Nonprofit finance, accounting, and tax news. Other tidbits of interest to the charity community.
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…)
(cross-post from Attestation Update.)
I’ve been following the corruption case in the city next to where I live. This post describes the sentencing and additional consequences of the fraud.
The mayor was accused of accepting bribes from a local business in return for helping them get back in business. In April 2012, he pled guilty to one count of bribery. The remaining 9 charges were dropped at the sentencing.
Yesterday he was sentenced to two years in federal prison.
Rich Karlgaard from Forbes thinks so. In his article, Recovery Drag: The Age of Cheats, he surveys the moral rot in sports, quickly touches on the rot in business and our political system and concludes we are in an Age of Cheats.
Is there something wrong in the sports world? Consider this:
Sosa was a former 165-pound rookie who weighed 220 pounds the year he banged out 66 homers, chasing McGwire’s 70.
A 55 pound bulk up?
Are Glasses the New TOMS Shoes? No, according to Lauren Bishop on the NYU Development Research Institute blog.
Warby-Parker sells glasses and then donates money to NPOs who train local workers who in turn provide eye exams and sell low-cost glasses.
Here’s the concept: (more…)
The investigative team for AC360 at CNN is working on a series of reports discussing charities. The series appears to have been focusing on some unpleasant things going on in the world of fundraisers.
Last week Anderson Cooper’s team started looking at the valuation issue of GIKs. Their report can be found here: Charities accused of overvaluing donations.
Check out the report if you are interested in GIK valuation issues.
They have invoices used by SPCA International for a large volume of medicines that were sent to an animal welfare organization in Nepal. They also have the invoice used for customs clearance. The income recognized on the books is $816,324 and the customs value is $2,500.
Here are two questions for administrators of NPO retirement plans from Emma Kong at the Mission: Accountable blog.
Check out her post, Hidden Rules of the 401(d) and 403(b), for the answers to these questions:
The 7-26-12 edition of CPA Letter Daily says a working draft is expected soon:
The AICPA’s Financial Reporting Executive Committee is expected to issue a working draft of the accounting content of a proposed Audit and Accounting Guide, Not-for-Profit Entities, on Aug. 15
If you work in the financial area of the NPO world, this would be something to watch for. The revised guide has been in development for a number of years.
Consider this ethics case study:
You work at a company that processes low-level radioactive waste from hospitals. Everyone knows your company is in serious financial trouble. Your manager tells you to start dumping truckloads of unprocessed waste material on the school playgrounds in your community. Just one truckload per school per month– your boss says that’s not enough to make anyone sick. What is the ethical thing to do? Develop and explain a range of options, choose one, and defend your choice.
While melodramatic, that case study is only a slight exaggeration from the case studies I recall from my long-ago ethics class in grad school. If memory serves, we had one class that was half marketing and half business ethics. The case studies, as I recall, were primarily dramatic overstatements with a painfully obvious correct answer. Those that weren’t extremely obvious had several choices, all of which were it-feels-good options with minimal ethical distinctions.
Melodrama does not really teach ethics. Neither does mush.
This post will have some inside-baseball info for those who are following the issue of how to value donated medicines that has been underway in the NPO and audit communities.
I came across a publicly available price list from a vendor, action medeor, that provides prices for a large range of medicines.
Since there is a behind-the-scenes debate whether the International Drug Price Indicator Guide (IDPIG) has any valid or relevant data in it, I decided to compare the public price list to the amounts listed in the IDPIG.
What did I find?
Prices in the IDPIG are very close to the price list.
I looked at four medicines: 200 mg albendazole and 100 mg mebendazole along with 250 mg and 500 mg ciprofloxacin. These are meds visible in the current conversations on valuing donated medicine.
Try a thing you haven’t done three times.
Once, to get over the fear of doing it.
Twice, to learn how to do it.
And a third time to figure out whether you like it or not.
Multiple internet sites attribute this to Virgil Thomson, American composer.
I’ve been pondering that quote over the last week or so. Lots of wisdom there. Doesn’t apply to everything, but it has lots of value for many situations, especially when dealing with radical change.
(cross-post from my other blog, Outrun Change.)
Caroline Preston has some discussion from the AICPA’s NPO conference in DC last month in her article Charities Continue Debate on How to Value Deworming Drugs. (The article is behind a paywall.)
Her article has a summary of the comments by AmeriCares’ Senior VP of Finance and World Vision’s CFO.
If you are following the deworming issue in the NPO community, you may want to read the full article.
The core issue
The Form 990 from Operation Blessing International for their year ending March 31, 2011 does not include any value for $113,043,709 of deworming medicine that was included on their audited financial statements for that year.
Between the date the audited financial statements were released and when the 990 was filed about seven months later, the ministry decided to remove the amount of contributions for deworming medicine and remove expenses of the same amount.
Operation Blessing has made it really easy to read their audited financial statements and tax return for 2011. You can get either of them with one click at the bottom of this page of their website. Hats off to them for putting both reports in an easy to find place.
Here is the timing:
The IRS has a major push underway to identify people who have hidden cash overseas to avoid paying taxes. That enforcement effort is obviously not a big deal to the nonprofit community.
However, the reporting requirement still applies to ministries that have cash located in their overseas programs.
Here’s the issue: If an individual or organization has ownership or signature authority in an overseas bank account that goes over a mere $10,000 at any point during the year, there is a report that has to be filed by June 30 of the following year.
Even though the severe penalties are intended to encourage people to report all their taxable income, those filing requirements and heavy penalties could create serious problems for an NPO.
If your ministry has cash located overseas, you really need to pay attention to this reporting requirement.
Here is some background that the IRS sent out today in an e-mail update to NPOs:
Deloitte Australia has a good list of tips for the social media aspects of managing a crisis. Planning beforehand is key. It’s better to do some planning before you have a disaster, but life sometimes gets in the way of planning.
If you find yourself in a mess, their ideas will get you started. If you want to do some planning, they have some good ideas.
A few key thoughts: (more…)
A few months ago I saw this message in the back window of a car:
Traditional Latin mass