Operation Underground Railroad CharityWatch Rating
Oct 20, 2023
CharityWatch has assigned a "?" rating to Operation Underground Railroad (O.U.R.) at this time due to our concerns related to the independence of the charity's board of directors and the circumstances surrounding the departure of its founder and CEO, Tim Ballard, from the organization in 2023.
O.U.R. reports that as of the end of 2022 the number of voting members of its governing body was 7, of whom only 3 were considered "independent." (IRS Form 990, Part VI, lines 1a & 1b). When less than 50% of a charity's board of directors is independent, this raises a concern that the board may lack sufficient independence to make decisions that prioritize the best interests of the charity over the interests of its individual board members.
In addition, according to a July 18, 2023 article published by VICE, "An anonymous letter sent to employees of and donors to the anti-trafficking group Operation Underground Railroad asserts that founder Tim Ballard left the organization recently after an internal investigation into claims made against him by multiple employees--something which OUR does not dispute."
"Tim Ballard's exit from Operation Underground Railroad earlier this year followed an investigation into claims of sexual misconduct involving seven women, according to sources with direct knowledge of the organization," VICE reported in a later article published on September 18, 2023. "O.U.R. is dedicated to combatting sexual abuse, and does not tolerate sexual harassment or discrimination by anyone in its organization," the charity told VICE, according to the article.
As previously reported by CharityWatch:
In an article published by Fox 13 Salt Lake City in October 2020, Davis County (Utah) Attorney, Troy Rawlings, confirmed that an investigation into Operation Underground Railroad is "ongoing," and that his office has "received complaints" and is "in the process of reviewing those complaints." Rawlings did not specify why O.U.R. is under investigation and would not release records concerning the inquiry to Fox News, according to the article, on the basis that doing so "would interfere with that investigation."
Fox 13 News also reported in the article that Rawlings, in an Instagram post, "implied [that] a local nonprofit was conducting illegal fundraising efforts by taking credit for arrests made by the Davis County Internet Crimes Against Children Task Force." Rawlings did not name the local nonprofit in the post.
An investigation by VICE World News touched on a similar concern. According to a December 2020 article published in VICE: "An investigation by VICE World News focused on OUR's operations identified a divide between the group's actual practices and some of its claimed successes. What we [VICE] found aren't outright falsehoods but a pattern of image-burnishing and mythology-building, a series of exaggerations that are, in aggregate, quite misleading."
CharityWatch contacted Davis County Attorney Troy Rawlings by email and voicemail in June 2021 asking him to confirm the existence of an investigation into O.U.R. by his office, and asking if he was able to provide any further comment. Rawlings never responded to our inquiries. In June 2021, CharityWatch also contacted O.U.R. via email to request copies of O.U.R.'s fiscal 2020 audited financial statements and Form 990 tax filing, and to ask for comment on the reported criminal investigation into its activities. O.U.R. did not respond to us at that time, but its CFO did later provide CharityWatch with a copy of its fiscal 2020 audited financial statements and IRS Form 990 in September of 2021 and March of 2022, respectively.
2022 and 2023 CharityWatch Correspondence With Operation Underground Railroad
CharityWatch reached out via email on June 29, 2021 to Tevya Ware, who at that time was O.U.R.'s VP of Finance. In this email we included the following questions:
1. Is O.U.R. currently under investigation by the Davis County Attorney or any other regulatory body?
2. If so, what is the nature of the investigation?
3. Can you respond to the specific allegations outlined in the cited article?
O.U.R. did not respond to CharityWatch's email at that time. O.U.R. later submitted a request to CharityWatch for an update of its charity rating. On September 8, 2021 we responded to this request with a copy of the same questions, cited above. We received no response. Finally, CharityWatch sent a detailed letter via email and U.S. mail to O.U.R. founder and president, Tim Ballard, on March 30, 2022, which included the questions cited above, as well as additional questions that arose upon our analysis of O.U.R.'s fiscal 2020 audited financial statements. We received no response to our letter at that time.
On May 18, 2023, CharityWatch received a request from O.U.R.'s Chief of Staff for an update of its charity rating. On May 24, 2023 CharityWatch responded by including copies of our previous correspondence with the organization, and communicated that O.U.R. had never responded to our questions. O.U.R. later provided responses to these questions on June 12, 2023.
Some of the questions and responses included the following:
In response to CharityWatch's questions about the status of the investigation being conducted by the Davis County Attorney's Office, O.U.R. stated: "O.U.R. was previously under investigation by the Davis County Attorney's Office [(DCAO)]; however, as of March 28, 2023, the investigation has been closed and the Davis County Attorney's Office declined to pursue charges..." O.U.R. provided to CharityWatch a copy of the DCAO Declination Statement substantiating this information.
In O.U.R.'s fiscal 2020 audited financial statements, Note 9, Legal Matters, O.U.R. cited the existence of various legal actions that included "four open cases." CharityWatch asked O.U.R. to describe the nature of the allegations, the status of any open cases, and the settlement terms for any settled cases.
O.U.R. responded that it is unable to disclose the terms of any settlements reached on the two closed cases. With respect to the open cases, O.U.R. communicated the following to CharityWatch: "During the 2020 fiscal year, the Davis County Attorney's Office opened a case investigating O.U.R. As discussed above, and as outlined in the Declination Letter, the investigation is now closed and the Davis County Attorney's Office is no longer pursuing charges against O.U.R."
CharityWatch asked O.U.R. for additional information about an impairment loss reported in O.U.R.'s fiscal 2020 audited financial statements, Note 7, and 2020 IRS Form 990, Part IX, line 24d. We asked O.U.R. to describe the nature of this impairment and how O.U.R. determined that an impairment loss should be recognized in this amount.
O.U.R. responded that the impairment loss "is related to the year-end valuation for certain intangible assets, including an in-kind donation of a copyright for a movie. O.U.R. discussed with the auditors the nature of these assets and how to value them. It was determined that because of the existence of a qualifying event impacting recoverability, it was appropriate to report an impairment loss. As a result, O.U.R. calculated the impairment loss alongside its auditors to come up with a total impairment amount of $365,039 related to copyright."
[According to O.U.R.'s audited financial statements for its fiscal year ended 12/31/2022, Note 7, Intangibles, "On December 17, 2019, the Organization received an in-kind donation of a copyright for the movie 'Operation Toussaint" which was determined to have a fair market value of $429,095 and which is reported as an intangible asset that is being amortized over its estimated useful life of 20 years...]
[According to O.U.R.'s audited financial statements for its fiscal year ended 12/31/2022, Note 7, Intangibles, "During 2021, the Organization acquired a copyright of the 'Dirty Business Docu Series' for $2,000,000 and additional film footage for $57,892, which was determined to be the fair value. The copyright and footage are reported as intangible assets and will be amortized on a straight-line basis over their estimated useful lives of 5 years. During 2022, the Organization continued filming more footage and capitalized an additional $1,334,874...They expect to begin using the footage in 2023."]
[According to O.U.R.'s audited financial statements for its fiscal year ended 12/31/2022, Note 7, Intangibles, "During 2022, the Organization acquired a music video and animations for $115,748, which was determined to be the fair market value...They expect to begin using the music video and animations in 2023."]
According to the Operation Underground Railroad (O.U.R.) 2019, 2020, and 2022 tax filings analyzed by CharityWatch, O.U.R. responds "Yes" to the following question: "Did any officer, director, trustee, or key employee have a family relationship or business relationship with any other officer, director, trustee, or key employee? (IRS Form 990, Part VI, Section A, line 2),
According to Form 990, Schedule O of O.U.R.'s 2020 tax filing:
"Multiple Officers and Directors have a family relationship. Todd Reynolds (Director) is Tim Ballard's (Founder) brother in law. Julianne Blake (Director) is Tim Ballard's sister. Tevya Ware (CFO) is Tim Ballard's sister in law. Mark [sic] Reynolds (Secretary) is Todd Reynolds' brother."
Todd Reynolds, Marc Reynolds, and Julianne Blake are reported as 3 of OUR's 5 board members in 2019, and Tevya Ware is reported as an officer. (IRS Form 990, Part VII).
Marc Reynolds and Julianne Blake are reported as 2 of O.U.R.'s 6 board members in 2020, and Tevya Ware is reported as an officer. (IRS Form 990, Part VII).
Marc Reynolds is reported as 1 of OUR's 7 board members in 2022. (IRS Form 990, Part VII). O.U.R. reports that as of the end of 2022 the number of voting members of the governing body of the organization was 7, of whom 3 were considered "independent." (IRS Form 990, Part VI, lines 1a & 1b)
According to the Operation Underground Railroad 2022 tax filing, OUR reports for Business Transactions Involving Interested Persons (IRS Form 990, Schedule L, Parts IV & V):
(1) A transaction in the amount of $278,684 involving Mark Blake, "Director," and described as "Legal Servi[ces]."
(2) A transaction in the amount of $230,534 involving Craig Anderson, "Director," and described as "Office Cons."
(3) A transaction in the amount of $118,283 involving Katherine Ballard, "Spouse of Founder," and described as "Payroll."
(4) A transaction in the amount of $47,918 involving Blaine Ballard, "Child of Founder," and described as "Payroll."
According to Operation Underground Railroad's audited financial statements for the fiscal year ended December 31, 2022, Note 12, Related Party Transactions:
"The organization contracted a member of the Board of Directors to perform legal services for an amount of $230,534 and $67,820 during the years ended December 31, 2022 and 2021, respectively. Another member of the Board of Directors performed construction services to improve office space in California for an amount of $490,000 and $221,793 during the years ended December 31, 2022 and 2021, respectively..."