CNN aired a report that is part of their combined reporting with the Tampa Bay Times and Center for Investigative Research. Previously mentioned the print reports here and here.
The video report, which runs just under 6 minutes in length, is from Anderson Cooper 360: Where did $40 million in charity donations go?
CNN sent their team to Guatemala to track down the shipments. They tried to follow the shipments after the meds arrived in country.
Previously discussed here and here two charities that revised their 2012 financial statements by increasing their valuation on donated medicine from WAC to AWP.
I reached out to both organizations on Wednesday, February 5, for comment on this post. I have not heard back from either organization. If they provide any comment, I will update this discussion.
You might want to get a fresh cup of coffee. This will be a long post.
Why look at these restatements?
Two reasons.
First, it is counter to the trend we are seeing of organizations reducing the valuation of GIK.
Second, it provides a glimpse into the reasoning for using AWP. There is very little in the public realm (at least that I’m aware of) that explains why organizations are using AWP.
I’ve looked at more than a few financial statements in the last two years for organizations that have a large volume of GIK. I’ve even had a few posts on point. Usually a specific issue is not very visible in the financial statements. Occasionally, a set of financials will clearly illustrate some issue that is widely present in this sector.
Print copy and Nook e-book are in addition to availability for the Kindle and another half-dozen formats.
The book is an intentionally short read at about 30 pages. The print copy has 20 pages of text. Focus is to quickly describe the differences between those levels of services using three illustrations:
It also explains the differences in plain language. Well, at least using less accountantese than you would usually get from an accountant.
This is a compilation of posts previously appearing on my blogs, with slight editing.
Where can you find the book?
Print book at Amazon here.
Nook e-book at Barnes and Noble here.
Kindle e-book at Amazon here.
Also available here in other formats:
When it rains, it pours.
That’s not just an advertising tag line from a salt seller. It’s also a saying in my family, meaning when a few things happen, there often is a string of things that follow.
That’s what it feels like in the GIK area now. After months of not much happening, I’ve written five posts in two weeks on GIK issues.
Today’s news (at least it’s news to me) is another charity’s revision of the values used for GIK in 2012. It looks like the amounts are increased from wholesale acquisition cost to average wholesale price.
You read that correctly. Audited financials and 990 were restated for value of donated meds. Not a reduction from AWP, but an increase to AWP.
Cancer Fund of America has filed an amended 990 and audited financial statements with the New York regulators. The valuation of GIK medicines was increased to AWP.
I was clued in to the change by a comment from William Barrett, who writes at Forbes and New to Seattle. He has been covering the GIK valuation issues for a loooong time. I’ve mentioned his articles several times. In fact, it was his article at Forbes that first made me aware of the issues with mebendazole.
You can find the filings with the New York AG here.
For a couple of years I’ve been looking at a few specific fraud incidents as case studies of fraud in general. It has been fascinating to dive deep into an embezzlement at a nearby megachurch and a corruption case in a nearby city. I’ve blogged about those extensively and even turned my blog posts into an e-book, Tragedy of Fraud.
Two more case studies have surfaced — one I’ll just mention and the other I’ll see what I can find for several more posts.
“Googlable”
Here’s a consequence of fraud I’d not pondered before:
Explaining to your young children that mommy is a felon before they have the opportunity to start searching the internet. Better to explain your record before they read about it.
That’s what one woman had to do with her young twin boys, as described by Dr. Michael Shaub in his blog post Redemption. Please read the short post to hear her story of going to federal prison for a creative accounting deal that didn’t give her anything.
Barry Minkow
Mr. Minkow is the other case study I’ll start focusing on.
My post is titled: Fraudster turned fraudbuster turned pastor turns fraudster again: Pleads guilty to stealing from his church
Dr. Shaub has a post also: Barry and Me.
He has a longer description of Mr. Minkow. It’s
… a rags to riches to orange jumpsuit to crime fighter to clerical collar to fraudulent short-seller to multimillion dollar church embezzlement story.
The professor has followed Mr. Minkow for many years, read several (most?) of his books, and even used his books in class.
Apparently the felon-again had a movie about his life in production. I’m guessing, along with the professor, it won’t be released anytime soon.
Read the full post as a further intro to the amazing life of a no-longer-alleged triple felon.
Charity Services International has posted a strong reply to the combined reporting by CNN, CIR and the Tampa Bay Times. I’ve mentioned their report here and here.
The CSI reply is A Breakdown of the Tampa Bay Times Story.
If you are interested in this issue, you really will want to read the full rebuttal.
It is broken down into four sections:
What the reporting got right. What CSI believes the reporting got wrong. Assertions that are questionable. Finally, non-essential elements of the story.
Please read the full article.
Three thoughts after reading the strongly worded rebuttal: (more…)
Life is complicated.
My reading over the last two years has opened my eyes to why successful aid and development is so difficult. Unintended consequences and complexity in general are a few reasons why it is hard to make things better in poor countries and why improvements are so slow.
Many of my readers processed through the ideas I’ll mention in this post a long time ago. This is old news for many.
For me, and for some readers of this blog, this is new territory. One of many reasons I blog is to work through what is new for me.
Here are two more articles that illustrate the complexities of facilitating change:
Systemic lack of justice
Why We’re Losing the War on Poverty is an interview in Christianity Today with Gary Haugen discussing his book, The Locust Effect: Why the End of Poverty requires the End of Violence.
The lack of functioning law enforcement allows violence to prey on the poor and plunder them. The corrosive effect of violence undermines everything else in a society. The one sentence summary: (more…)
The Tampa Bay Times has run the article they wrote with CNN and the Center for Investigative Research: No accounting for $40 million in charity shipped overseas. It looks to be the same text as in the CIR report, which I mentioned here.
I have performed lots of audits over the years but don’t have any clients with the kind of GIK programs that have been in the news lately. That does two things. First, it frees me to pontificate and speculate because the independence rules don’t limit me in discussing an actual client situation. Second, it gives me an auditor’s knowledge, experience, and intuition to apply to the news I read.
A few thoughts for CPAs after reading the article again…
Opinion shopping.
The combined team of Center for Investigative Reporting, Tampa Bay Times, and CNN have another feature article on GIK, this time trying to substantiate shipments.
The article is No accounting for what charities ship overseas.
If you’ve been following the GIK issues, you’ll want to check out the article.
If you are a charity, might be worth figuring out how your organization and your GIK shipments would look if you received some really simple media inquiries, like ‘do your shipments really exist?’ or ‘what was in the container?’
If you are an auditor, you might want to read the article as an education about what might going on beyond the documents you vouched.
Barry Minkow, pastor of San Diego Community Bible Church (SDCBC) pled guilty to embezzling $3 million from his church. The U.S. Attorney for Southern District of California announced the plea agreement on 1-22-14. You can see the press release here.
Pr. Minkow first went to prison as the mastermind of the ZZZZ Best fraud which collapsed back in 1987. He served under 8 years of a 25 year sentence.
After release he worked at a church in the LA area then became pastor at SDCBC. He started a for-profit company that researched and publicized frauds.
In 2011, he pled guilty to insider trading for reportedly shorting a stock before denouncing the company for alleged irregularities. He drew a five-year sentence for that felony.
That brings us to this week. In the press release announcing a plea agreement, the US AG says (more…)
California increases minimum wage from $8 to $9 per hour starting July 1, 2014. Another increase to $10 starts January 1, 2016, two years from now.
This affects the minimum that employers can pay their staff.
It also has another impact – on determining if other staff are exempt from overtime rules.
Audit. Review. Compilation. What’s the difference? – Illustrations using a football game, buying a used car, and filling a bucket.
What’s the difference between getting an audit, review, or compilation from your CPA firm? This short, 29 page book will help you understand.
Three illustrations help explain the differences:
This is a compilation of articles at my blog, Nonprofit Update.
The book is now available at Amazon.
Now available here in other formats:
Soon to be available at Barnes and Noble.
Five more examples of unintended consequences. The problem? People don’t always do what you tell them. They often do something totally different from what you expected.
Cracked describes 5 Laws That Made Senses on Paper (And Disasters in Reality). (Caution, moderate number of naughty words.) These examples are from government. My three favorites are how to:
Gun buybacks increase number of guns on the street. (more…)
The Wall Street Journal cites unidentified “law-enforcement officials” who say Criminal Charges Not Expected in IRS Probe.
Why am I discussing an issue that tip-toes into the political realm?
Because I’m always talking to my NPO clients about tax law. I’m often encouraging them to correct behavior that, ah, may not be completely correct under the tax law. I often answer questions on how to handle particular types of transactions.
The last half of this post will explain why the WSJ report worries me.
No charges expected