By a 6-1 vote, on 11/11/15 FASB authorized their staff to prepare the final draft of the lease standard. When the final draft is ready, it will be routed to the board members for a final, written vote.
Final standard is expected in early 2016.
Small charities usually cannot afford enough staff to put in place great internal controls. If you want a few ideas on how to make modest improvements at low cost, Charles Hall suggests How to Lessen Segregation of Duties Problems in Two Easy Steps.
Second set of eyes on bank statements
On October 28, 2015, FASB voted to split in two the exposure draft to overhaul presentation of not-for-profit financial statements. You can see their summary of the decision here, although that appears to be a dynamic link and the discussion will likely move soon. Extract of minutes on this issue on can be found here. That appears to be a link that will be in place a long time.
Reason for breaking this in two is that some components of the exposure draft received serious pushback. Those items will be considered in more detail and addressed at a later, yet-to-be-determined date.
The less contentious items will move forward “in the near term.” One article I read, but for which I don’t know how to provide a link, said FASB hopes to have what they call workstream one finished in mid-2016.
The AICPA has summarized the FASB’s Preliminary Analysis of the Comment Letters on the Not-for-Profit Financial Statement Exposure Draft .
I realize I’m going at this backward, what with commenting on the feedback before I’ve described the content of the exposure draft, but here goes….
Here are a few changes in labor law likely in the near future and a couple more issues on the distant horizon.
Nearest are proposals to make more people subject to overtime pay and classify more people as employees instead of independent contractor.
You can find more info from Accounting Today: Labor Department Driving Changes Accountants Need to Know About.
Overtime
If you, or your ministry or business, own an overseas financial account, you are required to file an FBAR annually. This is also called a Report of Foreign Bank and Financial Accounts, or Form 114. This would also include accounts for which you have signature authority.
A 21 page e-book, Protecting our Ministry with Integrity, is available from Church Law & Tax, which is the writing platform for Richard Hammar. If you are new to leadership in the church world, he is one of the leading writers on legal issues in the community.
At the price of signing up for future sales pitches (when you consider the quality of the resources available, that is a really low cost), you can read about: (more…)
There are four paragraphs in the FTC complaint against four cancer charities that summarizes the issues raised by the FTC. These paragraphs cover the main issues about valuation of GIK that have been under discussion in the NPO world for several years now.
These issues do not just apply to the four named charities.
The issues are not limited to the secular cancer charities.
These issues actually apply to a large number of high visibility religious charities. The issues may have drop out of news coverage, but they have not gone away. I hope those who have ears that are able to hear, will hear.
Who might want to take a second look at the FTC’s summary?
This is the twelfth in a series of posts diving into the detail mentioned in the complaint by FTC and all Attorneys General against four named cancer charities.
This is the fourth post on a series of paragraphs in the complaint addressing valuation of donated medicine.
The complaint can be found here. My posts in this series are visible using the FTC tag.
By reporting these GIK transactions as contributed revenue and program expenses, at inflated values, Corporate Defendants represented themselves to be both larger and more efficient than they actually were. They obscured the high percentage of donated funds spent on, among other things, for-profit fundraisers, executive salaries, and employee perks, and concealed the very small amounts spent on the charitable purposes described to donors. As a result, the Forms 990 and other documents filed by Corporate Defendants with the IRS and state regulators, and made publicly available to consumers, were false and misleading.
This is the eleventh in a series of posts diving into the detail mentioned in the complaint by FTC and all Attorneys General against four named cancer charities.
This is the third post on comments in the complaint addressing valuation at an overall level.
The complaint can be found here. My posts in this series are visible using the FTC tag.
On the impact of the allegedly misstated information: (more…)
This is the tenth in a looooong series of posts diving deep into the detail mentioned in the complaint by FTC and all Attorneys General against four named cancer charities.
The complaint can be found here. My posts in this series are visible using the FTC tag.
This is the second post discussing allegations in the complaint asserting that the financial statements of the charities were misstated. Four paragraphs summarize the problems the FTC has with the accounting for donated medicines.
Corporate Defendants obtained the paperwork they used to claim these figures for just the cost of the payment to INTERMEDIATE (which included both INTERMEDIATE’s fees and shipping costs). For example, in connection with a 2011 shipment to Guatemala, CFA reported contributed revenue and corresponding program expense of over $8 million, but only paid INTERMEDIATE a fee of $50,550. For one 2010 shipment to Ghana for which CCFOA reported contributed revenue and program expense of over $3.8 million, CCFOA paid INTERMEDIATE just $39,960. In addition, for a 2011 shipment to Honduras for which BCS reported contributed revenue and program expense of at least $3.8 million, BCS paid INTERMEDIATE just $28,120. Although Corporate Defendants used such transactions to add hundreds of millions of dollars in program expenses to their financial reports, these “programs” existed entirely on paper. Corporate Defendants did not possess the goods and played no role in their overseas distribution. They hired no additional staff to manage these multimillion-dollar international GIK programs and in most instances spent virtually no staff time on them. In addition, the very high dollar values associated with these transactions largely resulted from overvalued pharmaceuticals.
FASB has released three in a series of FAQs about the exposure draft that will drastically change accounting for all nonprofit organizations.
This discussion is cross-posted from my other blog, Attestation Update, since the overview of the massive changes will be helpful to accountants in the nonprofit community.
Watch for more FAQs in the future.
This is the ninth in a series of posts diving deep into the detail mentioned in the complaint by FTC and all Attorneys General against four named cancer charities.
The complaint can be found here. My posts in this series are visible using the FTC tag.
This is the first post in a series discussing allegations in the complaint asserting that the financial statements of the charities were misstated. Paragraphs 127 through 130 provide a condensed summary of the massive concerns the FTC has over the accounting for GIK shipments. There are severe accusations embedded in these four paragraphs.
To give you a hint where the FTC is going with this section, my paraphrase of the last sentence of paragraph 130 is the FTC alleges that the charities’ audited financial statements and 990s as provided to the IRS, state regulators, and the general public were “false and misleading.”
Deceptive Impact of Reporting GIK Transactions
The increased contributed revenue and program spending Corporate Defendants reported – collectively over $223 million – had the effect of diminishing the reported percentage of revenue they spent on fundraising and administrative costs and increasing the proportion of reported expenses they spent on program services, making Corporate Defendants appear more efficient to donors than they actually were. Thus, the reported international GIK revenue for the five years from 2008 through 2012 resulted in CFA’s reported fundraising expenses being 25.4% of total contributions. In reality, 67.4% of consumers’ donations (including revenue from CSS), or 82.9% without counting CSS’s “contributions” to CFA, were spent on fundraising. For the same period, CCFOA used its international GIK revenue to report fundraising expenses of 47% of total contributions. In reality, 81.5% of consumers’ donations were spent on fundraising. Similarly, BCS reported fundraising expenses of 29% of total contributions, while in reality 84.6% of consumers’ donations were spent on fundraising. Corporate Defendants also used the inflated contributed revenue amounts when choosing purported “comparable organizations” for setting their executives’ pay, thus improperly increasing the Individual Defendants’ salaries.
You might wonder what’s the big deal if a charity records a GIK shipment when it should not, as alleged by the complaint. Revenue is increased by the valuation of the shipment and expenses are increased by the same amount. Impact on the bottom line, or change in net assets, is zero.
Why does it matter?
This is the sixth in a series of posts diving deep into the detail mentioned in the complaint by FTC and all Attorneys General against four named cancer charities.
The complaint is visible be found here. I will quote and comment upon the complaint. My posts in this series are visible using the FTC tag.
This is the second of two posts on specific comments in the complaint addressing variance authority.
Continuing with the complaint… (more…)
This is the fifth in a series of posts diving deep into the detail mentioned in the complaint by FTC and all Attorneys General against four named cancer charities.
This is the first of two posts on specific comments in the complaint addressing variance authority.
I will quote and comment upon the complaint which can be found here. My posts in this series are visible using the FTC tag.
Defendants Improperly Reported Receipt and Distribution of GIK They Did Not Own (more…)