01 August 2012

An Open Letter from Soldiers' Angels' Audit Committee Chairman

An Open Letter to Our Friends and Volunteers
Below is a letter from the Chairman of our Audit Committee and Member of the Board of Trustees, Richard Lowe.  The Board of Trustees has recommended that this response get as wide an audience as possible, so we encourage you to share the message. 
Wingtip to Wingtip, 
Patti Patton-Bader
Soldiers' Angels Founder & CEO
It has come to the attention of Soldiers' Angels Board of Trustees that allegations have been raised by Michael Yon regarding the stability of our organization.  We understand that some of our volunteers and supporters are disheartened by these charges, and we would like to take the opportunity to respond to them.  We would also like to take this time to explain the ratings that were given to Soldiers' Angels by Gloria Wise/Better Business Bureau (BBB) and Charity Navigator, two independent rating organizations.
First, let me address organizational stability.  Mr. Yon’s allegations are baseless at best.  Soldiers' Angels has worked with over 400,000 highly-motivated volunteers since in its inception.  In any organization of this size there will always be interpersonal conflicts and hard feelings between some of the volunteers; that is only normal.  As our charity evolves in its mission to support service members and their families, organizational priorities change and some individuals may feel that their particular program isn’t being given the proper amount of attention.  Rest assured, the Board weighs every issue and does its level best to make sure that everyone is accommodated, but our focus is on delivering the maximum benefit to those who are serving or have served in harm’s way.  While most of our volunteers understand and support this concept, a handful of them have opted to air their grievances publicly, which has created fodder for Mr. Yon, who in turn has elevated concern among our other volunteers.
We assure you that the organization is in good standing and we sincerely hope that the actions of a few people who have placed personal agendas above service do not tarnish the feelings you have for all the amazing work you do.   We want to once again thank all of our volunteers for giving so much of themselves to our men and women in uniform. 
Regarding the ratings that we have received, the BBB rates organizations every two years for their charity accountability. Our first rating by the BBB was in 2008 and we received passing grades on 14 of the 20 criteria. In 2010 we were re-rated and received a grade of 18 out of 20. The next rating will take place this fall, and we have taken steps to correct the two deficiencies that were present the last time BBB rated Soldiers' Angels. We fully expect to receive a 20 out of 20 when the review has been completed.
The second independent agency is Charity Navigator. Charity Navigator has the following on their web site:
"Charity Navigator's evaluations of a charity's Financial Health --- which examines how a charity manages its finances day to day and how financially well-positioned it is in order to sustain its programs over time --- have helped millions of donors make better giving decisions impacting billions of dollars of donations each year. By adding this new Accountability & Transparency dimension to its rating system --- which tracks metrics such as whether the charity used an objective process to determine their CEO's salary, whether it has an effective governance structure, and whether it has a whistleblower policy --- Charity Navigator will help donors have even greater confidence in their charitable choices.
30% of the charities' star rating improved

19% of the charities' star ratings decreased

With the bar set higher, the total number of 4-star charities decreased by 20%.

At the same time, charities with ratings of 3 stars (good) or better increased by 8%.

As you can tell by the statement, the original concept was strictly a financial rating service.  In 2007, Soldiers' Angels received a two star rating.  In 2008 and 2009, we received a three star rating. In 2010 and 2011, we received a two star rating in each year.  While this may seem to be below average, we would note that SA has consistently received high ratings for Fund Efficiency with a score of 7.5 out of 10 for 2008 through 2010. In 2007, we received a 5, so we have improved and held steady since the initial rating period.  Fund expenses were high in 2008, and we received a low score of 2.5 out of 10 that year.  Since then SA has gotten a firm grip on its cost structure, and fund expenses have been below 15% since then, giving us 7.5 out of 10. Soldiers' Angels has consistently scored well with Program Expenses, consistently scoring above 7 out of 10 points since Charity Navigator has rated us. We have scored a perfect 10 out of 10 in administrative expenses in every year, as we pride ourselves on running a lean ship.  Where we have fallen short is in Revenue Growth and Program Growth. To an extent, the recession has hurt charitable giving across all charities, and SA has been no different. Basically, our funding hasn’t been what it was during the halcyon years and we are penalized for this.
Another area which reduced our financial rating relates to a change in Soldiers' Angels operations that we believe directly supports our mission.  In 2009 we started the S.A.V.E program to employ troops leaving the military and provide a transitional period while they sought permanent work.   In the early years of Soldiers' Angels, we hired third party companies to send out care packages on a large scale each day, which was considered by Charity Navigator as a 100% Program Expense.  As more troops started coming home from the wars and leaving military service, we recognized that many were struggling to find or keep jobs in the civilian sector due to the challenges of reintegration and Post-Traumatic Stress.  As such, we opened our own warehouse in San Antonio to send care packages directly and staffed it with recently-returned veterans to give them a chance to transition within a safe environment mentored by fellow veterans.  In this way, Soldiers' Angels has supported close to 30 transitioning veterans.  Supporting returning veterans through S.A.V.E is consistent with the Soldiers' Angels mission and logically falls under Program Costs, but Charity Navigator declared it to be overhead, shifting a major expense into the Administrative column.
On the positive side of our ratings, the new Charity Navigator category, which began two years ago, is Accountability and Transparency, and this is where we stand out.  For the past two years we have scored a four star rating from Charity Navigator.  This category takes into account many qualitative measurements, including the fact that we have a Whistleblower policy, a Privacy policy, a Records Retention policy, and many other criteria that are meant to ensure that the Board isn’t playing fast and loose with the rules as people have charged.  For the most recent period we received 70 out of a possible 70 points.  Our organization is an open book, and if anyone ever doubts this they have the ability to do a search at Charity Navigator or on our web site and find the information for themselves.
If the Board  so desired, there are a number of ways that we could creatively account for certain programs that Soldiers' Angels maintains.
There are accounting practices that can bring the fundraising cost down on paper, but we'd want an accountant to sign off.  There are accountants who actually specialize in reallocating costs for non-profits and the accepted practices seem to change fairly often.  As a result of this, we decided to adopt a more conservative posture and not jeopardize the reputation of Soldiers' Angels.
As an example, when we send mail and ask donors  to return a card with a message for a soldier and we include that card in a care package, the cost of sending and collecting that card can be partly attributable to program costs, rather than 100% fundraising.  We don’t attribute it to Program Costs, although we are allowed to.  It doesn't actually change any cost, but it could move some cost figures from "fundraising" to "program" and thus lowers our cost on paper.
As charities go, our fundraising cost percentage is 15%; pretty low if you're actually soliciting. Those who get much lower are funded with government money, foundations or a few wealthy individuals. Charity Navigator’s rating system would favor that because the fundraising cost is Zero.....but the drawback is that we would have no base of support.  For example, if a large foundation were our sole donor and they were to cut back on general charitable giving, it could theoretically put SA  out of business because we would be relying on one source to fund the bulk of our operation.  We have opted for a broad base of donors to prevent such a situation from happening.
In conclusion, we believe that the Board of Trustees is honest and ethical, and has behaved in a proper manner with the sole thought being the viability of the charity.  The attacks that were made against Soldiers' Angels and several of the Board members are baseless and without merit, and impugn the integrity of Soldiers' Angels and its Board of Trustees. Soldiers' Angels remains committed to its mission to support members of the armed forces and their families.
For those volunteers who are concerned by the attacks, rest assured that the Board is fighting them and we will prevail. There is no need to doubt the viability of the organization.  Our viability is strengthened by committed volunteers who always put the needs of our armed forces and their families first.  THESE HEROES ARE RELYING ON YOU TO COME THROUGH FOR THEM. What we are facing is nothing compared to what they are facing now, and we owe them our unconditional support.  As a general by the name of George Smith Patton, Jr. once said, “Do Not Take Counsel of Your Fears.”
Richard P. Lowe, CFA®, CFP®
Soldiers' Angels
Board of Trustees, Member at Large
Chairman of the Audit Committee

See also:
This Ain't Hell

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