Thursday, January 19, 2017
Haskell Murray, one of our co-conspirators over at the Business Law Prof Blog, recently wrote about a recent post by Rick Alexander, the head of Legal Policy at B Lab (of B Corp certification fame) on Benefit Corporations. Here's Prof. Murray's post:
Over at the Harvard Law School Forum on Corporate Governance and Financial Regulation, Rick Alexander has a post on benefit corporations. I plan to post some comments on Rick's post next week, when I have a bit more time, but for now, I will just bring our readers' attention to the post and include a small portion of his post below:
Benefit corporations dovetail with the movement to require corporations to act more sustainably. However, the sustainability movement often treats the symptom (irresponsible behavior), not the root cause—the focus on individual corporate financial performance. Proponents of corporate responsibility often emphasize “responsible” actions that increase share value, by protecting reputation or decreasing costs. Enlightened self-interest is an excellent idea, but it is not enough. As long as investment managers and corporate executives are rewarded for maximizing the share value of individual companies, they will have incentives to impose costs and risks on everyone else.
Personally, I would argue that part of the root cause is that corporate financial performance is not required to appropriate take into account societal externalities, such as pollution - the true root cause. Nothing is going to make a corporation be a good citizen if it doesn't want to do so, even if it could under a benefit corporation structure. But that's just me. I am really looking forward to Prof. Murray's thoughts, and will try to post them when I see them.
Friday, December 16, 2016
A new development in the NY bill (reported on yesterday) aimed at increasing transparency in 501(c)(3) and 501(c)(4) organizations has emerged. Citizens Union of New York has filed suit in federal court challenging the new law, claiming the regulations impede on their right of free speech. The group argues the law “’chills’ speech by forcing donors to choose between ‘exercising speech . . . and subjecting themselves to burdensome obligations and public disclosures.’” The organization further believes the disclosure requirements will dissuade donations, directly impacting their operations. Will other non-profits in New York feel the same?
David A. Brennen
Thursday, December 15, 2016
New York Governor Andrew Cuomo signed into law Bill No. A. 10742/S. 8160 in an effort to increase transparency between donations coming from 501(c)(3) organizations going to 501(c)(4) organizations.
Some of the upcoming changes for 501(c)(4) organizations include a dramatically decreased amount (decreasing from $50,000 to $15,000) of funds spent on lobbying that triggers a source of funding report, and added more details to be included in said report.
Among other things, 501(c)(3) organizations now must fill out detailed reports for gifts to 501(c)(4) organizations that are greater than $2,500.
A detailed memo from the Lawyers Alliance for New York outlines the implications for non-profit organizations and exactly what the new regulations are.
David A. Brennen
Wednesday, December 14, 2016
The Justice Department is investigating South Beach Missions of Oregon for allegedly fraudulently registering corporations as religions, entitling said corporations to 501(c)(3) status. The Justice Department believes that South Beach Missions is intentionally duping the federal government, and showing people how to set up phony churches in order to protect their assets from taxes. The government claims the organization has registered 126 active corporations, and 343 inactive ones, leading to “substantial” harm to the tax payer left footing the bill.
Unsurprisingly, South Beach Missions claims they have done no wrong, and believe they are acting within their First Amendment rights. Ted Landry, president of South Beach Missions, firmly believes he is helping people practice their legitimate religion. Mr. Landry believes the government has no place in defining what is and what is not religion, stating “you’re the only one who gets to figure it out.” South Beach Missions insists that they do not give out legal advice, despite the fact they circulate a 12-page booklet on the legality of corporations and churches.
There are obvious public policy concerns with people being able to establish pseudo-religions in the name of tax breaks. Further, unsuspecting churches registered by South Beach may face a crippling tax liability down the road if the government finds their church is not exempt, even if they were honestly practicing their religion. As obvious as the need to abate tax fraud is, so is the need for the government to allow for the freedom of religion, and adhere to Constitutional principles. It will be interesting to see how this is resolved.
David A. Brennen
Tuesday, December 13, 2016
A recent Bloomberg article by Colleen Murphy outlines some major potential changes impacting charitable giving that could come soon after President Elect Trump takes office.
The author believes alterations of charitable giving deductions could take place in the near future. Although there is no concrete plan or proposal, the House Ways and Means Committee “will develop options to ensure the tax code continues to encourage donations, while simplifying compliance and record-keeping and making the tax benefit effective and efficient.” Clearly, altering the amount one can claim as a tax deduction can significantly impact overall giving to 501(c)(3) organizations.
Another potential change is a cap of itemized deductions individuals may claim. President Elect Trump has proposed a ceiling of $100,000 for individuals and $200,000 for couples looking to subtract itemized deductions from their total tax bill. An expert claims that such a rule could diminish large-scale donations, some of which are vital to the existence of many tax-exempt organizations.
A third plausible change coming in the near-term is the overall lowered tax rates promised by President Elect Trump. Mr. Trump aims to reduce the current seven-bracket system to a three-bracket system, leading to a reduced tax burden for working and middle-class Americans. Experts are split on how this may impact charitable donations. Some believe that the reduced rate will lessen the impact of itemized deductions, disincentivizing individuals from making contributions. Another school of thought believe the reduced rates could increase donations, incentivizing individuals to “load up on deductions and decrease their tax burden.”
Finally, the author believes that some existing rules could be revamped over the next few years. Hadar Susskind, senior vice president of government relations at the Council on Foundations in Washington, stated that potential changes could include “Creating charitable giving accounts, simplifying the excise tax on private foundations and allowing the rollover of individual retirement accounts to donor-advised funds.”
Time will tell what the new year, and new administration, have in store for the nonprofit tax world.
David A. Brennen
Sunday, December 11, 2016
Legislation has been pre-filed in South Carolina by State Senator Tom Davis in an attempt to double a tax credit program that helps fund disabled students’ private education. The Legislation also plans to offer an additional $25 million in tax credits for the donors whose money would allow poor children to go to private school.
Senator Davis introduced the legislation in response to a South Carolina Supreme Court case where it was declared the state was not doing enough for poor, rural students and their schools. Davis believes making private schools a realistic option for many students is a step in the right direction.
The proposal would offer more tax credits to those who donate to a nonprofit that “makes private school tuition grants to students with disabilities or those who live in poverty.” These credits would allow the donor to reduce their state taxes by up to 60 percent.
South Carolina currently offers up to $10 million in tax credits for donations helping disabled students. The expansion would expand that offering to $25 million, and grant another $25 million specifically for impoverished students.
Whatever program the state ultimately adopts, hopefully it provides students with the quality education they both require and deserve.
David A. Brennen
Friday, November 18, 2016
TaxProf Blog: Pomona College May Have Violated 501(c)(3) Tax Status To Fund Anti-Trump Student Protesters
TaxProf Blog reports on this possibility at http://taxprof.typepad.com/taxprof_blog/2016/11/pomona-college-may-have-violated-501c3-tax-status-to-fund-anti-trump-student-protesters.html.
For the University's response to this allegation, see http://taxprof.typepad.com/taxprof_blog/2016/11/pomona-president-denies-wrongdoing-as-irs-complaint-filed-against-college-for-funding-anti-trump-stu.html.
My initial take is since the rally in question happened after the election, the University has a good argument that at that point Mr. Trump was no longer a candidate but instead President elect and so the activities they funded were not political campaign intervention. I realize that Mr. Trump may not technically be President elect until the votes of the electors are officially counted by Congress, but despite some calls for the electors chosen by the voters to abandon him that is not a realistic possibility. So while one can certainly criticize the University for appearing to take sides with respect to the newly elected President, its reported activities almost certainly did not cross the legal line provided by Internal Revenue Code section 501(c)(3).
Wednesday, November 16, 2016
Given the uncertainty regarding the plans of both President-elect Trump and the Republican-controlled Congress, I feel a bit like a sportswriter trying to rank college football teams before the season begins when I try to predict what the results of the 2016 election will be for the federal tax laws governing tax-exempt nonprofit organizations. With that caveat, here are my initial thoughts.
With respect to guidance from Treasury and the IRS, most of what appears in the most recent update of the 2016-2017 Priority Guidance Plan that is relevant to tax-exempt organizations (see especially pages 9-10 and, for section 170 guidance, page 14) appears non-controversial and so likely to eventually see the light of day. The one major exception is proposed regulations under section 501(c) relating to political campaign intervention, which project the Republican-controlled Congress has repeatedly suspended and likely will continue to block until the new administration gets around to killing it altogether. Another possible exception are the final regulations under section 7611 relating to church tax inquiries and examinations, although my guess is that Congress will instead simply focus on modifying or repealing the section 501(c)(3) prohibition on political campaign intervention, consistent with the campaign promises by then candidate Trump.
Speaking of Congress, university endowments likely will see continued congressional scrutiny especially in light of President-elect Trump's mentions of the issue during his campaign. Whether such scrutiny results in actual legislation remains to be seen, however. What should perhaps be of greater concern to all charitable nonprofit organizations is the possibility that the detailed tax reform plan developed by now-retired Ways and Means Committee Chairman Dave Camp may be looked to for inspiration, especially when seeking revenue-generating provisions that could help offset tax cuts elsewhere. For a detailed overview of the many proposed changes relevant to tax-exempt organizations, see the Joint Committee on Taxation Technical Explanation of those provisions. Also relevant of course are proposed changes to the charitable contribution deduction, which are concentrated in section 1403 of the draft legislation. And of course there will also likely be effects on charitable giving from any general reduction of marginal tax rates or other broad changes, such as modification or repeal of the estate & gift tax.
For consideration of likely ramifications of the election results for nonprofits beyond just changes to federal tax law provisions, here are some early predictions from others: Devin Thorpe, Forbes Contributor (collecting thoughts from various nonprofit leaders); National Council of Nonprofits; Mark Hrywna at The NonProfit Times.
Last month Princeton University announced that just days before trial was scheduled to begin it had settled the property tax exemption lawsuit brought by several local residents. As detailed in the announcement, Princeton committed to both pay millions of dollars to Princeton homeownersover six years through a tax credit and to also make over $1 million in contributions over three years to a local nonprofit to help economically disadvantaged residents obtain housing. The total cost to Princeton will be over $18 million.
While the settlement resolves Princeton's property tax exposure for recent years, it leaves open the possibility of suits challenging the university's property tax exemption at some point in the future. It also of course does not resolve the lawsuits currently pending against 35 nonprofit hospitals brought by local officials and challenging the hospitals' exemptions from property taxes, although at least two of those hospitals have already settled the claims against them. Legislation to try to resolve those suits has apparently stalled in the New Jresey Legislature.
Last month the Supreme Court of the United States denied certiorari to either the NCAA or the plaintiffs in O'Bannon v. NCAA. That decision left in place the decision by the U.S. Court of Appeals for the Ninth Circuit that found an antitrust injury to the plaintiffs from the NCAA's rules but rejected the portion of the district court's remedy that would have allowed student-athletes to receive cash payments that went beyond their full cost of attendance. Since the NCAA had already dropped its prohibition on members schools giving scholarships to student-athletes up to the full cost of attendance, the effect of the now final Ninth Circuit decision is to leave the current situation unchanged. That said, some commentators believe that the finding of an antitrust injury leaves the NCAA vulnerable to future antitrust challenges (see this ESPN story about the decision).
Tuesday, November 15, 2016
As has been documented in this space many times, state attorneys general continue to play a pivotal role in ensuring that charitable nonprofit organizations continue to fulfill the promise of their charitable label.
For example, earlier this fall The Fresno Bee reported that the California Attorney General denied a request from Saint Agnes Medical Center to reduce the amount of charity care it provides and instead ordered the nonprofit hospital to pay $2.1 million to other community nonprofit organizations that provide direct health-care services. The request was an attempt by the hospital to reduce the $7 million in charity care it is required to provide annually pursuant to a three-year old agreement with the AG's office. The hospital only provided $4.9 million in charity care in 2015, however. To make up the deficit, the AG ordered the hospital to pay $2.1 million to other tax-exempt entities that provide direct health care services in the hospital's service area by no later than October 31, 2016. While the hospital reportedly was considering its options for challenging the AG order, there are no news stories or other public reports indicating that it did so before the October 31st deadline.
And just last week, the New York Attorney General announced a settlement with the National Vietnam Veterans Foundation and two of its officers to end that purported charity's operations. The founder and president of the nonprofit, who is himself a veteran and an attorney with the U.S. Department of Vetranss Affairs, admitted that 90% of donations were paid to fundraisers, that contributors were deceived about the use of funds raised, and that he used nonprofit funds for personal expenses. In addition to the organization dissolving, he and another officer agreed to be permanently banned nationwide from handing charitable assets. CNN originally reported problems at the organization last May.
Thursday, November 10, 2016
The Philanthropy 400 is the Chronicle of Philanthropy's annual ranking of charities based on private fundraising. This year, for the first time, the Fidelity Charitable Gift Fund was ranked first, bypassing the United Way, in private fundraising. According to the Chronicle, it marks "the first time an organization that primarily raises money for donor-advised funds has held the top spot." Author's aside: Given the growing popularity of DAFs, wouldn't it be super if we had some regs? Just sayin'...
I happened to teach DAFs this morning in my Nonprofits class, right after having done a fairly comprehensive unit on the private foundation excise taxes. It is only after one understands the complexity and burden of Chapter 42 (even after the 2006 PPA changes) can one appreciate the simplicity of the DAFs. We went through a sample DAF agreement from a well-known community foundation, reviewing the restrictions on distributions and the private cy pres power. Even with these limitations, my class seemed pretty convinced that as compared to a private foundation, the DAF is the way to go. Happily from a teaching perspective, they were able to identify the private benefit issue with the commercial providers pretty quickly, although I had few answers on why the IRS didn't originally see it as an issue and continue not to do so.
In any event, the Chronicle has a pro/con opinion section in front of its pay-only firewall, which can be found here (pro) by Howard Husock of the Manhattan Institute and here (con) by Ray Madoff of Boston College. Husock's article teases a forthcoming report by the Manhattan Foundation on donor advised fund fees and spending, which the Chronicle article says will be released this month, so more to come on that. While we wait, I think that Husock's answer to the private benefit issue is somewhat weak ("they have to be managed by someone, so why not Fidelity?' seems disingenous) but I do think that he does a better job addressing some of Prof. Madoff's DAF distribution issues.
You know what else would address some of these issues? Regulations. Just sayin'.
Sunday, November 6, 2016
James Fishman (Pace) has the written the following commentary (posted with his permission) on recent news stories relating to charitable solicitation reporting issues involving the Bill, Hillary & Chelsea Clinton Foundation and the Donald J. Trump Foundation:
In a pallid imitation of David Farenthold’s work in the Washington Post on the Trump Foundation, a Scripps News investigation has reported that charity regulators in Mississippi cited the Clinton Foundation for three years beginning in 2001 for failure to register to solicit funds in that state, and the charity did not disclose those instances to some other states as required.
While the Clinton Foundation justifiably can be criticized for inattention to possible conflicts of interest as well as a lack of concern with good nonprofit governance norms, a failure to register in one state for several years followed by the Foundation’s failure to mention it some years later in other states’ annual filing forms are minor infractions equivalent to reporting someone was issued a traffic ticket for parking fifteen inches from the curb, instead of twelve as required by an ordinance.
Almost all of the states require registration in order for a charity to solicit funds. This is accompanied by a requirement of filing a financial report at the end of the year. The registration process is simplified in that almost forty states accept a unified filing statement, which means the charity has to fill out one form and can submit it to all states in which it will try to raise funds. This task is usually done by firms that specialize in fundraising registration and compliance services. The financial reports are likely prepared by the charity’s accountants, who may have no knowledge of the registration process. The charity may not know that a mistake was made in one state, and neither would the accountant. And, as the story indicates, the charity officials who sign the forms may rely on others to prepare them and so not catch inconsistencies between them.
Professor Linda Sugin of Fordham inspected the Trump Foundation’s 990-PF and wrote in a New York Times op-ed piece that there were misstatements made in answering questions whether the foundation engaged in any self-dealing or political activities. That form was likely prepared and filed by Mr. Trump’s accountants, who had little knowledge, like everyone else, of what the Foundation’s activities really were. (The Trump Foundation is registered as a private foundation. Despite its name the Clinton Foundation is a public charity.) So, as was likely the case here with the Clinton Foundation and its charitable solicitation filings, those reporting failures probably reflect more a lack of communication than intentional errors.
Failures of registration by charities to solicit funds are common as many small and new charities are unaware of the requirement. Even larger and more sophisticated charities often make mistakes when completing the many state forms; while a growing number of states accept the unified filing statement, many require additional, state-specific information. When such failures occur, the state’s attorney general or other responsible official will contact the charity, give a period of time to correct the failure, perhaps impose a minor fine, and that’s the end of the situation. Repeated violations may lead to somewhat larger fines, but absent evidence of fraud on the public or other substantive legal violations that is as far it usually goes, although on occasion an attorney general will order a charity to stop soliciting in their state until the filing failures are corrected.
The Trump Foundation, which failed to register anywhere, including its home state of New York, was ordered by New York Attorney General Eric Schneiderman to halt fundraising in New York until it registered, which it later promised to do. What was unique was that the failure to register was the subject of a press release, perhaps the first one ever issued for such an infraction. See Joseph Mead’s post in the Nonprofit Law Prof Blog. Whether the high profile nature of the Trump Foundation may have justified this step, unusual as it was, could certainly be debated.
Given the size and scope of the Clinton Foundation’s activities, not to speak of some legitimate issues for journalistic inquiry, are such inconsequential miscues worthy of the Scripps’ investigative reporters? One the many great things about the election finally taking place will be that the media can return to its normal stable of non-news stories. Kim Kardashian can’t wait.
Friday, October 28, 2016
Yale Daily News, the oldest student newspaper at Yale--and a separately organized 501(c)(3) tax-exempt organization--found itself under criticism for violating tax law when it endorsed Hillary Clinton for President. The Paper issued an opinion piece entitled "NEWS' VIEWS: Hillary Clinton LAW '73 for President," arguing:
We do not endorse Clinton solely because of the disqualifying flaws of her opponent, Donald Trump, whose campaign has disgusted and astonished our board. ... We endorse her because we, as young people, recognize this election is a turning point for our country. And the choice couldn’t be more clear. Voting for Clinton is our obligation to ourselves and to future generations.
The Yale Record--a student humor magazine--responded swiftly and hilariously:
The Yale Record believes both candidates to be equally un-endorsable, due to our faithful compliance with the tax code.
In particular, we do not endorse Hillary Clinton’s exemplary leadership during her 30 years in the public eye. We do not support her impressive commitment to serving and improving this country—a commitment to which she has dedicated her entire professional career. Because of unambiguous tax law, we do not encourage you to support the most qualified presidential candidate in modern American history, nor do we encourage all citizens to shatter the glass ceiling once and for all by electing Secretary Clinton on November 8.
The Yale Record has no opinion whatsoever on Dr. Jill Stein.
Tuesday, October 11, 2016
A recent article by Martin Levine highlights the struggle to define the line between providing education about issues and lobbying for specific legislative outcomes. The center of the controversy revolves around a complaint filed in 2012, when the Center for Media and Democracy and the Common Cause complained to the IRS that the American Legislative Exchange Council (ALEC) was incorrectly classified as a 501(c)(3) organization.
The ALEC characterizes itself as an organization “dedicated to advancing and promoting the Jeffersonian principles of limited government, free markets and federalism at the state level. ALEC accomplishes this mission by educating elected officials on making sound policy and providing them with a platform for collaboration with other elected officials and business leaders.”
The ALEC’s opponents, however, paint a different picture of the organization, claiming “the primary purpose of the organization is to provide a conduit for its corporate members and sponsors to lobby state legislators.”
As evidence of this lobbying, opponents of the ALEC point to a string of tax deductible donations from EXXON to the ALEC totaling over $1.7 million. The ALEC’s official position on climate change only leads to increased suspicions. According to the ALEC, there is no threat to the public from climate change or increased greenhouse gasses. In fact, the ALEC has stated that global warming is beneficial, claiming that “during the warming of the past 100 years global GDP has increased 18-fold, average life span has doubled, and per capita food supplies increased.”
While this information is certainly not determinative of foul play, it does provoke one to question the line between information providing and lobbying.
Monday, October 10, 2016
With the Election approaching, many are voicing their opinion on the Johnson Amendment, which denies 501(c)(3) organizations the ability to actively campaign or lobby for a political candidate. Currently, in addition to being unable to support a candidate for political office, nonprofit organizations are also unable to oppose political candidates.
Proponents of the rule fear that allowing nonprofits to advocate for candidates could create unhealthy political factions within their organizations and communities at large. A larger concern is that donations from these organizations would be tax deductible and could exacerbate the level of spending and the political power of large scale donors, heavily influencing electoral outcomes. A statement from the Americans United for Separation of Church and State exclaimed “If individual organizations came to be regarded as Democratic charities or Republican charities instead of the nonpartisan problem solvers that they are, it would diminish the public’s overall trust in the sector and thus limit the effectiveness of the nonprofit community.”
Opponents of the rule, like Republican Party Nominee Donald Trump, believe that organizations have a right to voice their opinion for leaders they believe would best represent them. In a speech to Christian leaders Trump stated “if you like somebody or want somebody to represent you, you should have the right to do it.” Opponents also believe freeing 501(c)(3) organizations from these regulations would increase voter participation and elevate levels of political debate.
It is unlikely that this debate will be solved in the near-term, and certainly not in time to impact the nearing election. However, a fundamental change to the Johnson Amendment could drastically change the way campaigns are ran and financed.
Thursday, September 22, 2016
I just wrote this CNN Op Ed comparing the two foundations. It begins:
Journalists and commentators across the political spectrum have subjected both the Bill, Hillary & Chelsea Clinton Foundation and the Donald J. Trump Foundation to a withering barrage of criticisms. Without a doubt, both foundations and their managers, including Ms. Clinton and Mr. Trump, have made mistakes. The critical question, however, is whether those mistakes are illegal.
Monday, August 29, 2016
Big news from Monongalia County, West Virginia (and I don't mean its party school ranking of number 2... ), but add West Virginia University to the list of charitable institutions making PILOT (payment in lieu of taxes) payments. WVU has done a significant amount of development in downtown Morgantown (yes, we have a downtown...) through private-public partnerships. As a result, a good deal of private property has gone off the tax rolls in this standard issue university town.
Of course, the issue of PILOTs has received a significant amount of discussion as of late (including on this website), as strapped state and local communities look for alternative sources of revenue. For more information, I strongly recommend starting with the Urban Institute website, which has a number of studies on PILOT issues (many of which are authored or co-authored by Evelyn Brody.) In that regard, this really shouldn't be much in the way of new ground... but...
(I am totally dating myself here...)
What I find interesting is that WVU is a public university. I've been searching on the interwebz (to no avail) for more information on how many public institutions - presumably, universities and hospitals - have agreed to PILOTs. (Anyone have any info? I found this helpful article by Langley, Kenyon and Bailin from the Lincoln Institute of Land Policy, circa 2012, that has a number of appendices - a very quick review doesn't seem to show any public institutions.) Part of the rationale for a private nonprofit to enter into a PILOT agreement and voluntarily pay not-taxes is that the alternative could be much, much worse. If a government changes the applicable laws granting nonprofit property tax exemption, the nonprofit will have little control over what happens next, so the devil you know and negotiate is probably better than what is behind Door Number 2.
I would think that with a public university, that calculus would be much, much different. After all, a public university is branch of government, it seems as if it would be much more difficult to muck with the property tax exemption for the University itself - both legally and politically. According to the press release from WVU, its 50 year payment agreement applies only to "private commercial establishments operating on University property for activities that are not a critical part of or integral to serving the academic needs of students." Therefore, while there may be limits on the ability to change the University's tax exemption, query how much play actually exists with attacking the property tax exemption for the University's leased property? (see section 10 versus sections 14 or 17, for example).
Thursday, August 18, 2016
Yesterday's NonProfitTimes reported that the OneOrlando Fund has begun accepting claims from victims and families of victims of the June 12 Pulse nightclub shooting that left 49 dead and dozens more injured. According to fund administrator, Kenneth Feinberg, the entirety of the fund -- estimated at $23 million -- will be disbursed. According to the OneOrlando website, to be eligible, claims must be postmarked by September 12. Claim forms can be found on the site.
Vaughn E. James
Wednesday, August 17, 2016
In 2003, four men came together to form Wounded Warrior Project, a nonprofit 501(c) organization that offers a variety of programs, services and events for wounded veterans of the military actions following September 11, 2001. The organization's website boasts that this charity and veteran service organization "provides free programs and services focused on the physical, mental, and long-term financial well-being of this generation of injured veterans, their families and caregivers." The charity urges its supporters to donate to its causes, assuring them that their tax deductible donations enable the organization to "help thousands of injured warriors returning home from the current conflicts and to provide assistance to their families." The website goes on to state that "[a]s the number of wounded [veterans] steadily increases, it is easy to see how the needs of these brave individuals also increase."
In March, CBS News reported that while Americans were donating hundreds of millions of dollars each year to the charity, Wounded Warrior Project was spending 40 to 50 percent of these donations on overhead, including extravagant parties. By comparison, CBS News reported, other veterans charities have overhead costs of only 10 to 15 percent.
Shortly afterwards, the organization's Board of Directors fired Chief Executive Officer, Steven Nardizzi, and Chief Operating Officer, Al Giordano.
Yesterday's NonProfitTimes reported on the next step for the organization: a restructuring plan, According to the Times, details of the restructuring plan are expected to be announced next month. But some details can already be gleaned from the organization's recently-released IRS Form 990 and consolidated financial statements for the fiscal year ended September 30, 2015. In notes to the consolidated financial statements, the organization states:
Negative media stories in January 2016 regarding the Organization prompted inquiries and requests for documents from Senator Grassley on behalf of the Committee on the Judiciary and from other parties. The Organization responded to these inquiries and requests, and management does not believe they will have a material adverse effect on the organization’s financial position, results of operations or cash flows.
The Organization is in the process of evaluating programs and services to ensure that they are delivered with even greater efficiency, as well as assessing its organizational structure to ensure that it maximizes all resources available. Management anticipates that certain roles will be eliminated as a result of this assessment and details of the restructuring will be announced in September 2016. Management does not believe the restructuring will have a material adverse impact on the accompanying consolidated financial statements.
The Times also reports that in recent weeks, new CEO Michael Linnington, has made reference during interviews to anticipated pay and staff cuts.
September will soon be here; we shall discover then just what Wounded Warriors Project will do to recover its image, stature and standing.
Vaughn E. James