Time to talk about GIK issues again

In the midst of a discussion of GIK valuation issues in December and January that I thought was taking place within the nonprofit community, news surfaced that the IRS had finished an audit which identified major concerns about the same issue.  I discussed that here and here.

I’ve held off on more discussion to see how many more shoes were going to drop.  Haven’t been too many – the Better Business Bureau and Charity Navigator are paying attention.

Really bad ideas for international aid – more unintended consequences

7 worst international aid ideas are Richard Supart’s nominations for the lousiest ways to help people.

Sending a ton of t-shirts or other clothing items to help the poor, naked, helpless people over there seems like a good idea.  Feels good, simple, great pictures, and easy-telling story.

Unfortunately, it is actually quite destructive.  T-shirts are at the top of Mr. Supart’s bad idea list:

1. One million t-shirts for Africa

Why is that hurtful?

How government policy could make it easier to go through the massive transition in the economy

Have a post at my other blog, Outrun Change, that discusses how government policy at all levels needs to change so it will be easier to move through the massive transition we are seeing throughout the economy.

See How government could make the massive transition in the economy easier.

Federal, state, and local policies could slow down the transition. (Not stop it, just slow it down.)  Or those policies could make it easier and quicker to get through the painful transition.

The power of data-mining – calculating which customers are newly pregnant

Have a post at my other blog, Outrun Change, describing the power of data-mining.  Target is looking at their customer sales database to determine who is in the early stages of pregnancy so those mommies-to-be can start getting coupons for baby stuff.

See Predicting who is expecting by their shopping patterns in the second trimester – the power of data.

Might be a bit weird if you haven’t quite yet announced the good news to everyone.

Twitter policy in 140 characters

A post at my other blog, Attestation Update, provides a Twitter policy in 140 words that Jay Shepherd developed.  Easy to adopt as your policy:  A twitter policy short enough to tweet. 

He also provides a one paragraph description of how businesspeople can use Twitter. Useful for ministries and churches as well.

Charity Navigator’s raises idea to revise prior year reports for changes in GIK valuation – A brief discussion of the rules for restating financial statements

Caroline Preston, from The Chronicle of Philanthropy, reports in Watchdogs Zero In on Charity Drug Valuations, that Charity Navigator is floating the idea of asking some charities to restate the last four years of financial statements.

Many NPOs that applied SFAS #157 saw their revenue drop dramatically because of using lower valuation for medicine, especially deworming meds, most specifically mebendazole. (I know, I know, it’s actually ASC 820-10, but my brain still thinks in terms of SFAS numbers when it comes to pre-ASC rules.)

The rating methodology used by Charity Navigator, according to Ms. Preston’s article, penalizes NPOs whose income drops. That means a lot of relief & development NPOs will take a big hit on their ratings.

I don’t have any information beyond the article, so I don’t know what reaction they are getting.

It’s just my guess, but I think they will not get a very good response to their idea.  I don’t think NPOs will be at all amused to take this approach.

Q: Are overhead ratios the perfect measure of NPO efficiency and effectiveness?

A: No way.

This is the conclusion of Saundra Schimmelpfennig in her e-book, Lies, White Lies, and Accounting Practices; Why nonprofit overhead doesn’t mean what you think it means

Many people believe that the ratio of supporting services to total expenses is the ideal way to measure the efficiency of a nonprofit organization.

Even at a conceptual level, that is a flawed idea.

At a practical level, Ms. Schimmelpfennig explains it is so easy to play games with the functional allocation that the overhead ratios should be viewed skeptically.

Again, here’s why it feels like the economy hasn’t recovered

Why doesn’t it feel like the real GDP has recovered from the recession? 

Because employment is still in the tank.

Mark J. Perry printed an update to his graph of the GDP and employment numbers at Chart of the Day: Structural Shift in the U.S. Economy.  I mentioned this graph earlier.

Better Business Bureau is looking at how charities value deworming meds

William P. Barrett just reported that the Better Business Bureau Wise Giving Alliance has asked several dozen large charities how they value deworming meds.

In his article, BBB Asks Charities To Explain Deworming Med Valuations, he says the BBB sent a letter in early January asking for a variety of information, including dollar volume of the meds distributed, number of pills, and the accounting rationale for the valuation that was used.

Comments from others on the IRS audit of Food for the Hungry

A few comments and observations are starting to appear about the IRS audit of Food for the Hungry. Here are a few I’ve seen:

Valuation of deworming gets more complicated – the IRS gets involved

It’s not just two big-time reporters and this teeny-tiny blog looking at the mebendazole issue anymore. 

It is now obvious that the IRS has been paying attention for quite some time.  On Monday their involvement hit the papers.

Two articles appeared:

William P. Barrett, from Forbes magazine, posted  IRS Audit: Big Charity Filed Misleading Tax Return

Caroline Preston, of The Chronicle of Philanthropy posted IRS Levies Fine on Food for the Hungry Over Drug Valuations.

If you have any interest in the issue of valuing GIK meds, you will want to read both articles.

Graphic that shows the impact of change in GIK valuations

The Chronicle of Philanthropy has a superb graphic that shows the amount of donated mebendazole deworming medicine recorded as contributions in the financial statements of three NPOs before and after applying the change in valuation required by SFAS #157:

Graphic: How Three Nonprofits Value Medications

Impact on GIK values form change in accounting rules – Part 4 – A few final observations

Previously I’ve discussed the impact of new accounting rules on valuing of deworming medicine.  Have been looking at Feed the Children financial statements to quantify the impact.

I am not picking on Feed the Children.  

I’m using their 2010 financial statements because they have the best disclosures in their financial statements that I’ve seen for the impact, plus there is public information on what per-pill valuation amounts they have been using.  It is to their credit that they have this amount of background available in their financial statements.

It is my guess, just a guess, that the same underlying valuation issues and impact on supporting services ratio that I have described previously here and here, would also be present in the financial information for other organizations that have large volumes of deworming medicine.  If I can find good info, I’ll do some calculations on other sets of financials.

I have a few more observations and then one more set of calculations.

10 year anniversary of Ulvog CPA

On January 28, 2002 I hung out my shingle as a one-person CPA firm.  Ten years ago!

That was an exciting and thrilling step for me.  I’ve never had as much fun in my professional life as I have in the last decade.

My hope is that I’ve helped many organizations in the religious non-profit community improve their accounting and accountability.

I’m looking forward to many more years serving the non-profit community.  Looking forward to serving the CPA community as well.  Also looking forward to having even more fun – the next decade will be better than the last!

Why my interest in the Bakken oil field is increasing

For quite a while now I’ve been fascinated by the rapid increase in oil production in the Bakken field in North Dakota. 

Have had a lot of posts on my blog Outrun Change.  Under 1% unemployment in one county. Production graphs that are going vertical.  More oil produced in ND than California. That kind of stuff.

This month my interest level took off like those oil production charts.