The Board of Directors at all organizations is responsible for the stewardship of the organization’s assets. This means protecting and safeguarding the tangible and intangible assets. There seems to be clarity on the protection of the tangible assets such as inventory, equipment, buildings, even information. Fire and casualty insurance policies are taken out. Controls are implemented to control access to inventory and use of equipment and buildings. Security mechanisms are implemented to protect customer, employee and organizational information and systems. However we have seen great failures in protecting one of the most important intangible assets – the organization’s reputation.
This is true in the corporate and not for profit sectors. Headlines have covered a number of allegations in blue chip corporations: Enron – concealing large losses; Wells Fargo – unethical sales practices; SNC-Lavalin – corruption payments; Volkswagen – emissions scandal. And the not for profit sector made news with: MADD’s exorbitant costs anger charity’s volunteers; Zoo foundation to disband after fallout with Board; SPCA Board quits en masse; Children’s Aid Society junkets, lavish dining cited in leaked audit.
The latest spectacular case is WE Charity. It has a Board of Directors – but the Board seems to be missing in action.
The claim: “WE Charity’s Board of Directors is composed of leading experts on governance, business, education and social justice that oversee the organization in North America and the United Kingdom. In addition to guiding the work of the charity, the board provides legal and financial oversight—including the review and approval of the annual budget, oversight and approval of independent audits, the ongoing review of WE Charity’s financial well-being, the selection and appointment of the executive director, the nomination and appointment of new board members, and independently reviewing and guiding WE Charity’s domestic and international projects.” This all sounds good but was it in reality being actioned?
How could there be such a significant failing for a multi-million dollar charity? How could there be such a failure in governance? Did no one consider the need to register the organization in the federal lobby registry? The Board Chair claims that it was not being provided with the information to understand the status of the financial health of the organization. If WE Charity was the only organization which could administer the Canada Student Service Grant program why did it require $30 million upfront in order to put the structure in place to do so? The Board Chair stated that she was asked to resign by the co-founders – that is odd – who works for who? The co-founders are not on the Board of Directors for WE Charity nor are they staff for the organization – they describe themselves as volunteers – so how do they have authority to tell the Board Chair to resign?
The WE organization is complex. There are a number of organizations in the structure: WE Charity, ME to WE Social Enterprises and subsidiaries, WE365, WE Wellbeing Foundation, ME to WE Foundation, WE Charity Foundation, Imagine 1 Day International Organization. There are at least two different auditors for the organizations. It seems to take a long time for the organization to get its financial information audited. The audit report for the financials for WE Charity for the period ended August 31, 2018 was dated February 28, 2019 – six months after year end; and the audit report for the ME to WE Foundation’s year ended December 31, 2018 was dated July 2, 2019 – six months after year end. The audit report for the WE Wellbeing Foundation’s December 31, 2018 year end was dated July 8, 2019 – six months after year end. WE Charity is a large organization holding at least $68 million in assets – why wouldn’t its financial accountability be more current? And the excuse for the August 2019 financials not being available still by September 2020 – a year later – is due to Covid. The Covid impact was in March 2020 – 7 months after the August year end.
Buried in the notes to the financial statements for the WE Charity, it is stated that the organization ME to WE is controlled by the co-founders of WE Charity. It also states that WE Charity purchases books, educational material, promotional items and travel services from ME to WE. It states that ME to WE donates 50% of annual profits to the organization and retains the remaining 50% for self sustainability. In fiscal 2019 WE Charity purchased goods from ME to WE for $800,000 and received donations of $1.9 million so a net transfer of $1.1 million. I could not find financial reporting for ME to WE to understand the significance of the net transfer.
There have been justifiable questions about the relationship of the co-founders, their parents, and the WE organization. The co-founders are not members of the Board of WE Charity nor staff. There is information that the co-founders receive a salary from ME to WE Social Enterprises. The WE Charity operates out of buildings owned by the parents of the co-founders. While it notes that WE Charity did not pay rent to the parents, the Charity did pay all costs of operating the buildings including the interest on mortgages taken by the parents to purchase the buildings – seems like the equivalent of rent.
The co-founders of WE are saying that there were mistakes made in pursuing a government program which involved the spending of over $900 million of public dollars that deserved public accountability. One of the co-founders stated that WE Charity would not make money on the program – let’s hope not. They themselves said that it was taking on the program to sustain the WE organization. This was not simply taken on as a loss leader. There has not been much communication from the Board of Directors and what has been shared by the former chair of the Board was not positive. Where were those “leading experts” in providing oversight and protection of the organization?
Individuals and organizations align themselves with charities which can be trusted, which can be understood, which demonstrate good governance and good management. It is not surprising that major organizations decided to step away from WE given what has unfolded. There are likely more questions that people have on WE Charity now that it has been in the spotlight but if there was good governance of the organization, its reputation would not have suffered catastrophically. It is unfortunate to not have had the benefit of good governance to further the Charity’s mission with utmost respect.
By Fay Booker. Fay Booker is principal of Booker & Associates, a consulting firm focused on promoting excellence in good governance and enterprise risk management.