Repost: 2018 nonprofit risk alert is available. New edition adds discussion on valuation of GIK as rebuttal to California AG.

March 29, 2019, 8:15 am

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Update:  This is a repost of an article on June 11, 2018. As I mentioned last summer, some newly added comments in this risk alert entered heavily into the decision by an Administrative Law Judge finding the charities complied with GAAP.

Some particular items of note for those who enjoy deep inside-baseball tidbits from the accounting world: 

  • discussion of GIK, especially paragraph .53 was added this year,
  • discussion in paragraphs .53 and .176 are directly responsive to the AG’s argument,
  • there is an overlap of ARL staffing with the R&D sector & auditors of that sector, and
  • the hard-fought, everybody-does-it-so-that-makes-it-right, spend-$475K-to-fight-the-IRS position on mebendazole has changed from the previously no-good, can’t-rely-on-it, non-representational pricing guide from five years ago now being the AICPA recommended standard for pricing.

So, here are some on-point comments from last summer with a few minor updates:

 

The AICPA has released the 2018 edition of Not-for-Profit Entities Industry Developments.

If you are a CPA serving the not-for-profit community, you need to read this document each year. It provides a survey of the accounting and auditing issues affecting the nonprofit world.

If you are an auditor, there are several other risk alerts you ought to be reading every year.

If you are working for a nonprofit, these alerts would give you a good survey of accounting issues in general and the audit issues your CPA will be dealing with this year.

Valuation of Gifts in Kind

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Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 5

March 27, 2019, 7:47 am

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In resolving the Cease and Desist order against three charities, the Administrative Law Judge hearing the appeal cited paragraph .58 of the 2018 Audit Risk Alert as being directly on point.  I perceive the comments in the 2018 risk alert were prepared in light of the AG’s case.

Paragraphs in the section containing .58 will be quoted for more context since that will likely be helpful for people reading all the way through this series of posts.

Introduction to this series of posts explained the Administrative Law Judge (ALJ) hearing the appeal of the California AG’s C&D order ruled in favor of the charities on the GAAP compliance issue.

The basis for his decision was that the charities’ expert witnesses were more persuasive than the government’s expert witness.

Another post illustrated why attorneys quibble so vigorously and described the remaining issue of whether the charitable solicitations by the charities are misleading.

Previous post explained where the case is now and the remaining issue of allegedly misleading solicitations.

2018 Audit Risk Alert

This discussion is new in the 2018 risk alert. Maybe I missed it, but word searches and browsing the 2012 and 2014 through 2017 risk alerts did not reveal more than a couple of brief mentions of GIK valuation with those comments not much deeper than identifying GIK as an issue.

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Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 4

March 21, 2019, 7:50 am

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Introduction to this series of posts explained the Administrative Law Judge (ALJ) hearing the appeal of the California AG’s Cease and Desist order against three charities has decided in favor of the charities.

The basis for his decision was that the charities’ expert witnesses were more persuasive than the government’s expert witness.

Yesterday’s post illustrated why attorneys quibble so vigorously and described the remaining issue of whether the charitable solicitations by the charities are misleading.

Today’s post mentions where the case is now and the remaining issue of allegedly misleading solicitations.

Is GAAP the real world?

The ALJ discusses his reasoning for continuing the hearing to address the allegedly mislead appeals, raising the entertaining question of whether this separate world with its rarefied atmosphere containing its own set of exquisitely detailed rules we call GAAP has an overlap with the real world where actual people actually reside and lead actual lives.

Additional testimony and a separate decision will resolve that issue for this case.

The ALJ’s comments:

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Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 3

March 20, 2019, 7:48 am

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Introduction to this series of posts explained the Administrative Law Judge (ALJ) hearing the appeal of the California AG’s Cease and Desist order against three charities has decided in favor of the charities.

The basis for his decision, as mentioned yesterday, was that the charities’ expert witnesses were more persuasive than the government’s expert witness.

Are the charities’ appeals misleading?

The remaining issue in the case is whether the charitable solicitations were misleading to donors.

The state alleged that the financial statements did not comply with GAAP and as a separate matter that solicitations to donors were misleading.

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Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 2

March 19, 2019, 7:19 am

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Introduction to this series of posts yesterday explained the Administrative Law Judge (ALJ) hearing the appeal of the California AG’s Cease and Desist order against three charities has decided in favor of the charities.

Preliminary ruling

The ALJ concluded that the testimony from the charities’ expert witnesses was more persuasive than that of the AG’s expert witness.  On that basis, the ALJ concluded the AG did not prove its case that the financial statements were in violation of GAAP.

I will summarize and quote some of the comments in the transcript and provide select quotes on the assumption many of my readers won’t download and read the transcript for the day. As a matter of my style choice, I will only use the first letter of the last name of witnesses and attorneys.

The basis for conclusion is whose arguments were more persuasive. The ALJ decided the charities had better expert witnesses.

He said:

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Preliminary ruling in favor of charities for the California AG’s cease and desist order for GIK valuation – part 1

March 18, 2019, 9:45 am

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On December 11, 2018, the administrative law judge (ALJ) hearing the case by the California Attorney General against Food for the Poor (FftP), MAP International (MAP), and Catholic Medical Mission Board (CMMB) announced his preliminary determination.

The ALJ concluded that the state did not prove its claim that the financial statements of the three charities violated GAAP.

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Friendly tip to people planning a felony: don’t do it. And if you still want to, you might want to avoid planning your escapade with the internet or your phone.

January 21, 2019, 8:33 am

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If you are planning to do something that our society says is a felony, or even thinking about it, please don’t.

Please change your plans. You won’t like the result.

If you are still pondering something that our society says is a felony, you might want to avoid using electronic devices that record your planning. Definitely don’t use your phone in commission of the actual crime.

Here are a few examples of what not to do, for amusement of people who are inclined to read my blog.  People likely to go ahead with felonious plans probably are not in my audience.

 

Tip #1

Don’t take along your location recording fitness device while conducting reconnaissance to plan an assassination and definitely don’t take it along for the ‘hit’:  Runners World -1/17/19 – This Runner is a Hitman. His GPS Watch Tied Him to a Mob Boss Murder

A competitive distance runner who moon lighted as a contract hit man took along his fitbit watch as he conducted recon and planning runs for two different assassinations. Also wore it for one of the actual hits. Police looked at the recorded location information on the watch which showed him making recon runs and placed him at the scene of the hit.

Result: Life in prison.

 

Tip #2

Don’t conduct an Internet search with questions of whether your plans are illegal: Cleveland.com – 10/19/18 – Brooklyn Woman falsely accused Parma Heights police chief of rape, investigators say.

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