Jim Ulvog

Guest post – What about underreporting GIK?

Mr. Jeff Beaumont is a CPA working for a firm that focuses on serving the nonprofit community. His opinions are his own and do not reflect the opinions or positions of his firm in any way. Because he speaks for himself, I won’t identify him or his firm in any more detail. He doesn’t speak for me either.

He has experience as an auditor working on the issues discussed on this blog.  He took me up on my invitation for guest posts, so here is Jeff:

 

by Jeff Beaumont, CPA

There has been quite an amount of discussion, articles, and consideration given to recording gifts in kind.

However, I would like to ask nearly the opposite question: what about organizations that don’t record gifts in kind?

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Jim Ulvog

Other disclosure issues for GIK medicine

Since starting to write about GIK valuation issues, I’ve noticed there are a few disclosure items that don’t seem to be visible in the financial statements of NPOs who receive large volumes of donated medicines. As I have time, I’ll start accumulating examples.

Concentrations – In general, if a line item of a financial statement contains a concentration, that concentration should be disclosed. The concept is one donor or lender or customer or vendor could go away. If loss of one counter-party would adversely impact an organization, the concentration should be visible. For example, if a huge portion of cash contributions come from just a couple of donors, that probably should be disclosed.

Concentration of revenue – (more…)

Jim Ulvog

Explain to me again why targeting NPOs was needed because the Determination Unit was swamped by the overwhelming flood of (c)(4) applications

The huge increase in 501(c)(4) applications is the cited reason for targeting some applications for additional review.

Two problems with that explanation.

First, the increase of (c)(4) applications in 2011 and 2012 is a very small portion of Determination Unit caseload.

Second, the ideological targeting started well before the volume of applications increased.

Increase in (c)(4) applications was cause for targeted review

Appendix I (page 22) of the TIGTA report identifies objective I of the investigation as: (more…)

Jim Ulvog

Call for guest posts on GIK valuation

I’ve noticed a remarkable lack of conversation on the ‘net for the GIK issue from people who think the current methodologies are reasonable and appropriate. Perhaps part of that is the lack of a place to comment.

I’m willing to host guest posts on the GIK valuation issue if someone would be interested in writing something. Rules would be simple. Be professional, no ad hominem attacks, advance the conversation. I will do minimal editing without permission.

Since this is a blog, length is not an issue. Brief or long, your choice.

Since comments are moderated, you could reply to any post and I’ll see it.  Leave a comment and we can start a conversation.

Make up a good nom de plume and leave me a note if you are interested.

Jim Ulvog

IRS targeting fiasco gets worse daily. The scary damage. Ponder the causes cited by the TIGTA report.

Using ideological criteria to select organizations for a drawn out review of their exemption application is a serious disaster for everyone.

I want to develop three ideas in more detail but don’t have the time to do so now. Still would like to lay down a marker for the ideas.

First, this disaster is getting worse with every day that passes. Not sure whether the progression is arithmetic, geometric, or exponential. If you need a sinking feeling in your gut, trace the pieces of information as they have emerged. Somebody needs to start giving answers that are accurate past the next sunrise.

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Jim Ulvog

World Help revises 2012 report again to say the 2011 numbers were restated again

My compliments to World Help. They have revised their financial statements to disclose the 2011 numbers were revised again.

My hat is off to them for the courage to revise the report.

The newest report can be found at their website here.

Note 12 is new. It is titled Comparative Statements and addresses the second revision of 2011 information.

The note says management restated the 12-31-11 financial statements.

The reason is provided. Quoting, the report says: (more…)

Jim Ulvog

My visit with telemarketer from the Children’s Cancer Recovery Foundation

Children’s Cancer Recovery Foundation (CCRF) is the latest charity to announce the revision of their financial statements.

Chronicle of Philanthropy reported this morning that the organization will revise their 2011 financial statements and 990 for the medicine they received from World Help – Cancer Charity Shrinks Its Revenue.  Mr. Doug Donovan, who wrote the article, indicates there is another donation that CCRF ought to address as well.  You can see CCRF’s announcement at the bottom of this page.

Mr. William Barrett tells of his telemarketing call from CCRF. The call was made by Associated Community Services (ACS). See his blog, New To Seattle, for his experience:  Really? Iffy charity says gift will benefit Seattle hospital. The script for the call he received said a portion of the donation would go to a nearby hospital that he’d not heard of. Some research revealed that hospital actually exists but had changed their name five years earlier.

A bit of research by Mr. Barrett identified the same issues that the Chronicle of Philanthropy has been discussing in their recent articles.

Mr. Barrett mentioned the Chronicle article and CCRF restatement this morning, calling it another shoe dropping in the ongoing issues over valuation. He suggests we may soon have a closet full of shoes – Iffy charity soliciting in Seattle gets more iffy.

Sometime soon I’ll have a series of posts on the accounting concept of joint cost allocation using the CCRF 990 as a case study. Before going into that discussion, it would be helpful to describe my call from ACS

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Jim Ulvog

Accounting ideas in World Help’s revised financial statements

There are some accounting concepts in the most recent financial statements released by World Help that warrant discussion. This post will walk through those items I noticed.

This will be a long post. You might want to get a fresh cup of coffee and settle in.

Efforts to reach out to World Help

I have been asking World Help for their comment for a week and a half. The only reply I have received was when the president’s assistant gave me the e-mail contact for the organization’s outside media consultant. I have sent e-mails to the president’s assistant and the contract media consultant several times and received no replies.

Proper accounting is a broader issue in the R&D community than has been discussed

The focus of conversation on accounting in the relief & development community has been variance power and the valuation of medicine, particularly 500 mg mebendazole.

I perceive there are issues involved in disclosures that haven’t yet been discussed.

In accounting shorthand, the matters I see that have not yet been addressed are disclosures of concentration of contributions, concentration of donors, and estimates with a reasonable possibility of change in the near-term.

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Jim Ulvog

GIK valuation – Things going on behind the scene

Previous posts have discussed an article at Chronicle of Philanthropy: Charity’s Exaggerated Revenue Could Affect Other Groups.

I saw two interesting background comments in the Chronicle’s article that tell me there is more going on than is visible.

The AG task force

The first is a quote from the office of the New Mexico Attorney General: (more…)

Jim Ulvog

Impact on downstream charities from World Help revising their financials

As discussed in an earlier post, World Help has revised the amount of 2011 gift-in-kind contribution from $223.7M to $1.6M. That is a 99.3% reduction.

What is the impact on charities who received GIK from World Help? This question is touched on by Aronson Nonprofit Report blog in their post I discussed here. That issue was discussed at more detail in a long article at Chronicle of Philanthropy: Charity’s Exaggerated Revenue Could Affect Other Groups.

The Chronicle article identifies two specific charities which received donations from World Help: (more…)

Jim Ulvog

Webcast for NPO board member orientation

Christian Leadership Alliance will have a webcast on 5/23/13 on board member orientation in a nonprofit organization – Effective and Efficient Governing Board Orientation.

The presentation is from Mr. Michael Batts, CPA, managing partner of Batts Morrison Wales & Lee, P.A. His firm focuses on serving the nonprofit community.

If I’m reading the description correctly, the webcast will cover the material in Mr. Batts’ book, Board Member Orientation.

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Jim Ulvog

Upcoming posts – Thoughts from Christian Leadership Alliance conference, May ‘13

I attended the CLA conference in Anaheim this week. Had a great time. It was a blast visiting with a lot of the lenders and other CPA firms serving the nonprofit community. (Yes, yes, you can pray for me that I enjoy visiting with accountants and bankers.)

General sessions were superb as usual. The selection of breakout sessions was good (not superb as in the past, but still very good).

Here are a few topics for posts to I want to write soon.

Resource books

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Jim Ulvog

Comments from others on World Help’s restatement

Aronson Nonprofit Report has a comment out today on the World Help restatement: Charity Overstate Revenue by $222 Million and You Thought Your Restatement Was Bad.

Middle paragraph:

Once again, we have an issue of claiming value for donated medicine which is an ongoing blight in the nonprofit community, but in this case, the donors say they never gave any donation. The finger-pointing is heated and people are no longer cooperating with the press.

Carol Barnard points out this creates an issue for other NPOs who have received donations from World Help.

If World Help’s GIK has been overstated by 99.3%, it seems like that could have an impact on the valuation used for those who received GIK from them.

Jim Ulvog

Impact of the technology revolution has barely begun

(Cross-post from my other blog, Outrun Change.)

That we haven’t seen the full impact of IT is a comment I heard the first time a few years ago. That sort of made sense but didn’t really register. This blog is focused on sorting out that change. The idea that the technology revolution has barely begun finally clicked for me with a column by Matthew Yglesias – Why I’m Optimistic About Growth and Innovation.

A few industries have seen huge impact from technology. Think of book publishing, journalism, and music. Those industries have been turned upside down. I read a lot and listen to a bit of music so am quite attuned to those areas. The way everyone consumes news has been transformed. I regularly read dozens of blogs a day. They just appear on my computer screen with a mouse click or two. I’ve always been a news junkie, and my consumption has soared in the last few years.

However, as big as those industries are, they are a small part of the total economy.

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Jim Ulvog

World Help reduces 2011 revenue by 92.8%

World Help has released their 2012 audited financial statements which you can find on their website at this link.

The total revenue initially reported in the audited financial statements for the 2011 fiscal year was $239.3M (audit opinion dated 3/12/12). In the most recent financial statements, the total revenue for 2011 is $17.3M (audit opinion dated 4/10/13).

That is a reduction of $222.0M, or 92.8% of the amount initially reported.

Contributions of GIK were initially reported at $223.66M for 2011 (3/12/12) and currently reported at $1.62M (audit report date 4/10/13). That is a decline of $222.04M, or 99.3% of the initial amount.

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Jim Ulvog