The AICPA has summarized the FASB’s Preliminary Analysis of the Comment Letters on the Not-for-Profit Financial Statement Exposure Draft .
I realize I’m going at this backward, what with commenting on the feedback before I’ve described the content of the exposure draft, but here goes….
Why have we seen such dramatic improvement in average wealth and average life expectancy everywhere in the last 100 or 200 years? What has led to a radical reduction in the number of people living in dirt-eating poverty in the last 50 years?
Over the last few years I have focused a lot of my reading on economics and history trying to figure out the answers to those questions. Why?
If we figure out the answer to those questions we can continue in the same direction. If we sort out how we got here, we can share that strategy with those who have not shared in the progress. If you want a different phrasing, we can radically narrow economic inequality within countries and between countries if we can answer those questions. We can help get even more people out of dirt-eating poverty.
I think those goals are in the back of the mind for most readers of this blog.
I have not been posting much lately, as you likely noticed.
Took a week of vacation for our fourth visit to North Dakota. Worked a week in the office on several deadlines. Then took another week of vacation in San Diego. Considering the time it takes to get ready for vacation, I have not had much time for blogging for about four weeks now.
In addition, I’ve been on a fairly stringent news diet for three weeks. Not a complete fast, just a diet. That has also been quite refreshing. I am still quite aware the world is falling apart even through I don’t know much of the current details.
I’m back in the office now so can get back into my routine. Plan to resume blogging at my regular pace.
So, stay tuned!
Church Law & Tax has a long (3,600 word) article providing a detailed case study of how one church handled an accusation of improper (and illegal) contact between an adult youth worker and a minor in the church.
All pastors and church leaders ought to read the article and file it away.
The article explains how the situation was discovered, evolved, and how the church handled each stage of the crisis.
The most valuable part of the article for me is an attorney discussing the situation at each stage and assessing how the church responded at each step.
Here are a few changes in labor law likely in the near future and a couple more issues on the distant horizon.
Nearest are proposals to make more people subject to overtime pay and classify more people as employees instead of independent contractor.
You can find more info from Accounting Today: Labor Department Driving Changes Accountants Need to Know About.
Overtime
If you, or your ministry or business, own an overseas financial account, you are required to file an FBAR annually. This is also called a Report of Foreign Bank and Financial Accounts, or Form 114. This would also include accounts for which you have signature authority.
Helping people move out of poverty is extremely complex. Every part of a culture and economy is tied to every other part. Changing one part could result in some unanticipated change another part. Or another issue may immediately surface as a block to any progress.
I don’t have any answers to the questions raised by the following articles. I am trying to work through these issues. Join me as I ponder.
About deworming medicine…
The complexity of helping is illustrated by this article at Vox on 7/28: Worm wars: The fight tearing apart the global health community, explained. Three main points I draw from the article:
First, there may be other factors that deserve credit for some portion of the effect of deworming medicine. Thus it isn’t merely passing out bunches of pills that makes things better.
A 21 page e-book, Protecting our Ministry with Integrity, is available from Church Law & Tax, which is the writing platform for Richard Hammar. If you are new to leadership in the church world, he is one of the leading writers on legal issues in the community.
At the price of signing up for future sales pitches (when you consider the quality of the resources available, that is a really low cost), you can read about: (more…)
One frustrating feature of life is that things are so complex. Doing something to help people or make things better can have unrelated impacts that offset any benefit. Sometimes doing good stuff can make things worse.
That is called unintended consequences. Here are two more examples.
Giving away free consumer goods may not make life better for poor people…
7/23 – Vox – Buying TOMS shoes is a terrible way to help poor people – Add this article to the vast and growing body of articles explaining that the buy-one-give-one-to-poor-people way to end poverty is doing little to help and might be doing a lot of harm.
Amongst the many points made: (more…)
There are four paragraphs in the FTC complaint against four cancer charities that summarizes the issues raised by the FTC. These paragraphs cover the main issues about valuation of GIK that have been under discussion in the NPO world for several years now.
These issues do not just apply to the four named charities.
The issues are not limited to the secular cancer charities.
These issues actually apply to a large number of high visibility religious charities. The issues may have drop out of news coverage, but they have not gone away. I hope those who have ears that are able to hear, will hear.
Who might want to take a second look at the FTC’s summary?
This is the twelfth in a series of posts diving into the detail mentioned in the complaint by FTC and all Attorneys General against four named cancer charities.
This is the fourth post on a series of paragraphs in the complaint addressing valuation of donated medicine.
The complaint can be found here. My posts in this series are visible using the FTC tag.
By reporting these GIK transactions as contributed revenue and program expenses, at inflated values, Corporate Defendants represented themselves to be both larger and more efficient than they actually were. They obscured the high percentage of donated funds spent on, among other things, for-profit fundraisers, executive salaries, and employee perks, and concealed the very small amounts spent on the charitable purposes described to donors. As a result, the Forms 990 and other documents filed by Corporate Defendants with the IRS and state regulators, and made publicly available to consumers, were false and misleading.
This is the eleventh in a series of posts diving into the detail mentioned in the complaint by FTC and all Attorneys General against four named cancer charities.
This is the third post on comments in the complaint addressing valuation at an overall level.
The complaint can be found here. My posts in this series are visible using the FTC tag.
On the impact of the allegedly misstated information: (more…)
This is the tenth in a looooong series of posts diving deep into the detail mentioned in the complaint by FTC and all Attorneys General against four named cancer charities.
The complaint can be found here. My posts in this series are visible using the FTC tag.
This is the second post discussing allegations in the complaint asserting that the financial statements of the charities were misstated. Four paragraphs summarize the problems the FTC has with the accounting for donated medicines.
Corporate Defendants obtained the paperwork they used to claim these figures for just the cost of the payment to INTERMEDIATE (which included both INTERMEDIATE’s fees and shipping costs). For example, in connection with a 2011 shipment to Guatemala, CFA reported contributed revenue and corresponding program expense of over $8 million, but only paid INTERMEDIATE a fee of $50,550. For one 2010 shipment to Ghana for which CCFOA reported contributed revenue and program expense of over $3.8 million, CCFOA paid INTERMEDIATE just $39,960. In addition, for a 2011 shipment to Honduras for which BCS reported contributed revenue and program expense of at least $3.8 million, BCS paid INTERMEDIATE just $28,120. Although Corporate Defendants used such transactions to add hundreds of millions of dollars in program expenses to their financial reports, these “programs” existed entirely on paper. Corporate Defendants did not possess the goods and played no role in their overseas distribution. They hired no additional staff to manage these multimillion-dollar international GIK programs and in most instances spent virtually no staff time on them. In addition, the very high dollar values associated with these transactions largely resulted from overvalued pharmaceuticals.
FASB has released three in a series of FAQs about the exposure draft that will drastically change accounting for all nonprofit organizations.
This discussion is cross-posted from my other blog, Attestation Update, since the overview of the massive changes will be helpful to accountants in the nonprofit community.
Watch for more FAQs in the future.
This is the ninth in a series of posts diving deep into the detail mentioned in the complaint by FTC and all Attorneys General against four named cancer charities.
The complaint can be found here. My posts in this series are visible using the FTC tag.
This is the first post in a series discussing allegations in the complaint asserting that the financial statements of the charities were misstated. Paragraphs 127 through 130 provide a condensed summary of the massive concerns the FTC has over the accounting for GIK shipments. There are severe accusations embedded in these four paragraphs.
To give you a hint where the FTC is going with this section, my paraphrase of the last sentence of paragraph 130 is the FTC alleges that the charities’ audited financial statements and 990s as provided to the IRS, state regulators, and the general public were “false and misleading.”
Deceptive Impact of Reporting GIK Transactions
The increased contributed revenue and program spending Corporate Defendants reported – collectively over $223 million – had the effect of diminishing the reported percentage of revenue they spent on fundraising and administrative costs and increasing the proportion of reported expenses they spent on program services, making Corporate Defendants appear more efficient to donors than they actually were. Thus, the reported international GIK revenue for the five years from 2008 through 2012 resulted in CFA’s reported fundraising expenses being 25.4% of total contributions. In reality, 67.4% of consumers’ donations (including revenue from CSS), or 82.9% without counting CSS’s “contributions” to CFA, were spent on fundraising. For the same period, CCFOA used its international GIK revenue to report fundraising expenses of 47% of total contributions. In reality, 81.5% of consumers’ donations were spent on fundraising. Similarly, BCS reported fundraising expenses of 29% of total contributions, while in reality 84.6% of consumers’ donations were spent on fundraising. Corporate Defendants also used the inflated contributed revenue amounts when choosing purported “comparable organizations” for setting their executives’ pay, thus improperly increasing the Individual Defendants’ salaries.
You might wonder what’s the big deal if a charity records a GIK shipment when it should not, as alleged by the complaint. Revenue is increased by the valuation of the shipment and expenses are increased by the same amount. Impact on the bottom line, or change in net assets, is zero.
Why does it matter?