Saturday, June 8, 2024

Organization Audit

 SPECIAL FORCES ASSOCIATION

      Chapter 76 - South Florida 

          “The Green Berets”

 

June 8, 2024

Hello Members and Friends of the Association,

This is a long message, but in the interest of keeping you informed, we have included much material.

 

Within the past couple of days, you may have received an email from one of our former chapter members, Russ Preston, raising the alarm in his position as SFA National Treasurer about audits (or lack thereof) of the Special Forces Association (National).  Our own chapter treasurer, Jim Trice, who has done an exemplary job of raising funds, donating his own funds, banking, ensuring our non-profit compliance, record keeping and who has been an invaluable asset to us, provided the following feedback. 

 

  1. SFA Treasurer Russ Preston original message
  2. Chapter Treasurer Jim Trice response
  3. SFA outgoing President Kevin Harry response

 

Message from SFA Treasurer Russ Preston –

Brothers, I regret to inform the Regiment that the current NBO voted to stop/cease/kill the annual audit for CY2023 which I am mandated to perform as Treasurer under the SFA Constitution. The reason Kevin Harry rejected the full scope audit as urged by the Board on 09 May is because the audit agency of PBMares insisted that he/we turn over the books for SFA-LI.

 

The full scope audit I initiated on 23 May was detailed and we supplied bank records, Board minutes, Articles of Incorporation, SFA Constitution, etc. Total compliance and total transparency.

 

The auditors noted that in CY2023 4 members of the SFA Board were also members of the SFA-LI Board (Kevin Harry, JD Campbell, Chris Bell, and this author Russ Preston). The auditors noted that there was a monthly revenue stream from SFA-LI to SFA for online sales commissions in CY2023. The auditors noted that during CY2023 the SFA was paying for SFA-LI’s internet service.

 

Under US Generally Accepted Accounting Principles, the auditors reasonably concluded there was a “leadership” relationship during CY2023 and that both organizations were inextricably intertwined. As a result of this “brother/sister,”  or “father/brother” relationship during CY2023, the initial audit of the SFA books had to be broadened to include the SFA-LI books, as well.

 

During the Teams meeting with PBMares at 1500 on 05 June, Kevin Harry and JD Campbell were adamantly opposed to allowing that access and refused to cooperate further with the audit. (There is video evidence of this!) Although Doug Livermore and I then voted to approve the expanded audit of SFA and SFA-LI books for CY2023 AT NO ADDITIONAL COST (emphasis mine!), this NBO nevertheless voted to kill the expanded audit.

 

Brothers, for the SFA President to refuse pointblank to cooperate with auditors is an unacceptable conflict of interest. As a lame duck SFA President, he is more concerned with his follow-on sinecure with SFA-LI, thus abrogating his duties and responsibilities to the SFA. I have already introduced one vote of no confidence in Kevin’s leadership because of his many moral and ethical ambiguities, not to mention these financial improprieties and others. Read the Minutes in the Teamhouse.

 

There is no excuse for his lack of transparency and unwillingness to open the SFA-LI books. When the SFA conducts an audit, and the auditors find no problems with the SFA books but no access to the SFA-LI books, they will issue a “qualified opinion” instead of a “clean unmodified opinion.” A qualified opinion on the SFA audit would result in higher scrutiny from the IRS and possible loss of our 501(c)(19) status No donors or grantors will do business with an organization that has a qualified opinion on an audit. Kevin Harry’s obdurate refusal to open the SFA-LI books is a clear and present danger to the continued financial health of the SFA.

 

Brothers, I beg you to speak to your Chapter Presidents and have them send the message to the 18 June NBO meeting that the Brotherhood demands a full scale audit of CY2023 books for the SFA and the SFA-LI. Since the current SFA NBO and the current SFA-LI Board of Officers are virtually the same, we can have our books opened and examined and the full scale audit completed BEFORE the new NBO has their first meeting in July. Brothers, please call National, call your Chapters, call your other Brothers! We need all hands on deck so we can compel this NBO to act in the best interests of the SFA now.

 

Guys, it’s been an honor to interact with many of you over the last 3 years. I would like to congratulate Mike Hurst as your new Treasurer in July and urge you Brothers to give him the gift of a full scope audit for his new job! RLTW/DOL!

 

 

Jim Trice:

I do not think it is an issue as Russ has for some reason tried to expand the scope beyond SFA. He did not even drop off documentation to them until a few days ago, and now claims they need to go outside of SFA. 

 

Russ is OUT, Kevin is OUT. Russ is just trying to be a thorn in the side of current board.

 

After the new board, which starts now, gets together they can approve the audit.  I do not blame a lame duck board to give the next board the right to approve.

 

Russ acts like it is a emergency, yet he filed IRS Form 990's two years after due and almost cost us our tax exemption.

 

Russ often hangs up during board meetings when he does not get his way. I've talked to some of the board members.

 

However, if the new board does not approve an audit of SFA ASAP, then we have an issue.  The new Treasurer is HIGHLY qualified.

 

 

Outgoing SFA President Kevin L. Harry response:

From: SFA President(president@specialforcesassociation.org) <mailer@mail2.clubexpress.com>
Sent: Saturday, June 8, 2024 6:52 AM
To: PruJoe@Bellsouth.net
Subject: Response to Treasurer's Email

 

 

SFA Members,

In light of the recent email from Russ Preston, I am providing additional information that was omitted and plan to schedule a General Membership Zoom meeting in the near future to answer additional questions.  You can also contact me directly at President@SpecialForcesAssociation.org or call (423) 895-3769.

 

I will state upfront, I do not believe or have any evidence of any financial malfeasance with regard to the SFA finances.  I do not have access to any SFA banking or financial information other than what is provided by the Treasurer.   The NBO (myself included) supports and has encouraged the Treasurer to provide clarity to the SFA finances with the assistance of a local accountant/bookkeeper AND an audit as required by the SFA Constitution.  I provided the names of three accountant services in September 2021 but a decision was made to go with TRP Sumner where most of the accounting was completed by a CPA.  The big difference between the CPA vs. an accountant assigned to our financial portfolio is access to the CPA and increased hourly cost of CPA.  We did approve and secured the services of CFR Accounting in May 2024 so the immediate oversight of SFA finances in the future will be with an accountant.  We also encouraged the Treasurer to seek out three estimates for an audit on SFA finances.  The SFA has not requested or complete an internal audit for many years.  The SFA was audited by the IRS in 2017/2018 period but not an internal audit.

 

The NBO agreed to allow the new accountant a few months to organize our finances and then be better prepared for and initiate an audit.  Our discussions were on providing a clearer picture of our finances for the NBO and more importantly, the SFA membership.  This would also significantly decrease the cost and increase the effectiveness of an audit.  We did not support the unilateral decision for the Treasurer to enter into a $28-32K contract with a single source auditor.  In fact, it was the recommendation of PB Mares (the contracted auditor) that the SFA get a policy/procedures review to ensure we are following good practices, then a financial review to make sure our finances/accounting practices are in order, and then an audit.  He specifically said that he never recommends that a non-profit organization go from “Zero to Audit”.  We have communicated this with the incoming Treasurer, Mike Hurst, and he is already working a plan to discuss with the in-coming NBO.

 

The information that I am providing is easily validated by previous NBO Meeting Minutes, financial records, and emails.  Additional information is in bullet format below each paragraph. 

The Treasurer's email with additional information:

Brothers, I regret to inform the Regiment that the current NBO voted to stop/cease/kill the annual audit for CY2023 which I am mandated to perform as Treasurer under the SFA Constitution. The reason Kevin Harry rejected the full scope audit as urged by the Board on 09 May is because the audit agency of PBMares insisted that he/we turn over the books for SFA-LI.

  • There is an SFA Constitutional requirement to conduct an annual audit.  This requirement has not been met for many years and the current NBO is working to meet this requirement.  Russ Preston has been asked for 2+ years to provide a clear accounting of SFA Financial records (January 2022 minutes and forward).He provided the NBO with a single source Audit proposal at an estimated cost of $28-32K.The NBO requested at least two additional quotes (NBO minutes and emails between Treasurer and PB Mares)
  • Email from Russ to PB Mares on March 14 “I've been directed by the Board to seek two additional quotes for these services from other firms (Never completed)

The full scope audit I initiated on 23 May was detailed and we supplied bank records, Board minutes, Articles of Incorporation, SFA Constitution, etc. Total compliance and total transparency.

  • During the May NBO meeting, the NBO determined the best path forward was to hire an accountant/bookkeeper to organize the SFA Financials so that any audit would be easier to complete and less costly for the SFA.
  • After the May NBO meeting, Russ Preston made a unilateral decision to enter into a contract with PB Mares for a single source audit projected to cost $28-32K without NBO vote or approval.

The auditors noted that in CY2023 4 members of the SFA Board were also members of the SFA-LI Board (Kevin Harry, JD Campbell, Chris Bell, and this author Russ Preston). The auditors noted that there was a monthly revenue stream from SFA-LI to SFA for online sales commissions in CY2023. The auditors noted that during CY2023 the SFA was paying for SFA-LI’s internet service.

  • The positions held by individuals from both organizations have been discussed many times and ultimately will resolve itself on July 1, 2024, when the new SFA NBO takes over.  Of note: Russ Preston was removed from the SFA-LI BoD by unanimous vote in March 2024 after committing to resign on several different occasions (December 31, 2022, after declaring that he was running for SFA Treasurer on February 15, 2024, and multiple promises to submit a resignation letter to the SFA-LI BoD)
  • SFA-LI assumed all online sales operations after the former SFA NBO (and input from SFA membership) decided to not continue with retail sales operations. (The two exceptions are SFA merchandise and Yarborough knife program)
  • SFA-LI fulfills all retail sales of SFA merchandise at no expense to the SFA and sends a monthly check to the SFA for the full amount of sales of SFA merchandise.  A spreadsheet with individual sales, any invoice for SFA merchandise, and a check amount is provided to the Treasurer and Executive Director.

Under US Generally Accepted Accounting Principles, the auditors reasonably concluded there was a “leadership” relationship during CY2023 and that both organizations were inextricably intertwined. As a result of this “brother/sister,”  or “father/brother” relationship during CY2023, the initial audit of the SFA books had to be broadened to include the SFA-LI books, as well.

  • During the Zoom call, this was the first time SFA-LI was discussed as part of an audit.I requested a complete list of SFA-LI documents that PB Mares would like to review so that I could present this to the SFA-LI BoD.We provided specific online sales data to PB Mares during the Zoom call.
  • SFA-LI is a separate organization with a different mission and accountable to different stakeholders.We provide monthly financial reports to our BoD and USAJFKSWCS Museum Advisory Board along with a quarterly financial report to MWR on Fort Liberty.

During the Teams meeting with PBMares at 1500 on 05 June, Kevin Harry and JD Campbell were adamantly opposed to allowing that access and refused to cooperate further with the audit. (There is video evidence of this!) Although Doug Livermore and I then voted to approve the expanded audit of SFA and SFA-LI books for CY2023 AT NO ADDITIONAL COST (emphasis mine!), this NBO nevertheless voted to kill the expanded audit.

  • Prior to this meeting, I personally uploaded all public documents for the SFA-LI to PB Mares portal (IRS Determination Letter, By-laws, and NC Articles of Incorporation).During the meeting, the discussion was about what documentation was needed from SFA-LI to support the SFA audit. I provided exact numbers for CY 2023 sales from online retail and an estimate of SFA merchandise sales but would follow up with exact numbers.  The request to provide banking information was tabled for two reasons: 1. The necessity for the SFA audit (SFA-LI did not request an audit) 2 SFA-LI BoD approval to provide financial information.  I am not authorized to make unilateral decisions for the SFA or the SFA-LI.
  • Russ Preston and Doug Livermore did vote yes to move immediately forward with the audit.  When Russ Preston was asked by Rob Flournoy to provide additional information that has changed since the May 2024 NBO meeting, Russ withdrew his motion before any more votes were cast
  • June 6, 2024 email from Treasurer to NBO “Guys, I withdraw my motion. I’d much rather leave it like this and walk away winner.

Brothers, for the SFA President to refuse pointblank to cooperate with auditors is an unacceptable conflict of interest. As a lame duck SFA President, he is more concerned with his follow-on sinecure with SFA-LI, thus abrogating his duties and responsibilities to the SFA. I have already introduced one vote of no confidence in Kevin’s leadership because of his many moral and ethical ambiguities, not to mention these financial improprieties and others. Read the Minutes in the Teamhouse.

  • The CPA for PB Mares told us on the call (and in email with Russ Preston on March 15, 2024) that he never recommends a non-profit organization to go from Zero to Audit.  He recommended that the SFA get a Policy and Procedures review, then a Financial review, and then an Audit.  This validates the concerns of the SFA NBO on making sure our processes and procedures along with accounting practices are reviewed prior to a full audit.
  • Telephone conversation with PB Mares after July 5th Zoom Call.  CPA recommended that non-profits conduct a Policy/Procedure Review and Implement Changes, then a Financial Review (1/2 cost of Audit but identifies financial irregularities and that correct procedures are in place), and then a full audit.
  • Emails from PB Mares:
    • March 15, 2024 “Reading through your 990, and even with having an outsourced CPA, there likely are going to be some internal control matters that we will be required to report on with the audit.
    • March 15, 2024 “My recommendation would be to have reviews done, or perhaps even 2 reviews and 1 audit, which I think would be doable.
    • May 11, 2024 “I would discourage you all from going with a one-time audit. If you will need annual audits going forward, it could make sense, but if not, in my opinion, you would be paying for more than you need.
  • Russ Preston’s words to me on the morning of June 5th, 2024. You’re welcome. The preliminary financial inquiry cleared me of any ‘fraudulent activities’.  I told him I have never engaged in fraudulent activities and that this was mis-informed tangents that he chased.

There is no excuse for his lack of transparency and unwillingness to open the SFA-LI books. When the SFA conducts an audit, and the auditors find no problems with the SFA books but no access to the SFA-LI books, they will issue a “qualified opinion” instead of a “clean unmodified opinion.” A qualified opinion on the SFA audit would result in higher scrutiny from the IRS and possible loss of our 501(c)(19) status. No donors or grantors will do business with an organization that has a qualified opinion on an audit. Kevin Harry’s obdurate refusal to open the SFA-LI books is a clear and present danger to the continued financial health of the SFA.

  • As stated above, the first time I was aware of any request for SFA-LI documents was on June 5, 2024.  Public documents were immediately uploaded to PB Mares portal and the remaining requests would be discussed by the SFA-LI BoD

Brothers, I beg you to speak to your Chapter Presidents and have them send the message to the 18 June NBO meeting that the Brotherhood demands a full scale audit of CY2023 books for the SFA and the SFA-LI. Since the current SFA NBO and the current SFA-LI Board of Officers are virtually the same, we can have our books opened and examined and the full scale audit completed BEFORE the new NBO has their first meeting in July. Brothers, please call National, call your Chapters, call your other Brothers! We need all hands on deck so we can compel this NBO to act in the best interests of the SFA now.

  • Every NBO member agrees that an audit is an SFA Constitutional requirement.  The majority of the NBO wants to make sure we complete a thorough review of our policy and procedures, organize our financial income/expenses so SFA members can understand where their money is, and finally, get the appropriate audit required at a competitive price (not a single source).  This has already been communicated to several members of the incoming NBO since any audit would not have been completed prior to July 1, 2024.


Joe Pruett on behalf of

Ed Pijuan

President