Got back yesterday from another trip to Williston, North Dakota to visit our son and daughter-in-law.
Also got to spend a lot of time with our first grandson, who was born on February 8. (Our daughter-in-law pointed out he has a mathematical birthday: 2-8-16. Read that as 2 x 8 = 16.
He is an absolute delight. Quite a precious baby.
Professor Brian Mittendorf has outlined his ideas on how the accounting community could pitch in on industry-wide efforts to assess the effectiveness of charities.
1/25 – Counting on Charity – Three Pressing Issues in the Nonprofit Sector that Need Accounting Input – He introduced three areas of nonprofit accounting where accountants could help:
Expanded discussions:
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.
A major rewrite of how NPOs present their financial statements is under consideration by FASB. An exposure draft was released in April 2015.
December FASB meeting
FASB has broken the project into two parts. One will move forward on a timely basis and the other will be postponed for reconsideration.
Here is a high-level summary of key components discussed at their December 11, 2015 meeting,
CCH (Wolters Kluwer) makes the material for some of its courses available for no charge.
If you want CPE credit there is a fee for grading the exam and awarding credit. However, if your goal is learning the materials are available gratis.
As I write this post, the following materials available:
I am pleased to report my firm passed peer review in 2015.
Peer review is a process CPAs go through to inspect their audit and review work. Experienced CPAs from another firm look at your quality control procedures and read through the workpapers for a selection of audit, review, and compilation engagements.
In the current system there are three grades from a peer review inspection:
I am pleased to report I received a pass report, the highest level currently available. I have gone through peer reviews in 2015, 2012, 2009, 2006, and 2003. Each time I received the highest grade possible.
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
Looks like the coverage of the Wounded Warrior Project financial statements has blossomed in the last few days. I will discuss that coverage and then discuss WWP’s public comments. Will throw in a reasonableness test of the conference expenses for no extra charge.
Rewriting the initial coverage
One of the things I have learned through blogging is that when a big story breaks there will be a few major articles covering the issue immediately. Over the next several hours many media outlets will repeat the initial coverage verbatim. I think this is done by buying republish rights from the major wire services or major newspapers.
The more fascinating thing I have learned is that over the next several hours there will be dozens of papers and wire outlets who rewrite the initial coverage. It will be done under the byline of their writer and with their copyright.
Having observed this multiple times and having read dozens of articles of follow-up, I have learned the rewrite jobs rarely bring in new information. They merely rephrase and reorganize the initial coverage, with a reference or two back to the initial article. If that was the only thing you read, you would have the impression the paper did their own original research.
I did a search on the net for coverage of WWP and noticed several dozen articles out on the same day which were nothing more than a rewrite of the initial Washington Post and CBS stories. Maybe it has always been that way and I’m only now catching on. I do find it amusing.
New coverage
Here is some coverage that goes beyond a mere rewrite:
1/28 – The Hill – Wounded Warrior charity pushes back against allegations of waste – Two of the major accusations by The Washington Post and CBS against WWP are spending $26M on conferences in total and spending $3M on a training conference in Denver. The overriding issue is essentially the same conversation about the functional expense allocation that has been in play for years.
WWP provided additional information.
A running debate in the donor and nonprofit community is whether the ‘overhead ratio’ is a good tool to measure the effectiveness of a charity. There seems to be more discussion of the issue lately. Wounded Warrior Project is the focal point for recent discussion. A few articles of interest along with some background:
1/27 – New York Times – Wounded Warrior Project Spends Lavishly on Itself, Insiders Say – Tell me your thoughts on the ongoing conversations in the nonprofit community about overhead ratios and I will tell you whether you will think this article is a balanced critique or a hit piece.
Yesterday I sent a package to a client via USPS’ priority mail. As always, I went to the USPS website to double-check the price.
Just about fell out of my chair.
9% increase.
… is the title of a great article by James B. Jordan to help churches and other faith-based charities protect their contributions from theft and protect volunteers from temptation.
Setting up internal controls is difficult in small organizations, even more so for local churches. The place churches routinely have the most difficulty is keeping control over contributions between the time gifts go into the collection plate until a deposit is ready for the bank.
Mr. Jordan’s tips:
If you receive a subpoena from some regulator or police agency asking for documents, it is imperative you process documents properly. Goofing up could cause serious problems, even if you aren’t the actual target of the investigation. If you are the target and you mess up, things could get really bad, really fast.
The law firm of Gammon & Grange provides some ideas on how to work through the serious issues without getting your organization in trouble: When the Knock at Your Nonprofit Door is Not Some Pizza, but Subpoena.
There are many places in the audit rules where the guidance says something like consider consulting with legal counsel before taking the next step.
If you ever receive a subpoena, that would be an incredibly wonderful time to consult with legal counsel. Get your attorney on the phone. Immediately.
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
If you want some background describing the wrong perspective used by charities, donors, and self-appointed rating agencies in evaluating nonprofit effectiveness, Marc Gunther at Nonprofit Chronicles points you to three resources you could check out. I discussed this post yesterday. Consider: (more…)
Here are a few background articles on the overhead issue and why it is a good idea to have a gift acceptance policy.
12/13/15 at Nonprofit Chronicles – If not overhead, then what? Maybe this. – Perhaps it is understandable that donors focus on the percentages on the functional allocation of expenses in assessing charities. What else is available? Nothing.
Article points to a new charity called ImpactMatters which is developing a methodology to audit the impact of charities with an intentional parallel to a financial audit of financial statements.