I went to the Hermitage last month, and paid for a copy of their 2008 tax return, which they finally filed on November 6 of 2009. On Part VI, Section C, Question 18, they state that they make their tax returns available on their website, but there in fact was no copy, months after they had filed. After I obtained my full copy, they then placed a summary copy of 3 pages of it on their website (go to the "News" tab, and then go to "Legal").

Keep in mind that the 2008 return is for is the year in which there were several months of "business as usual", prior to people being fired, banned, and the subsequent flight of donors. I fully expect the 2009 return to be far, far worse, but we probably won't be seeing that posted until 2012.

Also keep in mind the many statements made to the press and public by Tom Tulowitzski (then Board president, now treasurer) about the incredible job the Executive Director Mary Jo Spring was doing bringing in money, continued support from the public, letters on the website from Ms. Spring claiming record contributions for the 2008 holiday season, etc. Remember too, that this was all WELL before the general economic crash.

For 2008, the Hermitage expenses exceeded revenue by $122,975. Net assets decreased by $146,546. The total fundraising expenses were $49,660, but the total amount of contributions and grants was $62,841. Ms. Spring's ~49K salary would be a separate, additional item, under management salaries.

Veterninary services were changed from Encanto to the Humane Society, which managment rationalized as a cost-saving measure. But the amount spent is almost identical to the previous year (it looks smaller until you realize that the dental is separated out from the medial in the 2008 return, and not in the 2007). The return lists $0 for legal expenses, and yet I and two others received letters from the Hermitage attorneys the week prior to Thanksgiving of 2009. I've met their attorney in court, and I rather doubt he was working for them pro bono. The total number of employees for the year was 43 (current staff on the website number 9, so that gives you an idea of turnover).

The yearly non-public board meeting where new board members are chosen by the old members is coming up shortly. I'd say the three board members who were on the 2008 board need to explain to the newer board members just why they should be kept on the board, after analyzing this tax return. And if I were a current donor or sponsor, I'd be asking to attend that meeting.

Although a great deal has been going on behind the scences, I have had to withhold comment on the Hermitage settlement and related matters until the final legal document was filed. The settlement specifically did not include any clause preventing public disclosure; the floodgates are now open.

As part of the Hermitage's settlement with me, they agreed to pay $7,500. I hasten to add that I did not make any personal profit from the sordid situation. All the money went towards my attorney's fees, and my fine lawyer, Mike Fleischman, was worth every penny and much more.

But the Hermitage check bounced. Sky high. Now, to me, it's hard to think of anything more foolish than writing a bad check to the opposing lawyer when you're trying to settle a lawsuit; that kind of stupidity or hubris is just begging for trouble. You'd think after your bank contacts you about bad checks for thousands of dollars, you would immediately correct the problem. But no, the Hermitage notified my attorney they had written a bouncing check, and then were silent. Frankly, along about Day 5 Post-Bounce, I had visions of turning it over to Barbara LaWall's office. Only when threatened with a new lawsuit did they produce the cash.

Why would an organization that's so cleverly and efficiently run, and as prosperous as the Hermitage write a bad check? I'll let the board members answer that themselves; here's a copy of the email from Tom Tulowitzski, the former board president and current teasurer, to Taylor Heidenheim.

From: THOMAS TULOWITZKI
To: Taylor Heidenheim - Comcast
Sent: Friday, August 14, 2009 9:58 AM
Subject: Bounced check

Taylor,

I just found out that the $7,500 settlement check bounced because there were not sufficient funds at the time in the account. There is $9,320 in the account right now, and I have requested an additional $20,000 to be transferred from our money market account. This appears to be a timing thing, where at the time the check hit the bank for payment, the account was a little short. I don't want to take the chance of writing another check until the new $20,000 appears in the account (probably Monday or Tuesday), or the same thing could happen.

Can you notify Adam and explain what happened, and let him know that a replacement check will be written as soon as the new money has shown up in the account. We can hand-carry the check to Adam's office or to the other attorney's office if that works better.

I don't have visibility to our checking account balance, but I have spoken with Peggy, our rep at Alliance Bank, and she is going to get us password access to see the balance on-line. I'm not sure who is keeping a check register, if anybody, so I am working with Emily to get that figured out.

We should get you authorized to sign checks as well. Do you have a copy of the signature form that was passed out last meeting.

Tom

It's July, 2009. The most recent financial statement of any kind on the official Hermitage website is the 2007 Form 990s. In his court testimony, former Hermitage Board member Vern Alexander stated "There was $350,000 in the Hermitage account when Spring was hired, but when I left, they were down to $32,000. ... She had done no fundraising activities." When a print reporter asked the Board President if things had improved since Mr. Alexander left the Board in October 2008, Taylor Heidenheim assured him they had...and then turned down the reporter's request to see financial documents.

This is particularly interesting in light of Ms. Spring's court testimony earlier the same morning that no one had been denied access to financial records. I'm sure this open access will be news to others as well (see Hermitage Donor Files Complaint With IRS, originally posted on June 19, 2008).

In their filing their now-denied claim against me, the Hermitage claimed I was causing serious damage to their finances. You would therefore think that when they appeared before a judge to plead their case, they would have come armed with specifics: numbers, balance sheets, checking account statements, their current Form 990, demonstrations of specific dollar amounts they had lost from specific donors, or even a summary of the amount of monies lost. But they did not bring forth a single specific number on anything, zip, zero, nothing, nada. In fact, the only numbers they discussed were from this blog, and those (profit and loss statements, cash flow, statement of financial position) were from the public portion of the September Board meeting. In her testimony, Executive Director Spring stated that those numbers were accurate, but misleading. Questioned by her own attorney as to how this could be, she stated that money was coming in and going out every day. I'm sure that upon hearing that blinding logic, the boards of banks all over the country are going to stop sending out monthly statements.

Ms. Spring, Mr. Heidenheim, here's your opportunity to clear the air. I agree with you that a summary covering a longer period of time would be a better representation of the Hermitage's overall financial situation than a monthly summary. You already have a spot on your website where you publish your Form 990s; it's just that it doesn't report what happened to any money after December of 2007. Please, publish the Form 990's for last year, and a balance sheet for the first quarter of this year. It's the 7th month of 2009, so surely you have those documents.

The Hermitage continues to fail to make financial documents readily available to the public in a timely manner, while simultaneously soliciting more funds from that same public. It is now approaching mid-May of 2009, yet the most current financial documents available on their official website are for 2007. And you can forget about seeing any of the the board meeting minutes online ever, because that would mean the quarterly treasurer's report was easily seen.

I'm also wondering whether the Hermitage has finally managed to get it's financial act together enough to actually have an audited tax return this year. That doesn't seem to be too much to ask of an organization with a half-million dollar annual budget.

In past years, the board has required a $5,000 contribution from each board member. It would be interesting to see the Form 990, which lists all donations of $5,000 and more; I'd like to see how much the board members themselves donated to the Hermitage.

The Hermitage is required as part of its non-profit status to make available to the public certain financial records. This blog has chronicled the Hermitage's refusal to provide donors with that information. In late July, the Hermitage finally published on its website a portion of that information, the Form 990, dated July 19, 2008 and signed by Tom Tulowitzski, the Board president. The Form 990 is the tax return for non-profits.

We have now received information that the July 2008 Form 990 shown on the official Hermitage website is not accurate, and that there are subsequent tax documents regarding 2007, but not made public, regarding a real estate transaction.

By law, any member of the public has the right to this information. However, we do not wish to create a confrontation by going to the Hermitage office ourselves, and are therefore going the route of requesting any subsequent Form 990s or amended returns directly from the IRS. This takes several weeks processing time. However, if a donor or former board member or even a regular interested citizen would like to speed up this process for us by making a direct visit to the Hermitage office, that would be greatly appreciated. The Hermitage is permitted to charge 10 cents per page to cover copying costs, and absent unusual circumstances, must provide the requested documents the day of the request.

The official Hermitage blog claims that "The Hermitage is not going under, is financially solvent". To assist potential donors in evaluating those claims, I am publishing the Hermitage's September Profit and Loss analysis from their own September Board meeting. This document is three pages.
Hermitage September 2008 Profit and Loss Page 1
Hermitage September 2008 Profit and Loss Page 2
Hermitage September 2008 Profit and Loss Page 3

I am also publishing the Hermitage's September Statement of Financial Position, which is also three pages. This document is especially interesting because it compares the Hermitage's current financial situation with where it was a year previously.
Hermitage September 2008 Statement of Financial Position Page 1
Hermitage September 2008 Statement of Financial Position Page 2
Hermitage September 2008 Statement of Financial Position Page 3

Lastly, there is a one page Statement of Cash Flows.
Hermitage September 2008 Statement of Cash Flows


The accounting is done on a cash accrual basis.

This information was all presented prior to the board going into executive session, and is therefore public.

To view the files, which are large, wait until each page is fully downloaded--then move your mouse so that the arrow cursor is over the page. At this point, the arrow will turn into a magnifying glass with an x in it. Click, and you will see the page at full size.

Some days the blog just writes itself; but this is the first time, albeit unwittingly, that Mary Jo Spring has done it herself. I believe the phrase is "hoisted by one's own petard". http://hermitagecatshelter.blogspot.com/

Update May 17, 2009: The Hermitage has removed this link from their blog, and removed the direct link to their blog from their homepage (although as of this writing, you can still get there by clicking on the cat in the black hat icon on the right). Whether this was in response to legal action, or they finally realized how the article made them look, I do not know). Knowing they are heavily into revisionist history, on November 11, we went ahead and saved a copy of their text here on our own blog.

Updated info as of 10/22/2008.

Checking $23,749.51
Money Market $10,465.92
Total $34,215.43

Building Fund $556,064.53

Ironic that the public Board Meeting minutes for September include discussion of building a new facility, when the building fund is now being tapped for operational expendes.

Ms. Spring's big new fundraising idea for the fall is an Indoor El Tour. A tidal wave of two people have signed up, bringing in a profit of $60 for the shelter, so it may end up surpassing the Litterbox Lariat as the Hermitage's primary source of income for the fall. With an annual operating budget of a half-million dollars, the funds raised from this event should pay for shelter operations for .012% (yes, the decimal is in the right place) of the yearly expenses.

From the Hermitage August Monthly Budget Report:

Merchandise Sales: $0
Continuous Fundraisers: $0
Sponsor-a-Cat (Businesses): $0
Bequests & Surviving Cat: $0
Grants: $0
Seraphim Circle: $0

Having a competent, hard-working fundraiser in charge: Priceless

Those who have spent some time in the shelter know that the house does not have standard wall outlets. Instead, the electrical outlets are the old outdoor-style with the individual waterproof covers (the type where you have to flip the cover open to plug something in).

This is a safety feature. When part of your cat population consists of unrepentant sprayers and you have litter boxes nearby, it's not wise to have uncovered outlets.

That is why, when a volunteer noticed the cover was off one of these outlets, it was reported to the (then) shelter manager, who added it to the repair list. That was over two months ago. Despite being a simple and cheap fix, to our knowledge this still has not been rectified. This is of particular concern because the outlet is under a table that also has three litterboxes under it.

Why has such a simple, but important repair gone unfixed for so long? I would hope it's not a more drastic variation of the Piddle Program. Maybe the drastic reduction of the cat population with spraying issues has made it a low priority.

Maybe it falls under the same category as purchasing tarps for the outside laundry storage.

When the previous shelter manager asked about purchasing additional tarps to keep the monsoon rains out of the outside storage bins that hold the linens put down for the cats, she was reportedly told there was no money in the budget for it.

That's curious. If the shelter cannot afford a couple $10-20 tarps, where is it going to find the money for the long-talked-about "Neuter Scooter"? Where is the money going to come from for the new shelter that has also been talked about?

More importantly, if the shelter is in such dire straits that it can't do simple repairs, why isn't it doing more fund raising?

The 2007 Hermitage Annual Report, or as I like to call it, The Hermitage Annual Pie Chart, was published on their website the last week in July.
$104,770.81 is the amount listed in the upper pie chart from event fundraisers.
The 2007 Hermitage Form 990s, on page 13, line 101, lists the amount of NET income from special events as being $34,561.

I buy the line on the Form 990s, that make sense in terms of what I saw in the back office as the amount of money cleared from the sum of the Cat's Meow in the spring, and the fall Litterbox event. I believe there was also a yard sale in there. I calculate the difference between the amount claimed as being raised at event fundraisers, and the amount netted from special events as $70,209.81. Please explain.

I would really be interested in seeing the Hermitage put in writing a true annual report. Was there some special private money-raising event that the rest of us were unaware of? Is 67% of the amount raised at these events being spent to cover the cost of the events themselves? Did someone make a huge mistake in calculating the annual report that needs to be fixed? Is there some perfectly logical explanation for this difference? Among other things, fiduciary responsibility means making tax forms available to the public without them having to resort to IRS complaints to obtain access, inviting donors to inspect your books, publishing a basic balance sheet, a written analysis, making available the minutes of board meetings and amendments to the articles of incorporation, and being truly open to questions about finances. The Hermitage is not a little mom-and-pop animal rescue running on a shoestring out of someone's home, it is a nonprofit organization with a half-million dollar yearly budget. Fiduciary responsiblity is not satisfied by listing the amount of money down to the penny on two prettily colored pie charts.

Oh, and just in case John Q. Public wanted to compare the 2007 and 2006 annual reports, out of luck there too. The Hermitage's link is dead, and yields a 404 Not Found Error. http://www.hermitagecatshelter.org/forms/2006AnnualReport.pdf
But that's okay, because we have it here, stored on our website.

It's July 30, 2008, and after I announced yesterday that I would be publishing the Hermitage Form 990s for 2007 here, and had just finished publishing the 2007 Annual Report filed with the Arizona Corporation Commission, the shelter has finally placed some of the information on their website. Their website version of the annual report is only a series of pie charts, no statements of accomplishments, no goals, no lists of events, no balance sheet, nothing.

So let's look at the unaudited Form 990 (it is a big file, I recommend starting to download it, getting a cool drink, and then returning to your computer). If you try to open it, and get a message your machine cannot open a pdf file, you can get the utility to do that for free from Adobe (the pdf reader is free, it's the pdf writer they charge for).

Firstly, please note the upper right hand corner of the front page includes the notation: Open to Public Inspection. The Hermitage, like all other tax-exempt non-profits, is required by law to makes these documents available to any member of the public, they are NOT private.

Go to page 20, and you will see a donation in the amount of $224,370, from A. Stoller Scott. A huge donation, you might think, that "new" Executive Director must indeed be doing a fantastic job, and that Coalition should hush up and go away. Unless, however, you knew that what had happened was that a donor had placed in their will a bequest of their house, long before Mary Jo Spring ever entered the scene, and that donor died. That 220K+ donation is the proceeds from the sale of that house.

Next, go to page 1, and look at Item 18, which is the amount of excess or deficit for the year. For 2007, the Hermitage was $68,818 in the black. If that kind donor had not died and left a windfall, the shelter would have been over $150,000 in the red for the year. And that was with an Executive Director in place for the full year, who was hired expressly for her fund-raising abilities. Even with the windfall, 68K is not much overage for a place with over a half-million dollar a year operating budget and 50+ year old building. Note that there have not been any claims that the shelter has been more expensive to run, just that there was less money coming in. And where were the funds for the new building that was being promoted all last year, and the mobile Neuter Scooter supposed to come from? Where are all the big grants Board President Tom Tulowitzski claimed were going to be the financial salvation of the shelter?

Note as well how the $69,818 net figure is obtained. The shelter is given large amounts of credit for depreciation for everything from the swamp coolers to hand tools. For accounting purposes, that is totally appropriate and correct, and if your own accountant did not do the same for you, then you'd fire them. But what it means in terms of actual money in the bank is that there was far less than $70K left over. And even with a $220,000 windfall bequest, the best that Mary Jo Spring was able to do as a fundraiser was cover her own salary, and make about $50K more. Not very impressive.

Finally, go to page 9, which includes the amount of contributions coming from gifts since 2003. The amount of gifts in 2003 was nearly $700,000 for the year. The amount for 2004 was $522,734; 2005 was $397,192; and 2006 was $260,770. Each year since 2003, the amount of money contributed to the shelter declined at least an additional $125,000 from the previous year. WHAT IN THE WORLD IS GOING ON HERE? If fundraising had just been maintained at the 2003 level, not even increased, just maintained, the shelter would have a half-million dollars more money than it does today. Is this the Board's idea of fulfilling their fiduciary responsibility?

Not everyone in the coalition agrees with me that the public should be withholding funds from the shelter. But I think everyone in the community would look at these numbers and agree that an audit of the Hermitage is long overdue, and needs to go backwards as well. Something is very, very wrong. The Hermitage Board has some very serious questions to be answer.

The Hermitage has steadfastly refused to share its financial information with the public, although as a tax-exempt non-profit, it is required to do so.
The 2007 Annual Report, as listed online with the Arizona Corporation Commission, is now available by clicking here

I will post the federal Form 990s next, and then an analysis.

A big thank you to the concerned donor who has made this information available.