Initial reaction to alleged diversion of World Vision funds

August 8, 2016, 7:00 am
Image courtesy of Adobe Stock.

How can you tell who is really behind the mask, and what is he doing inside your organization? Image courtesy of Adobe Stock.

Last week, the Israeli intelligence service accused a World Vision manager of diverting resources to Hamas. The allegation is he diverted about 60% of the annual funds flowing through the Gaza office, with the amount diverted allegedly around $7M a year.

Some initial reactions are surfacing from donors. Also, some context for magnitude of the alleged amount. Finally, some questions to ponder for leaders of charities and those of us who audit NPOs.

8/4 – World Vision – Statement on World Vision Staff Arrest – Full statement from World Vision. Doesn’t say a lot because they don’t yet know a lot. I’m sure there will be more comments as the situation develops.

8/5 – Reuters at Business Insider – Australia suspends World Vision funding over allegations its Gaza representative funneled millions to Hamas – The Australian government has provided about $4.4 million over the last three years to World Vision for use in helping people living in Gaza and West Bank. The aid has been suspended over the allegations.

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How do you keep one person from diverting funds and causing a front-page fiasco for your charity? World Vision illustration.

August 5, 2016, 5:35 pm
Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

How do you keep one person from creating a public relations fiasco or, even worse, damaging the reputation of your entire organization? How do you keep a manager from illegally diverting a huge amount of resources?

What controls and procedures do you have in place to prevent something like this in your organization?

Let’s start with a FBI agent who pled guilty to charges of passing sensitive and classified information to a Chinese government official and businesses in China.

8/1 – ABC News – FBI Employee Arrested for Allegedly Acting as Secret Chinese Agent – According to the story, we can drop the word ‘allegedly.’ This week he entered a guilty plea to one felony charge. The government claims he was gathering sensitive and classified material based on instructions from his handler.

He was born in China and was naturalized in 1985 at age 16.

So, the FBI with all its investigative powers and intentional counter-intelligence operations was not able to prevent this man from being an agent of the Chinese government.

So what chance does a nonprofit charity have of filtering out people who want to do bad stuff? That is something to consider as we grieve the following story.

This week the story broke that a manager of the Gaza office of World Vision allegedly diverted a lot of money to Hamas for use in terrorist activities. At this point the story consists of allegations, but allegations from the Israeli security service after a few weeks of interrogation are extremely serious.

8/4 – Hareetz – Top Official in Christian Aid Group Charged With Funneling Funds to Hamas – The security service, Shin Bet, arrested the director of the Gaza branch office on June 16. He was indicted Thursday.

Shin Bet accuses the manager of joining an armed wing of Hamas in 2004 and being sent to infiltrate a western aid organization a year later.

In 2005 he was hired by World Vision and in 2010 was promoted to director of the Gaza branch.

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The overwhelming change you feel today is going to increase. Engage the change.

July 8, 2016, 10:03 am
Image courtesy of DollarPhotoClub.com before they closed their doors.

Image courtesy of DollarPhotoClub.com before they closed their doors.

The massive volumes of change you see surrounding you everywhere you look isn’t going to stop. In fact the pace of change is going to increase.

Each of us have a choice. Either figure out how to cope with and embrace the change or ignore it.

The cost of ignoring massive change is that you and your organization will get left behind. That doesn’t just mean you will be a laggard as you continue doing next month what you did last year. Instead that means your organization will radically shrink and before you know it, will disappear.

The downsides are serious. There is an upside and it is exciting.

Four articles I’ve seen lately focus the mind. While these articles are written in either the accounting or church context, they also fully apply in the church and accounting context. They also apply to every individual and organization.

This article will be posted across all my blogs because it applies to all of them.

7/7 – Bill Sheridan at LinkedIn – Embrace change or resist it: Only one option is viable.

The odds are really high that tax preparation will be completely automated in the next two decades. Estimated odds are almost as high that both accounting and auditing will be fully automated.

Consider my business and my core tasks of auditing charities. There is a real possibility those types of audits could be heavily automated in 10 or 15 or 20 years. I am not old enough to bank on retiring before that massive change starts eating away the entire audit profession.

Automation will take over an increasing number of tasks. The world of tax, accounting, and audit will be affected. Mr. Sheridan explains the shelf life of education and experience we have is shrinking.

As the Maryland Association of CPAs routinely points out our learning needs to be greater than the rate of change; L>C is their formula.

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Want some free CPE course material? Not for credit, but for learning? Included is some material I wrote.

February 11, 2016, 7:50 am
Cover of course courtesy of CCH.

Cover of course courtesy of Wolters Kluwer/CCH.

CCH (Wolters Kluwer) makes the material for some of its courses available for no charge.

If you want CPE credit there is a fee for grading the exam and awarding credit. However, if your goal is learning the materials are available gratis.

As I write this post, the following materials available:

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Ulvog CPA passes Peer Review inspection

February 4, 2016, 3:48 pm
Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

I am pleased to report my firm passed peer review in 2015.

Peer review is a process CPAs go through to inspect their audit and review work. Experienced CPAs from another firm look at your quality control procedures and read through the workpapers for a selection of audit, review, and compilation engagements.

In the current system there are three grades from a peer review inspection:

  • Pass
  • Pass with deficiency
  • Fail

I am pleased to report I received a pass report, the highest level currently available. I have gone through peer reviews in 2015, 2012, 2009, 2006, and 2003. Each time I received the highest grade possible.

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Today’s “overhead ratio” sparring match: Nonprofit Quarterly versus Nonprofit Quarterly.

February 2, 2016, 10:25 am
Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

For today’s lineup we have Claire Knowlton arguing charities should be funded for the full cost of their operations (including building cash reserves, additional reserves for new opportunities, and repaying debt) in order to remain healthy versus Ruth McCambridge and Alexis Buchanan body slamming Wounded Warrior Project because one line item on the 990 is more than what a couple of media reporters decided it should have been.

Let’s check out the NPQ versus NPQ match:

In this corner…

1/25 – Claire Knowlton at Nonprofit Quarterly – Why Funding Overhead Is Not the Real Issue: The Case to Cover Full Costs – In order to be able to continue delivering services to clients, charities need to be healthy enough that they can pay all their bills and have the ability to respond to opportunities.

Author suggests grants to charities should cover all of their costs, not just the immediate program under discussion in a proposal. Author introduces a new term, full cost, which is:

Day-to-day operating expenses + working capital + reserves + fixed asset additions + debt principal repayment = full costs

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Increased discussion of Wounded Warrior Project financial statements

January 29, 2016, 10:27 am

 

Let's do a few calculations. Image courtesy of DollarPhotoClub.com

Let’s do a few calculations before finishing this post. Image courtesy of DollarPhotoClub.com

Looks like the coverage of the Wounded Warrior Project financial statements has blossomed in the last few days. I will discuss that coverage and then discuss WWP’s public comments. Will throw in a reasonableness test of the conference expenses for no extra charge.

Rewriting the initial coverage

One of the things I have learned through blogging is that when a big story breaks there will be a few major articles covering the issue immediately. Over the next several hours many media outlets will repeat the initial coverage verbatim. I think this is done by buying republish rights from the major wire services or major newspapers.

The more fascinating thing I have learned is that over the next several hours there will be dozens of papers and wire outlets who rewrite the initial coverage. It will be done under the byline of their writer and with their copyright.

Having observed this multiple times and having read dozens of articles of follow-up, I have learned the rewrite jobs rarely bring in new information. They merely rephrase and reorganize the initial coverage, with a reference or two back to the initial article. If that was the only thing you read, you would have the impression the paper did their own original research.

I did a search on the net for coverage of WWP and noticed several dozen articles out on the same day which were nothing more than a rewrite of the initial Washington Post and CBS stories. Maybe it has always been that way and I’m only now catching on. I do find it amusing.

New coverage

Here is some coverage that goes beyond a mere rewrite:

1/28 – The Hill – Wounded Warrior charity pushes back against allegations of waste – Two of the major accusations by The Washington Post and CBS against WWP are spending $26M on conferences in total and spending $3M on a training conference in Denver. The overriding issue is essentially the same conversation about the functional expense allocation that has been in play for years.

WWP provided additional information.

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