Ponder a moment on Memorial Day the cost of our freedom.
Ponder a moment on Memorial Day the cost of our freedom.
Those of us living in the United States are blessed with religious freedom, political freedom, and economic freedom because those who went before us fought for freedom.
Many of those fighting offered up their life for freedom and the offer was accepted.
I am humbled and grateful to God that some of my ancestors are included in the long list of those who fought. I am especially humbled that a great, great grand-uncle is in the list of those who died in the defense of freedom.
Because of their sacrifice, I get to enjoy this kind of freedom:
In April 2015, an officer with the North Charleston, S.C. police department shot a man in the back as the citizen slowly ran away from the officer after an altercation.
In December 2016 the officer achieved a hung verdict in his murder trial after claiming he feared for his life after a struggle for his taser. He was facing a retrial at state level.
On May 3, 2017, the officer plead guilty to the federal crime of violating the man’s civil rights. He will be sentenced later.
Justice takes time, sometimes.
After you watch the video below and read my description of the incident, you will appreciate two questions that come to mind. For background, consider I am a middle-class, middle-age, white male, who runs my own business.
Here are the two distressing questions I’ve been pondering for the past two years:
A Wall Street Journal article provides background on the plea and the case: Former S.C. Policeman Pleads Guilty in Shooting of Walter Scott. The officer was fired immediately after the incident. The city apologized and reached a $6.5M settlement with the family.
If you have the stomach for it, feel free to watch the following video:
Please know in advance it is upsetting.
A few articles to follow up on the accusations a World Vision manager allegedly routed aid money to a terrorist organization.
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.
Last week, the Israeli intelligence service accused a World Vision manager of diverting resources to Hamas. The allegation is he diverted about 60% of the annual funds flowing through the Gaza office, with the amount diverted allegedly around $7M a year.
Some initial reactions are surfacing from donors. Also, some context for magnitude of the alleged amount. Finally, some questions to ponder for leaders of charities and those of us who audit NPOs.
8/4 – World Vision – Statement on World Vision Staff Arrest – Full statement from World Vision. Doesn’t say a lot because they don’t yet know a lot. I’m sure there will be more comments as the situation develops.
8/5 – Reuters at Business Insider – Australia suspends World Vision funding over allegations its Gaza representative funneled millions to Hamas – The Australian government has provided about $4.4 million over the last three years to World Vision for use in helping people living in Gaza and West Bank. The aid has been suspended over the allegations.
How do you keep one person from creating a public relations fiasco or, even worse, damaging the reputation of your entire organization? How do you keep a manager from illegally diverting a huge amount of resources?
What controls and procedures do you have in place to prevent something like this in your organization?
Let’s start with a FBI agent who pled guilty to charges of passing sensitive and classified information to a Chinese government official and businesses in China.
8/1 – ABC News – FBI Employee Arrested for Allegedly Acting as Secret Chinese Agent – According to the story, we can drop the word ‘allegedly.’ This week he entered a guilty plea to one felony charge. The government claims he was gathering sensitive and classified material based on instructions from his handler.
He was born in China and was naturalized in 1985 at age 16.
So, the FBI with all its investigative powers and intentional counter-intelligence operations was not able to prevent this man from being an agent of the Chinese government.
So what chance does a nonprofit charity have of filtering out people who want to do bad stuff? That is something to consider as we grieve the following story.
This week the story broke that a manager of the Gaza office of World Vision allegedly diverted a lot of money to Hamas for use in terrorist activities. At this point the story consists of allegations, but allegations from the Israeli security service after a few weeks of interrogation are extremely serious.
8/4 – Hareetz – Top Official in Christian Aid Group Charged With Funneling Funds to Hamas – The security service, Shin Bet, arrested the director of the Gaza branch office on June 16. He was indicted Thursday.
Shin Bet accuses the manager of joining an armed wing of Hamas in 2004 and being sent to infiltrate a western aid organization a year later.
In 2005 he was hired by World Vision and in 2010 was promoted to director of the Gaza branch.
(Cross post from my other blog, Attestation Update. I usually post comments on accounting theory there. This issues carries over directly to the nonprofit community. Consider the ongoing discussion on the mis-focus on ‘overhead’ and the need for some sort of outcome measures for the charity world and you can see how this applies.)
Consider this idea: perhaps GAAP-based accounting numbers aren’t giving stock investors all the information they need.
What is wrong with this picture?
In April, Netflix announced their earnings fell short of analysts’ expectations. Usually that would drop the stock price. What happened?
Nexflix stock jumped 18%.
What could cause that? The market supposedly has incorporated the consensus into the price. Missing the expectation should drop the price.
Consider this: At the same time, Netflix announced their new-subscribers were 4.9 million instead of the expectation of 4.0M.
That means they will have stronger earnings for the next several quarters than was expected the day before the announcement. Thus, the stock price rose.
Investors looked at the new subscriber tally as a better indicator of future earnings and thus future stock price than this quarter’s GAAP net income. New subscribers is more important than EPS.
If you wonder are wondering why GAAP EPS isn’t the driving force in that story, here is a brain stretcher for you:
“The End of Accounting”
Professors Baruch Lev and Feng Gu point to The End of Accounting and the Path Forward for Investors and Managers in their June 21 Wall Street Journal article.
You can find the book at Amazon here. It is a bit steep, $32 in hardback and $26 in Kindle format, which is really high for an e-book. I already have a copy on my e-reader. Started reading it yesterday.
The professors suggest that reported earnings under GAAP are losing relevance for investors as we move further and further away from an industrial economy. When know-how, processes, patents, using the internet, and other intangibles are the source of income, GAAP doesn’t report useful information for figuring out future earnings.
By the way, keep in mind that providing historical information to readers of the financial statements to allow them to make estimates of future earnings and cash flows of the company is, like, sorta’, kinda’, the purpose of GAAP financial statements.
The problem with GAAP
Some drawbacks in looking at GAAP numbers, according to the professors: