Jim Ulvog

Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 2

Image courtesy of Adobe Stock.

Introduction to this series of posts yesterday explained the Administrative Law Judge (ALJ) hearing the appeal of the California AG’s Cease and Desist order against three charities has decided in favor of the charities.

Preliminary ruling

The ALJ concluded that the testimony from the charities’ expert witnesses was more persuasive than that of the AG’s expert witness.  On that basis, the ALJ concluded the AG did not prove its case that the financial statements were in violation of GAAP.

I will summarize and quote some of the comments in the transcript and provide select quotes on the assumption many of my readers won’t download and read the transcript for the day. As a matter of my style choice, I will only use the first letter of the last name of witnesses and attorneys.

The basis for conclusion is whose arguments were more persuasive. The ALJ decided the charities had better expert witnesses.

He said:

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Jim Ulvog

Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 1

Image courtesy of Adobe Stock.

On December 11, 2018, the administrative law judge (ALJ) hearing the case by the California Attorney General against Food for the Poor (FftP), MAP International (MAP), and Catholic Medical Mission Board (CMMB) announced his preliminary determination.

The ALJ concluded that the state did not prove its claim that the financial statements of the three charities violated GAAP.

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Jim Ulvog

Friendly tip to people planning a felony: don’t do it. And if you still want to, you might want to avoid planning your escapade with the internet or your phone.

Image courtesy of Adobe Stock.

If you are planning to do something that our society says is a felony, or even thinking about it, please don’t.

Please change your plans. You won’t like the result.

If you are still pondering something that our society says is a felony, you might want to avoid using electronic devices that record your planning. Definitely don’t use your phone in commission of the actual crime.

Here are a few examples of what not to do, for amusement of people who are inclined to read my blog.  People likely to go ahead with felonious plans probably are not in my audience.

 

Tip #1

Don’t take along your location recording fitness device while conducting reconnaissance to plan an assassination and definitely don’t take it along for the ‘hit’:  Runners World -1/17/19 – This Runner is a Hitman. His GPS Watch Tied Him to a Mob Boss Murder. 

A competitive distance runner who moon lighted as a contract hit man took along his fitbit watch as he conducted recon and planning runs for two different assassinations. Also wore it for one of the actual hits. Police looked at the recorded location information on the watch which showed him making recon runs and placed him at the scene of the hit.

Result: Life in prison.

 

Tip #2

Don’t conduct an Internet search with questions of whether your plans are illegal: Cleveland.com – 10/19/18 – Brooklyn Woman falsely accused Parma Heights police chief of rape, investigators say.

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Jim Ulvog

Deserter from the U.S. Air Force apprehended and tried.

William Howard Hughes, Jr. (U.S. Air Force photo)

A 1983 deserter from the U.S. Air Force was arrested in 2018 and has now been tried and sentenced.

I was advised today by the Air Force Office of Special Investigation that the now-former officer has been tried and dismissed from the service. I’m working to find out the results of his trial and his current status. As more details are learned, updates will be posted.

Update 3/4/20:  Deserter from U.S. Air Force in 1983 was convicted at general court-martial, dismissed from service, and spent a short time in prison.

Desertion

Back in July 1983, while the Cold War was still running, USAF Captain William Howard Hughes Jr. deserted after returning to Albuquerque from a TDY in Europe. He did not report to his duty station on August 1, 1983.

He was last seen making 19 withdraws from his bank account totaling $28,500. That may have been around a year’s gross salary at the time. Would have allowed him to run and hide for a while as he worked on his new identity. His car was abandoned at the Albuquerque airport.

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Jim Ulvog

Standard mileage rates for 2019

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The IRS has published the 2019 standard mileage rates. New rate for transportation and reimbursements is 58 cents, which is up from 54.5 cents in 2018. That is an increase of 3.5 cents.

New rates from the IRS, along with some comments on the impact of TCJA legislation are found in Notice 2019-02: (more…)

Jim Ulvog

Recap of known state and federal interest in medical GIK

Superior court facade in downtown Los Angeles, California. Image courtesy of Adobe Stock.

There are a number of state and federal actions visible for financial reporting by charities. Focus of the efforts currently is valuation of GIK and the impact of those valuations on fund raising appeals. Perhaps a recap of those efforts will provide some helpful context to the charity community.

Update: End of this post describes the change in accounting over the last seven years in terms of how to value meds that legally may not be distributed in the U.S.  Hint: a 180 degree change.

Today is the 9th day of out of 15 days scheduled for hearings on the California AG’s cease and desist order (C&DO) for MAP International (MAP), Food for the Poor (FftP), and Catholic Medical Mission Board (CMMB).

Here is the list of publicly visible Attorneys General who are focusing on financial statements of the large medical GIK charities:

California:

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Jim Ulvog

Filings to seek depositions in the California AG’s cease and desist orders regarding three charities

Image courtesy of Adobe Stock.

The battle over the AG’s cease and desist order is in the appeal stage. Hearings are in day 6 out of 15 scheduled days.

The appeal is taking place in the state Office of Administrative Hearings (OAH). An Administrative Law Judge (ALJ) is overseeing the appeal.

This is the second in a series of posts describing some of the filings in the public record regarding the enforcement action and the appeals by the charities.

I have one stray follow-up comment to my previous post and then will dive into the filings about obtaining depositions from people living outside the state. Those individuals are not subject to an order to appear in person before the OAH.

Might want to get a fresh cup of coffee. This will be a long read. If you are at all interested in this case, you will find lots of interesting background info here.

Oh, everything I mention here is based on public documents available from the OAH.

Follow-up on Pro Hac Vice – FftP filed with OAH to get one of their attorneys granted Pro Hac Vice permission to practice in the state. This attorney is the lead litigator for the law firm on non-profit issues. Of note is the motion says it is unopposed by the AG. The OAH ruled they do not have authority to grant Pro Hac Vice. I don’t fully understand the reasoning, but I think it is essentially that the state bar or a court grants such status and the OAH is neither the state bar nor a trial court that can grant the permission. So, another motion, running 60 pages in length, was filed with the Superior Court of the county of Los Angeles. That court agreed it had authority and granted the attorney Pro Hac Vice status.

The docket shows a notice filed by MAP regarding Pro Hac Vice. I didn’t read it and assume it was announcing the same results for their counsel. I didn’t see anything on the docket from CMMB.

Protocol for naming individuals mentioned in filings

As I started this series of posts, I pondered how to name the individuals that are mentioned.

Full name? Initials? First name and initial of last name? No name?

Here is my conclusion:

For only the expert witnesses, my posts will list the person’s full name. Those individuals want to be in the public eye and want to be known as an expert. It looks like they usually speak in public on a regular basis. Thus I am comfortable listing their full name.

For everyone else in the case, such as management and staff of the charities along with partners and staff of CPA firms, it is different. They did not sign up to be in the public spotlight, so I’ll skip their last names. My posts will list their first name and first initial of the last name. I’ll also list job title or job description along with their employer when pertinent. Those in the know already know who has been dragged into the case.

Obtaining permission to obtain depositions

The AG wanted to depose a number of people who reside outside California but cannot be compelled to attend a hearing by the OAH. Thus the process the AG had to follow is request the ALJ to approve taking depositions.  The charities can file objections, which they did. (Charities unsuccessfully claimed these constitute discovery, which is not allowed under OAH regulations.). After addressing objections, the ALJ then issues orders allowing certain people to be deposed. The AG then goes to the Superior Court to request an enforceable order for those individuals to be deposed.

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Jim Ulvog

Court filings in California AG’s cease and desist order against three charities

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I’m reading through the filings for the AG’s cease and desist order against MAP International, Catholic Medical Mission Board, and Food for the Poor. The hearing on the order is underway this week. It will continue for the next two weeks, according to the schedule.

Although the filings are public information, they are not available on the Internet. Instead, they must be obtained directly from the state. It took several phone calls, and getting forwarded to another office, but I did reach the person responsible for responding to media requests. When I finally reached the right person, she was extremely helpful and very prompt.

So, I now have a huge amount of reading to do.

As time is available over the next few days and weeks I will comment on different things visible in the filings.

 

A few preliminary thoughts.

This is a major battle. The charities are responding accordingly.

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Jim Ulvog

Hearings start tomorrow on California AG’s Cease and Desist Orders against three charities

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Calendar at the Office of Administrative Hearing’s website still shows the appeal hearings on the AG’s Cease and Desist Order start tomorrow, November 27, at 10 a.m. in downtown Los Angeles. Hearings continue the next 14 days at 9 a.m.

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Jim Ulvog

A hearty thank you to the medical community on this Thanksgiving day

There will be empty chairs at three holiday meals today. My deepest condolences to the families. Image courtesy of Adobe Stock.

My family is both deeply grieving and so thankful this Thanksgiving.

We are grieving because there will be an empty chair at three different holiday meals today in Bismarck, North Dakota.

We are thankful for many things, including the wonderful medical care provided to my dad and our infant grandson. My dad’s story is for another day. Today, a few thoughts about our grandson.

About eight months ago, our grandson and granddaughter were born early. He was not only underweight but also gasping for every breath he took. (My wife and I flew to Williston a couple of days after they were delivered.)

Born in Williston, North Dakota, he desperately needed attention available in Bismarck at the Neo-natal Intensive Care Unit at CHI St. Alexius Hospital.

Making a four-hour drive would have been life threatening. Staying in Williston would have been too dangerous.

A medical airlift moved him to the care he needed.

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Jim Ulvog

Comments in financial statements of three charities appealing California AG’s Cease and Desist Order. Part 3 of 3.

Appeals of the AG’s C&D Order will be heard by an administrative law judge. Image courtesy of Adobe Stock.

There are a number of pieces of information of public interest in the most recent financial statements for the three charities who received cease and desist orders from the California Attorney General. The appeal hearings start in a week, on November 27, 2018.

Part 1 of this series provided background, an executive summary, and a short discussion of Catholic Medical Mission Board’s disclosed accounting policy. Part 2 discussed the Food for the Poor financials.

This post will discuss the MAP International financials. Might want to get a fresh cup of coffee since this is a long read because it quotes the accounting policy in 2017 and 2016 along with a transition comment from the 2014 financials.

Previous post discussed the 12/31/16 financials for FftP, 9/30/17 financials for CMMB, and 9/30/16 financials for MAP.  FftP and MAP have since issued their next year’s report; CMMB has not.

MAP International

The 9/30/16 financials were available for issue on February 2, 2017, about 4 months after year-end.

The audited financials for the year ending September 30, 2017 have a date on the audit report of September 27, 2018. That means the 9/30/17 financials were released, or available for issue, on 9/27/18, about twelve months after the fiscal year-end. Audit report is from the Lawrenceville, Georgia office of Capin Crouse.

This means the 2017 financials were prepared with knowledge of the AG’s allegations and known status of the case as of September 2018.

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Jim Ulvog

Comments in financial statements of three charities appealing California AG’s Cease and Desist Order. Part 2.

At issue in the AG’s claim: how should pallets of donated meds be valued if restricted by donor for distribution overseas? Image courtesy of Adobe Stock.

There are a number of pieces of information of public interest in the most recent financial statements for the three charities who received cease and desist orders from the California Attorney General. The appeal hearings start in about a week, on November 27, 2018.

Part 1 of this series provided background, an executive summary, and a short discussion of CMMB’s financials. This post discusses the Food for the Poor (FftP) financials. Part 3 will discuss the MAP financials.

Previous post discussed the 12/31/16 financials for FftP, 9/30/17 financials for CMMB, and 9/30/16 financials for MAP.  FftP and MAP have since issued their next year’s report; CMMB has not.

Food for the Poor

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Jim Ulvog

Comments in financial statements of three charities appealing California AG’s Cease and Desist Order. Part 1 of 3.

Image courtesy of Adobe Stock.

Just checked on the most recent financial statements for the three charities who received cease and desist orders from the California Attorney General. The appeal hearings start in a week, on November 27, 2018.

Found a number of pieces of information in the financials that are of public interest to this developing story. Will point out some of the information now. Later on, as time allows, I’ll provide some commentary on the disclosures.

Previous post discussed the 12/31/16 financials for FftP, 9/30/17 financials for CMMB, and 9/30/16 financials for MAP.  FftP and MAP have since issued their next year’s report; CMMB has not.

This discussion will be in three parts.

Executive Summary

All three charities disclose they use wholesale acquisition cost (WAC) to value donated medicine.

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Jim Ulvog

Appeal of three Cease and Desist Orders from California AG set for hearing before an administrative law judge.

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Here are the hearing dates for the three charities accused by the California AG of overstating revenue and program expenses.

As you recall, the AG filed cease and desist orders against three charities. The charities have all appealed the order.

The calendar for the appeals can be tracked at the Office of Administrative Hearings website.  On the right side of the page, third option from the top, is Calendar – General Jurisdiction.

Scheduling info is:

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Jim Ulvog

Assessment of allocating cost of speakers in Food For the Poor’s financial statements.

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The Cease and Desist Order filed by the Michigan Attorney General on December 19, 2017 provides an analysis of the joint cost allocation methodology used by Food For the Poor.  The Order can be found here.

FFP hires pastors from various denominations to make presentations at churches in the pastors’ denomination.  FFP applies joint cost allocation accounting to classify a large portion of the speakers’ time as program services.  The AG concluded the allocation methodology did not follow GAAP.

As mentioned previously, FFP settled the AG’s allegations by agreeing to pay the state $300,000 and revising its fundraising materials.

For general education of the nonprofit community, this post will quote the AG’s Cease and Desist Order at length on the joint cost allocation issue.

The authoritative explanation of what constitutes generally accepted accounting principles is found in FASB’s Accounting Standards Codification™ (ASC). I will add some citations from ASC to the AG’s Order. Will also add a few comments along the way.

A detailed look at the AG’s Order is valuable because it provides an in-depth analysis of a specific situation with a detailed comparison to authoritative GAAP.

You might want to get a fresh cup of coffee since this post is a long read, currently sitting at over 1,500 words. It is also quite technical.

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Jim Ulvog