Posts Tagged ‘disqualified persons’

SPLC and “Disqualified Persons”

February 12, 2017

Is there a tax doctor in the house? Last week the Southern Poverty Law Center released its IRS Form 990 tax returns for Fiscal Year 2016. The Form 990 is always an informative read because it contains so much useful information.

Page 1, Line 15 notes that the company paid $20,291,678 in “salaries, other compensation, employee benefits,” (11% of which went to the top 9 execs, leaving the other 282 employees to split the rest for an average of $64,000 each.)

We get that. What we don’t get is the entry on Page 10, Line 6 that reads: “Compensation not included above, to disqualified persons.”

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Who exactly are these “disqualified persons” and are they being paid outside of the $20 million dollar pot listed on Page 1?

Naturally, the IRS website was virtually incomprehensible on the subject, but several other sources defined disqualified persons as:

  • “Disqualified persons” are those who are in a position to exercise substantial influence over the affairs of the organization, during the five years before the excess compensation was made.

  • “Disqualified persons” would include, for example, voting members of the governing body, and presidents, chief executive officers or chief operating officers, treasurers, and chief financial officers.

  • Also included as “disqualified persons” are certain family members of a disqualified person, and 35% controlled entities of a disqualified person.

  • Other people could also be considered “disqualified persons,” depending upon the relevant facts and circumstances that show substantial influence over the organization, such as a founder, substantial contributor, or manager of a substantial portion of the organization’s activities.

So, apparently, for a 501(c)(3) public charity like the SPLC, “disqualified persons” include founders, presidents, and other top executives, who are already got paid on Page 1, Line 15.

It can also include members of the Board of Directors, who, according to Page 10, receive no compensation for their efforts.

Or, it may include family members of all of the above.

Sadly, the Form 990 does not disclose the identities of the people who are receiving that $14.4 million compensation. Surely somebody has this information. Perhaps the Freedom of Information Act could help?

We ask these impudent questions because the SPLC has a habit of hiding expenditures from the donors. For example, the company routinely makes the claim that “During the last fiscal year, approximately 68% of our total expenses were spent on program services.”

History has shown that this figure relies on the use of legal but ethically dubious gymnastics on the part of the bookkeepers. For example, Page 1, Line 16b of the Form 990 states categorically that “total fundraising expenses” for the year came to $9,689,461, or 21% of expenses for 2016.

Page 10, Line 26, however, notes “joint costs” of $6,989,987. What are “joint costs”? According to the SPLC’s own auditor: “The Center incurred joint costs of $7,983,475 for educational materials and activities as part of fundraising appeals during the year ended October 31, 2016.” (p. 14) Note that the auditor’s figure comes in at nearly a million dollars more than the Form 990.

Translation: “Joint costs are fundraising costs assigned to other departments.” For example, “Management” spent $737,711 on postage last year. That’s more than 1.6 million first-class stamps. Don’t the employees have email? Who else would “Management” need to contact on such a scale?

As Charity Navigator notes on its website: “Although the use of this accounting “trick” is often perfectly in line with the accounting rules for the reporting of joint solicitation costs (AICPA SOP 98-2) these rules allow for many interpretations and judgments that can produce questionable results.”

Add the auditor’s joint fundraising costs to the fundraising costs listed on the Form 990, ($17,672,936) and we’re already looking at 38% of last year’s budget, not the 32% claimed by the SPLC.

As it turns out, compensation to disqualified persons is also spread out across several departments, including another $2 million to fundraising, not listed above. That brings Fundraising’s grand total to $19,834,444, or 43% of the budget, not the 32% claimed by the SPLC.

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Long story short, if the Southern Poverty Law Center is willing to obfuscate its fundraising numbers to hide reality from the donors, why wouldn’t it use the same kind of accounting prestidigitation concerning what it pays its all-white executive suite?

Does anyone out there know how Watching the Watchdogs can obtain the names of these mysterious “disqualified persons”? If so, please contact us as soon as possible.


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