From: Aaron Thrush Amthrush@aol.com
Date: Fri 4/29/2005 1:34 AM

Subject: Rocky Mountain News Article

I'm forwarding an article that appeared in the April 27 edition of the Rocky Mountain News for your information to read and compare with Harry Pearce's letter that we all received in the past couple of days. Both sides have some valid points, and I'm sure that we will hear even more in the next six weeks from other sources as well. What-ever your decision as to which side convinces you of their position, I would urge you to vote. The outcome will have a significant impact on the AOG.

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AFA alumni association Critics' concerns over operations, exec pay lead to referendum

By Joanne Kelley, Rocky Mountain News
April 27, 2005

COLORADO SPRINGS - Graduates of the U.S. Air Force Academy have mounted a challenge to their alumni association, questioning the way the organization operates and the salaries it pays executives.

The small but vocal group has grown in ranks, enlisting support from enough fellow graduates to force the roughly 22,000-member association to hold a referendum next month on whether changes are needed.

In the process, the two sides landed in court. And the 27-year-old nonprofit association has found itself at the center of controversy as it launches a $100 million fundraising campaign on behalf of the academy.

"We're going to take the high road," said James Shaw, a 1967 graduate who is president and CEO of the academy's Association of Graduates, known as the AOG. "I don't think it solves any problems at all to get down in the dirt."

But Shaw, speaking from his office overlooking the grounds of the academy, maintained that the "fundamental direction" of the association is at stake.

And he said the association, which has a staff of 45 to handle alumni relations and raise money to support the academy, already has made changes to its governance structure.

He cautioned that the proposed changes would allow "a small group of people to throw an organization into chaos."

The group behind the referendum, which calls itself the AOG reunification committee, says it only wants to give control of the alumni association back to dues-paying members, who account for about 55 percent of the academy's almost 36,000 living graduates. Members pay $50 annual dues to the association.

The association's 17-member board, which includes a range of corporate executives and generals among others, can make changes without the approval of graduates. The committee wants alumni to have the ability to propose and approve changes to bylaws.

"They've created a lot of this controversy themselves by being very insular and not being willing to open themselves up for scrutiny," said Jim Wheeler, a 1964 graduate who once served as executive director of the AOG and now is leading the effort to change the bylaws.

When the association decided to post its latest IRS filing on its Web site, it initially left out information on executive pay.

It also removed the footnoted reference to the salary information that normally would follow the main portion of the filing.

Shaw later said that the association posted only a partial filing online because the entire form takes so long to download. The reference to the extra information was removed to avoid confusion, he said.

"It was an honest mistake," he said. "We provide more information than I bet you 75 percent of the nonprofits out there."

But the episode only fueled more criticism.

Wheeler called the association "naive to misjudge the audience they're dealing with. It's a smart group and an involved group that's been trained for leadership and to be analytic."

He said his group's aim is not to take over the AOG, but he also said he hopes the election results will lead to changes that include the replacement of the current board of directors in future elections.

"It isn't a personal thing at all," said Wheeler, who runs a nonprofit research group in San Antonio. "We want to fix the process."

The controversy comes at a time when nonprofit groups are under increased pressure to be more open and accountable about their finances and other activities.

Wheeler and his committee have struck a chord among alumni - almost 5,000 graduates signed the petition calling for a referendum.

The recently created committee has raised other concerns, which include questions about why IRS filings show that Shaw's compensation has jumped by an average $44,000 in each of the past three years.

In its fiscal year ended June 30, 2001, Shaw's salary and benefits stood at $86,100. By 2004, his compensation had topped $218,000. Shaw said his 2004 compensation figures included 2003 and 2004 bonuses paid in the same year.

The annual payroll for the association's staff is $2.18 million, according to AOG's IRS 990 filing.

Other association salaries, particularly those of its fundraisers, also have climbed in recent years, in large part because of the impact of a study conducted for the association by consultants Washburn & McGoldrick of Latham, N.Y.

"I found him (Shaw) making grossly below market," said Bill McGoldrick, whose firm's main business is to advise educational institutions on their fundraising campaigns.

When association board members questioned why Shaw and other staffers should be paid more, McGoldrick said he told them: "If they're not worth that much, find someone who is. That's the level of performance you're going to need."

McGoldrick's firm did the salary evaluation at no charge, but it has been paid by the association for providing fundraising guidance.

The consulting work involved the association's first major campaign, which has raised still more questions from alumni who want to know why a federally funded institution needs to raise $100 million from private donations.

"It's no different from the University of Colorado," Shaw said. "If we want to bring in the best of the best, we've got to go beyond the government-funded."

But opponents complain that alumni had no say in the decision to launch such a massive fundraising effort.

Also, they maintain that the campaign has added to the size and salaries of the association and boosted its expenses to levels that are eating up revenues in the initial phases of the campaign.

Academy officials say the campaign's theme is "building leaders of character for the nation" and will support key needs of the academy.

In its fiscal 2004 financial statement, the association reported $7.7 million in revenues and $5.7 million in expenses. Net assets stood at almost $22 million.

The referendum has proved costly for both sides. Wheeler's committee has spent almost $40,000 on its efforts so far. A legal dispute has contributed to the expense. A judge recently ruled that the association must provide Wheeler's group with e-mail addresses for all its members.

The association said it has hired an independent audit firm to count the votes in the referendum.

"It's been an expensive proposition," Shaw said.

The latest:

About 22,000 graduates of the U.S. Air Force Academy will start voting next month in a controversial election to decide whether members of the alumni association gain control of its policies, rather than the nonprofit group's board of directors.

• At issue: A committee of graduates has raised questions about the academy's alumni association, including the salaries it pays executives, policies governing board nominations and decisions made about a major fundraising campaign.

• The alumni association says the proposed changes would allow small groups of alumni to trigger expensive membershipwide votes regularly.

• Timing: The ballots will be mailed Monday and must be returned by June 17.

kelleyj@RockyMountainNews.com or 303-892-5068

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