Update on the charity that settled in January 2019 with the California Attorney General

June 4, 2019, 5:00 am

Image courtesy of Adobe Stock.

Went browsing around the web last night and found the settlement agreement for the AG’s case against the Giving Children Hope charity. Yesterday’s post discussed that case at length.

The National Association of State Charity Officials has a reprint of the California AG’s press release.

Included in the article is a link to the signed Assurance of Voluntary Compliance., which was approved by a judge on January 22, 2019.

Following are a few of the highlights from the signed agreement. In particular, the agreement fills in some of the details I was wondering about.

Remember my previous comment that I could see no reason one particular board member was included in the case?  He was chair of the board from 2014 through 2016, according to paragraph 2. On the settlement agreement, he signed as chairman on behalf of the charity which agreed to dissolve itself.

The CPA cited in the case provided accounting services to GCH from January 2014 through June 2017 (para 2).

In paragraph 10a the AG asserts GCH had at least 25 transactions in which it had one of two controlled subsidiaries purchase medicine from a named wholesaler in the Netherlands for a “very minimal price” and then had the controlled charities donate the meds back to GCH.

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Standard mileage rates for 2019

December 17, 2018, 7:45 am

Image courtesy of Adobe Stock.

The IRS has published the 2019 standard mileage rates. New rate for transportation and reimbursements is 58 cents, which is up from 54.5 cents in 2018. That is an increase of 3.5 cents.

New rates from the IRS, along with some comments on the impact of TCJA legislation are found in Notice 2019-02: Read the rest of this entry »


Some additional news reports on the California AG’s enforcement actions

May 14, 2018, 5:00 am

Image courtesy of Adobe Stock.

There are a few recent articles discussing enforcement action by the California Attorney General regarding the accounting for donated medicine used by three national charities. Looks like the issue is beginning to get a bit wider attention than this teeny tiny little ol’ blog.

Inflated Expectations / What’s going on with foreign affairs nonprofit Food for the Poor? from Slate on May 10, 2018, provides a non-technical description of the issues raised by the California AG.

Good explanation of medicine valuation, near-term expiry, joint cost allocation, principal market, access, and materiality issues without ever using those words. Even hints at daisy chain and SFAS 136 agency transactions.

Let me suggest a couple of exercises for accountants in the audience.

First, read through the article another time identifying all the accounting issues touched upon. Think about that as an illustration of how to describe technical accounting issues without being technical. (Yeah, I know, what a crazy idea – explaining stuff so people will understand.)

Second exercise is to read through the article thinking about how non-accountants would respond to each of those ideas if it was the first time they had heard about it.

How many of those GAAP accounting treatments would actually make sense?

How many would seem flat-out silly to people who haven’t spent years working with accounting rules?

Description of one shipment

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Regulators have serious problems with how the nonprofit community is accounting for donated medicine.

May 8, 2018, 1:25 pm

Image courtesy of Adobe Stock

There is a serious problem in the nonprofit community in terms of accounting for donated medicine. Three major enforcement actions by various regulators tell us that the regulators have serious reservations about how charities are dealing with gifts-in-kind.

Those of us working in the charity world need to ponder what could be making so many regulators so concerned.

50 Attorneys General

The rumors in the wind mentioned in my next post were discussed in 2012.  That turned into a major enforcement action by the Federal Trade Commission and all 50 state Attorneys General against 4 cancer charities. (See my posts under the tag FTC.) That was in 2015.

I’m not aware of any followup by that group and I’ll guess the reason is the complexity of coordinating a 50+ member committee.

For the FTC and all 50 Attorneys General to all be on the same page on an issue should serve as a warning they believe there is a serious problem.

IRS

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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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Reduced staffing and funding for the Exempt Organization division of the IRS

December 20, 2017, 8:22 am

Staffing and funding for the IRS division that oversees tax exempt organizations has fallen dramatically in the last six years or so.

According to a behind-the-paywall article at the Washington Post, the budget for the Exempt Organization division has dropped from $102M to $82M between 2011 and FY 2017. That is a $20M decline, or 19.6%.

For the same years, staffing has declined from 889 to 642, according to the article. That is a decline of 247 positions, or 27.8%.

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Standard mileage rates for 2018

December 18, 2017, 9:47 am

Mileage” by Anthony Albright is licensed under CC BY-SA 2.0

The IRS has posted the standard mileage rates for 2018. New rate for transportation and reimbursements is 54.5 cents. That is up a penny from 53.5 cents in 2017.

According to IRS comments in Notice 2018-03:

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