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Now You See It...Now You Don't

06 Nov 2011
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That’s definitely the tag line for every magician during his or her magic show. They somehow try to convince you that an object once seen by you has now somehow vanished into thin air. Of course we all know that is not true. With carefully crafted cues, skilled assistants and perfect timing they briefly redirect your focus for a mere millisecond and poof….Now you see it and now you don’t.

 Back around March 11, 2011 in response to a question raised by Jennifer Marriott, Paul Orwig replied "It has been my decision as Treasurer to not publish our unaudited financial statements until I am satisfied that they are reasonably accurate, and I still have some unanswered questions along those lines. I have been in touch with our accountants to get their assistance on that, and they have said they hope to have time next week to help get those questions answered." So, a reasonable person would conclude with the publishing of these financial statements some 7 months later that they are now deemed sufficiently accurate to have passed the tough Paul Orwig test. Right? Not so, young Obi-Wan Kenobi. Now we find with some certainty that these reports contain significant inaccuracies in reporting revenue received and that Paul Orwig, the OSM Treasurer is well aware of it!

Not many are aware that OSM is a Not For Profit Corporation registered in the State of New York. It is a dual registrant which simply means the corporation is subject to two New York laws - Article 7-A of the New York Executive Law and Administration of Charitable Assets Section 8-1.4, Estates, Powers and Trusts Law (EPTL). Both of these laws in combination with the bylaws of OSM essentially define what OSM can and cannot do. Of course, like most laws, they are not easy to read or even to understand the implications clearly. But, let's take a crack at it.

First, let's look at the Joomla! solicitation page and then review this applicable regulation:

§ 172-d. Prohibited activity

20. Use in any solicitation a New York state address, including a New York State return address unless:

(a) the charitable organization maintains and staffs an office at that address; or

(b) immediately proximate to the New York address, both the address of the charitable organization's actual headquarters and the fact that the New York address is a “mail drop”, using this or a substantially similar term that clearly conveys the message that the New York address is that of a mail handling facility;

 Looks like option (b) is not being utilized OSM board. Might want to implement this change quickly.

Here are a few FAQs from the New York Charities Bureau for OSM board members to keep in mind.

Q. Does the board have to keep minutes of its meetings?
A corporation is obligated to keep, at the office of the corporation, correct and complete minutes of all meetings, including those conducted face to face and over the telephone, of its members, board and executive committee, if any.

Since OSM is required to keep correct and complete minutes of all meetings then there is no excuse for the OSM board not to publish those minutes in a reasonable time frame. Publication outside of a one month window from the meeting's termination would not be considered reasonable. Obviously the bylaws paragraph the Secretary of OSM loves to quote really has no bearing on whether or not OSM must keep minutes. New York law takes precedence.

Q. Are the directors of a corporation responsible for ensuring that the corporation files its financial reports?
A. New York law provides that willful failure of the corporation to file a report required by law shall constitute a breach of the directors’ duty to the corporation. The board should make sure that the corporation is filing all its required reports including its filings with the Attorney General’s Charities Bureau, the Internal Revenue Service, including both its Forms 990 and employee-related reporting.

I would hope that the board of OSM has asked and received the answer to the question of whether these reports have been filed timely or not.

Q. Does a board member have a right to inspect corporation’s financial records of the corporation?
A board member is entitled to inspect the corporations’ books and records and may ask to see its financial reports.

 Given the questions that have been raised concerning missing funds in the financial reports, OSM board members, I sure hope you are also asking those questions for the following reason at least.

 

§ 717. Duty of directors and officers.

(b) In discharging their duties, directors and officers, when acting in good faith, may rely on information, opinions, reports or statements including financial statements and other financial data, in each case prepared or presented by:

(1) one or more officers or employees of the corporation, whom the director believes to be reliable and competent in the matters presented,

(2) counsel, public accountants or other persons as to matters which the directors or officers believe to be within such person's professional or expert competence or

(3) a committee of the board upon which they do not serve, duly designated in accordance with a provision of the certificate of incorporation or the bylaws, as to matters within its designated authority, which committee the directors or officers believe to merit confidence, so long as in so relying they shall be acting in good faith and with that degree of care specified in paragraph (a) of this section. Persons shall not be considered to be acting in good faith if they have knowledge concerning the matter in question that would cause such reliance to be unwarranted. Persons who so perform their duties shall have no liability by reason of being or having been directors or officers of the corporation.

Note the paragraphs (1) & (3) - OSM trustees who place unwarranted reliance on an individual(s) purporting to provide reasonably accurate financial reports may make themselves potentially liable which would not necessarily be protected under Directors and Officers insurance (D&O).

The OSM board is required by it's own bylaws and by New York law to hold what is called an annual meeting.

 

§ 710. Place and time of meetings of the board.

(b) The time and place for holding annual or regular meetings of the board shall be fixed by or under the by-laws, or, if not so fixed, by the board.

 6. REGULAR ANNUAL MEETING.A regular annual meeting of the Board will be held each calendar year.

 The significance of that Annual Meeting might be lost on most of you but the reason for its requirement is also buried in New York law.

 

§ 519. Annual report of directors.

(a) The board shall present at the annual meeting of members a report, verified by the president and treasurer or by a majority of the directors, or certified by an independent public or certified public accountant or a firm of such accountants selected by the board, showing in appropriate detail the following:

 (1) The assets and liabilities, including the trust funds, of the corporation as of the end of a twelve month fiscal period terminating not more than six months prior to said meeting.

(2) The principal changes in assets and liabilities, including trust funds, during said fiscal period.

(3) The revenue or receipts of the corporation, both unrestricted and restricted to particular purposes during said fiscal period.

(4) The expenses or disbursements of the corporation, for both general and restricted purposes, during said fiscal period.

(5) The number of members of the corporation as of the date of the report, together with a statement of increase or decrease in such number during said fiscal period, and a statement of the place where the names and places of residence of the current members may be found.

(b) The annual report of directors shall be filed with the records of the corporation and either a copy or an abstract thereof entered in the minutes of the proceedings of the annual meeting of members.

(c) The board of a corporation having no members shall direct the president and treasurer to present at the annual meeting of the board a report in accordance with paragraph (a), but omitting the requirement of subparagraph (5). This report shall be filed with the minutes of the annual meeting of the board.

 I have gone through the available minutes from March, 2010 to July, 2011 and could not find where a particular meeting was declared the annual meeting and certainly can't find any reference to to such a verified annual report that is supposed to be kept with the minutes of the annual meeting. In the March 21, 2011 minutes, it was stated that "Ryan will share his notes on what was done in 2010 for our input. Producing a nonprofit annual report with a listing of accomplishments, a snapshot of financials, details and information would be ideal." Of course, it is actually required by both OSM Bylaws and New York State law. There was no follow-up.

It looks like on the surface at least that there are a number of slight of hand activities or Now you see it..Now you don't that need to be dealt with by a competent board. I fault Ryan Ozimek, Paul Orwig, and Jacques Rentzke as the board officers for failure to follow through and appropriately deal with each of these issues.

If you feel strongly about what appears to be more then just incompetence, you might consider filing a complaint with the New York Charities Bureau.

The New York Charities Bureau has jurisdiction to investigate complaints that involve 1) wrongdoing by such organizations; 2) fraudulent or misleading solicitation and improper expenditure of money for charitable purposes; and 3) improper activities of executors, administrators, trustees and personal representatives responsible for honoring gifts or bequests to a charity.

Of course you could also try complaining to the Joomla! Leadership. Hasn't worked for many so far.

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David Huelsmann

Dave Huelsmann was Treasurer of Open Source Matters, Inc. from 2008 to July, 2010 and Joomla Forum Global Moderator from 2005 to November, 2010. Now retired, he was a senior healthcare executive who managed large and diverse clinical laboratory, radiology, electroencephalography, and centralized patient transport operations/departments in both not-for-profit and for-profit companies throughout the United States.

Dave was a Navy Corpsman who served in Vietnam while attached to Seabee battalionmcb71
MCB-71.

Read more about Dave Huelsmann

Comments   

0 # Anonymous Coward 2011-11-07 09:47
Clearly a bold statement posting a link to file a complaint. One might take away from this that you intend to see legal action taken against the project. If this is true, would that be to get the project on the right track (legally speaking anyway) or to derail the project. Would you care to comment?
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0 # David Huelsmann 2011-11-07 10:22
It would be more advantageous for all if the project got on the right track. The link is provided to provide opportunity for those readers who would not know where to look and to remind other readers that there is more then one way to get their attention to correct systems that are not working appropriately.

I, for one, would value your comments more if you didn't hide behind the anonymous label.
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0 # Anonymous Coward 2011-11-07 10:38
Dave,
Thank you for the reply. I'm not trying to push your buttons, just trying to see where you stand. I have my reasons for staying anonymous. My Anonymous status is more for the public and not for you. I do not mind if you know who I am, but I thought these comments would be best asked in the open to start a discussion. If you would like, I can move questions/comments to email first. It is your call. Thank you Dave.
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0 # David Huelsmann 2011-11-07 11:12
Continue using the comment system is fine with me. I prefer the openness this system provides for other readers.
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