Subtle changes were made to AB 1181 on August 12, 2019 by Assembly member Limón (the bill’s author) and the chair of the Senate Judiciary Committee. The bill was re-referred to the Appropriations Committee, which is still scheduled to hold hearings on August 19.
Two changes were made yesterday.
The first reports of a new college admissions scandal indicated the scheme was in play in Illinois. A small number of minutes research on the ol’ net shows the scandal is now open in Missouri.
With a sinking feeling, I am wondering where else this will show itself.
Scheme reportedly exists in Missouri
Kansas City Star – 8/5/19 – Did rich Missouri families give up custody of kids to get college aid? How’s that legal? Cases have been found of families in Missouri transferring guardianship of children in order to get financial aid.
Information posted yesterday on the California Legislature’s web site shows the Appropriations Committee will hold hearings on AB 1181 next month, on August 19, 2019.
At a status conference update for the college admissions scandal, the prosecutors said they have turned over about 3 million pages of documents to the attorneys for the 19 defendants still fighting the charges. This includes around a million pages of emails and 4,500 phone conversations which were wiretapped.
Several attorneys claim they want to see all the FBI interview forms (those infamous 302s, which are subsequently prepared notes of interviews documented at some various time after the interview) for all of the people *not* charged in the investigation. The claim is there is exculpatory evidence somewhere in the 302s. The judge denied that request for the moment.
For more info, check out USA Today on 6/3/19: College admissions scandal: Parents say payments to ringleader weren’t bribes. Next status conference is on October 1.
Another scheme
Financial aid calculations are based on family income and assets. If a student is assessed as ‘independent’ only the student’s income and assets enter the calculation.
So, how do you get mom’s and dad’s high income and very expensive house removed from the calculation so the student gets a bunch more assistance?
Anyone who has been an adult a few years or has read news for more than , oh a few weeks, knows there is massive ugliness in the world.
Anyone who has been in leadership of a church or ministry for more than a few months knows the ugliness we see in the world is also present in the community of believers.
Why read about and then study messiness?
There are several disasters in the Christian community at the moment which leaders should pay attention to.
Why?
So we can learn. By observing we can be better prepared for dealing with horrible things if (or rather when) they appear in our area of responsibility.
In my professional role as auditor over the last few decades I have observed moral failure of leaders, embezzlement, fraudulent financial misstatements, tax fraud, and sundry other unpleasantness. (Okay, okay, sin is the correct description of those things.)
Because of confidentiality requirements, I cannot discuss anything about any of those issues.
Current, public issues are a different story. Having no connection to those incidents frees me to discuss them.
Willow Creek Community Church
A major scandal has been in the news at Willow Creek for over a year. Here is a tour of some articles which can fill you in.
What can you learn as a leader from this fiasco?
3/22/18 – Christianity Today – Bill Hybels Accused of Sexual Misconduct by Former Willow Creek Leaders. Article summarizes a range of allegations that had surfaced over the previous five years, including stories of decades old misbehaviors.
FASB decided on 7/17/19 to postpone four major accounting rule changes for non-public companies. Journal of Accountancy reported the news on 7/17/19: FASB to propose delaying effective dates for 4 major standards.
Two of the rules are particularly significant to the non-profit community while two will affect few charities.
The article uses a new method of identifying effective dates. It mentions January 1 of the year the standard will first be effective instead of the ol’ “fiscal years beginning after December 15” phrasing usually used..
Changes include:
There has been relatively little public discussion of California AB 1181. Here are a few articles I’ve been able to find. Previous public comments discussed here.
CharityWatch
CharityWatch publicly supported AB 1181 on 7/12/19: CharityWatch Supports California’s Bill to Discourage Charities from Exaggerating Non-Cash Contributions. Comments in the article provide background on the issue. CharityWatch has long opposed the valuation methodology in place for the sector, mentioning there is an overvaluation issue.
CharityWatch perceives the application of current accounting rules creates enough variability and inconsistency in reporting that they remove all GIK from their ratings calculations.
Here is a one sentence summary of the underlying issue from the article:
AB 1181, which will require specific accounting treatment for GIKs when donors require the donation be used overseas, was approved by the Senate Judiciary Committee on a 7 to 1 vote, with 1 committee member not voting.
The bill was referred to the Senate Appropriations Committee. Mark Hrywna (@mhrywna) reports the committee will hold hearings on August 12. The last day to approve bills is September 13, when the legislature adjourns for this session.
FAF and FASB input
A sentence has been handed down in the first of the college admission scandal cases to reach a judge. The former sailing coach at Stanford received:
Prosecutors recommended 13 months in prison.
Several articles pointed out this person is the lease culpable of those lined up for sentencing. He did not receive any money directly.
If I read the articles correctly, the only student admitted as part of this scheme was not actually an athlete and has since been expelled. No other students were admitted.
One key point of detention is an assessment of what type of crime is present.
(Following discussion of nonprofit accounting issues was posted at my other blog, Attestation Update, since the string of posts are more focused on the audit community. These comments may be helpful for the nonprofit community so the discussion is cross-posted here.)
Here are some fun or interesting or useful tidbits from the October 2018 A&A and the June 2019 Not-for-profit conferences presented by California Society of CPAs that apply to not-for-profit organizations.
Previous posts had comments on
Non-attest services and Yellow Book independence. Everyone probably knows that charities with more than $2 million of revenue who are registered with the California Attorney General must have an audit. Excluded from the requirement would be religious organizations, who are exempt from registering with the AG.
That requirement was created by the Nonprofit Integrity Act of 2004, so it’s old news.
The best payoff from attending CPE conferences is to compare every piece of information you hear to what you think you know. So, here is one of the big rewards for me attending this class…
On June 28, 2019, the Senate Judiciary Committee made some minor changes to AB 1181. In one sentence, the bill under consideration would require charities to recognize gifts in kind at the fair value in the location where the items will likely be distributed if the items have a geographic restriction.
Comment at the legislature’s website says:
From committee chair, with author’s amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on JUD.
I am not quite sure how to read that, but think it means the author made some changes, probably at the suggestion of the committee chair, the bill was technically put back to the committee after that change, the committee made additional changes and the bill was technically put back to the committee again.
All that to say there were minor changes to the proposed bill.
Based on the “compare versions” tab at the website, changes made at this point include:
The pretend-to-be-an-athlete-in-a-sport-you-have-never-even-played scandal in higher education is one of many issues I have not focused on over the last year or more.
Family issues have pulled me away from blogging. Hope to start getting caught up on the massive changes taking place around us. I’ll begin with the college admissions disaster.
Brief background:
A large number of parents were paying Mr. William “Rick” Singer to help their children get into colleges where their kids wouldn’t otherwise gain admission.
More background:
The schemes, according to a long string of articles covered in most newspapers which I won’t link, included techniques such as:
Flow of cash was complicated, as expected. Most of the dollars went to a non-profit foundation set up by Mr. Singer. He then distributed portions of the money to college sports coaches, proctors, and other participants. Some of the payments went directly from the parents to the colleges.
Oh, by making those payments to a charity, the payments became tax deductible. So there is also a tax fraud angle for all the involved parents to ponder. You can easily guess someone from IRS Criminal Investigations is involved in each of the cases.
Current status:
Yesterday I watched a webcast from FASB providing an update on Private Company Council and Not-for-Profit organization accounting issues By the way, there are a couple of nice accounting options in the PCC world that have been extended to the NFP world. (Yeah, yeah, pray for me since I sort of enjoy those kinds of discussions.)
One of the speakers mentioned FASB has formed a working group to look at the issue of valuation of GIK, especially donated pharmaceuticals.
Update – Mark Hrywna (@mhrywna) tweeted on 6/17/19 the Senate Judiciary committee has scheduled a hearing on AB 1181 on 7/9/19.
After attending CalCPA’s Not-for-Profit Organization conference last week and talking to a small group of my CPA colleagues, I have two thoughts on regulatory attention currently focused on the valuation of donated medicine. Let me provided two questions which will focus my comments:
Previous post discussed the first question.
As I mentioned in that post, I have long wanted to develop an extensive discussion on the main accounting issues found in the California AG’s three cease and desist orders along with several accounting issues raised in their January 2019 settlement and May 2019 litigation.
That full discussion would have ended up somewhere around 3 or 5 times longer than these two posts. I won’t have time in the foreseeable future to write such an extended discussion. This pair of posts, at over 2,600 words, will have to do.
