Another article on donated meds and overhead ratios – the impact of substitution on our thinking process

An Op-Ed in the Los Angles Times by Jack Shakely, president emeritus of the California Community Foundation, discusses the impact of donated medicines on the functional allocation:  The worst way to judge a charity.

A friend of his was grouching about another NPO buying meds for $0.10 a pill and booking them as GIK revenue at $7.00.  Mr. Shakely looked at the organization’s web site and found they claim 90% of the contributions go to program, with 5% to G&A. That leaves 5% for fundraising.

He then wonders why we are putting so much emphasis on the functional allocation as the main measure of an NPO.

(more…)

Jim Ulvog

Another chapter in the Tragedy of Fraud

Prison.  Bankruptcy.  Publicity. Civil litigation.

Such are the wages of fraud.

It is such a tragedy.  Such a waste.

The mayor of a neighboring city provides the next example of the devastation from fraud.

I’ve discussed this case in my other blog, Attestation Update, over the last year from the perspective of an auditor. See my update for developments this week:  Guilty plea in corruption trial mentioned a year ago.

Here is my short version of the government’s accusation, based on reports in the local paper, mostly this article from the Daily Bulletin.

(more…)

Jim Ulvog

e-fax – Electronic facsimile services are really inexpensive

I changed my e-fax provider today.

If you hadn’t thought about it before, or were unaware, you can buy an electronic fax service that puts faxes into your inbox via email.  You can dump your fax machine.

Each time I change providers, I find out that the services have gone up and the cost has gone down.

This time around I learned it is a common feature to be able to send a fax from your email software. Just enter the recipient’s fax number plus an extension as if it were an email address, add attachments, and hit send.  Your fax is on its way.  Cool.  Oh, toll-free numbers are now available for no extra charge.

Price?

(more…)

Jim Ulvog

More info on NPOs from speech by the IRS’ Director of Exempt Organizations

Over the weekend I wrote a post saying that active and informed board members are the cause of the correlation between good governance and compliance with tax laws.

More info is available on the speech by Ms. Lois Lerner, Director of Exempt Organizations at the IRS.  She is the senior executive in the IRS that deals with NPOs, so her voice is one that we ought to listen to.  She spoke at the Georgetown Law Annual Conference.

(more…)

Jim Ulvog

So if you have your board read your 990, you will be a better run NPO. Right?

That is perhaps the conclusion you could reach from reading a new study from the IRS.

Holly Hall, of The Chronicle of Philanthropy, reports on a speech by Lois Lerner of the IRS in a post, Good Governance Makes tax Compliance More Likely, Says IRS Study.

The IRS looked governance issues in 1,300 charities after the IRS had involvement with those organizations for other reasons. They found a very strong correlation between organizations that had good governance and high levels of compliance with the tax law.

Key findings:

(more…)

Jim Ulvog

There is more to the IRS audit report on Food for the Hungry than is yet visible

CharityWatch has an article discussing the IRS audit report on Food for the Hungry – – View Through the Looking Glass.

One sentence background – the IRS claims that Food for the Hungry substantially overstated the valuation of donated medicine in their 2008 tax return.

I’ve mentioned the report here and here.  I’ve been talking about the valuation of deworming meds, especially mebendazole, for several months.

The CharityWatch discussion provides a bit more information from the report that has been discussed publicly. It looks to me like there is more to be revealed.

(more…)

Jim Ulvog

Welcome to readers outside the U.S.

While writing a post on my other blog, Outrun Change, about how much personal computers have changed in the last 30 years, I realized how many of the readers of my blogs are from outside the U.S.

On my two main blogs, this one which is Nonprofit Update and Attestation Update, about 20% of the page views in the last 30 days have been from readers in other countries.

Welcome!

Not sure what that means for my writing, but I’ll keep that in mind.

Enjoy!

Jim Ulvog

Cash flow classification for donated securities that are liquidated upon receipt

A nice clarification from the EITF…

One of the fuzzy places in the accounting literature for nonprofits is how to handle donated securities that are liquidated when they are received.

Here is the approach that most organizations take – Since they are not in the business of the investing in the stock market they transfer donated securities to their broker and liquidate them in an orderly manner.

How should those be presented on the cash flow statement? There’s divergence in practice, but I think the most common way is to reflect the liquidation has an investing inflow.

Exposure draft from the FASB will make the presentation consistent.

(more…)

Jim Ulvog

A short explanation of why feel good aid might make things worse

In The Broken “Buy-One, Give-One” Model: 3 Ways to Save Toms Shoes author Cheryl Davenport provides a concise description of the underlying problem with the TOMS model.

There’s a huge number of articles out there describing the conceptual issues.  Ms. Davenport has a great recap:

First, the Toms buy-one-give-one model does not actually solve a social problem. Rather, the charitable act of donating a free pair of shoes serves as little more than a short-term fix in a system in need of long-term, multi-faceted economic development, health, sanitation, and education solutions.

(more…)

Jim Ulvog

Moving up the value chain – data, information, knowledge, wisdom

What’s the difference between data, information, knowledge, and wisdom?

John Bredehoft pointed me to an academic definition from Sujatha Das, in her post Difference between Data, Information, Knowledge and Wisdom.

Value increases dramatically with each step up. Knowledge is far more valuable that just information. Wisdom far surpasses knowledge in value.

(more…)

Jim Ulvog

The price of free apps is not zero

You may not hand over money for that cool app, but you might pay in other ways.

Like handing over personal information.  Or perhaps the personal information of your friends.

An article in the Wall Street Journal, Selling You on Facebook, reports on their research into the data obtained by a variety of Facebook apps. Many apps look for personal information, sometimes including your political or religious beliefs.

(more…)

Jim Ulvog

Three skills for living in a social media world

There will be three career fields in huge demand in the social media world. That is the idea Mark Schaefer presents in his blog, {grow}.

I discuss this in my post Three Skills for Living in a Social Media World at my other blog, Outrun Change.

At an individual level, I think these three careers point to skills each of us need to develop if we wish to function in a world dominated by social media.  The career fields and individual skills are: (more…)

Jim Ulvog

Lots of things in life are really, really complicated. Sort of like a rain forest.

Some things are exquisitely complicated.  Making changes, fixing problems, or making improvements to such things is really difficult.

Unintended consequences result when you do something simple in a complex system.

Came across a superb illustration of the challenge of dealing with complexity. In his post The Health Care Disaster and the Miseries of Blue, Walter Russell Mead compares the US healthcare system to a jungle ecosystem.

(more…)

Jim Ulvog