Regulators have serious problems with how the nonprofit community is accounting for donated medicine.

May 8, 2018, 1:25 pm

Image courtesy of Adobe Stock

There is a serious problem in the nonprofit community in terms of accounting for donated medicine. Three major enforcement actions by various regulators tell us that the regulators have serious reservations about how charities are dealing with gifts-in-kind.

Those of us working in the charity world need to ponder what could be making so many regulators so concerned.

50 Attorneys General

The rumors in the wind mentioned in my next post were discussed in 2012.  That turned into a major enforcement action by the Federal Trade Commission and all 50 state Attorneys General against 4 cancer charities. (See my posts under the tag FTC.) That was in 2015.

I’m not aware of any followup by that group and I’ll guess the reason is the complexity of coordinating a 50+ member committee.

For the FTC and all 50 Attorneys General to all be on the same page on an issue should serve as a warning they believe there is a serious problem.

IRS

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Some details in the appeals filed by 3 charities

April 30, 2018, 12:44 pm

Image courtesy of Adobe Stock

As mentioned previously, appeals have been filed by the three charities receiving cease & desist orders from the California A.G.

This discussion will highlight some comments in the appeals. Will have a few observation from an auditor perspective along the way. Might want to get a fresh cup of coffee before you dig in. This will be a long post.

Previous posts:

 

Catholic Medical Mission Board appeal

At seven pages, this appeal is a bit shorter than the others. The page count includes the proof of service and a cover sheet which is the page the AG provided to request an appeal.

In the appeal, CMMB denies all the factual allegations and conclusions of law (para 4). Specific assertions are listed for emphasis:

  • The AG is not properly interpreting GAAP.
  • Geographic restrictions on medicine do not make the US a prohibited market for valuation purposes.
  • Representations to California citizens are neither unfair nor deceptive.

In the appeal, CMMB requests:

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Three charities file appeal of California AG Cease and Desist order

April 13, 2018, 4:07 pm

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With a deadline of April 11 to appeal cease and desist orders from the California Attorney General, MAP International, Food for the Poor, and Catholic Medical Mission Board each filed their appeal on the 10th or 11th.

You may find a PDF copy of the appeals and cease and desist orders at the AG’s website.

The individual appeals may be found at:

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A completely different perspective on the crisis surrounding Wounded Warrior Project.

September 26, 2016, 9:53 am
Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

Here are a few articles which will give you a different way of looking at the recent publicity surrounding Wounded Warrior Project. I’ve been swamped by several major projects so haven’t had much time to write recently. Those projects are still not done so I won’t be able to spend as much time on this post as I would like, yet I want to get some comments online for those who have been following the story.

The biggest article is The First Casualty: A report addressing the allegations made against the Wounded Warrior Project in January 2016 by Doug White, published September 6, 2016.

There is a lot of information about the entire story which has received minuscule coverage. Here is my quick recap of his major points:

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Three areas where accountants could help with analyzing charities

February 16, 2016, 7:34 am
Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

Professor Brian Mittendorf has outlined his ideas on how the accounting community could pitch in on industry-wide efforts to assess the effectiveness of charities.

1/25 – Counting on Charity – Three Pressing Issues in the Nonprofit Sector that Need Accounting Input – He  introduced three areas of nonprofit accounting where accountants could help:

  • Accounting for impact investments
  • Follow the money trail through multiple organizations
  • The development of alternative metrics of performance

Expanded discussions:

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CNN reports two charities accused by FTC agree to close their doors.

February 15, 2016, 3:43 pm
Federal Trade Commission Building in Washington, DC. - Picture courtesy of DollarPhotoClub.com

Federal Trade Commission Building in Washington, DC. – Picture courtesy of DollarPhotoClub.com

CNN investigators David Fitzpatrick and Drew Griffin report: Cancer charity targeted by feds agrees to put itself out of business. Article says preliminary documents filed in Federal District Court in Phoenix indicate Cancer Fund of America and the related fundraising arm, Cancer Support Services, agreed to turn control over to receivers for liquidation.

In May 2015, the FTC and 50 state attorneys general sued these two charities and two others run by relatives of the president of CFA, alleging fundraising fraud. Two immediately agreed to liquidate. The two discussed in the CNN report initially fought allegations but have now agreed to close their doors.

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California Attorney General sues charity and their auditor over RRF-1 filing and 990

December 8, 2015, 9:13 am

909 page 1

Sometimes there is a perception in the charity community that those pesky filings with the charity regulators are no big deal. Sometimes board members don’t pay much attention to the 990.

Well, last week the California AG sued one charity in the state for allegedly misleading information in the RRF-1. That is a simple one-page form that has only two numbers: total revenue and total assets. The AG claims the 990s have misleading information in them.

How can the AG of a state sue over a tax return filed with the federal government? Here is the path they take. They allege the one page RFF-1 was misleading because attached to the RRF-1 is the federal 990, which is where they find the information that they consider to be misleading. That gives the state grounds to sue.

The sobering lesson for CPAs who serve the charity community is the AG also sued the CPA firm. In addition, they sued the audit partner personally.

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