The Unaccountable Nonprofit: A Job for Regulators

October 21, 2018; Roanoke Times

A nonprofit should not be singularly owned and controlled; there is a public trust stewardship that’s core to the way that we work, and that’s reflected in a board that might have caught some of the critical problems in this organization but instead just keeps ending up in court.

Service Dogs by Warren Retrievers (SDWR) is fighting Virginia Tech student Brianna Burch for custody of a dog she volunteered to raise for a year through SDWR’s Service Dog Raiser program. When they failed to come through on promised financial support, she assumed the contract was broken; when she learned that the company was being sued by Virginia’s attorney general for a number of consumer protection violations, she decided she didn’t “want to be a co-conspirator with them” and kept the dog. The fight has progressed to an appeal, and Circuit Court Judge Marc Long called the whole thing “kind of ridiculous.”

It is ridiculous, and it isn’t the kind of story that we might expect to see in the news—except that this nonprofit has already earned themselves a reputation for poor practice, and that makes them worth a story—likely because they have few of the expected nonprofit accountability measures in play.

In May, SDWR was sued by Virginia Attorney General Mark R. Herring. Among an array of charges, the most serious is that the dogs aren’t actually service dogs, but “poorly trained, ill-behaved dogs that are not equipped to help [clients] manage a life-threatening disability and are little more than very expensive pets.” The dogs are supposed to be able to sniff out dangerously high or low blood sugar levels in diabetes patients, although research on this ability is inconclusive.

In addition to this, SDWR solicited donations while their nonprofit state registration had lapsed. Clients who found that their dog was not a good fit could not return it for breach of contract for at least a year after receiving it, and SDWR claimed that as a nonprofit, they were legally prevented from refunding the fees, which ranged from $18,000 to $27,000. (We can assure you, dear readers, that no such law exists.)

In this particular situation, we might focus on founder Charles Warren, who the lawsuit claims is simultaneously president of the board, CEO, and CFO. To clinch this extreme and entirely inappropriate in a nonprofit concentration of power, the nonprofit’s bylaws state that Warren is “entitled to be the president” in perpetuity and can only be removed by a unanimous board vote on material, intentional breach of duty. (The organization is currently seeking a CFO, so it seems some movement may have been made.)

The picture is not improved by the fact that Warren’s salary accounted for about 75 percent of the organization’s salary expenses in 2016, the last year for which a form 990 is available, and 26 percent of its total expenses. In 2015, the only year for which the relevant form is available, SDWR paid an additional $124,715 to companies either run or owned by Warren for routine expenses like office rental.

General District Court Judge Randal Duncan told Burch that she had been “bamboozled” by SDWR, but in a final blow to accountability, SDWR’s website currently states that the rules for dog raisers and the nonprofit’s financial obligation to them are subject to change without notice, and that statements on the website should not be “construed as a commitment.”—Erin Rubin