Nonprofit update

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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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Image courtesy of Adobe Stock.

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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Image courtesy of Adobe Stock.

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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Image courtesy of Adobe Stock.

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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