Giving Tree's new board quits

The new board was formed late last year after an Arizona Daily Star investigation found that the Giving Tree served expired and potentially unsafe food to needy kids, that it charges clients hundreds of dollars a month to live in crowded rental homes, and that at least twice it made a public display of giving kids gifts at holiday parties, only to take them back later. Many of the Giving Tree's actions violate city and state regulations, or are contrary to widely accepted standards for charities, the newspaper found.

Members of the new board - appointed because most members of the previous board of directors indicated they didn't have the time or expertise to fix the problems - say Director Libby Wright undermined their reform effort. They contend the Giving Tree's books are riddled with financial and accounting irregularities.

The first of the new board members quit in January. The rest resigned last month.

Board members Craig Littlefield and Mollie Moody, along with former Assistant Director Kathy Fast, cited numerous serious financial issues with the organization, which they have reported to the state attorney general.

Among their criticisms:

• Wright pays her employees as independent contractors rather than employees so the Giving Tree doesn't pay its share of federal payroll taxes, Social Security, Medicare and such costs as unemployment and workers compensation insurance, the former board members say. They also contend the Giving Tree doesn't report compensation such as housing and cars provided for these contractors to the Internal Revenue Service.

• The Giving Tree has an inadequate accounting system and is unable to track what is paid to whom, or for what, former board members say. They say there is no attempt to reconcile accounts - instead, volunteers take credit-card bills and bank-account statements after the fact and assign what they think the money was spent for.

A letter from Regier Carr and Monroe LLP, accountants the charity tried to hire to do an audit after the Star series, said the company was declining because it would take two years just to get the Giving Tree's books into good enough condition to be audited.

• Giving Tree money was used to pay the insurance for a truck belonging to Wright's son - money she said has since been repaid.

• After staunchly defending the Giving Tree when the Star did its original investigation, board members and former organization officials say they subsequently verified most of the complaints: requiring clients to sign over their food stamps, forcing them to work with no pay or overtime, and making clients dependent on the Giving Tree rather than helping them get out of homelessness.

In an interview Friday, Wright said the Giving Tree's accounting system is adequate and has been blessed by the accountants she hired. One recent Giving Tree accountant was let go, and another quit along with the board. The current bookkeeper has a background in human services.

Wright pointed out Moody and Littlefield are not accountants, and said their accounts of the Giving Tree's record-keeping were "silliness, because they're not true."

The letter from Mark Cowley, of Regier Carr and Monroe, however, disputes Wright's claim that her books are in good shape.

Cowley's letter said the Giving Tree's books are missing records for more than $1 million in non-cash contributions, they list rent paid by clients as charitable "donations" on financial statements, they have no disclosures or inventory for the organization's thrift shop, and they don't include records of "in-kind" assets such as vehicles and furniture. In addition, the letter said, none of the organization's 15 vehicles appears on its books.

"You have some general accounting practices to consider before an audit could be done," the letter says. Cowley did not return calls or e-mails seeking comment.

On Friday, Wright said she never saw the letter from the auditor.

She said she paid her son's insurance because all of the Giving Tree's trucks had broken down or been in accidents and her son had been laid off, so he used his truck to help with deliveries to the charity's homes and for its feeding program.

Wright said she and Littlefield had a personality clash. The bottom line, she said, was that the organization was not making changes as fast as Littlefield wanted. Anyone who thinks the Giving Tree is not doing right should "come and help us do it better," she said.

"If it's wrong, let's fix it," was her attitude, she said. "I just knew everything couldn't be done overnight."

"Truth has come out"

Moody, a holdover from the old board, said she was a true believer in the Giving Tree and Wright.

"I thought all the articles had been lies," Moody said of the Star's stories. "But the truth has come out over the past five months."

Moody and Littlefield said they came to believe Wright was only giving lip service to wanting to change while actually preventing them from reforming the organization. They said Wright denied them access to financial records she was required by law to provide and instructed clients to obstruct their efforts and lie to board members.

Wright, however, insists she gave Littlefield every record he wanted - more even than she was allowed to see.

Former board members said they still love the Giving Tree organization, and even now often say "we" when talking about it. They feel the organization does needed work in the community that isn't provided by anyone else.

But Moody, Littlefield and Fast, the former assistant director, said the organization cannot continue with Wright at the helm. They want it to go on without her, or a new nonprofit created in its image.

"We love the organization," Moody said, "but want to wrest control from Libby."

The board had the power to fire Wright but didn't because she and her husband own so much of the property used by the Giving Tree, and Littlefield and Moody said the organization is so built around her that she has the ability to evict clients and cut off services, effectively destroying the Giving Tree before she could be removed.

Glenn Bancroft, former board chairman and another holdover from the previous board, quit in January. He would not comment for this story, other than wishing the Giving Tree well and saying its services are needed in Tucson.

The other four board members quit in May. Gloria Taylor would not comment and Mark Resnick did not return calls for comment.

Five of Wright's longtime supporters sit on a new board.

Financial questions

After the Star stories ran last year, Littlefield, a former IBM manager, was put in charge of a committee to look into the Giving Tree's finances. He said he quickly ran into resistance and was shocked by the financial practices he saw.

He said he was most concerned about making employees independent contractors. That seemed to violate IRS tax laws that say workers aren't independent contractors if their behavior and business roles are determined by the nonprofit, which Littlefield said was the case with the Giving Tree.

In addition, he said worker benefits such as a housing and cars were reported to the IRS as income.

Wright denied both practices. She said all her employees who are independent contractors want to be classified that way, so they have flexible schedules and can work from home.

Littlefield said his goal was to get the 2010 books "clean," so they could be audited, and then go back to 2009 and 2008. But in more than four months, he said, he couldn't get it done because of resistance and nonexistent financial records.

The Giving Tree's accounting system lacks reconciliation for bank accounts or credit cards, he said, with volunteers given monthly statements to fill out what they think the expenses were for. A charge at Walmart, for example, might be listed as housing, he said.

Anthony Bustamante, whose degree is in human services, started keeping the Giving Tree's books less than a month ago. He said all expenses are properly logged and then reconciled at month's end - the criticisms leveled by Regier Carr and Monroe notwithstanding.

Littlefield said he's never been able to find any financial information on any of the other three Giving Tree corporations that are registered with the Arizona Corporation Commission and have filed past financial statements. "You can't get this stuff because it's so closely guarded," he said.

Two nonprofit experts were highly critical of the Giving Tree practices as described by the Star, contending they are inappropriate and potentially illegal.

"Everything points to an organization out of control," said Laura Otten, director of the Nonprofit Center at LaSalle University in Philadelphia. "They're violating every rule of fundraising, financial accounting and bond with their donors. They're violating everything."

Renata J. Rafferty, a consultant who specializes in nonprofit investigations, said if board members were denied financial records it would be illegal because they have a fiduciary responsibility to the organization.

"There are definitely irregularities," Rafferty said.

"Indentured servants"

Even more than their financial concerns, Littlefield, Fast and Moody said what bothers them most is that the Giving Tree makes its clients so dependent on the organization they can't move out of homelessness.

Littlefield called Giving Tree clients "indentured servants" who have to work without pay to stay in the program and so have difficulty finding time to get a job or save up enough money to get a place of their own.

Fast questioned how clients could get the money for first and last months' rent and to turn on utilities at a new apartment while working dozens of hours a week for no pay. Those with state or federal benefits or who have a job outside the Giving Tree are required to hand over a large chunk of their earnings to stay in a Giving Tree house, Fast said.

Wright said her organization isn't perfect but is dedicated to feeding, clothing and sheltering the homeless, particularly children. She said there are many success stories of Giving Tree clients moving out of homelessness.

"I am filled with compassion," Wright said. "All we want to do is help."

But as much as the former board members want the Giving Tree to succeed, "We want her out of there," Littlefield said, "because there is no way she will change."

Contact reporter Rob O'Dell at 573-4346 or rodell@azstarnet.com