Hearings start tomorrow on California AG’s Cease and Desist Orders against three charities

November 26, 2018, 7:55 am

Image courtesy of Adobe Stock.

Calendar at the Office of Administrative Hearing’s website still shows the appeal hearings on the AG’s Cease and Desist Order start tomorrow, November 27, at 10 a.m. in downtown Los Angeles. Hearings continue the next 14 days at 9 a.m.

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Comments in financial statements of three charities appealing California AG’s Cease and Desist Order. Part 3 of 3.

November 20, 2018, 7:05 am

Appeals of the AG’s C&D Order will be heard by an administrative law judge. Image courtesy of Adobe Stock.

There are a number of pieces of information of public interest in the most recent financial statements for the three charities who received cease and desist orders from the California Attorney General. The appeal hearings start in a week, on November 27, 2018.

Part 1 of this series provided background, an executive summary, and a short discussion of Catholic Medical Mission Board’s disclosed accounting policy. Part 2 discussed the Food for the Poor financials.

This post will discuss the MAP International financials. Might want to get a fresh cup of coffee since this is a long read because it quotes the accounting policy in 2017 and 2016 along with a transition comment from the 2014 financials.

Previous post discussed the 12/31/16 financials for FftP, 9/30/17 financials for CMMB, and 9/30/16 financials for MAP.  FftP and MAP have since issued their next year’s report; CMMB has not.

MAP International

The 9/30/16 financials were available for issue on February 2, 2017, about 4 months after year-end.

The audited financials for the year ending September 30, 2017 have a date on the audit report of September 27, 2018. That means the 9/30/17 financials were released, or available for issue, on 9/27/18, about twelve months after the fiscal year-end. Audit report is from the Lawrenceville, Georgia office of Capin Crouse.

This means the 2017 financials were prepared with knowledge of the AG’s allegations and known status of the case as of September 2018.

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Comments in financial statements of three charities appealing California AG’s Cease and Desist Order. Part 2.

November 19, 2018, 8:24 am

At issue in the AG’s claim: how should pallets of donated meds be valued if restricted by donor for distribution overseas? Image courtesy of Adobe Stock.

There are a number of pieces of information of public interest in the most recent financial statements for the three charities who received cease and desist orders from the California Attorney General. The appeal hearings start in about a week, on November 27, 2018.

Part 1 of this series provided background, an executive summary, and a short discussion of CMMB’s financials. This post discusses the Food for the Poor (FftP) financials. Part 3 will discuss the MAP financials.

Previous post discussed the 12/31/16 financials for FftP, 9/30/17 financials for CMMB, and 9/30/16 financials for MAP.  FftP and MAP have since issued their next year’s report; CMMB has not.

Food for the Poor

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Comments in financial statements of three charities appealing California AG’s Cease and Desist Order. Part 1 of 3.

November 17, 2018, 10:03 am

Image courtesy of Adobe Stock.

Just checked on the most recent financial statements for the three charities who received cease and desist orders from the California Attorney General. The appeal hearings start in a week, on November 27, 2018.

Found a number of pieces of information in the financials that are of public interest to this developing story. Will point out some of the information now. Later on, as time allows, I’ll provide some commentary on the disclosures.

Previous post discussed the 12/31/16 financials for FftP, 9/30/17 financials for CMMB, and 9/30/16 financials for MAP.  FftP and MAP have since issued their next year’s report; CMMB has not.

This discussion will be in three parts.

Executive Summary

All three charities disclose they use wholesale acquisition cost (WAC) to value donated medicine.

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Appeal of three Cease and Desist Orders from California AG set for hearing before an administrative law judge.

October 29, 2018, 9:59 am

Image courtesy of Adobe Stock.

Here are the hearing dates for the three charities accused by the California AG of overstating revenue and program expenses.

As you recall, the AG filed cease and desist orders against three charities. The charities have all appealed the order.

The calendar for the appeals can be tracked at the Office of Administrative Hearings website.  On the right side of the page, third option from the top, is Calendar – General Jurisdiction.

Scheduling info is:

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Assessment of allocating cost of speakers in Food For the Poor’s financial statements.

October 5, 2018, 8:39 am

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The Cease and Desist Order filed by the Michigan Attorney General on December 19, 2017 provides an analysis of the joint cost allocation methodology used by Food For the Poor.  The Order can be found here.

FFP hires pastors from various denominations to make presentations at churches in the pastors’ denomination.  FFP applies joint cost allocation accounting to classify a large portion of the speakers’ time as program services.  The AG concluded the allocation methodology did not follow GAAP.

As mentioned previously, FFP settled the AG’s allegations by agreeing to pay the state $300,000 and revising its fundraising materials.

For general education of the nonprofit community, this post will quote the AG’s Cease and Desist Order at length on the joint cost allocation issue.

The authoritative explanation of what constitutes generally accepted accounting principles is found in FASB’s Accounting Standards Codification™ (ASC). I will add some citations from ASC to the AG’s Order. Will also add a few comments along the way.

A detailed look at the AG’s Order is valuable because it provides an in-depth analysis of a specific situation with a detailed comparison to authoritative GAAP.

You might want to get a fresh cup of coffee since this post is a long read, currently sitting at over 1,500 words. It is also quite technical.

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Food for the Poor settles allegations in Michigan AG’s Cease and Desist Order

October 4, 2018, 11:38 am

Image courtesy of Adobe Stock.

On October 1, 2018, Mark Hrywna reports in Nonprofit Times that Food For the Poor Settles With Michigan AG. The settlement calls for FFP to pay the state $300,000 and to revise its fundraising appeals.

Action is based on 2015 financial data. The filed data shows 96.5% of all expenses are categorized as program services, according to the article.  The AG asserts that if gifts-in-kind are excluded, program services would be about 67%.

The AG issued a cease and desist order in December 2017. More on that later in this post.

Might want to get a fresh cup of coffee. This will be a long read.

My summary of the numbers mentioned in Attorney General’s Cease and Desist Order:

 $ total expense $program  $ supporting svc  prog %
 per filing             1,157.5    1,117.0                     40.5 96.5%
 GIK             1,033.3    1,033.3
 cash exp.                124.2         83.7                     40.5 67.4%

 

One particular fundraising pitch is mentioned in the article. FFP conducted a “6 Cents Appeal”, in which it claimed, quoting the article quoting the campaign, that “It only takes 6 cents to provide a meal for a starving child.” The AG took exception to this campaign for multiple reasons. More later in this post.

Article says FFP denies the accusations which leaves us in the typical situation seen in such settlements:  While denying the quite serious allegations, the charity will write a $300,000 check from donor funds to pay the state since they did nothing wrong and change their fundraising materials, all of which was actually fine, with both those actions done voluntarily since they didn’t do anything inappropriate.

Dropping the smart alack tone, I really do understand why such comments are absolutely necessary in negotiating a settlement, especially since the California AG still has a separate Cease and Desist Order under appeal. It still rubs me the wrong way, but that’s just me.

Press release from AG

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