Jim Ulvog

Why bother with internal controls? Stewardship

From a very basic perspective, the reason any governing board puts controls in place is so the board can be sure that the programs and activities they wish to implement are actually implemented.  Put a different way, this means the board needs to make sure that resources entrusted to them are used as intended.  We have a framework for this concept:  It is called stewardship (more…)

Jim Ulvog

“Nonprofit Starvation Cycle”

Stanford Social Innovation Review has a superb article on the cycle many NPOs have of starving themselves of critical infrastructure they need to be effective in their mission.

Superb summary: “The first step in the cycle is funders’ unrealistic expectations about how much it costs to run a nonprofit. At the second step, nonprofits feel pressure to conform to funders’ unrealistic expectations. At the third step, nonprofits respond to this pressure in two ways: They spend too little on overhead, and they underreport their expenditures on tax forms and in fundraising materials. (more…)

Jim Ulvog

Alleged embezzlement at nearby church

A church in my area has been hit by an embezzlement scandal.  It particularly grieves me because I have a number of friends who worship there. 

Basic details are that the business administrator is accused of embezzling between $720,000 and $960,000.  He has been arrested and formally charged with several felonies.  He has denied all charges.  Reports in on-line media do not provide any details of how the alleged scheme was supposedly carried out.  We wait while the judicial system resolves the accusations.  In the meantime, if you are so moved, please pray for the leadership (who are quite distracted from their ministry, I would guess), the membership (who are probably hurt and angry), the accused, and his family (they are victims too). 

More details in this article at the Church and School Embezzlement blog.  Articles from the Daily Bulletin, the local paper for my community, are no longer available on-line.

Full disclosure:  It is important to explain that I know nothing about this tragedy beyond what I have read on-line.

Jim Ulvog

Fraud and other moral disasters occur in the nonprofit world

You may think local churches are immune to scandals.  In your ministry, perhaps you feel that since you are staffed by sold-out followers of Christ who are passionately committed to your mission, you won’t have any of those kinds of problems.  

Allow me to share some of my experiences. (more…)

Jim Ulvog

What’s this ‘codification’ stuff my auditor is talking about?

You may have heard auditors talking about the codification of accounting rules. Well, it isn’t about everything getting fishy. (Bad joke – sorry!) You probably have seen lots of odd comments in the notes to your financial statements.  Instead of mentioning FAS Statement #157 when discussing fair value accounting of your investments, your notes now refer to something like ASC 820.  What happened? (more…)

Jim Ulvog

Dual control over church offering

One of the most difficult areas for a church to maintain good internal controls is for the offering between the time the ushers collect it and the counters start their count.  It is hard to keep controls over the uncounted offering.  That is also one of the riskiest areas for a local church.

If you want to look at just one area where there is high risk in your church, check out your procedures for controlling the offering.

Not to worry, there will be a lot of discussion on point in this blog.

Jim Ulvog

Test for ethical behavior – what will this look like on the front page of the newspaper?

You have probably heard this story before, but I will mention it again.  When you are pondering how to handle a situation, think about how it would look on the front page of the newspaper.  Do you want to see this policy, decision, or personnel action on the front page of the Wall Street Journal®?  How about the lead article in the local section of the Los Angeles Times®? The front page of your local paper?  (more…)

Jim Ulvog

Small nonprofit health care tax credit — 9-7 update

The healthcare act passed in spring 2010 provides a tax credit to small businesses and nonprofit organizations to assist with the cost of providing health care to employees.  The tax credit is available to NPOs with less than 25 full time equivalents that pay over half of the health insurance costs and have less than $50,000 average compensation per person.  For those nonprofit employers who qualify, the credit is 25% of healthcare costs and is offset against payroll taxes.  There is a phase-out calculation when full time equivalents are over 10 and average compensation is over $25,000. As you would expect, there are detailed rules and requirements. 

 The IRS has a fact sheet available.  They also have a one minute YouTube video. (A YouTube video?  From the IRS?  Yes, a YouTube video from the tax people.) 

Remember this is a brief overview.  Check out the IRS information and consult with your tax advisor before you do anything!

Update on 9-7-10 – The IRS announced today that the method of receiving the credit for NPOs will be for those organizations to file a soon-to-be modified 990-T. That is the form used to report unrelated business income and to pay taxes on the UBI.  The formwill be modified for the tax credit.  Watch for more details in the future.

Jim Ulvog

Merger and acquisition accounting

New accounting rules for mergers and acquisitions of nonprofit organizations are now in effect.  In the past, when two nonprofit organizations came together, the accounting was essentially to combine the accounting information of the two entities.  This is no longer allowed.

Under the new rules, there are mergers and acquisitions. The accounting for each is quite different. (more…)

Jim Ulvog