We need a new way to evaluate charities – Part 1

That is a major issue for Mr. Dan Pallotta. He suggests the excessive focus we as a society have on rating the effectiveness of NPOs by “overhead” ratios and our intolerance for NPOs paying market salaries are restricting organizations from getting the money to have the full impact they could have.

I read two articles by Mr. Pallotta on the same day. Please check them out.

Why Can’t We Sell Charity Like We Sell Perfume, from the Wall Street Journal.

Charities Must Battle Public Misconceptions About Overhead Costs, from the Chronicle of Philanthropy.

In the WSJ article he says:

We have two separate rule books: one for charity and one for the rest of the economic world. The result is discrimination against charities in five critical areas.

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Jim Ulvog

Check out this set of financial statements to see a live example of the pharmaceutical GIK issues – part 1

If you want to see an illustration of the issues surrounding valuation of GIK meds, check out the 2011 financial statements for Blessings International.  Many of the issues in discussion around the NPO community are visible in these financials.

This series of posts will be in 6 parts which will be posted over the next two weeks or so.

Their website went down a few weeks ago, so you can’t get the 990 or financial statements from their site. It is in operation again but only with a few pages working. You can find their website here.

You can find their 990 and audited financial statement for 2011 at the North Carolina Secretary of State’s web site. The specific page is here.

In case that link doesn’t work, you can go to the NC Secretary’s web site and use their search page, which is here.

Cover letter

Some time ago when the Blessings International website was up, I read a cover letter from the NPO’s president which was attached to the audited financial statements.  The report at the NC SoS site does not have that cover letter.  I will quote from the copy of the report I downloaded at the time. 

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Jim Ulvog

How to find financial reports for nonprofit organizations

Here are a few ideas in case you would like to find some financial info on a charity.

For donors, it is easy to find financial reports for charities you would like to support. For ministries, please understand how incredibly easy it is for your donors to find your financial data. 

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Jim Ulvog

How many stern warnings does a bank get before it winds up in real trouble?

Barclays settled with US regulators over its role in the fiasco about manipulating Libor. I’ve mentioned that mess in my other blog. As a part of that settlement, they signed a deferred prosecution agreement.

They were already on probation for an earlier deferred prosecution agreement for money laundering.

A Wall Street Journal article, Corporate Probation: Punishing or Punting? by Michael Rothfeld, gives the details (article behind paywall).

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Jim Ulvog

Wages of fraud – loss of licenses

The sad tragedy of fraud in a neighboring city is in the next to last chapter. Yesterday one of the admitted middleman in the Upland bribery scandal was sentenced to a year and a day in federal prison.

The Inland Valley Daily Bulletin discusses the case and sentencing in their article Co-defendant in Pomierski case is sentenced to one year.

Previously I described the wages earned from a felony conviction.

Add to the high cost the probable loss of any professional credentials or state licensing necessary to do your job.

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Jim Ulvog

Another graph illustrating why it feels like the recession hasn’t ended

The recession officially ended in June 2009, which means we’ve seen just over 3 years of recovery. GDP has finally passed the peak from before the recession. Yet it doesn’t quite feel like recovery, at least here in California. Saw another graph that shows why it feels so odd.

In a graph called The Zero Recovery, Tim Kane calculates the number of people who are employed as a percentage of the population. For the last six recessions he tracks the change in the employment to population ratio from the start of the recession. For the previous five recessions the drop wasn’t as severe as this one and there had been substantial recovery by the 4½ year point after the start of the recession.

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Jim Ulvog

2nd Blogiversary

August 29th marked the 2 year blogiversary of this little site (Nonprofit Update) to talk about nonprofit issues. I split off posts of interest to CPAs to another blog (Attestation Update) on October 14, 2010 and started Outrun Change on October 3, 2011. That site ponders the radical change around us and how we can stay ahead of it.

Thanks so much to those who have stopped by. I hope it has been a blessing to you.  In case you can’t tell, I’ve been having a blast.

Most visitors and page views are coming in from internet search engines. That is really cool.

One of the best things in the last year is a growing number of people interested enough is my musings to follow by e-mail or Google RSS feed.  Thanks very much for stopping by.

For the second year, I will report some stats for my sites.  Here’s some stuff for those interested in such things. I will adjust this time around to an August 31 cutoff instead of the 29th.  I’ll list stats for this year with the prior year in parentheses.

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Jim Ulvog

Food for the Hungry adjusts 990 amounts for valuation of GIK

Food for the Hungry has prepared pro forma revisions to its 990s for 2007, 2008, and 2009. They are following the suggestion of Charity Navigators to revise the 990 amounts to reflect what would have been reported if the valuations used in 2010 had been applied in prior years. Previous post discussed that briefly.

You can find the revised amounts at their website by clicking the “about us” tab and then clicking the “Finances” tab.

At the bottom of the page you can find the downloadable audit reports and 990s for the last three years. Under the “Charity navigator exhibits” heading you can find an attestation letter from the audit committee here and the restated pro forma amounts for 2005 through 2009 here.  The letter is in PDF format while the pro forma amounts are in an Excel spreadsheet.

I have not had time to analyze the numbers, let alone ponder the implications. Just wanted to get this information out, since it is very fresh. The letter from the audit committee chair is dated August 22.

Here is the total revenue amount, as reported on the 990 and as recalculated on a pro forma basis. The ’07, ’08, and ’09 amounts are from the template. I pulled the ’10 amounts from the tax return. The amount of revision is calculated along with the changed amount as a percentage of reported revenue. (more…)

Jim Ulvog

Time running out to get exempt status reinstated after it was automatically revoked

Gamman & Grange reminds us that 12-31-12 is the deadline to request reinstatement of exempt status. This is a concern for NPOs that had their exempt status revoked because they went three years without filing a 990-N, which is the on-line ‘postcard’ notice to the IRS.

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Jim Ulvog

2 more unintended consequences

One of the big ironies in life is called unintended consequences – You try to do something good or helpful to fix a problem and there is some completely unexpected problem caused by the good & helpful thing.

Two examples from today’s reading. First, making forest fires worse. Second, getting sick from reusable grocery bags. My previous examples were from the international aid world.

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Jim Ulvog

Money laundering settlements. Are fines from the U.S. just a cost of doing business?

My previous post described the settlement by Standard Chartered bank with the New York state Department of Financial Services for $340 million over allegations of money-laundering.

I also listed six other settlements I found in two Wall Street Journal articles here and here.

  • $567M – 12-09 – Lloyds TSB Bank
  • $536M – 12-09 – Credit Suise
  • $500M – 5-10 – Royal Bank of Scotland
  • $298M – 8-10 – Barclays
  • $619M – 6-12 – ING Bank
  • $340M – 8-12 – Standard Chartered – settlement with New York regulators
  • $700M announced reserve for settlement – HSBC Holdings PLC
  • $???M – Standard Chartered will have a separate settlement with US authorities

What is going on?

The cases leave me scratching my head wondering what’s going on in the big banks.

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Jim Ulvog

Standard Chartered settles money laundering case. The latest in a string of settlements.

The British bank has agreed to a $340 million penalty to settle allegations from New York state regulators that the bank was laundering money for their Iranian customers. The Wall Street Journal describes a settlement in their article Bank Settles Iran Money Case. This is one in a long string of settlements for money-laundering.

The accusation by the New York Department of Financial Services is that over the course of a decade the bank hid Iranian involvement for 60,000 wires totaling $250 billion.  The basic concept is the wires were withdrawn after initial submission and the identifying information removed from the transaction, then the instructions were resubmitted.

I touched on this in an earlier post.

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Jim Ulvog

The new Audit Guide’s here! The new Audit Guide’s here!

Well, maybe the release of the draft Not-for-Profit Entities Audit and Accounting Guide isn’t quite as exciting as those ancient commercials announcing the release of the new phone book by showing people running around celebrating that it arrived. (The line was also in the movie The Jerk, starring Steve Martin.) For auditors of NPOs, the arrival of the long-expected audit guide is far better than what the old commercials would have you think about a new phone book.

The draft guide can be found here. The AICPA’s page for the draft is at Overhaul of the Not For Profit Entities Audit and Accounting Guide.

The AICPA’s announcement can be downloaded here. Some highlights, as described in their announcement: (more…)

Jim Ulvog

CPA withholds clean opinion from NPO that values GIK meds at AWP

Hood Sutton Robinson & Freeman CPAs, P.C. are the auditors for Blessings International. The firm issued a qualified opinion on the NPO’s financial statements for the years ended August 31, 2011 and 2010.

The reason for the qualified opinion is that purchased medicines are valued at Average Wholesale Price instead of the wholesale exit price in the principal market. The specific paragraph in the audit report reads: (more…)

Jim Ulvog