Non-profit Tax

After reading about the mess World Vision is in, ask yourself what you are doing to prevent a similar disaster from disrupting your programs.

Question this manager is pondering: Do we have good enough controls to prevent this from happening in our field programs? Image courtesy of Adobe Stock.
Question this manager is pondering: Are our controls good enough to prevent something like this from happening in our field programs?
Image courtesy of Adobe Stock.

A few articles to follow up on the accusations a World Vision manager allegedly routed aid money to a terrorist organization.

  • Looks like the situation with the Gaza branch of World Vision could turn into an accounting argument.
  • Response from World Vision.
  • Other aid workers charged.
  • Finally, more questions for managers and finance teams to ponder.

A number of public comments on twitter are claiming the total budget for the Gaza branch is only $2.2M a year.

Some people making this comment usually continue the discussion by calling into question the entire set of accusations from the Israeli government because the current claim is the manager diverted approximately $7 million a year.

This position implies that accusations of diverting $7M a year when the budget is only $2.2M means the accusations are untrue.

8/8 – AP, The Big Story – World Vision: Israeli charges based on “huge gap” in numbers – Article points out the intelligence agency accuses the program manager of diverting food, agricultural equipment, and medical supplies in addition to currency. That means there was in-kind material as well as heavy equipment.

The accounting argument appears towards the end of the article. A Foreign Ministry representative is guessing that the stated budget does not include in-in-kind donations.

A World Vision representative in Germany says the budget of $22.2M for the Gaza office over the last decade does include in-kind materials.

So, we may wind up with this being an accounting issue in addition to a loaded political issue on top of an alleged defalcation issue carrying over into alleged terrorism funding issue.

8/9 – Al Jazeera – Christian charity ‘top of Israel’s target list’ – It will help you filter news you hear about the manager of the Gaza office if you keep in mind the visible political agenda you will see in much reporting.

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Jim Ulvog

Initial reactions to Sen. Grassley’s letter to Wounded Warrior Project

Image courtesy of DollarPhotoClub.com
Image courtesy of DollarPhotoClub.com

Here are a few of the first reactions I’ve seen to the letter that was released to the media by the Senator’s staff on Monday.

Professor Brian Mittendorf describes what he sees as The Fundamental Issue in the Wounded Warrior Project Inquiry. The underlying issue in the letter from Senator Grassley to WWP is just a different way to look at the core issues in the discussion. The issue: (more…)

Jim Ulvog

Senator Grassley sends letter to Wounded Warrior Project asking for more information

Image courtesy of Adobe Stock.
Image courtesy of Adobe Stock.

Yesterday Sen. Grassley sent another information request to Wounded Warrior Project. The request went by electronic mail, which means a couple of hours later it appeared in public.

The full letter is visible here.

The letter was discussed in an article at News4Jax.com:  Senator questions Wounded Warrior Project spending.

First few comments are looking at donated ads. Letter asserts that backing out about $80M of donated ads drops the program service percentage from 80.6% down to 66.6%.

I tried recalculating the 66% number in half a dozen different ways but can’t figure out how the calculation was made.

Fourth paragraph repeats the criticism of watchdog organizations who exclude SOP 98-2 allocations from program. Paragraph suggests that $41M of joint cost allocations should be removed from program.

Take your pick on how to account for long-term care support

Fifth paragraph opens up a very confusing discussion of funding for the Long-Term Support Trust. Since the letter is a public document I will quote it: (more…)

Jim Ulvog

Discussions on the WWP financial statements I would like to see

Image courtesy of Adobe Stock.
Image courtesy of Adobe Stock.

As I’ve watched coverage of the Wounded Warrior Project financial statements in recent months, I have been surprised by the shallowness of the coverage. Minor issues draw heavy focus while major issues remain unaddressed.

Majoring on the minors

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Jim Ulvog

Deeper coverage of Wounded Warrior Project – 5/10

I’ve noticed a number of articles lately that dive deeper into the WWP issues that the first round of coverage. These articles are discussing substance.

4/24 – Wounded Warrior Project – Statement by interim COO Charlie Fletcher – Interim COO promised to continue mission to serve wounded warriors and make the changes need to move organization forward.

5/4 – Florida Times Union at jacksonvile.com – First Coast News: Wounded Warrior Project executive resigns – The WWP Chief Programs Officer resigned, citing personal reasons.

Article gives no more detail.

The webpage listing the executive staff shows the CPO position as second of nineteen. My paraphrase is this looks like a strategic planning position with additional emphasis on managing and directing programs. His most recent experience was in development. He is a ’93 West Point grad.

Following article gives some speculation of what might be behind the resignation.

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Jim Ulvog

More coverage of Wounded Warrior Project – 4/21

Seems like the coverage of the WWP financial situation is slowing down. A few interesting articles for your consideration:

4/9 – David Bauerlein at Florida Times-Union – Ousted Wounded Warrior Project executives defend in their leadership of Jacksonville-based charity – This is the original article that generated the AP story I mentioned earlier. The Times-Union article is far better.

Note to the public relations, financial, and executive leadership of charities: pay attention to this article. The reporter not only understands joint cost allocation rules, he can explain the issues. Check out the section of the report titled How much really goes to veterans?

Perhaps it is just a function that I don’t get out very much, but I have noticed over the last couple of years that there are several reporters around the country who have a solid understanding of nonprofit accounting. There are quite a few reporters who are skilled at reading a 990. Keep that in mind as you interact with media.

More clearly than I have read anywhere else, this article explains Mr. Nardizzi’s regrets.  He wishes the 2014 conference had not been held at the Broadmoor. It doesn’t matter that WWP got discounts on room rates, food, and meeting space. He also wishes he had not rappelled down the side of the building.

Both of those things have given an impression the organization is wasteful.

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Jim Ulvog

More coverage of Wounded Warrior Project. Former CEO and COO talking to media. 4/12

Image courtesy of DollarPhotoClub.com
Image courtesy of DollarPhotoClub.com

Stephen Nardizzi and Al Giordano are talking to a variety of media outlets. They are defending the organization and their work. We hearing their side of the story.

Here are a few articles of interest in the last week or so. One odd tidbit is the major report received as part of the board’s investigation was provided in oral form only – the AP article says the board says there was no written report.

Another surprising tidbit – In the Chronicle of Philanthropy interview, Mr. Nardizzi indicates he was told not to speak to the media when the story broke.

One more observation after reading these articles – none of the following reports address the issue of whether WWP does or does not have a broken corporate culture.

4/10 – AP – 2 ousted executives defend work at Wounded Warrior Project – Mr. Nardizzi has repeated his comments on the things he regrets. Previous comments were not clear to me. In this article he is quoted as saying in a different interview that wishes the conference drawing so much attention has been located somewhere other than a luxury hotel. He also wishes he had not rappelled down the side of the building.

Those things allowed others (read that as media) to misrepresent the organization. His regret is allowing things to happen which would be  misrepresented.

His previous comments were confusing to me.

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Jim Ulvog

Lots of news about Wounded Warrior Project controversy in last few days – 4/1

Lots of things in the news this week. Here are a few things that caught my eye, including Steve Nardizzi and Al Giordano starting to speak out on public platforms.

Public service announcement ads – You can find the Youtube feed of the WWP PSAs here. Brian Mittendorf asked to see the PSAs and WWP provided the link.

Ponder ads in light of ASC 958-720-45 requirements. There is huge room for discussion here. As a tip for enterprising reporters, here are my two tweets:

wwp joint cost alloc

References:

  • ASC 958-720-45-35 – call to action
  • -48 – audience
  • -50 – content (oops, I mentioned -48 in the tweet)

Former CEO and COO speak up – Mr. Nardizzi and Mr. Giordano started a twitter account: TheWoundedTruth, @WoundedTruth. If you have a twitter account and have been reading my articles, you might want to follow @WoundedTruth.

They also started a blog: The Wounded Truth. If you are interested enough to still be reading, you might want to add the blog to your RSS feed.

3/30 – Stars and Stripes – Feud erupts at Wounded Warrior Project between board and founder – WWP founder John Melia has publicly called for the resignation of WWP board chair Anthony Odierno. Reason for the call for resignation is that a meeting which had been scheduled on April 4 between the board and Mr. Melia was cancelled by the board. (more…)

Jim Ulvog

News reports in the last week about Wounded Warrior Project – 3/30

Here are a few articles I found interesting about WWP in the last week, including an interview with the departed CEO and COO.

3/28 – News 4 Jax – Wounded Warrior Project names interim COO – The WWP board appointed retired Major General Charlie Fletcher as interim COO beginning April 11.  He has 30 years experience on active duty. He currently is one of the people on the advisory board.

3/28 –Board Source – Wounded Warrior Project-A Classic Case Study – Author is paying close attention to the WWP story. Real, current situations are wonderful teaching tools. Responses to Sen. Grassley’s inquiry letter will provide lots of insight.

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Jim Ulvog

More Wounded Warrior coverage – 3/24

Here are a few articles in the last few days that caught my eye which follow-up on the media firestorm surrounding Wounded Warrior Project.

3/21 – Charity Defense Council – Letter to Senator Grassley – The letter from the Charity Defense Council (CDC) to Senator Grassley is in response to the senator’s information request to WWP. The Senator asked for an explanation of the relationship between CDC and WWP along with an explanation of how a donation to CDC furthers WWP’s mission.

The letter provides CDC’s explanation.

Let me try to boil it down to a few sentences …

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Jim Ulvog

How to notify California Secretary of State of a change in your charity’s articles of incorporation

Image courtesy of DollarPhotoClub.com
Image courtesy of DollarPhotoClub.com

If your charity makes a change to the articles of incorporation, you need to notify the Secretary of State. I had opportunity to look at the process in California for filing such a notice.

There are comparable filing requirements in your state. Explore your Secretary of State’s website to find instructions. To help others here’s what I found for California.

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Jim Ulvog

More coverage of Wounded Warrior Project – 3/16

I’ve seen a few more articles of substance in the last two days on the WWP board firing their CEO and COO. Will discuss three articles to see what we can learn about this fiasco and how to deal with a crisis.

Balancing act

The board is in a delicate balancing act.

The media and likely some major donors want the juicy details on why the two execs were let go. I’m interested, too.

The board needs to be careful on how much information they release because of legal exposures, HR issues, and the possibility of causing additional harm to the organization and constituents.

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Jim 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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Jim Ulvog

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

Image courtesy of DollarPhotoClub.com
Image courtesy of DollarPhotoClub.com

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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Jim Ulvog

A few of the ways charities can create a requirement for reporting on foreign activities

Image courtesy of DollarPhotoClub.com.
An ocean of paperwork. Image courtesy of DollarPhotoClub.com.

Doing ministry overseas can generate several requirements to file reports with the IRS that you had no idea even existed.

CliftonLarsonAllen provide some background on IRS Foreign Reporting Requirements for Nonprofit Organizations.

Here is their technically worded description of the most common situations:

  • Transfers of property to, or ownership interests in, foreign entities
  • Financial interest in, or signature authority over, foreign bank, securities, and financial accounts
  • Certain payments of U.S. source income to foreign persons

I will mention just a few of the situations they describe which could trigger a reporting requirement. Keep in mind there can be some serious penalties for missing these reports. Serious, as in $10,000 per filing year, assuming the IRS doesn’t allege the failure to file was willful. If they raise that allegation, penalties can get really ugly. Also keep in mind that if you missed one of these reports once, you probably missed it all the years for which the statute of limitations is open.

Control of overseas affiliate

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Jim Ulvog