Recent articles and comments on GIK valuation

Image courtesy of Adobe Stock.

There has been little discussion of the GIK valuation issue, especially regarding AB 1181, that I have noticed over recent weeks. Here are all the public comments I have seen. Let me know anything I missed.

Before getting to five articles, a quick minor comment on AB 1181.  It was officially enrolled on 9/18/19. As of this morning (10/2/19) the exact status of the bill is that on 9/25/19 it was “Enrolled and presented to the Governor at 3:30 p.m.” according to the bill’s history.

I’m still playing catch-up on understanding the legislative process here in California. I now know that a bill must go through ‘engrossing and enrolling’ before going to the Governor for his consideration. Based on looking at some other bills, the next step after presentation to Governor is for him to sign. Then the bill is ‘chaptered’, or given an official location in the state statutes.

All that detail means the bill could not have been signed by the Governor before 9/25/19.

According to the Assembly’s legislative calendar, the governor has through 10/13/19 to either sign or veto bills.

Articles

Bloomberg Tax – 8/21/19 – Crackdown May Stop Charities From Inflating Cost of Donations

Article provides good background on the medical GIK issue. Gives good, brief background on the FTC case against four charities in 2015. Also summarizes the new FASB project.

If you haven’t tune in to the issue, this would be a good place to start.

ECFA – undated but posted sometime between 8/21/19 and 8/28/19 – States Creating Accounting Standards? What’s Next!  Post provides an update on AB 1181 and FASB looking at the GIK issue. Discussion points out the FASB project will consider additional disclosures, possible additional detail on statement of activity, perhaps disclosing region where medicine will be used.

Comment on the core of the issue is:

The main reason additional guidance is being considered is the valuation of noncash donations can lead to inflated revenues in financial statements, which makes organizations appear much larger than they really are.

Ironic part of that comment is overvaluing donated medicine is the core issue driving the California AG, Assembly, and Senate.

Bloomberg Tax – 9/13/19 – California Charity Crackdown Bill Upends Accounting Rules – Article is behind paywall so I only read the first three paragraphs. Looks like the article is a summary of the details of AB 1181, based on what can be read without a subscription. On the other hand, it does refer to the entities affected by the bill as

…bad-actor charities…

Who will be required to

…value donated pharmaceuticals more accurately…

(Whether that conclusion of existing accuracy being less accurate is from the writer or legislature or both is not readily apparent.)

With the goal that they

…don’t mislead donors and watchdogs.

(Which is the AG’s stated position.)

The NonProfit Times – Mark Hrywna – 9/23/19 – Layoffs, Buy-Outs at Food For the Poor. Nine people were let go out of a staff of 428 staff reported on the most recent 990.  FFP has also offered voluntary severance packages to an unidentified number of staff who are over 65 years of age and have worked for the charity over five years.

Article also summarizes the cease and desist order and ties that to AB 1181.

Nonprofit Law Prof Blog – 9/26/19 – California Assembly Passes Law Regulating Donated Medical Supplies – Very brief summary of AB 1181 and even shorter comment on other passed bills that affect charities.

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