A Christian relief charity, World Help, grew rapidly in recent years but not as rapidly as originally reported. The organization’s Form 990 reported $239-million in revenue for 2011. The audited figure came in at $17-million. That’s 1400% off-base for those of you punching your 5-key along.
Once again, we have an issue of claiming value for donated medicine which is an ongoing blight in the nonprofit community, but in this case, the donors say they never gave any donation. The finger-pointing is heated and people are no longer cooperating with the press.
A significant impact is to the recipients of the donated medicine. The restatement has caused organizations that received goods from World Help to go scrambling to ensure their valuation is accurate and supportable.
Restatements are never fun but just think of World Help to help you keep perspective when you feel scandalized by one. Read more about the story here.
All public charter schools, and many private schools and parochial institutions, undergo an annual audit. While best practice is to structure work throughout each year to ensure a clean audit, now is a good time to assess where you are and address potential deficiencies. A little preparation goes a long way in ensuring a smooth and painless audit.
Join Craig Stevens and Rob Eby of Aronson LLC for a free webinar led by Brad Olander, CEO of GoldStar, on May 16th at 11am. During this convenient 30-minute session, we will address common questions including:
- What does working throughout the year with the audit in mind look like?
- How do you assess potential deficiencies now?
- Who should be involved in the audit planning process?
- What are typical key audit tasks, processes, and deliverables?
Executive directors, controllers, CFOs, principals and other school professionals serving in an administrative or finance role should register today for this important webinar!
|Date:||May 16, 2013|
|Time:||11:00 am – 11:30 am|
If you missed April’s webinar: “Financial Reporting-Support your board so they can support you,” be sure to visit our resources page to download the webinar!
Join Maryland Nonprofits and Aronson LLC Partner Rob Eby on February 21st for an informative seminar that will answer many of the most commonly asked questions regarding nonprofit accounting and operations:
- What are some indicators of fraud?
- Why is the 990 so important?
- How come these nonprofit statements look so different from for-profit statements I’m used to reading?
- Is my nonprofit required to have an A-133 audit?
- How do I implement internal controls with limited resources?
- What are contributions, exchange transactions and agency transactions, and how are they recorded as revenue?
- Is there anyone who can help decipher nonprofit accounting, reporting and best practices?
This interactive discussion will address each of these questions and many more. Click HERE to register today and reserve your spot!
Each year, one-sixth of the federal budget is dedicated to grants for non-federal entities, such as schools, local governments and nonprofit organizations. This $400 billion expenditure is highly scrutinized and requires stringent compliance procedures, including a single audit for many organizations. Failure to meet compliance requirements could result in your organization having to repay grants and/or losing access to future federal funding.
Join Aronson LLC on January 10th for an informative webinar where our nonprofit accounting experts will help participants better understand the basics of federal grant and single audit compliance. Topics will include:
- The Basics of Control Procedures in a Federal Grant Environment, including COSO Internal Controls and the 14 Areas of Compliance
- The Basics of Costs in a Federal Grant, including Allowable/Unallowable and Direct/Indirect Costs
This is a great opportunity to get a free lesson from our professional nonprofit auditors that just might help you protect the future of your mission, so register HERE today!
The fall-out over the valuation of donated medicine continues with the nonprofit watchdog site, Charity Navigator, landing in the news because of its controversial approach to rating organizations that have changed their values due to adopting more a conservative estimate.
Charity Navigator has decided that instead of punishing organizations that would suffer bad ratings due to a severe drop in revenue based on a more conservative calculation, that they will allow the organizations to file revised financial information for past periods. This would effectively apply the change in value retroactively so that revenue is more comparative.
Opponents to this decision argue that it lets organizations that overstated the value of their donations off the hook and that the excessive balances reported were never supportable under existing accounting rules anyway.
Supporters of the decision say it is a realistic approach to the change in accounting rules.
Organizations that want to file revised financial information have to provide adjusted Form 990 returns, have audit committee sign off, and the revised information must be available on the organization’s website.
Read more about it here.
The Los Angeles Times is reporting that a Superior Court judge has blocked the sale of property given to UCLA under a 1964 agreement that stipulated the university would maintain the garden in perpetuity. In November 2011, UCLA put the property up for bid with a starting price of $9mil for the residence and $5.7mil for the Japanese garden on the property located in Bel-Air.
The university has been dealing with steep budget cuts and determined that the resources would be better directed towards their academic programs. Judge Lisa Hart Cole agreed with the donor’s heirs when they filed to block the sale and she noted that failing to notify the heirs of the university’s intent was “duplicitous”.
UCLA is considering its legal options and considers the judge’s ruling to be a “setback”.
Source: Los Angeles Times
FASB issued Proposed Accounting Standards Update (ASU) No. EITF-12B, Not-for-Profit Entities (Topic 958): Personnel Services Received from an Affiliate for Which the Affiliate Does Not Seek Compensation (a consensus of the FASB Emerging Issues Task Force). The FASB will be accepting comments on this proposed accounting update until September 20, 2012. The proposed update would modify the current that guidance which indicates that only those contributed services that (1) create or enhance nonfinancial assets or (2) require specialized skills, are provided by individuals possessing those skills, and typically would need to be purchased if not provided by donation should be recognized. In addition, under this accounting update the value of the services would be measured at the cost recognized by the affiliate for the personnel providing those services. For more detail read the full FASB exposure draft.
In 2005, Johns Hopkins University was the recipient of a bequest of 138 acres of farmland worth $54 million. The bequest had restrictions on it allowing for development of modest, low-rise academic campus facilities, however, the family (and heirs) of the estate believes that the university’s amended plans, which include a high-rise science facility of over 4.7 million square feet, constitute a violation of the donor’s intent. The family filed suit against the university in Montgomery County Circuit Court last November. Earlier this month during a scheduled hearing, the judge announced a November 13, 2012 trial date.
It will be interesting to see how the courts interpret the donor intent and whether the actions of the university violate the contract that transferred ownership of the property. Stay tuned for updates!
(Source: The Nonprofit Times)
On May 23, the Financial Accounting Foundation (FAF) voted to create the Private Company Council (PCC), whose main purpose will be to define differences and exceptions in U.S. GAAP for private companies. This new council will differ considerably from the previously proposed council in October. Several reductions of FASB’s part in the PCC’s decision making process have been made: FASB’s role in the decision making process has been switched from “ratification” to “endorsement;” The PCC chair will no longer be a FASB member; FASB will be given 60 days to approve a PCC decision or must give a public, written notice of why it failed to endorse the decision; and the PCC is able to decide, by a two-thirds vote and discussion with FASB and stakeholders, which components of GAAP are eligible to be exceptions or modifications.
The PCC, with around nine to 12 members chosen by FAF, will hold a minimum of five meetings every year during its first three years. Several of the deliberative meetings will welcome the public and FASB members, while other administrative and educational meetings will exclude FASB members. A FAF committee will supervise the PCC and FASB as they respond to the requests of the private companies. The Private Company Financial Reporting Committee, which had previously worked with FASB about private company matters, will no longer exist in the near future.
Suggested variances in U.S. GAAP for private companies will be brought up by the public and discussed further by the PCC, who will send the approved modifications or exceptions to FASB for final endorsement. These endorsed modifications or exceptions will then be integrated into U.S. GAAP. FASB is in the process of creating a Private Company Decision-Making Framework, which will be the standard set of rules to determine if and when an adjustment to U.S. GAAP is necessary for private companies. FASB is also working on establishing a clear understanding of how a nonpublic entity is to be defined. The AICPA has shown its support for the PCC and has proclaimed its plans to found an “other comprehensive basis of accounting” (OCBOA) framework for private companies that are small enough to be excluded from the requirement to file U.S. GAAP financial statements. The AICPA hopes that OCBOA will be a “less comprehensive, less costly alternative” for these small and medium-size companies and believes that steps have been made in the right direction to change U.S. GAAP for all private companies.
Source: Journal of Accountancy, July 2012, FAF Creates Private Company Council by Ken Tysiac
Frequently nonprofit organizations receive services from a parent or affiliate’s employees or there may be shared administrative support for which the recipient organization doesn’t pay or incur costs. But what do you do to capture the value of the work provided? What is fair value in this case and what qualifies as a “specialized skill” (sidenote: unrelated donated services must qualify as a specialized skill or one that creates or enhances non-financial assets)?
The Emerging issues Task Force (EITF)’s job is to hash out those insidious little details that are left in grey territory by the FASB. They began discussing this topic in March which I helpfully translated into dramatic narrative here. Or, you can read all about it in their own words here. They go through possible scenarios and discuss if changes should be retrospective. At their June meeting, EITF reached what is referred to as “consensuses-for exposure” which is to say they agreed on an approach and now the FASB needs to chime in.
What was agreed upon was this: The recipient organization should record donated service revenue and expense for all work done on their behalf by an affiliate’s employees at cost. Retrospective application is optional. Early adoption is permitted.
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