Category: Industry

Who Would’ve Guessed Al Sharpton Knew Nothing About Accounting?

Presumably everyone but if you guessed that the Rev had the good sense to hire a crack-squad of debit & credit mavens to keep everything at National Action Network tip-top, you’d be sorely mistaken.

An accounting firm hired by Al Sharpton’s National Action Network found the civil-rights group in such financial disarray that it flunked its record-keeping — and may not even survive, The Post has learned.

The scathing critique was spelled out in a hard-hitting internal audit of NAN’s books, a copy of which was obtained by The Post.

“The organization has suffered recurring decreases in net assets — and has been dependent upon advances from related parties and the nonpayment of payroll tax obligations — to maintain continuity,” the firm KBL concluded in an April 2 audit of NAN’s 2008 financial records, the most recent available.

The audit, which was submitted to NAN’s board of directors, warned, “These circumstances create substantial doubt about the organization’s ability to continue.”

KBL said it was “unable to form an opinion” on the accuracy of NAN’s financial figures “because of inadequacies in the organization’s accounting records.”

Audit finds Sharpton’s nonprofit on brink [NYP]

The IRS-Free, Islam-Free America Movement Gets a Boost

There are two things that really stick in the craw of many Americans: 1) The freedom-hating IRS and 2) Muslims thinking that they can build mosques in this country wherever they want.

Well now, according to a report issued by The Investigative Project on Terrorism (“IPT”) there is reason to lump the two together because a report now shows that Imam Feisal Abdul Rauf – the leader of the Islamic Community Center planned two blocks away from Ground Zero – obtained a ‘sketchy tax break‘ for a religious group he founded.

The IPT investigation found that “Feisal Abdul Rauf filed for ‘church’ status to the IRS for his newly formed Islamic group in 1998 and listed an apartment building where he claimed in the federal application that 400-500 people worshiped there.”


More alleged chicanery detailed in the IPT press release:

[A] review of the building and real estate records indicates there is nowhere in the building to house that many congregants. ASMA lists its office address as 201 W. 85th St., Apt. 10E on the federal tax form, while it cites only the building address as its location for prayer services.

In the article, IPT also shows:

• Rauf’s American Society for Muslims Advancement listed its office as the apartment of Rauf’s wife, Daisy Khan.

• Khan was listed as an ASMA director living at 201 W. 85th St., Apt. 10E, in the group’s 1997 incorporation papers filed with the state of New York. A year later, the group’s IRS filing does not list Khan as a director but instead gives her home address as ASMA’s address.

• ASMA told the IRS in 1998 that it planned to build a prayer center that would hold up to 1,000 worshipers at a time. That was never built.

• Although ASMA has tax-exempt church status, its website shows it has no permanent prayer site and the group no longer touts religious services as part of its mission.

The Post – likely acting on orders from the News Corp. overlords – inflames things bit further (citing IPT’s report) pointing out all the benefits that the ASMA enjoyed as a result of the exemption:

“Church status” is more than just an exemption — it means never having to pay taxes, file returns or reveal the sources of a congregation’s money or how it’s spent, according to the Washington-based Investigative Project on Terrorism, which discovered the group’s startling claims on the IRS form it filed seeking the special status.

On that form, the organization said it held services at 201 W. 85th St.

That’s a 17-story apartment building with no public space big enough to accommodate the 450 to 500 worshippers the group claimed regularly showed up five times a day to pray.

So now that the IRS has been twisted (albeit marginally) into the Burlington Coat Factory Mosque controversy, opponents of one or both will likely be reenergized for their holiday weekend protesting plans. Although, since the IRS has already been accused of anti-Israel it should make things slightly more interesting.

IPT Investigation Uncovers Problems in Mosque Leader’s IRS Status [PR Newswire]
Sketchy tax break for GZ imam ‘prayer pad’ [NYP]

The Last Thing the IRS Needed Was a Lawsuit Alleging Discrimination Against Israel

But that’s exactly what they got! The pro-Israel nonprofit Z Street filed suit against IRS Commish Doug Shulman because Z Street and other “pro-Israel groups whose policies conflict with that of the [Obama] administration,” are getting the stinkeye from the IRS.


From Zulu Avenue’s complaint:

The case is brought because, through its corporate counsel, Z STREET was informed explicitly by an IRS Agent on July 19, 2010, that approval of Z STREET’s application for tax-exempt status has been at least delayed, and may be denied because of a special IRS policy in place regarding organizations in any way connected with Israel, and further that the applications of many such Israel-related organizations have been assigned to “a special unit in the D.C. office to determine whether the organization’s activities contradict the Administration’s public policies.” These statements by an IRS official that the IRS maintains special policies (hereinafter the “Israel Special Policy”) governing applications for tax-exempt status by organizations which deal with Israel, and which requires particularly intense scrutiny of such applications and an enhanced risk of denial if made by organizations which espouse or support positions inconsistent with the Obama administration’s Israel policies, constitute an explicit admission of the crudest form of viewpoint discrimination, and one which is both totally un-American and flatly unconstitutional under the First Amendment.

Pro-Israel group claims IRS persecution [Politico]

Area Man Claims Racquetball Court Turned Church Lost Tax-Exempt Status Due to His Lack of WASPyness

We’re a little late getting to this story but whatevs. George Michael of Lake Bluff, IL is suing the town and the Land of Lincoln after the tax exemption of his home was revoked.

You see, George has an extremely ill wife (who is also religious) and he turned his racquetball court into an Armenian Church so they could worship in the comfort of an extremely high ceiling with transparent back wall. His brother got ordained online to perform the services, and voilà! A tax-exempt house of worship. At first, the Illinois Dept. of Rev. was cool with it but a judge wasn’t as accommodating, claiming that the Michaels are trying to dodge property taxes of $80k a year.

The Michaels took exception with this, arguing that Lake Bluff would prefer a more WASPy community and sued them claiming their lack of WASPyness. The Trib reports him saying, “I don’t think they want anything other than Anglo-Saxons in Lake Bluff.”


Whether Lake Bluff is trying to keep the nabe WASPtacular is not clear although the lawsuit does allege that “[he] heard someone use an unspecified racial slur ‘toward’ his daughters as he dropped them off at school.”

Lake Bluff of course doesn’t buy it and claims that GM is just trying to pull a fast one, sayeth the town’s attorney, “The church’s establishment was an ‘inappropriate attempt to escape the same property tax responsibilities that every other property owner in Lake Bluff is required to comply with.’ ”

Maybe Lake Bluff is on to something because we find out that something that isn’t up for debate is George Micahel’s overdue taxes. A sum that he, admittedly, might not be on top of:

Michael, a former executive at a Chicago bank taken over by the federal government this spring, denied that he founded his in-home church to avoid paying about $80,000 in taxes a year. He is willing, he said, to settle the bill.

But his tax tab remains unpaid, said Lake County Treasurer Bob Skidmore. Michael, who runs a real estate company, owes more than $239,000 in taxes from 2007 through 2009 and missed his first due date in June, Skidmore said.

Asked about that, Michael said his mail service is unreliable and he hadn’t seen the bill.

“I better check into it,” he said.

Blaming the WASPy mail carrier. That’s classy.

Man who turned mansion into church alleges bias after losing tax break [CT via TaxProf Blog]
Racquetball Court Turned Church Loses Tax Exemption [Web CPA Debits & Credits]

Despite What the IRS Says, This Guy Needs Your Help Raising $2 Million

Hinn says he accumulated the deficit in the past few months because offerings at some international appearances did not cover expenses.

Hinn’s reputation as an advocate of prosperity gospel has attracted millions of followers but has also drawn criticism from lawmakers and watchdog groups.

He is one of six televangelists who have been targeted by federal lawmakers investigating compliance with IRS rules for nonprofits.

Hinn has said on his website that external auditors ensure his compliance with IRS regulations and that in 2008, 88 percent of the money he collected was spent on ministry.

For starters, can someone tell the Hinnmeister that external auditors’ word doesn’t mean shit? Second, try shopping for your clothes somewhere other than the David Copperfield consignment store and maybe you won’t have trouble covering your expenses.

Televangelist Benny Hinn asks for $2M in donations [AP]

Non-Profits Get Picked On (And Deserve Some of It)

When budgets are tight, it only makes sense that non-profits would become targets since they tend to get the most free rides. We’ve seen it with this 990 push (kind of like 404(b) for < $75 million and new health care rules that require companies to send in 1099s for every vendor purchase over $600, it feels a little like bureaucratic busywork to me) and now non-profit executive compensation is in New Jersey tie’s crosshairs.

A provision in his state’s recently passed budget limits executive salaries at nonprofits that do business with the state.

Firedoglake foamed at the mouth over recent comments by Tom Coburn after he shot down $425 million in fresh money for the Boys and Girls Clubs. FDL appeared absolutely incapable of comprehending caps on non-profit salaries when for-profit CEOs earn “500 times” more than their non-profit counterparts.

On Capitol Hill, four senators this spring refused to approve a $425 million package of federal grants for the Boys & Girls Clubs of America after staff members looked at the organization’s tax forms as part of a routine vetting process and were surprised to learn that the organization paid its chief executive almost $1 million in 2008 — $510,774 in salary and bonus and $477,817 in retirement and other benefits.

“A nearly $1 million salary and benefit package for a nonprofit executive is not only questionable on its face but also raises questions about how the organization manages its finances in other areas,” said Senator Tom Coburn, Republican of Oklahoma.

We covered S.2924 back in March when Chuck Grassley wrote a nasty note asking for – gasp – accounting details. While I totally support FDL’s outrage towards for-profit CEOs, I have to remind them that we already have the accounting details of for-profit corporations; so if Jamie Dimon gets $42 bazillion a year, we can just dig into his financial statements to figure out why. Chances are assets > liabilities so he can do that (unless he’s asking for a bailout but I don’t recall hearing him ask in 2008). With the Boys and Girls Club posting a $13 million loss in 2008, President Roxanne Spillett still earned $593,926. You don’t think that might warrant a little investigation?

FDL goes on to wonder out loud if all non-profits are created equal:

If Senator Coburn is going to stagger down that path, arms flapping wildly at the injustice of these non-profit salaries, then by his reckoning, the NRA’s Wayne LaPierre should forego his $1,139,568 annual salary (as of 2008), and Robert Mazzuca of the Boy Scouts of America needs to pay back that $1,577,600 he received in 2009. (Note: Yaron Brook, President and Executive Director of the Ayn Rand Institute, only pulls down $350K a year. Methinks someone’s not living up to his objectivist potential.)

I’m all for reform but only when applied equally across the board. The alternative is letting the market decide by being an informed donor (using tools like Charity Navigator to see how much particular non-profit execs are making and how they are using their money). If you don’t believe in a non-profit’s compensation practices, don’t give them a thing.

The government can continue to do so without caring or it can get smart about the money that it does not have and start taking a closer look at how non-profits operate. If you ask me, the entire thing is a gaping hole of waste and confusion and you could possibly confirm that with anyone familiar with non-profit accounting.

Reno’s “Hot August Nights” Goes For-Profit and Skips Town?

Though the connection between the non-profit Hot August Nights organization that’s been putting on Reno’s biggest party for 24 years and the newly-registered for-profit Hot August Nights of Las Vegas is unclear, what is clear is that part of the event will be held in Long Beach this year due to “horrific” costs to put the event on in Reno.

Reno, if you don’t already know, is in pretty bad shape. I used to live there so I know that it always was but it’s in really bad shape right now. With the iconic Fitzgerald’s Hotel and Casino indefinitely boarded up directly under Reno’s “Biggest Little City in the World” sign as a direct result of the Corus Bank failure 1,500 miles away in Chicago back in late 2009, downtown looks more destitute than ever. I take full artistic license for use of the word “iconic.” This is Reno we’re talking about.


You’d think Reno city commissioners would want to encourage fun and leisure, mostly through the only event any of us with the big money to the West are familiar with (Hot August Nights) but all signs point to the city losing it.

On the same day paperwork was filed in Nevada to establish the for-profit, non-profit Hot August Nights officials announced part of the event would be held in Southern California in 2011.

There’s been a bunch of bitchfighting in Reno (and neighbor Sparks, who gets some of the tourism run-off for the event) and it continues.

We don’t expect you to be familiar with the Reno area (unless you happen to work for Deloitte or E&Y in town, though we don’t like those odds) so for a little background on Hot August Nights, it’s a yearly car show stamped as family fun for everyone. The event costs $700,000 to put on each year according to organizers who swear they aren’t looking to move the show to Long Beach in 2012.

The Reno Gazette-Journal breaks down the non-profit side:

In the 2004 tax year, Don Schmid, then listed as executive director, was paid $93,962 in salary.

On the nonprofit corporation’s 2008 income tax return, current executive director Bruce Walter is listed as collecting $256,890 in salary and $11,940 for a housing allowance, resulting in total compensation of $268,830.

Yes, I’m sure it’s the costs of putting on the event that are inspiring a move. Anyone been to a convention in Reno lately? It’s got to be the cheapest place in the country if you don’t count middle states. You’re telling me it’s cheaper to host the event in Long Beach?

For-profit Hot August Nights corporation created in Vegas [The Reno Gazette-Journal]

Nonprofits Could be Forced to Pay to Save the Postal Service

It’s difficult to find numbers that don’t contradict each other, some reports say nonprofits are doing better than expected in this uncertain economic environment while others insist it’s still rough out there, especially for organizations that rely on donations to get by. For nonprofits, it doesn’t matter how the year is going, it may soon cost more to send out those pleading donation mailers.

The Postal Regulatory Commission is looking at a 2 cent increase for first class mail, an 8% increase for periodicals (just what the doctor ordered for struggling print publications) and a 23% increase on parcels. While they have not specifically mentioned an increase in nonprofit mailer pricing, the PRC has already identified certain “underwater” mail classes, non-profit mail being one such case.


As is, authorized nonprofits get a price break of about 40% over commercial mail prices so you could see why a struggling USPS might go straight for non-profits when looking for additional revenue sources to close its $7 billion budget gap.

Overall, postal prices are expected to rise 4 – 5%, a huge jump from the legally allowed .6% the Postal Service can use to adjust for inflation. Seeing as how we supposedly haven’t experienced any inflation this year, the jump is that much more disheartening to mass mailers.

Not surprisingly, there’s a nonprofit set up to focus on postal issues around nonprofit mail and they’re all over it. Said Tony Cooper of the Washington-based Alliance of Nonprofit Mailers, the USPS delivery system “is a system that’s built to handle about 300 billion pieces of mail, and they’ve got about 170 billion, and it’s set to decrease. It’s basically twice as big as it needs to be. It’s that excess capacity and costs that are creating the need in their minds to do this.” Hear that, USPS? Cut the fat before you start going after the little guys.

Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor. You can see more of her posts here and all posts on the CPA Exam here.

Non-Profits are Now Exempt from Political Contribution Rules (Well Three of Them at Least)

Out of millions of non-profit organizations in America, three have been hand-picked by the authors of the DISCLOSE Act, a House bill meant to bring transparency to political contributions.

The bill is inspired by a Supreme Court decision that overturned a cap on corporate contributions to political campaigns. So to compromise and soften the hard-ass bill a little bit, they threw in an exemption for certain non-profits that meet specific requirements.

They must have more than 1 million members, be at least 10 years old and receive no more than 15% of their contributions from corporations to receive this exemption. OK, how many non-profits could that be?


The NRA and 2 others (AARP and the Humane Society).

Reform at its finest, I guess.

Just a note, Charity Navigator doesn’t do the NRA for the following reason:

We don’t evaluate National Rifle Association.
Why not? We don’t evaluate 501(c)(4) organizations because they are allowed to spend a substantial portion of their revenue on lobbying our government and not every donation to them is tax-deductible. You may be interested in our evaluation for The NRA Foundation.

If you’re curious, “DISCLOSE” stands for Democracy Is Strengthened by Casting Light On Spending in Elections and I don’t think light is what we need in this situation. Companies, unions and other groups that spend more than $10,000 would be required to disclose donors who have given $1000 or more.

Why does this matter? Should lobbying groups really receive any tax deductions at all?

Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor. You can see more of her posts here.

Top Ten Worst Administrative Expense Offenders in the Non-Profit Sector

Administrative expenses are a part of any non-profit’s overall operating expenses and though donors generally give to charity with the hope that their contributions will help fulfill the organization’s mission as opposed to cover SG&A, Charity Navigator has a top ten of the worst offenders when it comes to admin expenses. Let’s take a look, shall we?


10: Center for Individual Rights 46.1%
9: Changed Lives 47.4%
8: Vision New England 48.7%
7: Charleston Area Medical Center Foundation 48.8%
6: National Museum of Racing and Hall of Fame 55.1%
5: Cherokee National Historical Society 58.2%
4: Union Rescue Mission Little Rock 62.1%
3: National Council of Negro Women 64%
2: Boys Choir of Harlem 66.3%
1: American Tract Society 68%

For its last available income statement through Charity Navigator, the American Tract Society brought in $2,194,730 and spent $1,615,847 on administrative expenses, compared to $711,854 in program expenses and $47,210 in fundraising expenses. This is twice what the charity spent the year previous on admin expenses.

The American Tract Society’s mission is to distribute religious literature to spread its message. Well actually its mission is officially “to make Jesus Christ known in His redeeming grace and to promote the interests of vital godliness and sound morality, by the circulation of Religious Tracts, calculated to receive the approbation of all Evangelical Christians. The mission of ATS is to provide relevant tools for presenting the gospel.”

Perhaps someone needs to say a prayer to St Matthew asking for a little accounting help.

By comparison, similar charity Bibles for the World, based in Colorado, spent only 6.4% of its $4,215,202 in revenue on administrative expenses in the same period.

The second worst offenders on the list, the Boys Choir of Harlem, spent $140,787 out of $299,729 in total revenue on administrative expenses in 2007. At that point, the charity was nearly $4 million in the red and has since ended. The group spent 30 years bringing the joy of music to at-risk inner-city youth and the choir had performed for sitting presidents since Lyndon Johnson.

Would-be donors are welcome to peruse Charity Navigator for detailed information on just about every charity in the country before making donations, lest that $100 feel good gift end up paying mostly for secretaries and prime office space.

Convio Users Indicate That Things in the Nonprofit Sector Aren’t So Bad

Convio provides technology solutions to nonprofits and recently released a bit on its user base, showing pretty reassuring data that things are not that bad in the nonprofit sector.

When the Nonprofit Finance Fund released its 2010 outlook earlier this year, a nice calming Xanax was recommended before reading. So this is certainly a bit of good news for nonprofits, at least for the customer base from which the data was compiled.

Online giving grew 14 percent despite a difficult economy. Overall, 69 percent of organizations raised more in 2009 than 2008, while 31 percent saw declines in their online fundraising.

An increase in gifts drove fundraising gains. Of those that grew fundraising in 2009, 92 percent saw an increase in the number of gifts in 2009 compared with just 43 percent of organizations seeing an increase in their average gift amount.

Small organizations grew fastest. Organizations with fewer than 10,000 email addresses on file, many of which are participants in the Convio Go! program, grew online revenue by 26 percent, and gifts by 32 percent.

Web traffic growth continued for most, but at a slower rate. 60 percent of organizations grew their website traffic from 2008 to 2009. Web traffic growth in 2009 was in the single digits at 6 percent compared with double digit growth seen in previous years.

Web traffic was strongly correlated with email file growth. 38 percent of an organization’s success building large email files could be directly attributed to the amount of traffic to the organization’s website.

This year’s study analyzes data compiled from 499 nonprofit organizations that have at least 24 months of data to compare. The study aggregates results into benchmarks that nonprofit organizations can compare against their peer group and the industry as a whole. In addition the study provides separate benchmarks for 15 nonprofit industry sub-groups, or verticals across 19 key metrics. In total Convio’s clients raised more than $920 million online in 2009.

Convio Releases Annual Study of Nonprofit Sector’s Online Fundraising and Marketing Trends [BusinessWire]

GAO Audit Uncovers Fraud at Head Start Programs

The Head Start Program, under the Department of Health and Human Services, provides child development services to mostly low-income families and their children. Up to 10% of Head Start-enrolled families can be over-income, with an income 130% above the poverty line.

Of course, things don’t always work out as they are supposed to and the GAO has discovered problems with about half of the centers it examined through the investigation, just a small sample of the 1,600 nonprofit centers running 3,000 Head Start programs.


From the GAO:

GAO received allegations of fraud and abuse involving two Head Start nonprofit grantees in the Midwest and Texas. Allegations include manipulating recorded income to make over-income applicants appear under-income, encouraging families to report that they were homeless when they were not, enrolling more than 10 percent of over-income children, and counting children as enrolled in more than one center at a time. GAO confirmed that one grantee operated several centers with more than 10 percent over-income students, and the other grantee manipulated enrollment data to over-report the number of children enrolled. GAO is still investigating the other allegations reported. Realizing that these fraud schemes could be perpetrated at other Head Start programs, GAO attempted to register fictitious children as part of 15 undercover test scenarios at centers in six states and the District of Columbia. In 8 instances staff at these centers fraudulently misrepresented information, including disregarding part of the families’ income to register over-income children into under-income slots. The undercover tests revealed that 7 Head Start employees lied about applicants’ employment status or misrepresented their earnings.

GAO managing director for special investigations Gregory Kutz told a House education committee last month that “the system is vulnerable to fraud.” No kidding.

While unable to determine the motivation of Head Start employees to commit fraud by adjusting income levels on applications, Kutz theorized that management of nonprofit agencies receiving Head Start funds pressured staff to fudge, fiddle with, or straight up fake figures on applications in order to keep federal funds coming in.

Head Start has served over 25 million children since 1965 and there are currently over 1 million children enrolled in Head Start programs.

Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor . You can see more of her posts here.