Catalyst Center for Nonprofit Management provides a challenge for those of you thinking of forming an NPO to provide a structure to carry out your passion: Should You Start a Nonprofit Organization?
The article surveys the costs and says think carefully before diving in to start a 501c3.
Why?
Previously mentioned that in 2012 California charities retained 37% of the total proceeds raised by telemarketing firms. In New York, the percentage going to the charities was 38%.
The Michigan Attorney General released their report on telemarketing campaigns in the state for 2013 –
I previously used the publicly visible costs of a charity’s legal dispute to urge you to Please Try to Stay Out of Court. The costs in dollars and time can be high.
This advice is not anything new.
Turns out Abraham Lincoln gave that same advice to young attorneys. He said (more…)
Going Concern/Sift Media is offering a one-hour on-line course that is a survey of the balance sheet used by charities, which is called a statement of financial position.
If you are new to the financial part of the NPO world, I really recommend you check out the class. If you aren’t an accountant and want to understand the NPO world, I really recommend the course.
RSVP: An Overview the Statement of Financial Position for Nonprofits on March 26th
On-line. Free. 1 CPE credit. Wednesday 3/26.
If you miss the course, the video will be available after the class, but no CPE credit for that.
The course will be presented by Mr. Larry Perry, CPA. I just completed a Sift Media on-line course presented by him. He’s very good.
Check it out.
Did I mention it’s free?
BBC reports on 3/6 that Oxfam ex-fraud chief admits defrauding charity.
Oxfam, a development charity in England, has revenue of £385.5M (~$645M) in 2012.
The charity’s head of the counter-fraud department pled guilty to embezzling about £62.6K (~US$105K) and will be sentenced May 16.
His scheme?
Corey Pfaffe answers lots of nonprofit tax questions at his blog, MinistryCPA. If you work in the accounting part of the nonprofit world, might be a good idea to check out his site regularly. Here’s a few of the recent posts of interest:
Check out the links for answers.
That first item on donated services is a question I receive often.
An example of how that can be phrased:
Can our charity issue a tax-deductible receipt for the value of work done by contractor at no charge?
Here’s a very unaccountant-like answer in terms of brevity:
No. You can’t.
Prof. Pfaffe has lots more info at his blog. Check it out. If you use an RSS reader, add his blog to your feed.
What portion of telemarketing campaigns makes its way to charities for whom the campaigns were conducted?
Here’s the 2012 results based on two recent articles:
The articles:
In my journeys as a CPA serving the nonprofit community, I’ve been able to observe one (or more) charity/charities that have been in court because of their involvement in civil litigation. The time and costs involved can be substantial if you find yourself in civil court.
I can’t talk about those situation(s) because of confidentiality rules.
There are several things an auditor would routinely do in such situations. The auditor would see the costs incurred from looking at the general ledger. Because of the possible financial impact, the auditor would have discussed the status of the case and possible outcomes with management, looked at legal invoices, and read the legal confirmation letter received from outside counsel. I can’t tell you what steps I took in any particular situation.
What I can say after seeing one/some specific situation(s) is that you should try really, really hard to stay out of court.
The costs can be high. The distraction for your leadership (and membership if you have members of some sort) can be significant.
One situation I can talk about
Some more articles that are worth attention but I don’t have enough time to respond in a full post. Here are the headlines, with links and a brief comment below: Super Bowl t-shirts, costs to raise funds, and an art museum gets ready to close its doors.
Impact
Update 2/19, 6 p.m. – Earlier today I received a reply from Food for the Hungry sharing some background information with me. They will look at this post in more detail and get back to me. I will share with readers whatever additional information the organization wishes to share.
Update: IRS audit has been resolved.
A charity going through a major dispute with the IRS has incurred a lot of costs dealing with an audit.
After seeing two sets of financial statements and 990s that were restated last fall (yes, yes, I’m a little slow on the uptake), I thought about checking to see if the Food for the Hungry financials have been restated. Checked the New York AG web site and didn’t see any revisions.
I would like to use the Food for the Hungry financial statements as a case study of the costs incurred from getting involved in a tax or legal dispute.
MinistryCPA blog summarizes Form 1099-MISC Failure to File Penalties. There are per-return penalties that increase over time. Ouch.
Check out the post for more details. Then check that you are ready to file all your 1099-MISCs.
Need more details? Corey Pfaffe, CPA has more info at another of his post’s: Form 1099-MISC Rental Payment Reminders.
The second part of the Anderson Cooper 360 report on a number of shipments worth over $40M ran last night. Check out What happened to $40 million in charitable donations? – Four charities, one identical shipment. The segment is 7 minutes long.
My comment on part 1 is here.
The AC360 team tried to follow shipments on the ground in Guatemala to find either the charity that received them or the downstream charities that used the medicines. They did not have much success. Actually, no success.
CNN aired a report that is part of their combined reporting with the Tampa Bay Times and Center for Investigative Research. Previously mentioned the print reports here and here.
The video report, which runs just under 6 minutes in length, is from Anderson Cooper 360: Where did $40 million in charity donations go?
CNN sent their team to Guatemala to track down the shipments. They tried to follow the shipments after the meds arrived in country.
Previously discussed here and here two charities that revised their 2012 financial statements by increasing their valuation on donated medicine from WAC to AWP.
I reached out to both organizations on Wednesday, February 5, for comment on this post. I have not heard back from either organization. If they provide any comment, I will update this discussion.
You might want to get a fresh cup of coffee. This will be a long post.
Why look at these restatements?
Two reasons.
First, it is counter to the trend we are seeing of organizations reducing the valuation of GIK.
Second, it provides a glimpse into the reasoning for using AWP. There is very little in the public realm (at least that I’m aware of) that explains why organizations are using AWP.
I’ve looked at more than a few financial statements in the last two years for organizations that have a large volume of GIK. I’ve even had a few posts on point. Usually a specific issue is not very visible in the financial statements. Occasionally, a set of financials will clearly illustrate some issue that is widely present in this sector.
Print copy and Nook e-book are in addition to availability for the Kindle and another half-dozen formats.
The book is an intentionally short read at about 30 pages. The print copy has 20 pages of text. Focus is to quickly describe the differences between those levels of services using three illustrations:
It also explains the differences in plain language. Well, at least using less accountantese than you would usually get from an accountant.
This is a compilation of posts previously appearing on my blogs, with slight editing.
Where can you find the book?
Print book at Amazon here.
Nook e-book at Barnes and Noble here.
Kindle e-book at Amazon here.
Also available here in other formats: