Roger Chapin, a self-described "non-profit entrepreneur," retired last year from the charity he founded in 1971, Help Hospitalized Veterans (HHV), after nearly forty years as president of the group. Chapin's charity was roundly criticized by Congress during hearings in 2007 and 2008 that exposed wasteful and unethical uses of funds among many charities that purport to help veterans. At the 2007 hearing, AIP president Daniel Borochoff testified as to how little HHV and many other veterans charities spend on programs for veterans relative to the huge amount of donations they raise from the public in their name. After enjoying years of generous, multiple six-figure salaries and perks paid with the charity's funds, such as use of a $444,600 condo in northern Virginia owned by HHV, access to a $17,000 country club membership, and large reimbursements for hotel, restaurant, and other expenses, Chapin's retirement from HHV was marked by a $1.9 million payout to the exiting president.
According to HHV's tax filing for 2008, "the president of the organization is covered under a plan" established in 1998 "which provides for the payment of 75% of the employees [sic] average of the last three years compensation, reduced by any other pension benefit provided by the organization." In addition, HHV's audited financial statements reveal that on July 27th, 2009, the charity entered into a "supplemental executive retirement plan" with Chapin under which he would be entitled to $1.9 million "within 30 days of retirement," which he could take either as a lump-sum or in the form of annual payments. Four days later on July 31st, 2009, Chapin retired, making him eligible to receive the payout only 34 days after this new retirement agreement went into effect.
HHV may be calling the $1.9 million payout Chapin received last year a "retirement plan" for his "38 years of service" in its financial reporting, but it certainly has the appearance of an employee bonus or severance payment. This last-minute agreement between Chapin and the charity is atypical of charity retirement plans, and in past years may have misled donors as to the amount of compensation Chapin earned for his role as president of HHV. Most charities account for retirement compensation each year over the period of time an employee works for the charity and include such compensation in their reporting of salaries and employee benefits in their yearly financial statements, as well as in their reporting to the IRS of annual employee compensation. HHV did not report any of the $1.9 million retirement payout in Chapin's salary on its annual tax forms until 2009. When AIP contacted HHV for comment, the charity's new president, Michael Lynch, would not answer our specific questions about Chapin's compensation. Instead he said only that the $1.9 million payout was "given careful consideration by [HHV's] board of directors," and that its reporting was consistent with tax regulations and accounting standards.
Chapin was already receiving a generous salary and employee benefits package amounting to $426,434 in 2006, $482,990 in 2007, and $364,351 in 2008, according to the charity's tax filings of the same years. Had the $1.9 million payout been accounted for under the original 1998 retirement plan during the twelve years it was earned between 1998 and 2009, the compensation the charity would have reported for Roger Chapin would have been about $158,000 higher (in nominal dollars) per year. If donors had known in past years that in addition to his already high level of compensation he would be receiving a whopping $1.9 million payment upon his retirement, this may have affected their willingness to donate to the group.
HHV included nearly all of this retirement payout, at least $1.7 million, in its program expenses according to its tax form for 2009. In AIP's opinion, it is not fair for HHV to take credit for this large payout to its retiring president in its program spending. It is fair to say that most donors would not consider such a payout to be a bona-fide program of a charity on the same level as the funds a charity spends on services for veterans. Donors who want to understand how efficiently HHV is using their donations will likely agree with AIP's assessment that such a large retirement payment recorded in a single year should more appropriately be counted as a management expense of the charity, not a program. This example should serve as a warning to donors that not everything a charity reports as program spending in its financial documents or marketing materials reflects activities that most donors would consider to be the charitable activities they are intending to support with their donations.
HHV had consistently received an F rating from AIP in past years due to its high fundraising costs and paltry spending on programs to help veterans. After an analysis of the group's 2009 tax form and audited financial statements, the most current available, HHV showed a very slight improvement, escaping an F rating by only 2% and earning a rating of D from AIP for spending 37% of its expenses on programs.
AIP is doubtful that HHV's new president, Michael Lynch, will dedicate more of the charity's resources to helping veterans rather than to lining the pockets of for-profit fundraising companies. Lynch had significant input into HHV's past operations during his twenty years at the charity, including working under Chapin as the charity's executive director. He filed fundraising reports with the New York Attorney General's office in 2010 indicating that inefficient fundraising contracts that were in place during 2005 and 2008 will continue through 2012 and 2011, respectively.
While Chapin's retirement as president of HHV was marked by a generous $1.9 million payout, Chapin has by no means retired from the charity business. Roger Chapin continues as president of Coalition to Salute America's Heroes (CSAH), an AIP F rated charity Chapin founded in 2004 that is related to HHV through large financial transactions between the two groups and until recently, a shared president. Although Chapin is the "volunteer president" of CSAH, the 2007 Congressional investigation revealed that Chapin received reimbursements from this charity amounting to $273,500 between 2004 and 2006, alone. Chapin is also president of two other non-profits he recently founded: Help Wounded Heroes, founded in 2006; and Make America Safe Foundation, founded in 2008.
