Non-profit accounting – Page 10

First day coverage of WWP firing its CEO and COO

Major news yesterday was the CEO and COO of Wounded Warrior Project getting fired by the board of directors. Here are a few articles on the story. Also, my rant on the long-running pattern of media articles that focus on trivialities.

3/10 – CBS News – Wounded Warrior Project execs fired – CBS is reporting that on 3/10 WWP fired Steven Nardizzi, CEO, and Al Diordano, COO. CBS reports preliminary results from a financial audit have been received and reviewed by the board.

3/10 – Chronicle of Philanthropy – Wounded Warrior Project Fires Top Officials After Query Into Spending Practices – Article points to CBS coverage above. The board initiated a financial and policy audit.

In the hour since CBS broke the story, I saw several dozen articles hit the ‘net that report the story with merely a rewrite of the CBS coverage.

3/10 – Wounded Warrior Project – Board of Directors of Wounded Warrior Project Addresses Independent Review – Very tactful press release says the CEO and COO are no longer with the organization.

The independent review refuted the headline accusations against the organization and tactfully found room for improvement.

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March 11, 2016, 8:30 amMarch 18, 2016, 10:57 amJim Ulvog

Lease accounting rules overhauled

The rules describing how to account for all leases were drastically revised on February 25, 2016. That is when the accounting rule setters, FASB, issued their document called Accounting Standards Update 2016-02 – Leases (Topic 842).

You will be hearing a lot more about these changes over the next few years.

Highlights

In extremely brief summary, the new rules require all entities preparing financial statements (including nonprofit organizations) to record all leases as an asset and liability. The assets will be called right to use assets and will be amortized over the life of the lease. An offsetting liability will be recorded. Whether the asset will be reported at the sum of total future payments or at the discounted present value of future payments would depend on the nature of the lease.

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February 26, 2016, 11:36 amFebruary 26, 2016, 11:41 amJim Ulvog

Three areas where accountants could help with analyzing charities

Professor Brian Mittendorf has outlined his ideas on how the accounting community could pitch in on industry-wide efforts to assess the effectiveness of charities.

1/25 – Counting on Charity – Three Pressing Issues in the Nonprofit Sector that Need Accounting Input – He introduced three areas of nonprofit accounting where accountants could help:

Accounting for impact investments
Follow the money trail through multiple organizations
The development of alternative metrics of performance

Expanded discussions:

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February 16, 2016, 7:34 amFebruary 16, 2016, 1:13 pmJim Ulvog

CNN reports two charities accused by FTC agree to close their doors.

Federal Trade Commission Building in Washington, DC. - Picture courtesy of DollarPhotoClub.com — Federal Trade Commission Building in Washington, DC. – Picture courtesy of DollarPhotoClub.com

CNN investigators David Fitzpatrick and Drew Griffin report: Cancer charity targeted by feds agrees to put itself out of business. Article says preliminary documents filed in Federal District Court in Phoenix indicate Cancer Fund of America and the related fundraising arm, Cancer Support Services, agreed to turn control over to receivers for liquidation.

In May 2015, the FTC and 50 state attorneys general sued these two charities and two others run by relatives of the president of CFA, alleging fundraising fraud. Two immediately agreed to liquidate. The two discussed in the CNN report initially fought allegations but have now agreed to close their doors.

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February 15, 2016, 3:43 pmJim Ulvog

Update on overhaul of not-for-profit financial statement presentation

A major rewrite of how NPOs present their financial statements is under consideration by FASB. An exposure draft was released in April 2015.

December FASB meeting

FASB has broken the project into two parts. One will move forward on a timely basis and the other will be postponed for reconsideration.

Here is a high-level summary of key components discussed at their December 11, 2015 meeting,

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February 12, 2016, 7:05 amFebruary 12, 2016, 7:03 amJim Ulvog

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

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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February 2, 2016, 10:25 amMarch 20, 2016, 7:43 amJim Ulvog

Increased discussion of Wounded Warrior Project financial statements

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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January 29, 2016, 10:27 amMarch 20, 2016, 7:38 amJim Ulvog

Overhead ratios getting more attention. Wounded Warrior Project is again focus of discussion.

Working on overhead. Yeah, that's a poor joke. Photo courtesy of DollarPhotoClub.com — Working on overhead. Photo courtesy of DollarPhotoClub.com. Yeah, I know that is a poor joke.

A running debate in the donor and nonprofit community is whether the ‘overhead ratio’ is a good tool to measure the effectiveness of a charity. There seems to be more discussion of the issue lately. Wounded Warrior Project is the focal point for recent discussion. A few articles of interest along with some background:

1/27 – New York Times – Wounded Warrior Project Spends Lavishly on Itself, Insiders Say – Tell me your thoughts on the ongoing conversations in the nonprofit community about overhead ratios and I will tell you whether you will think this article is a balanced critique or a hit piece.

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January 28, 2016, 7:54 amMarch 20, 2016, 7:37 amJim Ulvog

“4 Tips to Prevent Fraud at Faith-Based Organizations”…

… is the title of a great article by James B. Jordan to help churches and other faith-based charities protect their contributions from theft and protect volunteers from temptation.

Setting up internal controls is difficult in small organizations, even more so for local churches. The place churches routinely have the most difficulty is keeping control over contributions between the time gifts go into the collection plate until a deposit is ready for the bank.

Mr. Jordan’s tips:

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January 27, 2016, 7:29 amJim Ulvog

What to do if your charity gets a subpoena or is drawn into an official investigation

If you receive a subpoena from some regulator or police agency asking for documents, it is imperative you process documents properly. Goofing up could cause serious problems, even if you aren’t the actual target of the investigation. If you are the target and you mess up, things could get really bad, really fast.

The law firm of Gammon & Grange provides some ideas on how to work through the serious issues without getting your organization in trouble: When the Knock at Your Nonprofit Door is Not Some Pizza, but Subpoena.

There are many places in the audit rules where the guidance says something like consider consulting with legal counsel before taking the next step.

If you ever receive a subpoena, that would be an incredibly wonderful time to consult with legal counsel. Get your attorney on the phone. Immediately.

January 22, 2016, 5:47 amJanuary 22, 2016, 5:48 amJim Ulvog

3 resources that explain the wrong way we look at evaluating charities

This is where we go in order to evaluation a charity's effectiveness. We need something better. — This is where we go in order to evaluation a charity’s effectiveness. Merely do one calculation using the totals at bottom of the functional expense page and you are done. We need something better.

If you want some background describing the wrong perspective used by charities, donors, and self-appointed rating agencies in evaluating nonprofit effectiveness, Marc Gunther at Nonprofit Chronicles points you to three resources you could check out. I discussed this post yesterday. Consider: (more…)

January 12, 2016, 7:24 amJim Ulvog

Articles on overhead ratios and why not to accept every GIK you are offered

Here are a few background articles on the overhead issue and why it is a good idea to have a gift acceptance policy.

12/13/15 at Nonprofit Chronicles – If not overhead, then what? Maybe this. – Perhaps it is understandable that donors focus on the percentages on the functional allocation of expenses in assessing charities. What else is available? Nothing.

Article points to a new charity called ImpactMatters which is developing a methodology to audit the impact of charities with an intentional parallel to a financial audit of financial statements.

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January 11, 2016, 8:00 amJim Ulvog

California Attorney General sues charity and their auditor over RRF-1 filing and 990

909 page 1

Sometimes there is a perception in the charity community that those pesky filings with the charity regulators are no big deal. Sometimes board members don’t pay much attention to the 990.

Well, last week the California AG sued one charity in the state for allegedly misleading information in the RRF-1. That is a simple one-page form that has only two numbers: total revenue and total assets. The AG claims the 990s have misleading information in them.

How can the AG of a state sue over a tax return filed with the federal government? Here is the path they take. They allege the one page RFF-1 was misleading because attached to the RRF-1 is the federal 990, which is where they find the information that they consider to be misleading. That gives the state grounds to sue.

The sobering lesson for CPAs who serve the charity community is the AG also sued the CPA firm. In addition, they sued the audit partner personally.

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December 8, 2015, 9:13 amJim Ulvog

“How to get ready for a financial audit”

The website XPastor discussed How to Get Ready for a Financial Audit. Figuring out how to get going on an audit for the first time is a challenge. Main points from a CPA who is now an executive pastor:

Hire an audit firm

This is a board responsibility. Staff helps but it needs to be driven by the board with the real decision made there.

Meet with the auditors before the audit

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November 16, 2015, 6:54 amJim Ulvog