1 fact and 2 stories explaining why you should set up a fraud hotline in your charity

What would you think is the most likely way that a fraud is detected?

Internal audit?

No.

External audit?

No.

One fact

Forty-two percent of frauds are discovered by a tip.

Internal audits are the means to catch 14% of frauds. External audits catch a mere 3% of frauds.

Frauds are ten times more likely to be discovered by a tip than by an external audit.

That single fact, 42% of frauds discovered by tips, is a strong argument to set up an anonymous fraud tip hotline.

That data is provided by The Association of Certified Fraud Examiners in their 2014 Report to the Nations on Occupational Fraud and Abuse based on their survey of over 1,400 frauds reported to the organization.

First story

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Jim Ulvog

Before you get upset about who worked on a book you don’t like, check the family tree of the imprint

There is a brouhaha in the Christian community about a book published by one imprint with a focus on one segment of the faith community saying things that will definitely not pass muster with readers of a sibling imprint that has a focus on a different segment of the faith community. Underlying issue is that staff working for one imprint were doing some work on a title published by the other imprint.

Comments made in book from imprint 2 are doctrinally unacceptable to audience of imprint 1. Of course, the same can be said of books from imprint 1 if read by the audience of imprint 2.

I can’t get worked up about that issue.  Imprints are only labels on the book that provide a way to group books appealing to like-minded people.

Before you get upset with this issue, consider some of the family trees outlined by Christianity Today in their article Too Close for Comfort.

I’ll summarize one part of the family trees and then list the imprints, along with their focus. I’m doing this because it is interesting to me as a microscopically small writer and sub-microscopically small publisher.  It may be of interest to several readers of this blog.

A few of the pertinent imprints and their publishers are:

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Jim Ulvog

Some sources for comparable salary data

Where can you find some comparability information for salary? To support that your nonprofit is providing reasonable compensation to  your staff, you will need something to back up your conclusion the pay package is reasonable.

With a few minutes research, I found several resources. Prices and links as of the moment I looked at the websites.

The first three are already known in the religious community. Three more might be helpful as well. You can find more sources with a few minutes research on the ‘net, but this will get you started:

National Association of Church Business Administration: (more…)

Jim Ulvog

2013 giving trends

It always takes a while to gather all the info needed to calculate giving trends, so the information often starts to feel stale. However, here are some tidbits from a Nonprofit Times article – Americans Feeling Better, Giving More.

The Giving USA Foundation research for 2013 shows giving increased in 2013 by about 3% on an inflation-adjusted basis.

Individual giving was up 4.2% in total, which is 2.7% after an inflation adjustment. That represents 72% of total giving.

Lesson learned, according to the article?  (more…)

Jim Ulvog

Simplified application for exempt status, Form 1023-EZ

The IRS has released a new Form 1023-EZ to provide a much simpler way for small charities to get tax exempt status at the federal level.

The new form is 3 pages long instead of 26 pages in the full 1023. This application is allowed for organizations who expect revenue to be $50,000 or less for each of the next three years.

If the applicant is already in operation, the income in each of the past years cannot be over $50,000.

There are a few other conditions for using the 1023-EZ, but I think that charities that plan to be under $50K for three more years won’t have much problem meeting those requirements. One condition to keep an eye on is that the applicant cannot have over $250,000 in assets.

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Jim Ulvog

N.Y. State settlement with veteran’s charity and their fundraiser

The NY Attorney General negotiated a $25M settlement with a charity that raises funds to help veterans and the fundraising organization that runs the direct mail campaign.

The fundraiser, Quadriga Arts, agreed to pay a range of financial penalties:

  • $  9.7M – to NY State for damages caused
  • $13.8M – forgive debt owed to Quadriga by Disabled Veterans National Foundation
  • $  0.8M – reimburse NY State for investigative costs
  • $24.3M – total penalty

A consultant to Quadriga agreed to pay a $300K fine.

How does DVNF owe Quadriga so much money?

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Jim Ulvog

Primer on reading a 990. Lessons learned from looking at a journalists’ presentation.

If you don’t know where to start when looking at a 990 to figure out what’s going on, two reporters have provided you a great intro.

Here is a slide deck for a presentation that highlights a few items to look at: Five Tip-offs to Trouble in the Form 990.

A 990 has been highlighted here so you can see where to look for key numbers that tell the story of what is happening in a charity. The sample is an actual 990 with an unflattering story to tell.

Board training opportunity

If you have board members who have a basic idea of how to find their way around a 990 and want them to learn more, show them the above links.

The presentation is from Kris Hundley of the Tampa Bay Times and Kendall Taggart of The Center for Investigative Reporting.

For finance staff in a charity, some things to learn

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Jim Ulvog

Introduction to reading an audited financial statement

Does it seem like the report you get from your auditors is an unorganized jumble of numbers and words?

If so, that’s because financial statements for a charity are presented in a very stylized way. A specific set of rules spell out the sequence and structure of the information.

Need someone to help you get oriented so you can figure out what that report is saying?

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Jim Ulvog

More details on the new Florida law for charitable solicitation

A Florida CPA firm has provided much more detail on Florida’s toughened charitable solicitation laws going into effect on July 1, 2014.

See New Florida Law Tightens Rules for Charitable Solicitation, by Mike Batts, CPA of Batts Morrison Wales & Lee.

If your charity raises funds in Florida, you might want to check out the article to see if you need to do more research.

Previously mentioned this law in my post Increased oversight for charities in Florida.

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Jim Ulvog

Trying to make the world less miserable is complicated and messy

One of the big reasons I blog is to help me sort out this big, complicated, messy world.

“J”, an anonymous blogger and novelist at AidSpeak, helps in general and especially with his recent post It’s a Crappy World.

He points out 5 of the tensions and paradoxes of the aid and development world. Lots to ponder.

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Jim Ulvog

Giving to ECFA members increased in 2013

Preliminary data provided during early renewals of ECFA members indicate that cash contributions increased 5.2% in 2013 with total revenue increasing 6.5%

Those are the results from the first 700 members renewing for 2013, according to the ECFA’s article Giving Remains on the Rise to ECFA Members. That would be renewal info arriving in January 2014.

Full report expected in October.

Jim Ulvog

6 action items for churches

Clifton Larson Allen provides six great ideas to put on your to-do list.

Check out Six Finance Tips for Religious Organizations.

The ideas:

1. Correctly account for contributions

2. Develop a gift acceptance policy

3. Consider offering online giving

4. Address risk management

5. Understand the housing allowance

6. Establish a finance committee

Check out the article for more detail. It will be worth every moment of your time. By the way, this is one of those wish-I-had-written-it articles.

Jim Ulvog

Why do we study economics? Because of the suffering of people left behind in poverty.

Many countries around the world have seen their economies grow and enjoy the improved nutrition, health care, comfort, and consumer goods that go along with growth. Other countries, locations, and people groups have been left behind.

Why should we care about growth?

Consider a billion people struggling in India while a billion people in China have a per capita GDP today that is equal to what we had in the U.S. back in 1972.

The Economist explained the issue this way on 5/24:

The increase in (China’s) average annual GDP per head from around $300 to $6,750 over the period (of the last 30 years) has not just brought previously unimagined prosperity to hundreds of millions of people, but has also remade the world economy and geopolitics.

That’s great. I am sincerely happy for the people of China. The next sentence asks us to consider a billion people who got left behind:

India’s GDP per head was the same as China’s three decades ago. It is now less than a quarter of the size. … India’s economy has never achieved the momentum that has dragged much of East Asia out of poverty.

So what, I hear some say.

Consider the human cost: (more…)

Jim Ulvog

IRS closes audit of Food for the Hungry’s 2008 tax return

On March 24, 2014, Food for the Hungry issued this press release:

Food for the Hungry’s 2007 Tax Return Audit Resolved – IRS acknowledges that FH followed all laws and accounting standards

In the press release the CFO, Barry Gardner, provided the following comment:

“After an exhaustive review lasting 1,030 days, the IRS allowed the 2007 return to stand as originally filed,” said FH Chief Financial Officer Barry Gardner. “Contrary to erroneous press reports in 2012, no fine was ever levied or paid. While FH and the IRS have minor disagreements concerning certain transactions from that period, those transactions were deemed not to require revision of FH’s tax return.”

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Jim Ulvog

Another explanation why meds cost so much; this ties into the GIK valuation issue

This post will be deep background on the GIK valuation issue. I won’t connect the dots to the international versus US pricing issue, just lay out a few pieces of the puzzle.

One of many fascinating things I’ve learned about pharmaceuticals while blogging about mebendazol and the related valuation issues is the dramatic disparity of the prices for meds in the US and overseas. There is also a huge gap between branded and generics.

I’ve looked for data on the difference in consumption of meds and costs paid here in the US versus the rest of the world. Can’t find what I’m looking for. Somewhere sometime I saw a comment that we in the US consume 10% of all prescription meds but pay 50% of the costs. Can’t support that with anything other than hazy memory. I am fairly comfortable that the disproportionate relationship exists, even if the numbers are off.

Why does that disparity exist? Is it, perhaps, a good thing?

The underlying economic model is US residents pay for all the astoundingly huge development costs of brand new wonder drugs and the rest of the world pays the incremental costs of making another pill.

What that model does is recover the billions of dollars needed to find a new drug and motivates big pharma to look for another blockbuster.

Megan McArdle explains the issue much more clearly in her article Would you Pay $84,000 for a New Liver?

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Jim Ulvog