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.
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
Regulators have serious problems with how the nonprofit community is accounting for donated medicine.May 8, 2018, 1:25 pm
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.
California A.G. files cease & desist order against 3 large charities alleging donated medicine was overvaluedMarch 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:
- Cease and Desist Order – Food for the Poor, pdf
- Cease and Desist Order – MAP International, pdf
- Cease and Desist Order – Catholic Medical Mission Board, pdf
This is a long post, approaching 2,200 words. Might be worthwhile to get a fresh cup of coffee before diving in.
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.
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%.
Here are a few of the comments from the May 24, 2017 Not-for-profit conference presented by California Society of CPAs that I thought would be of interest to others in the nonprofit community. Since all comments are the opinion of the speaker, neither their names nor organizations will be mentioned. The ideas mentioned can stand or fall on their own.
This is the first of two posts. The next discussion will address changes in financial statement presentation outlined in ASU 2016-14. In this post: tax, revenue recognition, and single audit.
- It might just be possible that filing a form 1023 or 1023-EZ is so easy that people can get exempt status for an organization without knowing the requirements to properly operate a charity and maintain exempt status. In examinations to follow-up after exempt status is approved, the IRS is finding a lot of charities are out of compliance.
- One of several focuses of the IRS is filing of FBARs, those forms used to report overseas bank accounts. One ripple effect of chasing money laundering is the impact on charities who have overseas accounts. Even though there is minimal risk of those accounts being used for tax evasion the FBAR filing requirement still apply. As a reminder, the deadline for filing FBARs is now April 15 with a six-month extension available.