comments in the cease and desist orders, which I’ll referred to as C&DO. Because the C&DO are roughly parallel to each other, I’ll walk through the MAP order and add comments on the CMMB and FftP order where it is helpful. The CMMB C&DO does not have the comments regarding state charitable filing requirements.

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Financial info for the 4 charities the California AG accuses of overvaluing donated medicine

March 14, 2018, 11:00 am

Image courtesy of Adobe Stock.

For future reference, here is some select financial information on the charities that have been accused of overvaluing donated medicine.

In March 2018, the Attorney General of California filed cease and desist orders against three charities and a complaint against one.

The complaint was resolved with a stipulated judgment the same day the complaint was filed. Resolution? The National Cancer Coalition agreed to dissolve.

Listed in this post is some data from the most recent set of financial statements available at the charities’ web sites along with the 2015 info, which is the latest year cited in the cease-and-desist orders.

Since the cease-and-desist orders allege material misrepresentation in the audited financial statements, the auditor is also listed. Therefore this is an audit issue as well as an accounting issue.

I will make an educated guess that the 2017 financial statements for MAP and FffP will not be available until after the impact of the AG’s cease and desist action is assessed. Looking in from the outside, it seems to me like this issue would constitute a material subsequent event.

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California A.G. files complaint against a charity for overvaluation of donated medicine. That charity agrees to dissolve itself. Three other charities issued cease-and-desist order.

March 14, 2018, 8:51 am

(update: headline modified)

The conflict over donated pharmaceuticals has heated up again.

The California Attorney General has filed cease and desist orders against three large charities who received between 89% and 98% of their revenue from medical GIK.

Update:  Those percentages appear to include all GIK, not just medicines. For example, in 2015 Food for the Poor had $1,159M total income with $1,033M of donated goods, according to their audited financial statements. According to their 990 for 2015, of the total GIK $818.7M was drugs and medical supplies, $110.8M was clothing and household goods, with $103M of other GIK. For 2015 donated drugs and medical supplies are 70.6% of total support and revenue.

Update: For MAP in 2015, total drugs and medical supplies from Schedule M of the 990 ties to the donated inventory on the audited financial statements. The only other GIK listed on Schedule M are securities, which amount ties to the financial statements. For 2015, donated drugs and medical supplies are 97.8% of total revenue and support.  Likewise for CMMB, the drugs and medical supplies listed on Schedule M ties to the line donated pharmaceuticals, equipment and supplies on the audited financial statements. For 2015, donated drugs and medical supplies are 90% of total support and revenue.

A complaint was filed against another charity, National Cancer Coalition, for overvaluation of GIK. The charity conceded the state’s claims and agreed to terminate the charity’s existence.

The three large charities are Food for the Poor, MAP International, and Catholic Medical Mission Board.

The cease and desist orders can be found at the AG’s web site:

Actions regarding the charity closing its doors:

This post will describe the complaint against NCC and the stipulated judgment.

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Free update on new and recent accounting rules from CCH

January 29, 2018, 7:30 am

For a summary of the accounting rules released in 2017 and the most significant new rules from 2016, 2015, and 2014, check out A Closer Look: Discussion and Analysis of Current Accounting and Audit Issues.

CCH made this update available for free to people on their mailing list. I received permission from my editor at CCH to make it available on my blog.

Click here to download the 54 page newsletter. CCH does not  have a separate landing page for the document, so that link automatically downloads the newsletter. UPDATE:  If link didn’t work for you, please try again. I reloaded the link and it is working now.

 

For each of the accounting rules covered, the newsletter provides:

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Reduced staffing and funding for the Exempt Organization division of the IRS

December 20, 2017, 8:22 am

Staffing and funding for the IRS division that oversees tax exempt organizations has fallen dramatically in the last six years or so.

According to a behind-the-paywall article at the Washington Post, the budget for the Exempt Organization division has dropped from $102M to $82M between 2011 and FY 2017. That is a $20M decline, or 19.6%.

For the same years, staffing has declined from 889 to 642, according to the article. That is a decline of 247 positions, or 27.8%.

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Standard mileage rates for 2018

December 18, 2017, 9:47 am

Mileage” by Anthony Albright is licensed under CC BY-SA 2.0

The IRS has posted the standard mileage rates for 2018. New rate for transportation and reimbursements is 54.5 cents. That is up a penny from 53.5 cents in 2017.

According to IRS comments in Notice 2018-03:

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