Non-profit accounting

Impact of changing rules for determining fair value (SFAS 157) on GIK of NPOs

Wow. When I started blogging about GIK valuations, I knew there was a major issue, but didn’t quite grasp how big it really is.

The beginning point of my discussion was a Forbes article, by William P. Barrett: Donated Pills Make Some Charities Look Too Good on Paper. In this post I will look at the impact of a change in accounting rules on the valuation of GIKs.

Additional background

Several articles by Caroline Preston in The Chronicle of Philanthropy outline the issues.  One deworming medicine, Mebendazole, seems to be the biggest issue. In her article Aid Charities’ Accounting Practices Draw Criticism, she quantifies the significance of that one med: (more…)

Jim Ulvog

What impact does a change in GIK valuation have on financial statements? (Part 4 of a series)

Before looking at some actual financial statements that have been affected by the changes in valuation of GIK, I thought it would help to look at a simple picture.

This is a continuing series of posts looking at deworming meds, especially Mebendazole, which started here.

A major component of this discussion is new accounting rules that change the definition of how to value GIKs. Those changes are discussed here.

I am quickly learning that this whole GIK valuation thing is a bigger issue than I realized and already has some interest.  I hope I will be able to contribute to the discussion from the accounting side.

To illustrate the change in valuation rules, I have made up two sample financial statements. The numbers are small and simple so we can see the overall picture.  I set the internal relationships so they are representative of an actual NPO.

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Jim Ulvog

How I make corrections and updates to posts

This would be a good time to explain how I make changes on posts. The etiquette in the blogging world seems to be that changes and corrections should be clearly identified.  That’s a great idea.

Here’s my protocol:

The original comments will be left in the post.

Corrections and deletions will be marked through with strikeout.

Update comments will be identified Update: with the word update and italicized comment.

Small updates will be italicized right after a strikeout. For illustration example.

Minor typos will be corrected without a special notation, unless it has significance to the article.

With two different series of posts I’m working on now, I’m making a number of corrections, so thought it worthwhile to mention this.

Jim Ulvog

Gamesmanship in GIK valuations? Part 3

Two previous posts discussed the issues raised by an article in Forbes about the valuation used by some nonprofits in their financial statements for recording donations of deworming medicine.

I’d planned to look at the impact on some specific financial statements next, but think it would be better to look at what the accounting rules have to say before doing some number crunching.  This will be a really long post, so please bear with me.

The Forbes article by William P. Barrett is Donated Pills Make Some Charities Look Too Good on Paper.

(more…)

Jim Ulvog

Gamesmanship in GIK valuations? Part 2

Previous post discussed an accounting issue raised by Forbes about valuing deworming medicine.  Forbes magazine thinks some nonprofits are using a valuation that is too high for recording donated meds in their financial statements.

The Forbes article, by William P. Barrett, is Donated Pills Make Some Charities Look Too Good on Paper.

My first post describes some of the valuations that are in use. 

This post discusses where the valuation amounts came from.  (more…)

Jim Ulvog

Gamesmanship in GIK valuations? Part 1

Forbes magazine dives into the nonprofit community’s GIK valuation issue in an article by William P. Barrett, Donated Pills Make Some Charities Look Too Good On Paper. (In print the article had a cooler title – Magic Pill, Magical Accounting)

GIK valuation is difficult and messy.  Before anyone gets mad at me for airing dirty laundry from the NPO community, keep in mind that Forbes has a circulation that is somewhere in the range of, say, one gazillion times larger than this little blog.  The article appears in Forbes magazine guys, and on their website.  Don’t get mad at me.

My point in writing these posts?  The issues we are struggling with in the religious NPO world are getting attention from secular media.  It would be wise for NPOs and auditors to deal with this on our own. Quickly.

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Jim Ulvog

15 tips for QuickBooks

A Quick Guide to QuickBooks from the December Journal of Accountancy provides 15 great tips for more efficient and effective use of QuickBooks.  Check it out for ideas you haven’t seen before.

A few highlights of interest to small NPOs:

Memorized transactions – you can memorize recurring transactions, such as the rent or copier payment and have them posted automatically on a chosen day.

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Jim Ulvog

Philanthropy articles in the Wall Street Journal

Five great articles in the Wall Street Journal on November 28. If you have yesterdays paper sitting around, grab The Journal Report section and save it.

I will discuss these articles in more detail later, along with my thoughts on the operate-as-a-business question.  In the meantime here are some links.  Check them out – they are not behind a paywall! (more…)

Jim Ulvog

“Once Upon Internal Control” is available on Kindle platform

My tale on internal control done well and poor at two churches is now available in Kindle format at Amazon.

Price is $0.99.

You can read the book on your Kindle device, on any smart phone with a Kindle app, or on your computer using the Kindle-for-PC application.

At Amazon, search for my name, Ulvog, or the book title, Once Upon Internal Control.

Or click here to go directly to the book.

Jim Ulvog

2 great QuickBooks tips

Sharlynn Garza has two great tips for QuickBooks users in her post Quickbooks Tips at the Nonprofit/Government GPS blog..

One of the things that can create a mess in QuickBooks is to make a change in prior year data that has already been closed out or even audited.

One of the underappreciated dangers of changing prior year data is a loss of credibility for the finance staff.  When a new report has prior numbers that don’t equal what was on previously distributed reports, the finance team looks bad.  The board can lose confidence in your abilities if the previous numbers change and the report users think prior data is fluid.

Ms. Garza points out two things you can do to avoid changing previous amounts.

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Jim Ulvog

Numbers a lender looks at when considering a church loan – final observations

This wraps up a series of posts on ratios a lender looks at when considering whether to make a loan to a church.  The series started here.  Just a few thoughts.

The recession has hurt giving levels at most churches.  The financial health of the balance sheet has suffered as well.

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Jim Ulvog