A financial analysis of the USHCC finds questionable controls and accountability.
"Most associations view themselves as publicly accountable," say Amy Lerner and Audrey Newton, accountants and columnists with the American Society of Association Executives. But at the United States Hispanic Chamber of Commerce (USHCC), a minimalist approach to financial accountability has become business as usual, raising questions about the chamber’s controls even as the organization moves into competitive commercial enterprises.
By law, a nonprofit 501c(6) organization such as the USHCC must provide its Form 990 – the tax-exempt equivalent of a tax return – to the public upon request. Hispanic Business requested and received the USHCC’s Form 990 for the last four years, but a request for more detailed annual audit statements was denied. Unlike many nonprofit organizations, the USHCC does not publish an annual financial report for its members and donors. Only board members review financial documents, and as reported earlier, USHCC directors sign strict non-disclosure agreements as a prerequisite to board service (see "Advocate or Competitor?" January/February).
A financial analysis by Hispanic Business of the USHCC’s 990 forms turns up several trends. During the four-year span, income for the USHCC rose from $2.7 million to $4.9 million, a jump of 86 percent, but expenses grew even faster (see table). Factors contributing to the cost increases include consulting services (up $760,000), staff salaries (up $454,000), travel (up $260,000), rent (up $119,000), and salary of the CEO (up $60,000).
To make up the difference between income and expense, the organization’s assets have decreased year over year. In 1997, the year before George Herrera became CEO, the USHCC had $222,000 on hand; by 2000, that figure stood at $40,000 – an 82 percent reduction in four years. The fact that cash balances continue to decrease while payables have increased indicates "a significant lack of financial control within the organization," according to one accountant who analyzed the documents for Hispanic Business. "The unrestricted fund having a negative $620,000 balance [to cover the income shortfall] indicates cash-flow problems and overextension of financial resources."
At the same time, the USHCC has attempted to increase revenue from advertising, even if it means expanding into commercial activities such as television broadcasting and magazine publishing. Over the last four years, income from USHCC events has increased $1.5 million, while the "television advertising" category has grown from zero in 1997 to $674,000 in 2000.
Those dollars come from Hispanics Today, the syndicated television show co-produced by the chamber and Trans World International. Production expenses for the show are not reported in the USHCC’s Form 990, so it remains unknown to the public if Hispanics Today makes a profit or not.
Hispanics Today combines national sponsors, whose ads are shipped with the show, with open time slots for local ads supplied by the individual stations that air the program. Although Hispanics Today airs on Sunday or Saturday mornings in most markets – with half the stations scheduling it at 6:30 a.m. or earlier on the weekends – the show has landed sponsors such as America Online, Coca-Cola, and Chevrolet. The piecemeal airtimes of syndication mean Hispanics Today doesn’t produce definitive ratings to justify its audience by the same standards as commercial television. And the strategy of fund-raising through competition against commercial television broadcasters raises concerns similar to those leveled against the USHCC for its magazine publishing venture Hispanic Trends (see "Advocate or Competitor?" January/February).
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