Cat Charity Criticized for Straying from Good Governance Practices
Dec 17, 2018
Alley Cat Allies (ACA), “the global engine of change for cats,” according to its website, has found itself the target of criticism in an article by Marc Gunther titled “The Limits of Nonprofit Oversight.” The November 2018 article was published in The Chronicle of Philanthropy, an independent news organization that serves the philanthropic sector. “A close look at the charity reveals a number of questionable practices,” Gunther says of ACA.
Alley Cat Allies has consistently maintained reasonable financial efficiency, based on CharityWatch’s analysis, currently receiving a “B” grade for spending 71% of its total cash budget on charitable programs and $24 to raise each $100 in funds in fiscal year 2017. CharityWatch has not independently verified the governance issues raised in Gunther’s article. We believe, however, that when making a giving decision, donors should also take into consideration factors such as a charity’s governance and transparency standards. Therefore, we think donors should be aware of some of the critiques and “questionable practices” concerning ACA that Gunther highlights in his article.
One of the primary criticisms of Alley Cat Allies noted by Gunther is problematic governance. All charities are legally required to have a board of directors to assume responsibility as the governing body of the organization. According to BoardSource, a nonprofit that advocates for good governance at charities, a primary duty of the board is oversight, which “consists of working closely with management to ensure that goals are met and that ethical principles serve as the guidelines for all activities of the organization.” The board sets the organization’s overall policies and oversees its operations. It is responsible for protecting the organization’s assets and supervising its financial resources to make sure sufficient funds are available for its mission to be fulfilled. The board also has an obligation to ensure that no board member, officer, or key employee inappropriately gains personal benefit or advantage at the expense of, or from decisions related to, the charity’s activities and operations. Individual board members are legally bound by the duties of care, loyalty, and obedience to act in the best interests of the charity and to be faithful to its mission.
The legal, ethical, and practical reasons a charity needs a board of directors “shape the foundation for good governance,” according to BoardSource. Following principles of good governance is vital for all charities as part of building public trust. Correspondingly, as a charity’s contribution levels grow, good governance practices become even more imperative. Alley Cat Allies’ reported contributions reached the $10 million mark in its 2017 fiscal year, which ranks ACA 12th in terms of most contributions raised among the 46 Animal & Animal Protection charities rated by CharityWatch (as of November 2018). Gunther points out: “Alley Cat Allies is not a mom-and-pop charity: It raised $10 million last year and employs about 25 people, according to its website.” He then continues, “But [Becky] Robinson [ACA’s President and founder] runs the organization with few checks on her power, insiders say…”
CharityWatch’s Governance Benchmarks recommend that a charity has a board of directors with at least five voting members, 51% or more being independent, and that it documents the board and board committee meeting minutes. ACA reported having a seven-person board of directors, with five independent voting members, at its fiscal year-end July 31, 2017. It also reported contemporaneously documenting board and board committee meetings. ACA’s board, however, “rarely meets – it has yet to convene in 2018,” according to the Gunther article. The Vice President of ACA, Donna Wilcox, is the chair of the board, and ACA’s President and founder, Becky Robinson, is also a member of the board. In addition, Robinson and Wilcox are the two highest compensated employees at ACA. Given the respective positions of Robinson and Wilcox, both on the board and as officers of the charity, Gunther describes ACA’s board structure as “unorthodox because as a board member, Wilcox has a duty to oversee Robinson, who is also her boss.”
One of the examples of Alley Cat Allies’ problematic governance highlighted in the Gunther article relates to the purchase of two houses in Arlington, Virginia, one for $590,000 and one for $569,000, made by ACA in 2015 and 2018, respectively. Neither real estate purchase was disclosed to, or reviewed or approved by ACA’s full board, according to Gunther. Raising further questions, the 2015 purchase was the home of Robinson’s next-door neighbor, who Gunther alleges “complained about the pack of cats” in Robinson’s backyard. (Wilcox refutes there being any neighbor dispute in a November 2018 article published by Animals 24-7, a nonprofit online newspaper and information service covering the humane community.) Wilcox defended the 2015 house purchase as being part of ACA’s “comprehensive diversified investment strategy which includes real estate as an investment option,” according to an email response cited in the Gunther article. The notes accompanying ACA’s fiscal 2015 audited financial statements are consistent with Wilcox’s statement, disclosing that subsequent to fiscal year end, ACA made a “real estate investment for approximately $590,000” that “further diversified its investment portfolio.”
Wilcox also defended Alley Cat Allies’ 2015 real estate purchase, the Gunther article describes, by saying that it was approved by the investment committee of the board. Robinson and Wilcox comprise two of the three members of the “investment committee,” and the board treasurer, who is a government economist, is the third member, per Wilcox’s email response to the Chronicle. Additionally, Wilcox is cited in the Animals 24-7 article as saying that “counsel from outside experts about the [2015 and 2018] purchases” was received, and “total growth and net earnings [from the purchases] have been excellent.”
The Gunther article notes that one of ACA’s board members in 2015, Dina Paxenos, who is a Washington, DC real estate agent, was unaware of the 2015 house purchase until she was asked about it by the Chronicle. Given her longtime experience in real estate, she wondered why she was not consulted before the purchase. All the same, if Paxenos was not aware of the real estate purchase beforehand, she should have at least been alerted to the purchase after it was disclosed in ACA’s audited financial statements. ACA’s tax filings, dating back to at least its fiscal year 2014, report: “The board of directors assumes responsibility for the audit" and selection of the independent auditor (or accountant). Paxenos is reported as a board member for fiscal 2014-2017.
Lending support to Gunther’s critique of Alley Cat Allies’ governance, he quotes Jenifer Gager Holland, an associate vice president at BoardSource: “Generally speaking, it is the full board’s responsibility to provide financial oversight of an organization. I would include major asset purchases as a part of that.” Gunther also cites “Principles for Good Governance and Ethical Practice,” a publication by the Independent Sector, an association of nonprofits: “Concentrating authority for the organization’s governance and management practices in one or two people removes valuable checks and balances that help ensure that conflicts of interest and other personal concerns do not take precedence over the best interests of the organization.” Wilcox told Animals 24-7 that “we followed all proper [ACA] board policies and procedures, and all appropriate actions were taken to make the [two real estate] purchases.”
Also questioned in the Gunther article is a copyright lawsuit Alley Cat Allies has “pursued, at considerable expense” against a former staff member and her husband, Elizabeth and Jason Putsche, over ownership “of more than 17,000 cat photos.” According to public documents, the copyright fight involves multiple court cases, as well as a settlement agreement. In the matter of Jason Putsche v. Alley Cat Allies, Inc., a February 2018 Memorandum Opinion by Judge Paul W. Grimm of the U.S. District Court for the District of Maryland states: “Unfortunately, the resolution of the Federal Action and the State Court Action did little to resolve the differences between the Putsches and ACA, and they continue to nourish their animosity towards one another in this litigation.” Judge Grimm then continues by calling the litigation “convoluted.”
A detailed recounting of the litigation between Alley Cat Allies and the Putsches is beyond the scope of this article. Nevertheless, CharityWatch wants to warn donors that ACA has reported relatively high expenses for legal fees in its fiscal year 2016 and 2017, according to its annual tax filings. ACA’s legal fees jumped from $84,596 in fiscal 2015 to $203,275 in fiscal 2016, and rose again in fiscal 2017 to $274,755. While ACA’s legal fees in fiscal 2016 and 2017 represent only about 2.2% and 2.7%, respectively, of its reported total expenses each year, that percentage was just 1.1% in fiscal 2015. Donors should be aware that some of their contributions appear to be funding ACA’s “convoluted” legal fight with the Putsches, which is still ongoing at the time of this writing. ACA also did not disclose the existence of the litigation matters with the Putsches in the accompanying notes to its audited financial statements for fiscal 2016 or 2017, raising a question as to whether the donating public can count on ACA to be fully transparent concerning such matters of legal contingency.