From the April/May 2010 Charity Rating
Guide & Watchdog Report
the Children Controversies Continue
Charity Accused of Overstating Its Work in
More bad behavior has come to light
after AIP handed Feed the Children (FC) its "Most Outrageous
Charity Award" in our last edition of the Charity Rating
Guide. After having worked three decades at the charity, FC founder
Larry Jones was finally fired by its board last November after
admitting to authorizing the bugging of three FC officials' offices.
Jones filed a wrongful termination suit later that month and the
charity countered 12/28/09 with a claim against Jones, including
allegations that he took kickbacks from vendors, did not tell
the truth to FC's board about giving himself and his wife unauthorized
raises, and had a large stash of porn magazines hidden in his
office and his private area at this Christian charity.
The charity's counterclaim alleged
that Jones failed "to disclose that he entered into an improper
and unauthorized 3-year contract with Affiliated Media Group...
[and] that he was in business with a top executive of Affiliated
Media Group in another business venture
" In a 12/30/09
article, Jones told The Oklahoman that he was paid $10,000 a month
in sales commissions by Affiliated Media Group (Affiliated) because
he "recruited preachers to use the company for their own
" and that he helped his son get a
job with Affiliated. FC paid Affiliated $110 million from fiscal
2005 through fiscal 2007 according to August 22, 2008 board minutes
filed with a prior lawsuit, FC v. Osteen.
Since Jones was fired from FC, he has
gone from being a defender to a critic of the charity. Last summer
Jones defended the Oklahoma City based charity's purchase of a
$1.2 million house in the Los Angeles area "to reach out
to celebrities" and told the Oklahoman that his daughter
"lived and worked out of the house as intended." Yet
in legal papers filed 1/19/09 against FC, he accused his daughter
of "treating a business residence in California as her personal
residence." In the same lawsuit he criticized other employees
who worked for him for many years when he was head of the charity,
including accusing FC's chief financial officer, Christy Tharp,
of being incompetent even though she had worked for him as FC's
CFO since 2002.
Just a month after the catastrophic
earthquake struck Haiti, a CBS News investigation exposed that
FC was greatly exaggerating the amount of aid it was providing
to victims. The 2/18/10 story, which included an interview with
AIP's president, showed that while FC's web site claimed that
it was "providing medical relief for 12,000 people,"
the three doctors that FC employed in Haiti could realistically
only treat about 100 people a day. FC's web site also said that
United Nations agencies "are partnering with us to provide
food and milk for the entire camp," but when CBS investigators
visited the camp, they were told by FC's field manager in Haiti,
who has since resigned from FC, that this was not true. CBS reported
that more than two weeks after the quake struck FC had not fed
anyone. When CBS reporter Sharyl Attkisson during an on-camera
interview told FC Director of Communications Tony Sellars that
no food had been handed out, his response was, "That does
surprise me at this time, yes."
to the CBS piece, FC issued a press release stating: "We
were advised that World Food Programme already had rations for
one million people for one month as part of their ongoing programs
before the quake. Accordingly, our priority was tents, blankets,
medical supplies and bottled water." FC later indicated on
its ftcfacts.com site that it disputes its ex-field manager's
claim in the CBS report that FC had not provided food at the camp,
claiming that it had distributed a significant amount of food
on January 20th. FC characterizes the CBS report as inaccurate.
AIP has been giving FC an F grade since we began reviewing the
charity over a decade ago, other charity monitoring agencies that
previously gave top honors to FC have only recently lowered FC's
Wise Giving Alliance (WGA) had been granting FC its Wise Giving
Seal, for which it paid WGA $15,000 annually, up until about the
middle of last year. There is another connection between WGA and
FC. Larry Jones v. FC court papers filed by the charity in 12/28/2009,
state that WGA's Treasurer, Marcus Owens, Esq. had been hired
by Larry Jones to help him with a failed scheme to fire FC's board
"and replace them with his hand picked Pastor Board, so Larry
Jones would have unfettered control over FTC [Feed the Children]
and he could continue his free wheeling dominance of its affairs."
Owens is also a former director of the IRS's Exempt Organizations
Division and is presently an attorney with the law firm of Caplin
& Drysdale. Owens told AIP that he could not comment on the
lawsuit due to his professional obligations.
to not let a four star rating by Charity Navigator (CN) become
a green light to give without checking further. In a November
2009 article in the Daily Oklahoman CN spokeswoman Sandra Miniutti
said FC has CN's highest possible rating and "is one of those
charities that has their financial health in order." CN continued
to give its top rating of four stars to FC, which it heavily promoted
on its web site and in press releases until February 19, 2010,
the day after the CBS news story on FC was released.
AIP's December 2009 Charity Rating Guide & Watchdog Report
Most Outrageous Charity in America
Larry Jones' Feed the Children
From forged audits and alleged employee
theft in the late '90s to alleged burglary and board coup staging
within the past year, no other major charity can match Feed
the Children's (FC) record of outrageous behavior over the
past ten years. The madcap antics of Feed the Children and Larry
Jones, its founder and president for 30 years, may be coming to
an end. In August 2009, after months of turmoil at the charity,
Mr. Jones agreed to give up control of FC in order to settle a
lawsuit between FC's longstanding board and a new board that he
had attempted to install. Fascinating details about many alleged
wrongdoings at this charity have been brought to light as a result
of this lawsuit.
Last December, Larry Jones staged a
failed coup in an attempt to take over the board of FC after the
board decided to put an end to his "freewheeling dominance"
over the charity and demanded that he take a sabbatical for an
indefinite period of time. The new board members Larry Jones attempted
to install consisted of prominent ministers. This board along
with Larry Jones promptly fired FC's chief operating officer,
chief financial officer, internal auditor and the daughter of
Larry Jones, Larri Sue Jones, FC's Vice President and General
Counsel. The longstanding board sued the new board in January
and was reinstated by Oklahoma County District Judge Patricia
Parrish in February along with the previously fired employees.
FC has continuously received an F grade
from AIP since we began rating this charity in 1995. Based on
FC's most recently available financial statements for fiscal 2008,
only 21 to 23 percent of its cash budget was spent on program
services and $63 to $65 was spent to raise each $100 cash contribution.
In 2008 about 54% of FC's cash budget of $125 million was spent
on "television and radio," "direct mail,"
and "direct mail postage" according to its audit of
the same year.
Medicate the Children?
FC emphasizes feeding hungry children
in its name and most of its fundraising and PR. Yet food is not
mentioned in the breakouts of noncash property received in FC's
fiscal 2008 tax form. These breakouts account for $736 million
or 69% of the total noncash items received consisting of $584.5
million or 83% medicine; $52.2 million or 7% books; and the rest
"assorted necessities" and "disaster relief supplies."
FC's 2008 audit reports that one contribution of medicine accounts
for about 46% of total noncash property received and the related
receivable accounts for 98% of $362.4 million in contributions
The Chronicle of Philanthropy
lists FC as our nation's 7th largest charity based on its private
support of $932.5 million, of which $820.6 million or 88% is noncash
or in-kind, according to FC's fiscal 2007 tax form. FC's ranking
might not be so high if its noncash income was valued more precisely.
AIP has long questioned the reported value of FC's noncash support.
In an article in the April/May 2009 AIP Guide, we pointed
out that FC reported donations of pharmacy discount cards that
were valued on its fiscal 2007 tax form at $22.4 million, yet
according to a charity that received a shipment of these cards
valued by FC at about $112,000, they could not be distributed
because people did not want them due to their limited use. Charities
have incentive to inflate the value of the in-kind items they
receive and distribute because they can take credit for the value
of these goods in their program percentages and appear to be operating
more efficiently as a result.
The charity's own auditors flagged
how FC values its noncash goods as one of its "material weaknesses,"
according to FC's Board of Directors Meeting Minutes of April
11, 2008. (Note: All board minutes and resolutions cited in this
article are filed with the court as part of the lawsuit, FC vs.
Osteen.) When AIP asked FC on October 5, 2009 to describe these
"material weaknesses," they refused to answer the question
and said that FC's outside auditors have determined that its valuation
process no longer has "material weaknesses." Rather
than explain its valuation methodology, FC chose not to answer
AIP's questions concerning how it valued the discount pharmacy
cards and also its shipments of Mebendazole, a deworming drug
that FC says it distributed 61 million tablets of in fiscal 2008.
Millions to Media Group
The longstanding board at its meetings
related numerous incidents of major agreements being made by FC
staff without formal board approval. The most eye-opening one
is a television buying agreement in which FC pays approximately
$40 million annually to Affiliated Media Group (Affiliated), according
to minutes of a June 30, 2008 board meeting, filed with the Oklahoma
court. "This purchasing function has never been let out for
bids, and there has been a less than satisfactory accounting by
Affiliated of the true cost of the television time." FC told
AIP that it will utilize "
competitive bidding on future
purchase[s] of television air time."
More detail regarding payments to Affiliated
was provided in the August 22nd minutes: $37.0 million in fiscal
2005, $38.0 million in fiscal 2006 and $35.0 million in fiscal
2007. These payments represent 35.8%, 33.2% and 30.1%, respectively,
of total cash spending in each of those years. FC did not identify
these payments made to Affiliated, its largest vendor, in its
tax forms for those years even though the IRS asks that charities
list the five highest paid independent contractors for both professional
and other services. FC told AIP that it is not required to list
separately its payments to Affiliated on its IRS form 990.
Allen Jones, Larry Jones' son, was
employed by Affiliated, according to minutes at the June 30, 2008
FC board meeting. The board at this meeting expressed concern
about a possible conflict of interest with this arrangement.
Larry's Son Runs Roughshod
AIP previously reported on Allen Jones
in its 1999 Guide when he received from FC a $950,000 loan
or promissory note to finance a framing business that he later
assumed and defaulted on. Larry Jones told The Oklahoman
that FC recovered its money in the foreclosure of the business.
FC told AIP in 1999 that the co-owner of Allen Jones' business
also guaranteed the note.
FC's April 11, 2008 board minutes stated
that Allen Jones is not an employee of FC, though he had a charity
credit card and used FC's offices, equipment, vehicles, and storage
space. Allen used approximately 17,405 square feet to store "his
pontoon boat, sea doos and other personal items," according
to August 1, 2008 board minutes. The board alleged at its June
2008 meeting that FC paid for a garage door that Allen Jones had
received and electrical work performed at his home. Allen reimbursed
FC for these expenses, according to a "LIST OF [FC] BOARD
RESOLUTIONS AND FOLLOWUP ACTIONS [FOR BOARD] MEETINGS MAY 16,
2008 THROUGH OCTOBER 24, 2008" (FC Board Resolutions). He
also oversaw a large call center building in Elkhart, Indiana
on behalf of his father. It is the FC board's understanding that
during a two to three year period in which Allen oversaw the building,
its "components and excess equipment were being stripped
and removed by
personnel [from a company whose "contact"
for FC was Larry Jones] and sold for cash in the nearby towns."
The Elkhart call center had been leased
and some of its equipment purchased from FC in 2006 by InService,
a company FC hired to answer calls from potential FC donors. According
to a lawsuit filed by InService against FC and also Affiliated,
who served as FC's negotiator, FC promised that it would make
InService the "exclusive provider of call services."
After a dispute with FC over InService's billing practices and
performance of its contract, according to InService, FC later
reneged on this promise by routing some of its calls to a competitor
and not paying InService's invoices. Ray Davis, the CEO of Affiliated
at the time who is now deceased, stated, according to the lawsuit,
"I can destroy you brother. I will take In Touch from you.
I will take Lakewood [Church] from you." These were InService's
largest clients, according to the lawsuit. An interesting connection
is that Lakewood is also the employer of Paul Osteen, the brother
of famous televangelist Joel Osteen, and one of the people that
Larry Jones attempted to place on the FC Board in his failed coup
FC's June 30, 2008 board minutes state
that "legal counsel had been instructed to settle this matter
to issues with Affiliated" and that "Ray Davis had brokered
the transaction originally and was heavily involved in the settlement."
The minutes also said that the total loss to FC from the lawsuit
and equipment at the Elkhart call center was $1,675,630.
One of a number of internal FC disputes
involved Rick Ross, FC's Vice President of Donor Relations, who
was "forced" by Larry Jones to sign a contract with
the vendor, AMP, even though it "was not in conformance with
FTC's General Counsel comments," according to FC Board Resolutions,
filed with the court. This document also stated that "Rick
went on record as disapproving having to sign this contract without
the General Counsel's or the Finance Committee's approval."
FC contradicted this document in October 2009 when it stated in
writing to AIP: "There has been no contract signed by Rick
Other Family Personnel Problems
The consequence of the limited number
of hours worked due to health problems by Larry Jones' wife, Frances,
who held the title Executive Vice President, was discussed at
the June 30, 2008 Board meeting. The Board expressed a concern
that Frances' "relatively low number of hours worked in relation
to her compensation paid," $182,952 plus $4,100 expense account,
according to FC's fiscal 2008 tax form, "might draw unwanted
attention from the IRS...." FC declined to inform AIP of
how many hours Frances Jones works each week.
Ian Harris, formerly manager of international
operations for FC, was criticized at a June 2008 Board meeting
for continuing delays in submitting expense reports and not reporting
"possible additional Grants." An audit of FC in South
Africa uncovered a $100,000 embezzlement by the son of Ian Harris,
according to August 1, 2008 board minutes. At the June meeting
Ian Harris' brother-in-law, Peter McLaren, was criticized for
refusing to submit financial data on FC operations in Thailand.
FC told AIP in October 2009 that Ian Harris is no longer associated
Paid Pro Golfer
Last July, Larry Jones told the NBC
mid-Michigan affiliate: "We are incredibly thankful that
[pro golfer] Lee Janzen has partnered with Feed The Children for
this food distribution in Flint.".... "Lee has a servant's
heart for struggling families during this difficult economic time
and he is committed to reaching out to those in need
What was not reported in this story is Mr. Janzen's interest in
getting paid by FC. August 1, 2008 FC board minutes state "More
discussion was had regarding the sponsorship price of $250,000
per year." Also, the board wanted a one year escape clause
in Mr. Janzen's contract, yet the contract went out on FC's behalf
with a 2.5 year clause that the board had not agreed to. Janzen
declined to answer AIP's questions regarding his contract with
FC. FC declined to provide AIP specifics about Janzen's contract
and also declined to tell AIP whether or not other celebrities
are paid to do promotions or fundraising for FC.
Larry's Daughter Burglarized
Rather than spending $1.2 million of
donations on helping the needy in 2007, FC spent it on a new four
bedroom house in tony Burbank, California for Larri Sue Jones
to live and work in, according to The Oklahoman. Larri
Sue filed a police report in December 2008 that stated her Burbank
home had been burglarized while she was in Oklahoma City being
fired and that her personal papers and a FC-owned computer had
Upon questioning from a Burbank police
investigator, FC's human resource manager, Richard Gray, admitted
that an FC employee entered the house because Larri Sue was trespassing
on the charity's property and "we have a right to enter and
take our property." The policeman informed Gray that the
person who entered the house committed a burglary. The officer
also said that the house is a private residence and that the charity
"is not allowed to enter and take any property
she moves or is evicted through a legal process." Some FC
directors identified Jerrald Buchanan, former VP of Information
Technology, as the employee involved in the alleged burglary,
according to The Oklahoman. Gray and Buchanan were subsequently
fired by FC. When AIP asked FC in October 2009 who ordered the
breaking in of Larri Sue's residence, their only comment was that
it is a matter under police investigation.
Larry Jones told The Oklahoman
that he had no regrets about the charity's purchase of the Hollywood
area home because FC needed an office and a home to forge relationships
with celebrities who could open doors to help FC raise more funds.
Many in the entertainment world allow FC to use their image to
promote this charity. FC's 2007 annual report, the latest one
that FC has made available on its Internet site, had three pages
of photos of celebrities entitled "Special Friends and Partners,"
which included Maria Shriver, Sir Roger Moore, Joan Collins, Garth
Brooks, Antonio Banderas, Bishop T.D. Jakes, Kobe Bryant, Congressman
Charles Rangel and many others.
In August a private investigator hired
by FC found evidence that three of its offices had been illegally
wiretapped, according to an Oklahoma City Police Department Crime
Report. The Oklahoma Police investigation is ongoing and at the
time of publication it is not known who orchestrated planting
of the bugs. Update 11/02/09: The Oklahoman reports that police
were told Larry Jones authorized placing hidden microphones in
the offices of three executives, including Larri Sue Jones, previously
fired by Jones, after a judge's ruling gave the executives their
jobs back. Oklahoma law allows for clandestine recording of one's
own conversations but it is illegal to use wiretaps to remotely
eavesdrop on other people, according to The Oklahoman.
AIP has long been the only major charity
watchdog to give FC a poor rating. None of FC's numerous and serious
problems have kept it from obtaining the top or four star rating
from Charity Navigator. FC boasts on its home page at feedthechildren.org
that it "meets the extensive standards of America's most
respected charity evaluator."
As we have been doing for over a decade,
AIP will continue monitoring this charity and look forward to
seeing FC's appointment of a new president or CEO that will efficiently
and ethically fulfill its mission.
Update 11/09/09: The Board
of Directors of FC announced: "Larry Jones' employment and
office as president has been terminated effective immediately."
From AIP's April/May 2009 Charity Rating Guide & Watchdog
Head Stages Failed Coup
Larry Jones, founder of the well-known
hunger charity Feed the Children (FC), was recently mentioned
in an ongoing court case in which the groups longstanding
board of directors claim they were unlawfully ousted by Jones,
board chariman Dwight Powers, and five improperly appointed directors.
Court papers reveal that after learning of the board's plans to
place him on "indefinite sabbatical," Jones packed the
board in his favor with directors who would be friendly to him
and then fired the longstanding directors. Among the board's concerns
were that Jones allegedly did not receive board approval for major
purchasing commitments, including approximately $35 million per
year for a "Television Buying Agreement," and evidence
of a son's personal use of charitable resources. Jones, along
with his new board, then fired most of FC's key staff, including
the charity's chief financial officer, chief operating officer,
and an internal auditor. Also fired was FC's general counsel,
Larri Sue Jones, Larry Jones' daughter.
According to a February article in
The Oklahoman, Jones' attorney, Leif Swedlow, said of the
court case, "The suit attempts to dispute the election of
five prominent pastors to Feed the Children's board of directors.
Feed the Children believes that the claims have no merit."
The judge disagreed, reinstating the five fired board members,
and ordering no major changes in the organization until a later
hearing on the matter can be held.
FC, which has consistently received
an F grade from AIP for low program spending and high fundraising
costs, continues to receive a failing grade based on its 2007
tax form and audit, the most current available. For more than
a decade AIP has been reporting on issues related to FC's financial
efficiency, accountability, and governance, and is interested
in what additional information may be revealed while following
the ongoing case as it unfolds.
Update: In order to settle the above-cited
lawsuit, Larry Jones agreed to step down as head of Feed the Children
and focus his efforts on public relations and fundraising, according
to an August 14, 2009 statement from the charity.
From AIP's April/May 2009 Charity Rating Guide & Watchdog
Questions the Value of Donated Goods
$118,000 Shipment May Be Worth Less Than $7,000 to Recipients
Feed the Children (FC) is practically
a household name thanks to its celebrity endorsers and television
infomercials featuring malnourished children in impoverished areas
of the globe. The charity claims on its web site that it spends
83% of its budget on its programs. What some donors may not realize
is that hundreds of millions of dollars worth of donated goods
are included in this high program percentage, some of which are
"worthless to most people" according to one Oklahoma
based charity, Mission Shawnee (MS).
FC receives a large share of its donations
from its "corporate partners," such as Avon, Frito-Lay,
ADM Co., Coca-Cola, among a long list of other companies. Companies
have incentive to give in-kind donations of what FC refers to
on its web site as "unsaleables, overages, and dated products"
to charities such as FC in exchange for the lucrative tax deductions
such donations may generate. In fact, FC lists tax savings as
the first reason companies should consider donating, touting that
companies "can receive up to twice the cost of the products
you donate," and that FC works to "maximize benefits
to your company."
Unfortunately, not all of the items
FC accepts and later distributes to its partner charities are
in usable condition or appear to be worth the value that FC is
placing on them. MS received a shipment from FC late last year
that included 265 cases of canned goods, most of which were "severely
dented or rusted," or "without labels" and had
to be thrown away, according to MS president, Dr. Robert Dawson.
This shipment, which also included 1 pallet of containers, 72
cases of bottled water, 50 bags of flour, and 1 case of discount
pharmacy cards, was valued by FC at $118,932.61, according to
the "Certificate of Donation" FC provided to MS. This
amount seemed extremely high to Dawson, who later contacted FC
for a breakout of how the different items were valued. He discovered
FC was valuing the pharmacy cards at "about $23 per card,"
accounting for about $112,000 of the shipment's total value, according
In its 2007 tax form FC reports accepting
donations of pharmacy cards worth over $22.4 million, but does
not provide a breakout of the amount it distributed to other charities
or, more importantly, explain how it determined that the cards
are really worth this amount. Similar cards are readily available
for free through numerous web sites and organizations. At least
some of the pharmacy cards were initially donated to FC from marketing
services company Vertrue Inc. According to the informational material
attached to the pharmacy cards MS received, people using the cards
may "save an average of 20% on prescription drugs."
Dawson said he was not able to distribute any of the pharmacy
cards he received from FC due to lack of interest because they
cannot be used in conjunction with any other discounts, such as
with a person's health insurance. "If one side were blank
we could use them for scratch paper," said Dawson, referring
to the cards.
While it does appear that some cardholders may be able to take
advantage of drug discounts by using the pharmacy card for certain
purchases, AIP questions the high value FC is placing on the cards.
Charities have incentive to inflate the value of the in-kind items
they receive and distribute because they can take credit for the
value of these goods in their program percentages. This can have
the effect of making a charity appear to be operating efficiently
even if very little of the cash donations it receives are being
used for its charitable programs. According to FC's Board of Directors
Meeting Minutes of April 11th, 2008, the charity's own auditors
flagged how FC values its noncash goods as one of its "material
weaknesses," specifically naming the "Vertrue pharmacy
This is not the first time AIP has
caught a charity using donated cards of questionable value to
puff up its program percentage. Help Hospitalized Veterans
(HHV) took credit for $18,750,000 worth of "phone cards"
it received and passed through to its related charity Coalition
to Salute America's Heroes (CSAH) in fiscal 2006. These "phone
cards," which were distributed to overseas military personnel
by CSAH, were not for soldiers to call home to their family but
rather to make free calls for sports scores with ads provided
by a company called EZ Scores. HHV and CSAH, who share the same
president and founder, each counted $18,750,000 of the sports
score cards as a contribution and program expense in their respective
fiscal 2006 financial statements. These sports score cards and
$2 million in donated public service airtime accounted for 85
percent of CSAH's total program expenses reported in its 2006
MS received only one shipment from
FC prior to the one containing the mostly unusable items. It included
a large volume of items for infants and toddlers, most of which
MS was able to distribute to the needy and were "very useful"
according to Dawson. However, it can be expensive for some small
groups to request items from FC since it requires charities like
MS to pick up the tab for any costs to transport available donated
items from its warehouse. "We have to get ahold of a refrigerated
truck to pick up the items," said Dawson, who cited this
as the primary reason why MS did not regularly request additional
goods from FC after the first shipment. He said that arranging
transportation for the items was costly and that the goods made
available to his charity by FC were not always items his small
charity could easily use or what was most needed. "Usually
we have limited use for a half a train car of pickled beets,"
Since FC does not purchase the donated
goods that it distributes, nor does it pay to deliver goods to
its recipient partner charities, donors who contribute to FC may
be wondering what happens to their cash donations to the group.
About 60% of FC's cash was spent on "television and radio"
and "direct mail" in 2007 according to the group's audit
reporting of the same year. AIP determined that in 2007 FC spent
only 18-19% of its budget on its programs once noncash items are
As of publication FC has not responded
to AIP's requests for comment on this story.
From the April/May
2005 Watchdog Report
is Only a Small Portion of What Feed the Children Distributes
Feed the Children (FC), an AIP
F-rated charity that spends only 18% of its cash budget on program
services and spends 60% on direct mail and television and radio
ads, has been enormously successful obtaining gifts in kind. In
fiscal 2004 FC received $865 million in donated goods, a 79% increase
from fiscal 2003. 64% of its in kind donations came from three
corporations, according to FCs fiscal 2004 audit.
FC has repeatedly declined to fulfill
AIPs request to disclose what it is actually distributing
to which specific charities. Finally, in February of this year
FC did disclose to us in a letter the basic categories and amounts
of $796 million worth of goods distributed. This letter did not
cite the time frame in which the distribution occurred and omitted
any information on which charities received the goods, saying,
Our policy to not disclose the names of the charities that
we distribute to is fully compliant with nonprofit law.
FC cited privacy as their reason for not disclosing who received
the goods. This would be an understandable concern if we had requested
the names of people who had received the goods. Since AIP is asking
only for the names of charities, not individuals, AIP does not
believe that providing such information violates anyones
Donors should be cautious not to read
too much into a charitys nameFeed the Childrens
distribution of assorted food, produce,
and beverages accounts for only 14% of the total distributed.
By not disclosing more specifically what types of in-kind food
or drink are distributed, there is no way of knowing how much
of it is non-nutritious or empty-calorie foods, such as soda pop
and chips (Frito Lay is a corporate partner of FC).
The biggest category of distribution is medical at
66%. After food, the next largest categories cited are miscellaneous
at 9% and books at 5%. Knowing which charities received
these goods could give the public insight as to whether or not
these items are used to benefit children or others in need.
From the November 2000 Watchdog
Circulated Forged Audits
When are audited financial statements unaudited? When
the accompanying audit report is fake. The fiscal 1999 and 1998
financial statements of Feed the Children (FTC), formerly Larry
Jones International Ministries, Inc., distributed to AIP and state
regulators contain the forged signature of Arthur Andersen L.L.P.,
a major public accounting firm.
According to FTC, its former Chief Financial Director
Monty Rainwater confessed that he forged Arthur Andersens
name on FTCs 98 and 99 financial statements. Tim
Hackler, a spokesperson for FTC, said that Mr. Rainwater had told
officials that he did it because he got behind in his work. Mr.
Hackler said no one told Mr. Rainwater to forge the documents and
that he did not do so for financial gain.
Mr. Hackler said that he feels at this time that the
unaudited numbers used in the financial statements are good. He
also said that Arthur Andersen is currently conducting an audit
of FTCs 1998 and 1999 finances.
FTC became suspicious a few months ago when officials
could not get a few financial documents from Mr. Rainwater in a
reasonable amount of time, according to Mr. Hackler. FTC then asked
Capin Crouse, a Chicago accounting and consulting firm that specializes
in nonprofits, to take a look around the finance department. At
the time of Capin Crouses investigation, Rainwater admitted
creating the forged audits and was fired shortly thereafter, according
to a statement from Capin Crouse.
Although FTC has stated that it does not doubt that
the 1998 and 1999 forged statements are materially accurate, AIP
still is concerned that FTCs Board of Directors did not discover
over a two-year period that a real audit was not conducted. Typically
at nonprofit organizations, the board or an audit committee of the
board annually approves an audit and also receives communications
from the auditor concerning the organizations internal controls
and other financial management practices. Barry Gardner of Capin
Crouse told AIP that FTCs audit committee approved the forged
fiscal 1998 audit and he did not know if the committee had approved
the forged fiscal 1999 audit. FTCs audit committee approved
the 1998 audit in spite of the fact that it had not received direct
communication from its auditor. Mr. Rainwater, according to Mr.
Gardner had circumvented direct communication between FTCs
board and its auditor.
Feed the Children continues to receive an F
grade from AIP for spending only 12% of its fiscal 1999 cash budget
on program services that are not conducted in conjunction with fundraising.
FTC also continues to spend most of its cash budget on television
programming and advertising, direct mail and postage, which accounted
for $37 million, or 75% of total cash expenses, in fiscal 1999.
AIP believes strongly that an organization with a
name like Feed the Children should devote more of its efforts to
collecting and distributing food. Only 13% of the $243 million of
gifts in kind that FTC distributed in fiscal 1999 was Food
and child care items, this category accounted for 23% of gifts
in kind in fiscal 1998. FTC continues to distribute far more dollars
worth of Medical, dental and optical supplies, equipment and
services and Other materials and services than
The Daily Oklahoman reported that the son of Larry
Jones, founder and president of Feed The Children (FTC), AKA Larry
Jones Ministries International, stated in a personal bankruptcy
filing that he owed his fathers charity $950,000. When the
Oklahoma City newspaper pursued its story, FTC appeared to attempt
to squelch the news. These are disturbing and reprehensible
tactics, of the kind you would expect from the worst elements in
society, not from our religious leaders, commented Stan Tiner
of the Oklahoman in an editors note that accompanied the story.
The editor of the Oklahoman reported that Larry Jones
said he would give the newspaper a story "twice as good"
if it did not publish its story, and FTCs lawyer and other
third parties insinuated that information about the private lives
of the reporters covering the story had been obtained. A Feed the
children spokesperson told AIP that the twice as good
story Larry referred to was about the work of Feed the Children,
and information about a reporter was discussed, not insinuated,
with an Oklahoman editor off the record and on background.
Many charities encourage their employees to spread
the word about their good works and fine leaders. At FTC employees
are required to sign a confidentiality agreement as a condition
of employment. The Oklahoman reported that one section of this agreement
states: The undersigned agrees not to write or publish, or
cause to be written or published, anything relating to, or alluding
to, Larry Jones International Ministries, Inc., Feed the Children,
or any other subsidiary or about Larry Jones and his immediate family,
or staff members, past, present or future or concerning vendors.
This includes, but is not limited to television, radio and all other
media. While it is a common practice in the nonprofit field
for employees to respect the privacy of donors and clients and not
to reveal the trade secrets of any for-profit subsidiaries, FTCs
confidentiality agreement is exceptionally broad, and it may deter
the scrutiny that every charity needs. FTC told AIP that it is reevaluating
its employee confidentiality agreement.
AIPs summer Charity Rating Guide reported on
FTC employee thefts at its Nashville warehouse, the low percentage
of its cash budget being spent on program services, accountability
problems and other concerns. Since AIPs summer publication,
the Oklahoman has looked further into FTCs practices and activities.
Some of the newspapers findings follow:
Steve Highfill, who was recently replaced as director
of the Nashville center, one of FTCs two U.S. distribution
centers, told WTVF: If they're taking stuff home and giving
their little brother a pair of shoes or some food, I don't have
much to say about that. If thats wrong, fine. I don't think
so and I don't think people are going to think so. Larry Jones,
founder and president of Feed the Children, responded later at a
press conference by saying: Donated items are not perks for
employees. The executive director was not acting with my authority
or approval with the decisions that he made regarding the employees
taking donated items, and he was not acting in conformance with
company policy. FTC has temporarily closed its Nashville center
and laid off all of its staff.
Ms. Truelove told AIP that Larry Jones learned in
April that warehouse employees had a tape of alleged warehouse thefts,
but that they had not sent it to him as he had requested.
Feed the Children distributed $140 million of donated
goods in fiscal 1998. About 23% of this amount was for food
and child care items. (Note: FTC changed this category in
fiscal 1998 from food and grains.) FTC distributed far
more dollars worth of Medical, dental and optical supplies
and Other materials and services than food in fiscal
Feed the Children appears to have an accountability
problem. In the past it has not received open book status
from AIP because it has failed to send us requested documents. Since
the recent warehouse problems were exposed, however, FTC has said
that it will comply with AIPs document requests. FTC, also
known as Larry Jones International Ministries, Inc., is not a member
of the Evangelical Council for Financial Accountability, which requires
that its members uphold standards for financial accountability,
ethics and reporting.
FTC owns a for-profit trucking company that is headed
by Larri Sue Jones, Larry Jones daughter. (She is also Legal
Counsel for FTC.) This is of concern to informed donors since for-profit
companies are not required to publicly disclose their financial
statements. It is also not clear why FTC should be in the for-profit
trucking business unless it can demonstrate that it can ship the
charitys donated goods more efficiently than outside transportation
companies. Ms. Truelove told AIP that Larry Jones created
an empire from the ground up and that he set up his own trucking
company because he does not want to rely on outside people. She
said that the trucking company was set up as a for-profit so that
its trucks could bring back loads after making shipments of donated
goods. She also said that none of the Jones family receives pay
or benefits from FTCs for-profit trucking firm. Larry Jones,
his wife Francis Jones, who is Executive Vice President of FTC,
and his daughter Larri Sue Jones together received compensation,
benefits, expense accounts and other allowances totalling nearly
$269,000 in fiscal 1998, according to FTCs fiscal 1998 IRS