Compassionate-sounding programs provide fertile ground for serious abuses. The Oregonian newspaper reports that a program designed to help the disabled through purchasing preferences on Federal contracts has, through lax oversight, led to the disabled being squeezed out of employment, while the non-disabled heads of the nonprofits reap huge salaries.
The Javits-Wagner-O'Day program requires federal agencies to buy certain goods or services from nonprofits that employ blind or severely disabled workers. Pentagon purchasing has doubled the program to $2.25 billion since 9/11. Yet the products in the program are more complex to assemble, requiring a more skilled, less disabled work force with market-level salaries.
Over 300,000 disabled workers are currently employed in JWOD programs, some paid less than minimum wage under a Federal waiver based on their presumably lower productivity.
There is limited oversight over the programs—in many aspects it is an honor system. Reforms are difficult because the nonprofits that benefit maintain a strong lobbying presence. Once intended for the severely disabled, lobbying encouraged regulators to redefine disabilities to include conditions such as alcoholism or chemical dependency, minor learning disabilities, limited English, nasal polyps, carpal tunnel syndrome, allergies, arthritis and speech impairments.
In another case, the Army allowed a JWOD program to hire non-disabled workers under a three-month waiver, but never checked compliance at the end of the waiver period. In other cases, JWOD contracts were let for complex tasks, like Humvee repair, that were inherently too complex for the seriously disabled.
Yet the executive compensation is what really sets these programs apart. The newspaper reviewed the compensation reported on Form 990 for the 50 top JWOD contractors and found that more than a dozen had salaries in excess of $350,000.
The largest JWOD contractor, in El Paso, paid a $4 million management fee to a management firm run by the family trust of the organization's president, Robert E. Jones. In a pattern that should be familar to readers of WMN, Jones took over the organization in 1995 and has been increasing his compensation reguarly ever since. The paper found complaints and violations of employment rules as far back as 1999. Only after the story ran did Federal reviewers in El Paso move toward formal sanctions, and the Mr. Jones abruptly resigned.
We'll be interested to see what happens next. Already the voices in El Paso are more fearful of the loss of jobs than about the program's lack of compliance with the employment regulations.
Oversight for an affirmative business enterprise lies with the Board of Directors. Directors have a fiduciary responsibility to review the operations of the business. One of their duties is to set the compensation for the CEO and approve annual changes to the compensation package for all employees. If the CEO's compensation is out of line with other CEO's with similar size business, and with similar responsibilities, the Board is responsible and may share liability. As set forth in the corporate bylaws, the Board has a responsibility to obtain an annual independent audit of the business. The auditors have a responsibility to identify internal control issues raised in this article, especially the JWOD employee ratios and major contract irregularities.
Posted by: Jon P. Gilbert | December 19, 2009 at 06:19 PM