Repost: 2018 nonprofit risk alert is available. New edition adds discussion on valuation of GIK as rebuttal to California AG.

March 29, 2019, 8:15 am

Image courtesy of Adobe Stock.

Update:  This is a repost of an article on June 11, 2018. As I mentioned last summer, some newly added comments in this risk alert entered heavily into the decision by an Administrative Law Judge finding the charities complied with GAAP.

Some particular items of note for those who enjoy deep inside-baseball tidbits from the accounting world: 

  • discussion of GIK, especially paragraph .53 was added this year,
  • discussion in paragraphs .53 and .176 are directly responsive to the AG’s argument,
  • there is an overlap of ARL staffing with the R&D sector & auditors of that sector, and
  • the hard-fought, everybody-does-it-so-that-makes-it-right, spend-$475K-to-fight-the-IRS position on mebendazole has changed from the previously no-good, can’t-rely-on-it, non-representational pricing guide from five years ago now being the AICPA recommended standard for pricing.

So, here are some on-point comments from last summer with a few minor updates:

 

The AICPA has released the 2018 edition of Not-for-Profit Entities Industry Developments.

If you are a CPA serving the not-for-profit community, you need to read this document each year. It provides a survey of the accounting and auditing issues affecting the nonprofit world.

If you are an auditor, there are several other risk alerts you ought to be reading every year.

If you are working for a nonprofit, these alerts would give you a good survey of accounting issues in general and the audit issues your CPA will be dealing with this year.

Valuation of Gifts in Kind

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Posted by Jim Ulvog

2018 nonprofit risk alert is available. New edition adds discussion on valuation of GIK as rebuttal to California AG.

June 11, 2018, 8:38 am

Cover of 2018 NFP risk alert, used under fair use since I’m recommending you buy the document.

The AICPA has released the 2018 edition of Not-for-Profit Entities Industry Developments.

If you are a CPA serving the not-for-profit community, you need to read this document each year. It provides a survey of the accounting and auditing issues affecting the nonprofit world.

If you are an auditor, there are several other risk alerts you ought to be reading every year.

If you are working for a nonprofit, these alerts would give you a good survey of accounting issues in general and the audit issues your CPA will be dealing with this year.

Valuation of Gifts in Kind

Of particular interest are new comments responsive to the challenge from the California AG over valuation of GIK. The 2017 and 2016 editions had minimal comments on GIK.

The 2018 edition has a new section, Gifts-in-Kind: Reporting Contributions of Nonfinancial Assets, in paragraphs .53 through .57, which describes the AICPA’s interpretation of GAAP.

Years after the mebendazole issue has faded away, the second bullet point of paragraph .56 says that when GIK is sourced outside the U.S. and is not approved for distribution in the U.S., the meds should be valued at international prices. (If you have been following this issue for years, you realize the concession made by that comment.)

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Posted by Jim Ulvog

Some details in the appeals filed by 3 charities

April 30, 2018, 12:44 pm

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As mentioned previously, appeals have been filed by the three charities receiving cease & desist orders from the California A.G.

This discussion will highlight some comments in the appeals. Will have a few observation from an auditor perspective along the way. Might want to get a fresh cup of coffee before you dig in. This will be a long post.

Previous posts:

 

Catholic Medical Mission Board appeal

At seven pages, this appeal is a bit shorter than the others. The page count includes the proof of service and a cover sheet which is the page the AG provided to request an appeal.

In the appeal, CMMB denies all the factual allegations and conclusions of law (para 4). Specific assertions are listed for emphasis:

  • The AG is not properly interpreting GAAP.
  • Geographic restrictions on medicine do not make the US a prohibited market for valuation purposes.
  • Representations to California citizens are neither unfair nor deceptive.

In the appeal, CMMB requests:

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Posted by Jim Ulvog

California A.G. files cease & desist order against 3 large charities alleging donated medicine was overvalued

March 20, 2018, 5:00 am

As mentioned previously, the conflict over donated pharmaceuticals has heated up again. It seemed to have faded away over the last couple of years but has now gained renewed visibility.

The California Attorney General has filed cease and desist orders against three large, high-profile charities who received between 70% and 98% of their revenue from medical GIK.

A complaint was filed against another charity for overvaluation of GIK. That charity essentially conceded the accusations in a stipulated settlement, agreeing to terminate the charity’s existence. That action is discussed here.

The three large charities are Food for the Poor, Inc., MAP International, and Catholic Medical Mission Board, Inc.

The cease and desist orders can be found at the AG’s web site:

This is a long post, approaching 2,200 words. Might be worthwhile to get a fresh cup of coffee before diving in.

 

Background

This post will walk through a number of key comments in the cease and desist orders, which I’ll referred to as C&DO. Because the C&DO are roughly parallel to each other, I’ll walk through the MAP order and add comments on the CMMB and FftP order where it is helpful. The CMMB C&DO does not have the comments regarding state charitable filing requirements.

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Posted by Jim Ulvog

Free update on new and recent accounting rules from CCH

January 29, 2018, 7:30 am

For a summary of the accounting rules released in 2017 and the most significant new rules from 2016, 2015, and 2014, check out A Closer Look: Discussion and Analysis of Current Accounting and Audit Issues.

CCH made this update available for free to people on their mailing list. I received permission from my editor at CCH to make it available on my blog.

Click here to download the 54 page newsletter. CCH does not  have a separate landing page for the document, so that link automatically downloads the newsletter. UPDATE:  If link didn’t work for you, please try again. I reloaded the link and it is working now.

 

For each of the accounting rules covered, the newsletter provides:

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Posted by Jim Ulvog

Various thoughts from continuing education classes this year, part 3. Not so good news on audit and peer review quality.

October 5, 2017, 9:35 am

The road we CPAs need to be on, but not all of us are…
Image courtesy of Adobe Stock.

As I’ve mentioned here and here, I have reread my notes from several continuing education classes this year. Thought I would share a variety of stray ideas.

Probably need to note again that I have not gone back and read the original pronouncements supporting each idea and therefore I do not have a specific citation for you. (Reading three of the documents is the next step for  my writing project.)

I should probably throw in a disclaimer. All of the comments I’m mentioning were the opinion of the presenter, not the agency from whom the person was drawing a paycheck. That is why I’m not mentioning the names of the presenters, or even the CPE event. In addition, the rephrasing of their comments is my interpretation, not their words.

Here are some tidbits you might enjoy:

More interest in Financial Reporting Framework for Small- and Medium-sized Entities (FRF-SME)?

The FRF-SME framework is a non-GAAP alternative to GAAP. It is dramatically less complicated with the promise it will not be revised more often every three years.

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Posted by Jim Ulvog

Helpful comments from 2017 CalCPA Not-for-profit conference, part 1

May 30, 2017, 7:45 am

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Here are a few of the comments from the May 24, 2017 Not-for-profit conference presented by California Society of CPAs that I thought would be of interest to others in the nonprofit community. Since all comments are the opinion of the speaker, neither their names nor organizations will be mentioned. The ideas mentioned can stand or fall on their own.

This is the first of two posts. The next discussion will address changes in financial statement presentation outlined in ASU 2016-14. In this post: tax, revenue recognition, and single audit.

Tax update:

  • It might just be possible that filing a form 1023 or 1023-EZ is so easy that people can get exempt status for an organization without knowing the requirements to properly operate a charity and maintain exempt status. In examinations to follow-up after exempt status is approved, the IRS is finding a lot of charities are out of compliance.
  • One of several focuses of the IRS is filing of FBARs, those forms used to report overseas bank accounts. One ripple effect of chasing money laundering is the impact on charities who have overseas accounts. Even though there is minimal risk of those accounts being used for tax evasion the FBAR filing requirement still apply. As a reminder, the deadline for filing FBARs is now April 15 with a six-month extension available.

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Posted by Jim Ulvog

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