Jim Ulvog

An illustration why interpreting functional allocation information is difficult: the Wounded Warrior Project financials

Apparently there is conflict going around on how to interpret the functional expense allocation information for Wounded Warrior Project.

All their info is laid out in their audited financial statements, which you can find here. Their annual report, audited financial statements, and 990s for the last eight years are all available on their website. Good on them for making all that info readily available. That is an example for all charities to follow.

How can three different calculations all be correct?

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Jim Ulvog

FASB is starting to write a major overhaul of NPO accounting

One discussion inside the accounting rule maker deals with a massive restructure of the accounting for nonprofit organizations. The FASB staff have started drafting the changes.

Exposure draft might be released in early 2015. Adjust the estimate by a few months to allow for the complexity of a rewrite that affects such a wide variety of organizations and I’ll guess we may see an exposure draft in spring or summer 2015.

Thomson Reuters Tax & Accounting News reports Not-for-Profit Proposal Targeted for 2015 Release.

If you are involved in the finance or accounting areas of the NPO world, it might be worth keeping your eye out for this issue.

Jim Ulvog

Is the cost of reducing fraud risk greater than the loss from a fraud incident?

I recently had the opportunity to visit with Sam Antar, convicted felon and former CFO of Crazy Eddie.

During our interview, Mr. Antar suggested a reason why businesses don’t put enough effort into fraud prevention and detection. He said the cost of deterring fraud may be more expensive than the consequences of fraud. Before I refine the concept, look at some costs he mentioned:

  • In the corporate world, particularly companies that have grown for a while, there needs to be a lot of systems put in place to deter and mitigate fraud risk.
  • There needs to be an audit committee and they need to have resources available to them. Translate that to they have authority to hire legal and accounting experts. They need training personally. This is expensive.
  • The audit committee, consisting of skilled and knowledgeable people, must have a direct line of contact to the Board of Directors. That is expensive in terms of time.
  • The Board of Directors has to have a substantial amount of financial skills. That is expensive in terms of time and dollars for training and dollars for their access to expert resources.
  • At some point in the growth curve, there needs to be a robust, skilled internal audit department. That could get quite expensive, if you look at it only in terms of cash outflows.

I would add to that the time involved to implement quality controls, policies, and procedures. Those will take a lot of time for the finance & accounting team. In turn, those procedures will take time for operational staff to follow. All of that translates into more staff.

That can get costly fast.

What is the cost of a fraud incident

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Jim Ulvog

“Top 10 questions that Ministers, Missionaries, and Church Treasurers Ask Tax Preparers”

Corey Pfaffe, CPA, provides answers to those top 10 questions at MinistryCPA.

The questions, with links to each answer, can be found here.

You can download a superb 12 page PDF of the full set of answers here.

If you are a pastor, missionary, church treasurer, or on the finance staff of a charity, I recommend you check out Prof. Pfaffe’s superb explanations. Get professional advice to apply the information to your situation or if you need to go beyond the very straightforward answers.

There is a bonus question: (more…)

Jim Ulvog

Nonprofits cannot *prevent* fraud but they can reduce the risk

Sam Antar is a convict and former CPA. He was the CFO of Crazy Eddie, which by his description was an intentionally fraudulent business.

I recently had opportunity to interview him by phone. Will have more of our conversation in future posts.

What I’m going to do in these discussions is combine his comments and ideas with my thoughts.

Advice for charities

I asked him what advice he would have for small charities to prevent fraud.

Wow, was that a mistake. I should not have used the word “prevent.”

You can’t prevent fraud. If someone is intending to steal or is completely determined to cook the books, they will find a way.

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Jim Ulvog

Tragedy of Fraud series now available in print as well as e-book formats

tragedy-cover   tragedy-cover

 

Both books in my Tragedy of Fraud series are now available in print format from Amazon.

The newest book:

tragedy-cover

Tragedy of Fraud – Insider Trading Edition describes – Scott London’s long fall from Big 4 audit partner to prison inmate.

Click the link for your reading preference:

First book in the series:

tragedy-cover

Tragedy of Fraud – The Ripple Effects from Fraud and the Wages Earned – Consequences of fraud spread far. There is a long list of well-earned wages from fraud that will be paid in full.

Available in your preferred format:

Jim Ulvog

“If you only write one book in your whole life … (it) will be someone’s absolutely favorite book of all time”

That is the encouragement from John C. Wright in his post “Your Book of Gold.”

The beautiful, full sentence:

If you only write one book in your whole life, and only sell 600 copies or less, nonetheless, I assure you, I solemnly assure you, that this book will be someone’s absolutely favorite book of all time, and it will come to him on some dark day and give him sunlight, and open his eyes and fill his heart and make him see things in life even you never suspected, and will be his most precious tale, and it will live in his heart like the Book of Gold.

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Jim Ulvog

The world’s oldest profession? Fraudster.

Last week I listened to a continuing education class by Sam Antar (Crazy Eddie CFO and ex-CPA Sam Antar Shows You How He Cooked the Books).

He suggested that unlike what has been said for a long time, prostitution is not the world’s oldest profession.

Instead, he suggested that committing fraud is the world’s oldest profession.

How can that be?

Go back to the garden of Eden. The serpent deceived Eve through a knowing misrepresentation of the truth in order to deceive her and take something from her. His intent was to harm her.

Definition of fraud

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Jim Ulvog

Can you live with mission critical applications disappearing for a week?

Consider your vulnerabilities to a software vendor disappearing overnight.

I changed RSS readers for a third time this week. They keep shutting down on me.

As an active blogger, reading a lot of blogs and news sources is mission critical. Well, I suppose I choose to make it mission critical – it’s a big deal for me.

Substitute your mission critical applications for my reliance on RSS feed and you can think through an assessment of how vulnerable you are to vendors just going away.

On Monday Bloglines disappeared. That has been my RSS feed for quite a while. Might be a server problem. Maybe a software upgrade that failed. Down lines somewhere. I can live with that for a little bit.

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Jim Ulvog

Don’t compare your messy backstage to someone’s presentable front stage

Things behind the scene are invisible to others. That’s the backstage. The ready-to-go portion shown to the world is the only part others see. That’s the front stage.

The ol’ sage advice is don’t compare your backstage to the front stage you see of others.

This applies in so many areas.

You know how your children behave at home or on a long vacation or how much effort it takes to get homework done. What you see in other families is the on-your-best-behavior public face and the brag-ready list of accomplishments that were oh so easy to achieve.

Compare the backstage of your family to someone else’s front stage as if that was actually a valid comparison and you will be distressed with either your children or your parenting skills. The most likely outcome is wondering why you are a failure as a parent.

Jeff Walker has a great video about that idea. He uses a messily hand-tailored shirt as a great contrast of the slick front stage and the messy, sloppy, slap-dash back stage.

Check this out:

[youtube=https://www.youtube.com/watch?v=Herruzu4HYY&feature=player_embedded]

 

Literally the difference between (more…)

Jim Ulvog

Tragedy of Fraud – Insider Trading Edition available at Amazon

Now available at Amazon:

tragedy-cover

 

Tragedy of Fraud – Insider Trading Edition: The fall from Big 4 audit partner to prison inmate.

Until April 2013, former KPMG audit partner Scott London was in charge of the audit practice for the southwest region. He was responsible for the audit work of 500 accountants and had the paycheck to go with those duties.

Today he is a prison inmate residing at the federal penitentiary in Lompoc, California serving a 14 month sentence.

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Jim Ulvog

Arguments in favor of harmful aid

Blogger “J” writing at AidSpeak recently experienced another round of lousy arguments in favor of harmful aid. He developed an inventory of the bad arguments in play.

I’ve mentioned “J” a number of times on my blog. He has helped me stretch my understanding in general and especially on the difference between doing aid well and causing harm & hurt by doing aid poorly. We rarely consider the risk of unintended consequences when helping others. Check out some of my articles:

His detailed explanation of great reasons to do aid that hurts is A Taxonomy of Arguments in Favor of Bad Aid.

What does he include in the population of harmful aid?

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Jim Ulvog