Out of respect to the hard work and generosity of Donation for Education’s volunteers and contributors, the Board of Directors would like to provide an update regarding the organization’s current status.

 

Where we came from:

 

Donations for Education (“DFE”) was incorporated as a Minnesota nonprofit corporation on May 7, 2009. DFE’s original mission was to reduce educational costs for students and families. The volunteer program and scholarship program assisted students/families with community volunteering and scholarship development. The donation program partnered with individuals and corporations to manage/award scholarships to students.

 

Since the inception of DFE’s scholarship program, a total of $2,122,144 in scholarships were awarded on behalf of students. The scholarships were awarded as follows from 2009 to 2015:

2009    $ 44,945

2010    $453,817

2011    $572,401

2012    $337,487

2013    $291,931

2014    $407,634

2015    $ 13,929

 

http://www.collegescholarships.org/images/forutune500-scholarships.jpg

 

Our sincerest, whole-hearted “THANK YOU” to the many dedicated volunteers and very generous donors who made these scholarships possible. With warm regards, compassion, and integrity, we appreciate you.

 

Where we are:

 

The DFE Board of Directors met on February 24, 2015, 165 Western Ave. N., St. Paul, MN 55102, and passed a resolution to dissolve the organization.  The resolution passed unanimously 5-0, with no abstaining votes.  On April 2, 2015, DFE filed a Notice of Intent to Dissolve with the Minnesota Secretary of State pursuant to Minn. Stat. § 317A.723.

 

Therefore, DFE is currently in the process of dissolution. Dissolution is the process by which a nonprofit corporation winds down its affairs and goes out of business.  If you would like to know more information about the dissolution process, you can click on the following link and scroll down to the section about “dissolution”: https://www.revisor.mn.gov/statutes/?id=317A.

 

Pursuant to Minn. Stat. § 317.727, Donations for Education (EIN: 27-0186801) is providing written notice to known and potential creditors that the organization is in the process of dissolution. If you believe you have a claim against the organization, please put that claim in writing and send it to:

 

Jennifer L. Urban, Esq.

Urban Birken PLLC

5401 Gamble Dr., Suite 275

St. Louis Park, MN 55416

 

All written claims against Donations for Education must be presented by Friday, July 24, 2015, and mailed to the address listed above. If you have any questions AFTER reading the entirety of this communication, please contact Ms. Urban at (612) 284-6441.

 

Please note that, if you were a DFE volunteer, you are not a creditor. Volunteers who donate their time on behalf of a charity are not “owed” any compensation in return. As you know, one way that DFE raised funds was by bringing in volunteers to provide concession services at Target Field, Target Center, TCF Stadium, and other similar venues. Individuals who provided such services did so as volunteers and were not paid wages or other direct compensation for their services. By engaging in such fundraising events, DFE (as an organization) received donations from the sponsoring concession company to distribute according to its mission in accordance with the federal and state nonprofit laws, and each volunteer freely consented to provide concession services to raise funds for DFE (as an organization). Not only was providing such services as volunteers an express condition of the concession companies, but the volunteers routinely acknowledged during the required “check-in process” that they were not being paid compensation for providing such concession services.

 

The scholarships provided by DFE (which in the Internal Revenue Code are called “qualified scholarships”) are only excludable from the taxable income of the recipient if, among other things, the scholarship is not provided in return for services. If there is a correlation between the provision of a scholarship and services rendered (i.e., 6 hours of service = $300, or whatever), the scholarship is not a qualified scholarship. Rather, in that scenario, it is income to the recipient to be recorded on the recipient’s personal tax return, and the scholarship recipient will need to be issued the appropriate tax forms, and tax amounts withheld by the nonprofit corporation.

 

Moreover, pursuant to federal and Minnesota nonprofit laws, to obtain and keep its federal tax exemption as a charitable organization, an organization must broadly benefit the public. Scholarships should be made only on the basis of written, objective criteria (i.e., financial need or academic performance, or both) and should not be tied in any way to the number of hours parents/students have volunteered to raise funds for the organization. Furthermore, when a nonprofit organization grants scholarships, the organization should have a Scholarship Committee (whichever group of people responsible for making scholarship decisions) comprised entirely of people who have no family members who could apply for scholarships. This is critical to ensuring that the charity is not accused of providing either (a) a private benefit to a small group of parents, or (b) private inurement to insiders of the organization. Providing either private benefit or private inurement can result in federal excise taxes being imposed on the organization, its insiders, or both.

 

Please note that none of the information provided in this communication is intended to be legal advice (nor should it be construed as legal advice). If you volunteer for nonprofit organizations with similar missions as DFE, please do your due diligence and ask the proper questions. You volunteer at your own risk with no expectation of material reward.

 

How we got here:

 

DFE had several successful years, but, unfortunately, improprieties existed in the organization’s finances and operations that the Board of Directors was not privy. On or about February 2015, it was unexpectedly determined that there were insufficient funds to cover DFE’s ongoing expenses, so the Board of Directors discontinued DFE’s relationship with Robert Howard in order to do a full investigation. DFE’s Board also severed its relationship with Allyssa Howard at that time. Mary Vandagriff resigned from her position on or about March 22, 2015.

 

            The Board of Directors has been conducting a full accounting of the finances and a complete review of the organization’s records, and has discovered the following (among other things): In or about 2012, Robert Howard designated himself as CEO and Executive Director, and named Mary Vandagriff as CFO, without authorization or approval of the Board of Directors. Payments to Mr. Howard and Ms. Vandagriff were solely controlled by Mr. Howard and Ms. Vandagriff at all times, and amounts of compensation grew over the years. While the Board of Directors attempted to oversee the financial activities of DFE and were assured at all times there were sufficient funds to cover DFE’s ongoing charitable operations, there were not. Without the Board of Directors’ knowledge or approval, thousands of charitable dollars were misspent on personal expenses such as gas, meals, an automobile lease, lodging, and other expenditures. Mr. Howard initiated policies and procedures over the years that he vowed were sanctioned by the organization’s attorney and accountant, but were not. 

 

            In addition, following Bob’s separation from DFE, Mr. Howard filed several claims against DFE:

1.)    Claim #1: Minnesota Department of Labor & Industry for misclassification as an independent contractor and for back wages - claim currently pending

2.)    Claim #2: Minnesota Department of Employment and Economic Development for unemployment benefits - DFE is currently appealing claim

3.)    Claim #3: Minnesota Department of Labor & Industry for workers compensation - claim was denied

 

 

 

Allyssa Howard also filed claims against DFE:

1.)    Claim #1: Minnesota Department of Labor & Industry for misclassification as an independent contractor and for back wages - claim currently pending

2.)    Claim #2: Minnesota Department of Employment and Economic Development for unemployment benefits - DFE is currently appealing claim

 

It is important to reiterate that throughout the years, the Board of Directors asked critical questions, made efforts to know and govern, but was not given truthful or accurate information. There was no way the Board of Directors could have known facts would ultimately unfold in this manner.

 

What’s next:

 

DFE is actively trying to fight all unfounded claims in an attempt to preserve the organization’s charitable assets for proper distribution in the dissolution process. Moreover, the organization is reporting all improprieties, as they are discovered, to the proper authorities.

 

DFE must follow the nonprofit dissolution statutes as it winds down the business. As stated above, the organization has already filed its Notice of Dissolution with the Minnesota Secretary of State’s Office. DFE has also provided notice to all known and potential creditors as the statute requires. Following the notice period, DFE must pay its debts in the following order:

 

1.)    Distribution of restricted assets (DFE had none)

2.)    Payment of costs and expenses related to the dissolution proceedings (including attorney fees, filing fees, court costs, and other direct expenses related to dissolution)

3.)    Payments of debts, obligations, and liabilities of the nonprofit corporation in the following order:

        • Government debts/obligations (federal government first, then state government second)
        • General creditor debts/obligations (vendors, service providers, etc.)

4.)    Distribution of assets to charitable beneficiaries, another 501(c)(3), or to a government entity

 

After DFE pays all of its outstanding debt and distributes any remaining assets, the organization must file its final Form 990 tax filing (and amend any Form 990s that were filed with incorrect information), provide the Minnesota Attorney General’s Office with notice of dissolution, and file Articles of Dissolution with the Minnesota Secretary of State’s Office.

 

Given the level of complexity associated with what the Board of Directors ultimately discovered, there are a lot of “unknown factors” that will affect the amount of assets DFE has remaining to distribute in dissolution. We ask for your patience and understanding as the organization proceeds through this process.

 

Again, our sincerest, whole-hearted “THANK YOU” to the many dedicated volunteers and very generous donors who made DFE’s scholarship program possible. With warm regards, compassion, and integrity, we appreciate you. 

 

                                                            Sincerely,

                                                            DFE Board of Directors