The recently disclosed financial meltdown at Special Olympics of Oregon shouldn’t have come as a surprise to the members of its board. If it did, they were either not paying attention or they were the victims of the endless capacity of people for self-delusion.
Margaret Hunt, CEO of the nonprofit from 2003 to May of this year, portrayed the organization’s current troubles as part of the normal ebb and flow of a typical nonprofit’s finances. “There are always ups and downs in the nonprofit world,” she told The Oregonian.
But the nonprofit’s financial filings going back to 2003 show that the only years its expenses exceeded its revenues from 2003-2013 were in 2007 and 2008. It covered a $525,979 deficit in 2007 with balances from 2006. In 2008, it faced a $666,361 deficit, but it recovered, restoring its net assets or fund balances to 1,484,764 by 2013.
The following year, however, was a fiscal fiasco, with expenses exceeding revenue by $506,464, necessitating another dip into its net assets to cover the overspending. Some recovery came in 2015, when revenues increased by about $1 million, but 2016 brought another revenue dip of about $700,000, resulting in $325,280 of expenses over revenues.
Britt Carlson Oase, appointed Special Olympics Oregon’s CEO in June, attributed the financial problems to a mismatch between the program spending and charitable giving. In other words, the nonprofit spent more than it took in.
Things got even worse in 2017, Oase told The Oregonian earlier this month. Few details are available, however, because Special Olympics has not yet filed its 2017 financial report to the Internal Revenue Service and the organization has not made public a 2017 financial report by its CPA, GaryMcGee & Co. LLP.
The nonprofit’s tenuous position was evident, however in the CPA’s 2016 report.
The 2016 financial statements reported a net operating loss of $131,850 and a decline in total net assets of $269,156. This followed operating losses in 2014 and 2015, and a decline in new grant and contribution commitments in 2016.
As a result, the organization’s cumulative unrestricted net asset deficit increased from negative $1,172,950 in 2015 to negative $1,304,800 at December 31, 2016.
In addition, during 2016, outstanding trade payables, money the nonprofit owed to suppliers for goods or services, grew by $328,082, and cash balances declined to $58,360, representing only 5 days of operating outflows.
As of the end of 2016, current liabilities were greater than current assets by $282,346 and after the 2016 report, out-standing trade payables increased to more than $1.0 million.
According to the CPA’s annual report for 2016, the organization had outstanding borrowings of $651,232 on its line of credit, which increased to $1 million as of September 30, 2017.
In other words, even if Special Olympics Oregon had pulled off a decent 2017, it would have been in trouble.
The CPA’s report said that as of October 31, 2017, Special Olympics of Oregon did not expect to be in compliance with certain financial covenants under the credit agreement. “If unable to continue to obtain amendments from the Lender that waive compliance with these financial covenants, the Lender could place the organization in default under the terms of the Credit Agreement,” the report said. A default “may severely or completely constrain the organization’s ability to continue to operate its business…”
Pretty alarming stuff.