October 13, 2019; Las Vegas Review-Journal
The Las Vegas Review-Journal calls attention to the strange budget of a local nonprofit called Miracle Flights, a group with an operating budget of just under $4 million that provides free air travel to sick children who need medical care. At least, that was their mission…until they announced an expansion to also provide similar services to veterans. This expansion of mission would not be so very unusual, coming as it does with an additional fundraising push, were it not for the fact that the organization already has $44 million in the bank and, according to this article, spent only around $1.28 million on services for 2018, the last year for which there is a Form 990 filed.
Considering the fact that the organization’s investment income alone for that period was $2,852,596, and it ran a surplus of $1.5 million in the same year, one has to wonder, just what it is fundraising for?
The organization’s reserves are the result of a windfall cy pres judgment on British Airways for exorbitant fuel surcharges that began to flow into the organization in 2012. Just after that followed a number of questionable financial decisions, for which the organization was taken to task. It made an inappropriate $2.2 million loan to an organization partially owned by a board member—a loan that later went into default—and bought into two Las Vegas office complexes for a $10 million price tag. It also funded an annual retirement stipend of $344,000 to founder and former CEO Ann McGee (75 percent of her final salary of $430,000), along with an annual payment of $82,000 to her husband William, who worked at the agency for 10 years.
Mark Brown, who took over from McGee, says he intends to expand the number of flights Miracle funds by 20 to 30 percent in the next year, using no income limits when it comes to veterans. But even if he were to do that, by our count, the budget would still be off-balance, with more money coming in from investments than would be spent on services.
Daniel Borochoff, president and founder of CharityWatch, which gave Miracle Flights an “F” in its most recent review, wonders if maybe the group should stop asking for money until it can address the budget imbalances.
“It’s a poor basis to ask for money when they’ve already got so much money,” Borochoff said. “My question would be, ‘You’ve got this balance of $44 million. Couldn’t you spend some of that before you take my hard-earned money?’”
Brown says the current reserve comes with some restrictions that hold the organization to maintaining a fairly high reserve, and that it is—amounting to 11 years or so of full operating costs.
CharityWatch says its analysis indicates that Miracle Flights reported spending 47 percent of its expenses on services in FY2018.
And, as if the organization needed more eyebrow-raisers, founder and former CEO McGee has filed suit against them, saying she was improperly removed from the board. She claims she was challenging the board on potential financial improprieties, alleging breach of contract and violation of state law. She was one of only three board members until earlier this year, despite the fact that the Review-Journal started raising questions about the operation’s finances as far back as 2007, when it was reported that most of the money raised for the organization pre-windfall went to pay fundraisers rather than to services.
Brown said on Saturday, in what he imagined was a good defense, that, “I operate a lean organization. We don’t have a CFO, a COO, a senior HR leader or a chief administrative officer to monitor the legal aspects of our fundraising in all 50 states. Those tasks all fall to me.”
It also makes for a pretty closed shop.
“A lot of people would love to have that job,” says Borochoff. “Certainly, they’re not paying him because he’s brilliant or he’s got the expertise to raise a lot of money, because they’ve already got the money.”
Brown adds, “We are fully transparent with our donors about our board of directors’ position on compensation. And, as a result, they understand that their donations are well utilized to not only fulfill but grow the mission of the organization.” But that doesn’t appear to be the case.—Ruth McCambridge