I was featured on the front page of the Philadelphia Business Journal

13 Feb

I was recently featured on the front page of the Philadelphia Business Journal, along with a full-page inside-the-back cover Q&A.

Eric posing for PBJ Profile 1-22-2016

The profile was under the category of “social capital.”  While it is ostensibly about me, it is really about the work that our firm does for the nonprofit sector.

The link to a PDF of the two pages follows:

Eric Fraint Profile in Philadelphia Business Journal 1-22-2016

Comments welcome.

Eric Fraint, President
Your Part-Time Controller, LLC

Coming to our senses

26 Jun

The United States Declaration of Independence declares “all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

As the events in Charleston, SC, this past week have shown, this country still has a long way to go.

But we can and should celebrate that the Supreme Court voted today to legalize gay marriage.

It is a crime against God and humanity what we have done to gay people in our country.  Better late than never, though, we today, with respect to gay marriage, have finally come to our senses.

Comments welcome.

Eric Fraint

REPEAL FASB 116!

7 Jun

The accounting profession has done a huge disservice to the nonprofit world.

One need look no further than the accounting rule that used to go by the name of FASB 116*.  If you have ever tried to read and understand financial reports for a nonprofit organization that has received multi-year awards, you know what I mean.

FASB 116 forces accountants to ignore the longstanding “matching principle” in which revenue and related expenses are matched by showing them in the same time period.   Instead, with FASB 116, if you receive a multi-year grant, pledge, or other award, and if the award meets certain accounting requirements, all of the revenue must be shown in the first year even though expenses related to that award continue to be incurred in subsequent years.

This creates the bizarre set of circumstances in which, during the first year of the multi-year award, the organization shows what appears to be a huge windfall in its budget and financial reports, while in subsequent years losses are shown from continuing expenses even though the organization received the funds to pay them!

For an example of how this all works, see my previous blog called, “The Single Biggest Problem With Nonprofit Accounting Rules.”  (See https://ericyptc.com/2013/01/20/the-single-biggest-problem-with-nonprofit-accounting-rules/ )

For a real-life example of how this rule ensnared the Clinton Foundation, see my blog, “Bill Clinton Feels Your Pain.” (See https://ericyptc.com/2013/09/01/bill-clinton-feels-your-pain/ )

Without going too far into the accounting details, it is helpful to understand for comparison purposes how multi-year awards used to be treated prior to FASB 116.

Prior to 1993, when FASB 116 was passed (effective for fiscal years beginning after December 15, 1994), future years’ funds from multi-year awards were simply shown on the balance sheet as a liability.  Each subsequent year the liability was reversed, thereby showing the revenue that should be matched against that year’s expenses.

This pre-FASB 116 treatment was easy to account for.  It was easy to explain.  It made it easy for nonprofit organizations to develop their budgets.  It made it easy for readers of financial reports (e.g., board members, funders, management, etc.) to read and understand their numbers.

Because of this rule, accountants, like me, have spent the last 20 years explaining the consequences of this rule to our nonprofit clients and to the readers of their financial reports.  Over the years we have had to develop a variety of workarounds to help our clients with this accounting fact of life when preparing their budgets and when presenting and explaining their financial reports.

The management teams and boards of nonprofits all across America treat this accounting rule with disdain, and derisively ridicule the accounting profession which foists rules like this upon them.  Why, our clients want to know, must they show a deficit for programs in the second and subsequent years of an award when they were awarded the funds to cover the costs?  Logically, it makes no sense either to the lay person or to the accounting professionals.  How much time is wasted every year by organizations as they try to figure out how to portray and reflect these so-called “carry-over” funds, a phrase we hear often, in their budgets and financial reports?  While there are various techniques we use with our clients to help them through this, most organizations view the accounting rules, and the profession that promulgates them, as something they are forced to put up with, something that hinders their ability to properly manage their organizations.

Organizations put up with this accounting rule because they have to.  If a nonprofit is audited by a certified public accountant and wants to receive a “clean” unqualified audit opinion, the organization must follow this rule, among all other generally accepted accounting principles.  As a result, accountants and their rules are often viewed as a necessary evil.  (I exempt my firm, Your Part-Time Controller, from this since our clients appreciate our advice about how to understand and deal with the problems created by this rule.)

The FASB states on its website that its mission is to:

“…establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision-useful information to investors and other users of financial reports.”

FASB 116’s required treatment of multi-year awards does not provide decision-useful information to anyone.

We, the accounting profession, have created this problem.  Fortunately, there is a simple solution.

FASB, repeal this provision of FASB 116.

Comments welcome.

Eric Fraint, President and Founder
Your Part-Time Controller, LLC
The NONPROFIT accounting specialists
Washington, DC – New York, NY – Philadelphia, PA

*As of 2009, the FASB’s (Financial Accounting Standards Board, a group of people based in Norwalk, CT) numbering system was replaced by the ASC (Accounting Standards Codification) numbering system.  Those of us who have been working in the accounting field for long still refer to the subject of this blog as FASB 116.  Also note that FASB 116 deals with a variety of topics related to nonprofit accounting.  This blog is concerned with just one aspect of this rule, that which deals with the treatment of multi-year awards.

Why I work with nonprofits

28 Oct

I ask everyone at some point during their job interviews at our accounting firm YPTC (Your Part-Time Controller) why they choose to work with us.    

Why us?

There are hundreds of accounting firms in the cities we serve, and tens of thousands of nonprofits, for-profits, and government agencies where accountants can work.

So why YPTC?

Among the many reasons that make us a best place to work, there is one for me that stands head and shoulders above the rest.  It is our work with nonprofit organizations.  More to the point: it is the chance to work with the people who work at our nonprofit clients.

One such person is Father Greg Boyle. 

Father Boyle is the founder and Executive Director of Homeboy Industries.  As its website explains, Homeboy Industries serves high-risk, formerly gang-involved men and women with a continuum of free services and programs, and operates several social enterprises that serve as job-training sites.

Father Boyle is not a client, but I heard him speak at the Talent Connect conference in San Francisco last week (10/21/2014) sponsored by the social networking company LinkedIn. 

It is because of people like Father Boyle that I choose to work with nonprofits.

His talk at the conference is available on YouTube.   You will laugh, and you will cry. 

You may view it here:  http://youtu.be/8z6pZp8Lu7E?list=PLoBbPuCYnPF9B6dTPxTO6GBwUbgqoiFuV .

Eric

The Truth About Nonprofit Outcomes Measurement: Trying to run when you cannot yet walk

28 Dec

Outcomes measurement at nonprofit organizations will never gain widespread traction until at least one fundamental problem is solved.

Much has been written about the potential benefits of outcomes measurement.  Who can argue that knowing the effectiveness of a nonprofit’s programs is anything but a good thing?  Donors and nonprofits alike should want to know the effectiveness of their grantmaking so that they can fix what is broken or redirect funds to what works.

I’ve written separately about the futility of attempting to find a single measure of effectiveness (see “In Search of the Holy Grail of the Nonprofit World” ).  Yet, though often difficult and expensive, measuring effectiveness can be very beneficial.

But there is an underlying problem, typically overlooked in the outcomes measurement debate, which prevents most* nonprofits from being able to measure their outcomes: most organizations cannot effectively measure, report on, and analyze their basic finances.  How can these organizations, who cannot adequately and timely report on their financial operations, be expected to move to the next level of measuring, reporting, and analyzing their outcomes?

* My assertion that “most” nonprofits cannot do a proper job of reporting the basics of their financial operations is based on my experience over the last 20 years working with and visiting hundreds of nonprofits.  (I exempt our accounting clients from this troubled group: our clients have strong financial reporting systems!)

The uncomfortable truth is that asking a nonprofit organization to perform relatively sophisticated outcomes measurement when they cannot properly perform basic accounting and financial reporting functions is like asking a child to run who cannot yet walk.

Comments welcome.

Eric Fraint, President and Founder
Your Part-Time Controller, LLC
The NONPROFIT accounting specialists

Fare & Square & Vision

30 Nov

A vision was recently realized.  What was the vision and who was behind it?  Read on.

The first nonprofit supermarket, named “Fare & Square,” opened in a “food desert” in Chester Pennsylvania on Saturday, September 28, 2013.  Chester, a city of 34,000 where one in three people live in poverty, had been without a supermarket for twelve years.

If you’ve not heard about this, I refer you to various news articles and videos.  See the citations below.

In this blog, though, I am interested in the vision that made this possible, and the man behind the vision.

The man is Bill Clark, executive director of Philabundance.  Philabundance is the largest hunger relief organization in the greater Philadelphia metropolitan area. It was founded in 1984 by Pam Lawler as a food rescue organization and later taken over by Scott Schaffer who expanded the organization’s operations.  Bill came in as executive director in 2001.

I can’t say for sure when the idea that has become Fare & Square first germinated, but various press stories have given credit to Bill for working on this for seven years.  I can say this, however: it has not been an easy seven years.

Along the way Bill had to overcome every imaginable obstacle.

To secure funding Bill had to cobble together a hesitant coalition of government, foundation, and private support.  He had to persuade his board that the plan was viable.  He had to win the hearts and minds of his staff that worried that the organization was straying too far from its food rescue origins.  The business model had to be developed.  Consultants and experts of all types had to be consulted.   A skeptical local community in Chester, who had seen too many promises in the past go bad, had to be wooed.  And ultimately, an executive director willing to risk his job, career, and reputation was required.

Team efforts are needed for grand visions to succeed.  In this case the team consisted of a strong board which gave the go-ahead, a highly motivated staff that did the work, funders who understood the potential, and a local community who appreciates the results.

At the center of all this was a man with a vision.  Bill Clark.

Fare & Square is still brand new.  The final chapters on this story have yet to be written.  But two things are eminently clear:

(1) thousands of people in the city of Chester will benefit greatly, and;

(2) none of this would have happened without a man of vision, Bill Clark.

Comments welcome.

Eric Fraint, President and Founder
Your Part-Time Controller, LLC

For additional information about Fare & Square, I refer the reader to the following links:

The Philadelphia Inquirer – http://articles.philly.com/2013-09-30/news/42505117_1_ninth-and-trainer-streets-west-end-food-center-grocery-store

The New York Times – http://www.nytimes.com/2013/11/24/opinion/sunday/an-oasis-of-groceries.html?_r=0

A video on Billmoyers.com – http://billmoyers.com/content/an-oasis-in-a-food-desert/

Philabundance website – www.philabundance.org

#####

BILL CLINTON FEELS YOUR PAIN

1 Sep

If you’ve ever had a complaint about nonprofit accounting rules, you have a friend in former President Bill Clinton.

In a recent article from the New York Times, the Bill, Hillary and Chelsea Clinton Foundation has come under criticism for mismanaging the foundation’s finances.

According to the New York Times article, “The foundation piled up a $40 million deficit during those two years [2007 and 2008], according to tax returns [IRS Form 990].”

In an open letter on the Clinton Foundation website, Bill Clinton indicates his frustration with accounting rules. He says:

“The New York Times recently reported that the Foundation ran a deficit of $40 million in 2007 and 2008 and $8 million in 2012. The reporting requirements on our tax forms, called 990s, can be misleading as to what is actually going on. Here’s why. When someone makes a multi-year commitment to the Foundation, we have to report it all in the year it was made. In 2005 and 2006 as a result of multi-year commitments, the Foundation reported a surplus of $102,800,000 though we collected nowhere near that. In later years, as the money came in to cover our budgets, we were required to report the spending but not the cash inflow… In other words, for any foundation with a substantial number of multi-year commitments, the 990s will often indicate that we have more or less money than is actually in our accounts.”

In other words, according to President Clinton, it’s not me, it’s the accountants.

There is a great deal of merit in President Clinton’s claim.

In a previous blog I wrote about The Single Biggest Problem With Nonprofit Accounting Rules. (See https://ericyptc.com/2013/01/20/the-single-biggest-problem-with-nonprofit-accounting-rules/)

The trouble making accounting rule in question is commonly known as FASB 116.

(FASB stands for Financial Accounting Standards Board. Several years ago the accounting rules were “codified” to make them easier to follow. Send me an email if you’d like the reference to the new rule number.)

This troublesome rule obscures, rather than illuminates, nonprofit performance. In our accounting practice we spend a lot of time helping nonprofit managements explain to their boards and to funders this quirk in their financial reporting.

Bill, if you are listening, call us. We have a New York City office!

Comments welcome.

Eric Fraint, President and Founder
Your Part-Time Controller, LLC
The NONPROFIT accounting specialists

Washington, DC – New York, NY – Philadelphia, PA

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