Monday, November 20, 2017

Was Penpa Tsering wrong to see $1.5 million as Accounts Payable?

The explanation from Sikyong last night at Toronto, Canada was very convincing but runs short on the legality as well as fiscal aspect of this entire loan vs grant/donation saga - specifically from someone with a law background.

There is no doubt that The Tibet Fund as an IRC 501(c)(3) registered tax exempt non profit organization is not in a position - legal as well as fiscal - to give away $1.5 million to another registered non profit organization based in Washington DC. So, to protect its own integrity and organization, there is no question that this amount was given in the form of a loan with an unwritten understanding that it will be written off someday as grant. A formal loan agreement seems to be in place according to 2015 and 2016 financial statements of The Tibet Fund.

In both 2015 and 2016 financial statements of the Tibet Fund, 1.5 million was mentioned as Accounts Receivable from the Office of Tibet, Washington DC (registered as Tibetan Community Development Fund Inc) with interest rate and maturity date. In the world of accounting, when there is accounts receivable, there must be accounts payable in the recipient organization's financial statements. This is where the entire episode of mistrust between current representative of North America and Kashag seems to have begun.

What could have been done to stop this from the beginning?
  1. In a country (United States) where the rule of law is given the utmost respect and regard - though it is an internal understanding - there should have been a formal written document between the Tibet Fund and the Office of Tibet. As this could be against the law of the land, this document should have been written in Tibetan language and marked as Highly Classified. The drafting should have been done in consultation with Kashag.
  2. This highly classified document should have a clause on how the process of writing off of this loan amount will begin and end.
  3. This highly classified document should have been handed over to new representative with a copy to Kashag at the time of handing-taking.
  4. In order to follow the general rules of accounting, the loan amount of 1.5 million must be accounted for in the books of the Office of Tibet's financial statements. Remember that it’s easier to write off accounts payable than accounts receivable.

To conclude, without any documentary evidence of this internal understanding/adjustment, there is no guarantee in the eyes of law that someday the Tibet Fund will not ask the money back. For information, the Tibet Fund is managed under a board.

Please note that this piece is written to share information that many might not see due to lack of working experience.