To describe the crazy scene requires a little background. Jack has been the undisputed champ in PR using the Public Relations Society of America as his veritable workout bag for some time. More recently with the hiring of PRSA's new president Murray, some insiders say Jack's really turned up the heat apparently looking to provoke a confrontation. Dogs pee on trees and men fight. Why? Because. It's a testosterone thing. That said, Jack has variously called Murray out literally peppering PRSA with various insults and accusations. "Your mamma!", not quite but almost.
Murray's jab stopped a hair short of publicly calling Jack a dirty liar. Some believe he did. He said, "Despite PRSA's continued outreach and reams of supporting data and information, the newsletter's PRSA coverage remains antagonistic, misleading and in many cases just wrong."
"In many cases wrong!"? Jack?! Youza!! Jack immediately shouted back, "The letter does not go into specifics of any of the criticisms that have been placed on PRSA by this website."
Well, we immediately asked PRSA for those specifics; and PRSA responded directly. We then presented them to Jack for comment.
What comes to mind? HBO's hit boxing series. JACK "THE HITMAN" O'DWYER VS. BILL "SHOWBIZ" MURRAY, from the Foxwoods Casino in Mashantucket, Ct. What follows is the pre-fight sampling. Here Jack and Murray trade blows. Here you'll find Jack's assertions followed by PRSA's answers and then followed by Jack's counter. What a heart-pumping preview of things to come.
1. TO O’DWYER’S STATEMENTS REGARDING: “criticism of PRSA’s financial reporting by three accounting professors”...
PRSA ANSWERS: Our finances are healthy. The Society’s membership has grown steadily in recent years, and has steadily increased its reserves to provide a safety cushion and the opportunity for future investments.
PRSA’s sixth straight year of financial growth was marked in 2006. Revenues, reaching near the $12 million mark, increased 12 percent over 2005. This success was led by significant increases in membership, professional development programs and our student society's membership and programs, each recording their highest level of an annual income in PRSA’s history. For the sixth consecutive year, the Society exceeded its financial policy goal of growing net assets by at least 1 percent of the annual operating expense plan. At the end of 2006, Unrestricted Assets were more than $2.8 million, another record high, which allows PRSA to reinvest in products and services that enhance member value.
In order to continue to grow and offer enhanced member benefits and services, PRSA—like all not-for-profit organizations—must generate income each year to reinvest in programs and services By generating income, PRSA operates with improved liquidity which allows the organization to reinvest in essential programs and services. The trade and professional association industry average is to have reserves that cover just over six months of operating expenses and PRSA is continuing to work toward this goal.
Although not required by law (with the exception of two provisions), PRSA is committed to supporting the principles of the federal Sarbanes-Oxley Act of 2002 (SOX). PRSA follows Generally Accepted Accounting Principles (GAAP) and has, for many years, engaged independent CPA firms, that have been peer-reviewed by the American Institute of Certified Public Accountants, to audit and comment on PRSA’s financial statements and internal financial management controls.
In addition to the two required areas of compliance for all corporate entities — whistle-blowing and document destruction — the Society has implemented practices that, as a not-for-profit organization, it is not bound to do by SOX yet the leadership believes are important. For instance, PRSA strengthened the structure and heightened the responsibility of its Audit Committee that oversees the activities of external auditors and internal control procedures. Additionally, PRSA’s financial policies and procedures periodically undergo a full review.
For continuous oversight and understanding of PRSA, Audit Committee members serve two years with alternating year replacements. The Audit Committee — all with knowledge and experience in financial matters — reports directly to the Society’s Board of Directors and meets in closed session with its CPA firm annually to assure that auditors can be candid.
PRSA also has adopted a conflict of interest policy that is annually acknowledged and signed by all key leaders as well as all staff members.
O’DWYER COUNTERS: The audit committee is a bunch of insiders at PRSA, none of whom are financial experts as demanded by Sarbanes-Oxley (which PRSA purports to follow). Following SOX would mean having two independent directors on PRSA’s board and one member director who is a financial expert.
For PRSA to cite an accounting firm as the arbiter of what is truthful and honest, after all the accounting scandals involving many of the biggest accounting firms, is ludicrous. Accounting firms spend a lot of time creating monstrously complicated tax returns that take years for the government to unravel and which sometimes cross the line of legality. The huge KPMG case is proof of this.
The PRSA report is false and misleading as found by three distinguished college accounting professors, Phil Wolitzer of Long Island University, who teaches accounting to reporters for the New York AICPA; Edward Ketz of Penn State and Charles Mulford, Georgia Tech. The latter two were quoted by the Wall St. Journal in its analysis of false Omnicom reports.
They contend that PRSA should be deferring about half of its dues because it has not yet earned the dues. Revenue recognition is a big issue in accounting. Other big associations defer dues including the ASAE, ABA, AMA and IABC (PRSA’s sister organization). The professors also said correct staff time for the annual conference should be on the expense report of nearly $2 million rather than about $100,000.
PRSA’s finances are not health by its own definition. PRSA, with income approaching $12 million, only has about $1 million in cash it can call its own. Another $2 million has yet to be ‘earned’ although it's in-house. It should be a liability rather than an asset.
Also, according to the accounting professors, there should be the more than $5 million lease obligation on PRSA’s downtown HQ (13-year lease) on the balance sheet.
Bottom line: PRSA, by the reckoning of three college accounting professors, had about $1 million in cash that it had earned as of Dec. 31, 2005, while expenses were running at $10M annually. Ideal is to have six months of cash/investments. The balance sheet fails to reflect the nearly $6M PRSA owes on its 13-year lease. Its expense statement for 2005 had staff costs at the annual conference as $181,657 when they’re not far from $2M.
2. TO O’DWYER’S STATEMENTS REGARDING: “lack of a staff CPA”...
PRSA ANSWERS: The Society’s financial statements are prepared annually by PRSA’s chief financial officer and the accounting staff after the business year closes on Dec. 31, in accordance with Generally Accepted Accounting Principles (GAAP).
Once the auditing firm completes its review of the financial statements, a meeting with the Audit Committee is held in which the outside auditor reviews results and any business or management issues. Afterward, the financial report is reviewed by PRSA’s Board of Directors. PRSA then makes the audited report available to members on MemberNet.
PRSA also prepares quarterly unaudited financial reports, which are reviewed by the treasurer and the Finance and Audit Committees. The reports are submitted to the Board in conjunction with its quarterly meetings; and the unaudited financials are posted on MemberNet subsequent to board meetings.
The treasurer then presents a full report on PRSA and the PRSA Foundation financials at the annual PRSA Assembly held each fall prior to the International Conference. In conjunction with outside auditors, PRSA and the PRSA Foundation annually prepares and files IRS Tax Form 990 (information returns). PRSA also files an IRS Form 990-T tax return to reflect its unrelated business income and pay the accompanying tax.
Once filed, each Form 990 (For both PRSA and the PRSA Foundation) information is available as a public document in accordance with the Internal Revenue Code’s public inspection requirments, with which PRSA fully complies. The Form 990 can be obtained from PRSA by mail, by visiting PRSA’s premises or by contacting the IRS.
For organizations such as PRSA that are tax-exempt under the Internal Revenue Code Section 501(c)(6), the Form 990-T is not a public document, and this form is not subject to public inspection. Additionally, as an organization tax-exempt under Internal Revenue Code Section 501 (c)(3), the PRSA Foundation’s Form 990 is posted annually on www.guidestar.org.
O’DWYER COUNTERS: The CPA professors say that outside CPAs “don’t reach far enough down” into an organization’s spending to catch stuff like $100,000 booked for conference staff time when it is really close to $2 million. What’s needed is something PRSA has never had, an on-staff CPA.
As I said, the audit committee is a bunch of insiders at PRSA, none of whom are financial experts as demanded by Sarbanes-Oxley. Compliance would mean having two independent directors on PRSA’s board and one member director who is a financial expert.
Lastly, keep in mind, GAAP has a lot of play in it.
3. TO O’DWYER’S STATEMENTS REGARDING: “refusal to defer dues income”...
PRSA ANSWERS: PRSA gives proper value to deferred dues in PRSA’s balance sheet, following guidelines set by the accounting profession. Dues payments to PRSA are nonrefundable, and as accounting standards dictate it is perfectly acceptable to book nonrefundable revenues upon receipt. PRSA’s outside auditors support the Society’s treatment of recognizing income.
O’DWYER COUNTERS: The deferred dues situation is complicated. There are six criteria for judging whether dues can be deferred or not.
When you "join" the Red Cross, you expect nothing in return. That "dues" can be booked immediately. Also, anyone can join the Red Cross. But with PRSA, only PR people can join and you expect a lot as a member. Therefore, the dues should be deferred until those services are rendered. Also, you join PRSA for a defined period of time (one year). All the big professional associations defer about six months of dues (the average of the unserviced period). Some dues are deferred 12 months and others for one month, depending on the month of renewal.
4. TO O’DWYER’S STATEMENTS REGARDING: “refusal of new COO Bill Murray to disclose his salary”...
PRSA ANSWERS: The salary of the PRSA President and COO becomes a matter of public record when it is released annually as required by federal law. As an organization exempt from federal corporate income tax, PRSA is subject to the federal tax law provisions that require disclosure of certain compensation information on tax returns that are available for public inspection. The current PRSA President and COO, William M. Murray, joined PRSA in January 2007; his 2007 compensation will be included on the 2007 PRSA Form 990 that will be filed in 2008. Disclosing the President’s salary as part of the PRSA’s Form 990 filing, as required by law, provides an overall context with which to view the organization and employee compensation.
O’DWYER COUNTERS: Just ask them for Murray’s salary NOW, not in November of 2008.
5. TO JACK O’DWYER’S STATEMENTS REGARDING: “refusal of leaders to supply transcripts of Assemblies”...
PRSA ANSWERS: Although the Assembly is a private meeting, minutes and any voting outcomes are made available to PRSA members via MemberNet.
Additionally any PRSA member is welcome to attend the assembly as a guest. Member of the media are also permitted to attend.
O’DWYER COUNTERS: The Assembly tapes and transcripts are the property of members and should be released like they always were until 2005.
The "minutes" are a pale imitation of the actual transcript and subject to heavy editing by leaders.
- "They’re such hypocrites, saying they believe in the “highest standards of truth and accuracy.”
- "This stuff can’t be covered in an exchange of written materials. The answers and questions are so long that few will read them. Most people have made up their minds about me and PRSA. You could rain down the wildest arguments against PRSA and the loyalist “leaders” won’t listen to one of them."
Jack's right. As such, we STRONGLY recommend that Murray agree to debate Jack in a public forum directly. For the good of the profession, let's set the date and secure the venue today.
Well, Don King himself could not have scripted this better. At the pre-fight weigh in for PR Industry heavyweights Jack O'Dwyer and Bill Murray, the young challenger Murray cold-cocked the champ leaving him bloodied, incensed and a bit dazed; and then, an all out fracas ensued.
In Jack's words: