Global Economic Issues

I read the CAI’s response to the media’s accusations and found it to be somewhat encouraging. I have been one of the few who I have talked to since these allegations surfaced who has tried to defend Mortenson, and I refuse to cast judgment on him until he has a chance to respond after his surgery. I found it particularly enlightening when the CAI defended Mortenson’s book and the fact that he was indeed held against his will. When I read that Mortenson made this up, I was confused as to why he would even bother to fabricate such a story. After all, he is working on becoming a friend of those in the Middle East, not a man who makes up stories about mistreatment in the place he is trying to make better off. I don’t believe Mortenson would have made this story up just to sell more books, or to look like more of a hero. After all, isn’t building schools for girls in Afghanistan enough? Building schools is what sells his books and makes his speeches so intriguing, not the fact that he was held against his will at one point. I was a little disappointed, however, as I felt the CAI did not directly address the fact that such a small percentage of their donations actually went towards building schools. It seems to me, as we talked about in class, that the root of the problem is the fact that the CAI is not run by people who understand how to run a business. Even though the CAI is a non-profit organization, it still needs to be run and held accountable as a business. Every dollar that is misused is a dollar stolen from the girls in Afghanistan, and I believe that the CAI needs to form a more responsible system of accounting and management of their donations. That being said, I still do not believe that Mortenson or the CAI ever intentionally committed fraudulent behavior.

Personally, I am tired of the controversy surrounding Mortenson and the CAI. Everyone involved needs to be clearer with who is giving the CAI donations, what Greg does with his share of any royalties, and how he interacts with the CAI. In some degree, this brings back how people desire more oversight as to how the Bill and Melinda Gates Foundation allocates their funds. (After the budget is set up for the year, the federal government should discuss how to better protect donors and to better show how the foundations spend their donations.)

I see a few red flags, as far as the 2008 CAI’s Form 990 (the Return of Organization Exempt from Income Tax). Line 10: investment revenues. 2007 shows the CAI earned ~$23,000, but 2008 shows a 25-fold increase to ~$609,000. How did this happen—maybe more donations were stocks, but the CAI could have invested more without anyone knowing it. Line 19: revenues less expenses. 2007 revenue was just over eight million dollars, but 2008 showed a decrease of almost $3.5 million (due to an increase in other expenses). However, line 4b (on page 2) has me wondering . . . $4.6 million in expenses for “Domestic Outreach And Education, Lectures And Guest Appearances Across The United States Telling Central Asia Institutes Story And The Plight Of Children In Pakistan And Afghanistan”. How could the CAI rack up so much in expenses for that?

On page 7, it lists what Greg actually made (money-wise). $141,075 from his W2/1099-MISC and $39,672 in other compensation from the CAI (a total of $180,747). Now, scroll to page 10 and look at line 5, under total expenses. The amount: $180,747, and the CAI claims 1/3 of that was fund-raising expenses ($63,261).

Back on page 7, it lists Abdul Jabbar as the Board Chair, Karen McCown as the Treasurer, and Christine Slaughter as the secretary. All three are listed without any compensation. On page 10, under other salaries and wages is an expense of $402,757. How can that be—your board chair, treasurer, and secretary are all unpaid, yet you claim a wages expense of $402,757? Something’s not right.

$1.4 million in travel . . . seems high, but I’d want to see Greg’s itinerary as well as that of the CAI and their fund-raising partners. A six-fold increase in publicly traded securities—who made those donations?

Now, I’m either angry or frustrated, and I don’t know which. Page 17 shows payroll liabilities of $29,128. How can that be? Greg was paid $141,075 and given another ~$40,000 in other compensation. I sense a sleight of hand trick . . . especially since the keeper of the books does not list her physical address on page 6 of the statement. Also, the CAI had an increase in their publicly traded securities, yet they claim a loss of $23,000 on page 18 on their investments.

Page 19 might be the straw that breaks it open—one office is listed in Afghanistan (as well as one in Pakistan). After all the schools he built (or helped build), I would think there was more than one office in each country, so that people could more easily access the people needed to build schools. Page 21 states 17 scholarship recipients were given scholarships worth $40,000 (altogether) to attend school. I guess there are not as many students attending as he wanted us to believe.

I’m looking at pages 30-31, and my anger has turned to disgust. A printer valued at $899, a monitor valued at $818, a $5,000 Mac computer, a $3,126 laptop, another printer valued at $3,100, and the list continues. I am wondering why the CAI needs all these items—I’m tired of seeing how much the CAI spent on these items and the fiasco with Greg.

Page 35 seems odd—I wonder why the CAI didn’t list its land and the Jeep they bought to be depreciated.

I found the response by the CAI to be interesting. I don’t believe that there are really any shady activities taking place. I think that our government is probably more corrupt than the CAI. I not really an advocate for news/media outlets anyways as I believe that they are concerned with ratings and controversies and tragedy are the two big “money makers” so I don’t put it past them to fabricate much of what they report on.

I briefly looked at the financial statements, but there was way too much information there to go through it all. The pie chart was really enough for me…I found it surprising that 91% of the CAI funding comes from individuals.

Overall i feel like the money issues should not take away from the incredible work Greg has done. However, i do feel that he should be responsible for any misdoings by the CAI etc. As with any large company the president or ceo is responsible for any fraudulent activity. I do not think that his efforts throughout the world should have any impact as to how he is looked at with the financial issues. If he is found to have comitted fraud than he should face the consequences. I do not think he actually commited fraud, however the lines are gray in many of these cases. Lets just hope that it all works out and nothing ends up affecting the people he has helped or is currently helping.

Nick

Unfortunately I do not know enough about accounting to make a valid statement on whether the CAI is incriminating themselves with improper financial practices. However, I do know that the fact that there are discrepancies is problematic. When an organization of this size is dealing with such a sensitive subject and they are not being 100% transparent with their finances it is irresponsible and they should definitely be held accountable for every penny. That being said I think that what the CAI has done for the advocacy of female education in third world countries is beyond damage. Even if the whole situation turns out to be one giant scheme, the fact that people are actually aware of illiteracy now is amazing. Greg Mortenson has almost single handedly become a figure for literacy and womens rights and it is impossible to take that away from him. Nobody questions the success of the civil right movement just because MLK plagiarized his thesis and bought hookers. This reminds me of the spin pumps because even though they failed they were a valiant effort and if everyone put forth this kind of attempt on poverty the world would be cured of it.