CharityWatch analyzed the fiscal year ended 6/30/2022 IRS Form 990 of Wreaths Across America and has assigned the charity a "?" rating. CharityWatch has specific concerns about the charity's governance and the reliability of its financial reporting, as outlined below.
In its fiscal 2022 tax filing, Wreaths Across America responded "No" to the question: "Were the organization's financial statements audited by an independent accountant?" (Part XII, line 2b).
The lack of an audit means that a qualified, independent Certified Public Accountant (CPA) has not subjected the charity's financial reporting to auditing standards that would test the effectiveness of its internal controls and assess whether or not the charity's financial information is fairly presented and free of material misstatements. In the IRS Form 990, Part XII, line 2b, charities are asked to respond "Yes" or "No" to the following question: - "Were the organization's financial statements audited by an independent accountant?"
An audit includes inspecting a charity's assets and examining its accounting records, including source documents (e.g., invoices, purchase orders, expense reports, credit memos, cancelled checks), journal entries, and ledgers (the aggregate set of records containing all of a charity's accounts). Before expressing an opinion on a charity's financial health and conformity (or nonconformity) with Generally Accepted Accounting Principles (GAAP), an independent CPA conducts analytical procedures to identify possible problems with its financial records and investigates them. Analytical procedures may include comparing different sets of operational and financial information, reviewing the consistency of historical relationships, and examining trends in financial ratios to identify any unexplained variances.
When a large charity (annual revenue of $1 million or more) responds "No" to this question on the Form 990, this is a potential red flag since it is unusual for larger charities to not have their books audited by an outside accountant. A lack of independent audited financial statements has prompted CharityWatch to investigate certain large charities in the past, such as HeroBox and Central Asia Institute, where we uncovered and reported on additional problems.
In fiscal 2022, Wreaths Across America reports bringing in $30,867,081 of total revenue, of which $29,934,432 is reported as "Wreath sponsorship." The same fiscal year it reports total expenses of $31,275,595, of which $21,377,509 is reported as "Sponsorships, Trucking & Other Sponsorship costs." (IRS Form 990, Parts VIII & IX) Wreaths Across America reports "Transactions With Interested Persons" in fiscal 2022 (IRS Form 990, Schedule L) in the amount of $21,457,810. The "Name of interested person" is reported as "Worcester Resources; [dba, Worcester Wreaths];" the "Relationship between interested person and the organization" is reported as "Owners are related to me[sic];" the "Description of transaction" is reported as "Sponsorships, shipping and other."
According to Form 990, Schedules L & O, and Form 990 Part VII. - Renee Worcester and Sarah Worcester are officers and employees of Worcester Wreaths. Renee Worcester is reported as a Director and "Secretary" of Wreaths Across America, and Sarah Worcester is reported as a Director of Wreaths Across America.
- The husbands of Renee Worcester and Sarah Worcester, who are reported as Michael Worcester and Morrill Worcester II (Robbie), own the majority ownership interest in Worcester Wreaths.
- The Executive Director of Wreaths Across America, Karen Worcester, who is reported as having worked an average of 40 hours per week for Wreaths Across America while receiving a reported compensation of $0, is also "the mother of the two owners of Worcester Resources."
- Renee Worcester, a Director and officer, and Sarah Worcester, a Director, are sisters-in-law. Karen Worcester the Executive Director, is the mother-in-law to both Renee Worcester and Sarah Worcester. Ann Hanson a Director of Wreaths Across America, and Wayne Hanson, Chairman of the board of Wreaths Across America, are spouses but are reported as "not related to the Worcester family." Pamela Slaven-Lee, a Director of Wreaths Across America, is reported as "daughter to Karen Worcester."
The members of a charity's board of directors have a fiduciary duty to make decisions in the best interest of the charity. In its fiscal 2022 IRS Form 990, Wreaths Across America reports having a board of directors comprised of 18 total members, of which 15 are reported as being "independent." It also reports having basic governance policies in place such as a conflict of interest policy, a whistleblower policy, and a document retention and destruction policy. However, CharityWatch remains concerned that the family relationships and the significant financial interests of certain board members in the charity's primary vendor may impact the independence with which the charity's board can make decisions. In addition, the charity's lack of an independent audit raises potential red flags for a charity of this large size. While the charity reports that its fiscal 2022 tax return was prepared by a Certified Public Accountant (CPA), tax preparation is not equivalent to the rigors of an audit, which is conducted according to Generally Accepted Auditing Standards (GAAS) and which presents the charity's financial information according to Generally Accepted Accounting Principles (GAAP). Due to these concerns, CharityWatch has assigned Wreaths Across America a "?" rating for its fiscal 2022 reporting year. |
