Fall-out Over Foundation Impropriety

There’s a lot of finger-pointing and passing the fiduciary buck going on at the Los Angeles Trade Technical College these days and heads are rolling. The executive director of the Trade Tech foundation, Rhea Chung, is being investigated on claims of lavish spending, excessive bonuses, and allegations of forged signatures on checks. The improper spending came to light during a state audit.

File this under Do Not Do This: Included in the questionable spending are items such as: $1,500 monthly car allowance, $22,000 performance bonus, $2,000 monthly pay for running the youth orchestra, tens of thousands of dollars on golf outings and daily restaurant meals averaging $150 a day.

Here goes the finger pointing: Ms. Chung claims all her expenses were approved by the President of Trade Tech, Chip Chapdelaine. Chapdelaine claims no knowledge. Faculty claim they brought the questionable spending to Chapdelaine’s attention and that he ignored it. Chapdelaine stated he never had fiduciary responsibility over Chung, that it was the chair of the board, Darryl Holter’s responsibility. Holter claims Chung reported to Chapdelaine, not to the board. Holter is also under fire for potential conflict of interest and claims personal vendettas are causing all these problems. Faculty of the college and the state education code agree that as President, Chapdelaine bore responsibility to ensure the foundation’s finances were appropriate.

Here goes the head-rolling: Chung is on administrative leave pending further investigation. Chapdelaine removed Holter as chair of the board and Holter, along with another board member resigned. The faculty governing body at the College issued a no-confidence vote yesterday, calling on Chapdelaine to resign. Chapdelaine is declining to comment.

What to learn from this: Don’t make assumptions someone else is responsible or looking. When it comes to public funding, everyone involved owes some fiduciary responsibility but absolutely no one at the top can shirk that responsibility. Review current financial reports regularly. Ask questions about odd spending and follow up – especially if someone else seems to be ignoring it. If you aren’t sure of the chain of command – it needs to be in the by-laws.

Source: L.A. Times

#LATradeTech #fraud #fiduciary #Chapdelaine

Giving Trends & Expectations Report

The Philanthropy Journal has released its special report on Corporate and Foundation Giving for 2011 which examines trends and expectations, along with providing information about what corporates, foundations, and nonprofits need from each other now.

After the economy collapsed in 2008, foundations and corporations seriously cut back on their funding of nonprofits. Many of the plans put in place after the fall-out have become an ongoing business strategy even after some bounces towards recovery. The fact that I’ve seen the word “austere” (defined as a rigorous economic approach of no luxuries or comfort) used more in the media over the last 24 hours than I have in years is just an indication of current attitudes.

So how to approach corporate and foundation grantors in this climate? The Philanthropy Journal’s study urges grantseekers to be clear, candid and work on building purposeful partnerships.

For more detail on their advice and the study findings, visit the Philanthropy Journal.

#giving #philanthropy #nonprofit #taxexempt #grantseeking

More Pushback on PCAOB Auditor Rotation Issue

According to the Virginia Society of CPAs, several public businesses have banded together and submitted a group letter to the PCAOB in opposition to their stance on the auditor rotation issue. Viacom, Safeway, United Healthcare, FedEx, and even the SEC themselves were among those signing the letter.

The letter points to that there has been no compelling proof presented by the PCAOB of a benefit of mandatory auditor rotation.

For more on the debate, see previous posts The House Gives PCAOB a Smackdown and AICPA Opposed to Mandatory Audit Firm Rotation.

Source: VSCPA

#auditorrotation #pcaob

Social Security Numbers on Form 990 = Identity Theft Risk

A recent study published by Identity Finder, a security and privacy software company, revealed that nearly half a million social security numbers were included in public filings of Form 990. The study reports that between 2001 and 2006, 18% of all non-profit organizations included at least one social security number on their Form 990. Since these forms are permanently public, this practice opens these individuals to identity theft.

Personal information gets reported when there are individual scholarship recipients, tax preparers, employees and in some cases individual donors. The charities that disclose this information can be held liable if the information is fraudulently misused.

The IRS does NOT require organizations to include social security numbers on Form 990 – even for the tax preparers who are required to provide their tax id next to their signatures. The instructions state that they should NOT provide social security numbers.

Sources: Identity Finder, Chronicle of Philanthropy

#form990 #identitytheft #nonprofit #taxexempt

Nonprofit Ninjas are at it again!

The Aronson Nonprofit Association Industry Services Group, a.k.a. the Nonprofit Ninjas are working on another fundraiser. We will be fundraising and participating as a team in the 17th Annual Walk for Animals to benefit the Animal Welfare League of Arlington. The walk is May 12th, dogs and people invited!

The money will help:

• $25 covers the cost of 1 heart-worm test for a shelter dog
• $50 covers the cost of 4 shelter cats or dogs being micro-chipped
• $100 covers the cost of 2 cat spays/neuters or 1 dog spay/neuter

The League provides temporary care and refuge for homeless and suffering animals and works to place them in suitable homes.

If you’d like to donate or join our team in the effort and be a nonprofit ninja, please click here!

Discounting Pledges (avoiding management letter comments, part 3)

Discounting pledges and accounts receivable can be a confusing topic, so it shows up often as a management letter comment.  Depending on the amount requiring adjustment, this can be either a significant deficiency or a material weakness if it gets too big. Below are some suggestions on how to record pledges and discounts, and avoid getting a management letter comment.

• Pledges should be recorded as revenue when there is substantive proof of intent, a signed pledge card or email.
• Pledges not expected to be paid for more than one year should be discounted for time value.

There are two ways to determine the rate used for discounting:

• Use a rate equivalent to the rate you would receive if you were borrowing the funds from a bank; or

• Determine the risk free rate at the date of the pledge and the length closest to the term of the pledge by using this website http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2011.  If you choose this route the rate will need to be adjusted for your organization’s personal level of risk by increasing the risk-free rate an additional amount as deemed appropriate by management. Increases from 0.5% to 1.0% are common. When interest rates increase, these risk-adjustments will also increase.  The longer the term of the pledge the higher the additional rate of risk should be. Continue reading »

What’s the Real Value of a Benefit Plan Audit

That depends on who you ask. If you ask an employer that takes their fiduciary obligations seriously, or one that has had problems with their plan in the past, then the audit is very valuable. However, if you ask an employer that is not so in-tune with their fiduciary obligations and views the audit as a commodity that goes to the lowest bidder, then the audit is a hassle and of little or no value.

For many, a benefit plan audit is not an option:

Once a retirement plan falls into the large plan category, an audited financial statement is Continue reading »

Webinar: Hot Topics in Nonprofit Accounting

The AICPA’s Auditing Standard Board has recently completed their Clarity Project, which includes provisions that will affect your audits. Additionally, the FASB has been busy addressing nonprofit accounting issues that you should be aware of. Join Rob Eby of Aronson LLC’s Nonprofit and Association Industry Group on April 23rd for an informative webinar designed to keep you abreast of important developments related to:

• Changes to the Auditor’s Standard Opinion
• EITF Issue No. 12-A: Classification of Gifts of Securities in the Statement of Cash Flows
• EITF Issue No 12-B: Services Received from Employees of an Affiliated Entity
• SSAE No. 16: Reporting on Controls at a Service Organization
• NAC Projects
• COSO Internal Control – Integrated Framework

Maryland Couple Indicted for $1M Fraud Against USAID

The Washington Business Journal is reporting that two people from Prince George’s County, Maryland were indicted in district court last week with 21 counts of fraud against the US Agency for International Development (USAID) under its Analysis and Information Management (AIM) contract. The charges include money laundering, program and identity theft and fraudulently submitting bogus invoices for more than $1 million from 2005 to 2010 for work that was never performed.

One of the accused parties was working as the Deputy Director and Project Manager of the AIM contract at the time.

How did he allegedly do it? The accusations claim he used other people’s identities without their knowledge, forged signatures on purchase orders, and colluded with others to submit and pay invoices of a fake company. The couple have entered not guilty pleas.

Remember! When it comes to fraud, people in positions of authority can frequently cause the biggest damage if they abuse their position. Generally speaking, the higher up the person is, the greater the potential level of damage. Keep this in mind when planning internal controls and make sure everyone has checks and balances, regardless of position.

Source: Washington Business Journal

#fraud #collusion #USAID

Fundraising FAIL (Reminder: Hug Your Volunteers)

Volunteers, fundraisers, and donors are human and don’t take kindly to being slighted. Especially by the board they’ve dedicated years of service to. The Wall Street Journal is reporting the story of the Brooklyn Museum Community Committee, a group of largely older women some of whom had invested more than 50 years in time and funding of the museum only to be curtly disbanded by the board who decided to shift to professional fundraisers. The committee had a documented level of success for years, raising funds since 1948. In the late 1990s, their annual ball netted $850,000. Many of the committee members included the museum in their wills but after feeling discarded and unappreciated, those wills are being revised.

The point being that these women were personally invested and they felt their time, efforts and money were worth more than a sudden disbanding with a note of thanks and a pin from the museum gift shop.

One can imagine that a board faced with a fundraising committee with some of their members in their 90s, might be thinking in terms of succession. Opting for professional fundraisers is not unreasonable but possibly there could have been a more respectful way to proceed. Maybe some sort of blended committee with the volunteers and the professionals or a phase out. Maybe even just asking the committee themselves what their suggestions were for a 5 year plan and succession.

One member who had bequeathed her personal art collection, including valuable prints from Rauschenberg, has since changed her will and those prints will now go to the Jewish Museum of New York. The Brooklyn Museum now has garnered negative press, lost funding, bequests, and general goodwill.

With the nonprofit sector news lately reminding everyone that the job market is opening up and employee retention is going to come down to work satisfaction, job meaningfulness, and generally being appreciated, it is imperative to keep those same concepts in mind with volunteers and committed donors. Don’t forget to show them your love and appreciation!

Source: WSJ

#fail #fundraising #nonprofit #volunteer