Monday Morning Accounting News Brief: 990s to Get a Facelift; DOJ Gets Busy Busting Fraud | 4.27.26

Everyone Loves an Informative 990

The IRS is updating Form 990, reports Journal of Accountancy:

The revisions, announced in a news release on Thursday, are also focused on the government contracts, government grants, and fiscal sponsorship arrangements of Sec. 501(c)(3) organizations.

A fiscal sponsor is a tax-exempt organization that funds other, typically newer, groups before they establish themselves on their own.

“When bad actors misuse charitable structures, directors and officers should understand that transparency can lead to scrutiny, accountability, and liability under the law,” Treasury Secretary Scott Bessent said in the release.

The Official IRS Shit List for Practitioners

In other tax news, the IRS put out a list of practitioners on their shit list and Tax Notes published it. The list includes people who have been disbarred or suspended from practice before the IRS, among other things. It’s a short list.

The Prompt Is the Problem

For tax practitioners who aren’t on the shit list, Thomson Reuters has some guidance on the skills you need. Let’s see what they say about prompt engineering:

Prompt engineering: The skill nobody takes seriously until they see what it does

The name doesn’t help — but set that aside, because the underlying skill is straightforward: giving your AI tools clear, precise, well-contextualized instructions that produce outputs that are worth using.

Most people start badly when approaching a blank AI screen. They type something vague, get something generic, and conclude the tool isn’t useful. That conclusion is wrong, because it was the instructions given, the prompt, that was the problem. Specify the entity type, jurisdiction, tax year, audience, and format. Then tell the tool what you need and why. The difference in output quality is not marginal.

Of course, it’s important to remember that AI will tell you things that are wrong with complete confidence. It will cite an amended provision, apply a rule from the wrong jurisdiction, or construct a plausible analysis on a flawed premise — all without flagging any of it. The professional responsibility to catch it remains entirely upon the user. That’s not a flaw in the tool; it’s a reminder that expertise isn’t being replaced here — it’s being put to better use.

Accountant Allegedly Caught Up in a Big Mortgage Scam Ring

Bit of a fraud scandal unfolding in Australia with the arrest of an accountant, reports AFR:

The Australian Federal Police has arrested and charged what appears to be the first person linked to a wave of recent suspected mortgage fraud, alleging he is associated with a criminal money laundering syndicate involved in illicit tobacco, drug importation and onshore scam networks.

Melbourne accountant Qi Gao, also known as Andy Gao, was arrested and charged on March 31. He was granted bail to appear in the Magistrates’ Court in July, and faces a maximum penalty of 27 years in prison.

The charges follow broader allegations that $3 billion in estimated fraud has been linked to multiple individuals and businesses across the country’s $2.4 trillion mortgage market this year.

Firm Has to Pass on a Flock Audit

Have you been keeping up with the Flock surveillance drama happening around the country? I don’t have time nor inclination to get into it here and my tinfoil hat is in the shop, have this from The Guardian: ‘Creepy surveillance’: why some cities are shutting down Flock cameras amid privacy concerns and this from the EFF: EFF’s Investigations Expose Flock Safety’s Surveillance Abuses: 2025 in Review.

But hey, let’s get back on topic. In Palo Alto, CA they were going to ask their auditor to review Flock data but turns out their auditor works with Flock:

Baker Tilly, the national firm that six years took over the functions of Palo Alto’s city auditor’s office, will likely perform these duties for at least another two years under a contract that the City Council is set to approve next week.

The council had briefly considered asking Baker Tilly to review the city’s Flock automated license plate readers to ensure, among other things, that the city’s data is not being used by other agencies in violation of local policies. The firm bowed out of that assignment due to the fact that it also works with Flock.

Not entirely sure what “works with” means, might be this third party assessment thing announced in 2025. Due to the barrage of security concerns they’ve been getting, Flock recently announced an automated audit tool that “continuously monitors system activity and surfaces search patterns that fall outside an agency’s typical usage.”

Not Answering Emails For Weeks Gets This Firm Fired

A town in Maine has fired their auditor:

Norway has worked with Runyon Kersteen Ouellette, or RKO, for the past four years.

According to minutes from the April 2 meeting, the town has paid the firm more than $90,000, including a recent $40,000 payment.

“RKO has had extremely slow response times, upward of several weeks for answers to inquiries,” the minutes read.

The firm also had not provided a draft of the 2024 audit to the town.

Asked this week why the town ended its contract with RKO, Select Board Vice Chair Sarah Carter‑Hill wrote in an email, “From my understanding they were taking an incredibly long time to produce the 2024 audit, overcharging for services, and hadn’t started in 2025 so we have switched auditors to be more fiscally responsible and have timelier results.”

Unfortunately RKO didn’t respond to the media inquiry so we don’t know what their excuse is.

The National Fraud Enforcement Division Had a Busy Week Busting Fraud

The DoJ has been busy busting fraud and wants you to know: In One Week, DOJ’s New Fraud Division Secures $300M in Funding for Prosecutorial Support While Announcing More Indictments, Convictions, and Sentences Representing Millions In Taxpayer Fraud.

Law firm ArentFox Schiff summed up the DoJ news release really well:

The US Department of Justice’s (DOJ) newly created National Fraud Enforcement Division announced a sweeping series of enforcement actions representing over $340 million in taxpayer fraud in a single week. The DOJ’s press release touted more than 20 enforcement actions, including five individuals who were arrested in Kentucky, Indiana, and Colorado for an alleged $1.6 million COVID-19 relief fraud scheme; a former teacher who pleaded guilty in San Diego to conspiring to launder millions in health care fraud proceeds and paying $3.7 million in unlawful kickbacks; a federal grand jury in Maryland that indicted a former Social Security Administration employee in an alleged disability theft scheme; a Missouri chiropractor who was sentenced to more than eight years and ordered to repay $4.7 million for health care fraud involving the issuance of nearly 95,000 oxycodone pills with no legitimate medical purpose; a Minneapolis man who was sentenced to 43 months for his role in the $250 million Feeding Our Future child nutrition fraud scheme; and an Iowa farmer who was sentenced to over 10 years for cheating federal taxpayers out of more than $1.7 million.

Getting Brazen With the Crypto Fraud Aren’t We

And in crypto fraud news, JD Supra has a dumb one:

On April 17, the SEC filed a complaint in the U.S. District Court for the Eastern District of New York alleging a crypto founder and related entities perpetrated a securities offering fraud that raised approximately $16 million from investors. The SEC alleged that from at least March 2021 through December 2021, the founder sold simple agreements for future tokens that purported to give investors the right to receive a crypto asset in the future when and if the issuing entity declared, in its sole discretion, that an operational milestone had been satisfied, and that these arrangements constituted securities under federal securities laws. The SEC alleged the defendants made materially false and misleading statements to investors, including claiming that the crypto asset was insured with up to $1 billion in coverage, was asset-backed by an existing trust fund, and that a “basket” of digital assets supported the token’s asset pool. The complaint contends that no insurance policy was issued, that no trust or asset pool was ever created, and that the founder falsely claimed that 80 percent or more of the offering proceeds would support the token’s underlying value.