We received a lot of feedback on the previous post about the Ironman Foundation (when I say “we” I am referring to myself and to Ryan Heisler and Dark Mark — together we have combed through hundreds of pages of IRS filings and compiled findings). The biggest take aways from all the feedback was the need to drill down on certain issues, ignore some red herrings and give the Foundation an opportunity to respond.
For those new to the story, here’s a quick synopsis, the Ironman Foundation is the charitable arm of the World Triathlon Corporation (the people who own Ironman). The Foundation has existed since 2003 but the character of the Foundation changed somewhat in 2010 when the Foundation’s partnership with Janus (remember the Janus Charity Challenge) ended. The mission of the Foundation is “to leave IRONMAN’s legacy through philanthropy, volunteerism and grant making; by supporting various athletic, community, education, health, human services and public benefit non-profits organizations around the world.” Based on the IRS filings, the Foundation has one full time paid employee Dave Deschenes and an agreement with WTC that allows the Foundation to lease both office space and employees from WTC as needed by the Foundation. The Foundation is governed by a Board of Directors, all of whom (as of the 2012 filings) are employees of WTC. Like all 501(c)(3) charitable organizations, the Foundation is required to file Form 990 tax returns with the IRS. In looking into the Foundation we reviewed the following documents:
- 990s for the Ironman Foundation for 2010, 2011 and 2012
- Private audit of the Foundation from 2012
- 990s for the Madison Area Sports Commission for 2010, 2011 and 2012
- 990s for the Greater Louisville Sports Commission for 2008, 2009, 2010, 2011 and 2012
- 990s for the Adirondack Community Trust for 2008, 2009, 2010, 2011 and 2012
What We Found
About 53% of all funds collected by the Foundation are granted to various community groups. This percentage is about average (yes, we know there are some organizations that do a much worse job in this respect). While 53% may be respectable, it is not the “ALL funds” that athletes fundraising for the Foundation often state will go back to the local communities and its not a number that can be easily found on the Foundation’s website. Donations to the Foundation go into a general “community fund.” So if you buy a Foundation slot to race Ironman Florida, your funds may go to Panama City Beach or they may go to some other community. Same holds for those raising funds for Team Ironman Foundation, the funds may go back to the local community in which you are racing or they may go to some other community.
The funds that are granted by the Foundation to local communities fall into two general categories — local organizing committees (sports commissions) and smaller organizations who provide volunteers to Ironman (Boys and Girls Clubs, churches, scouting groups, etc.). Using the Foundation’s tax return for the period of September 1, 2011 to August 31, 2012 (the last full year return we have) the Foundation had $2,057,069 in revenue from $1.9 million in contributions/grants to the Foundation, $118,000 in investments, and $32,000 in “other revenue.” From this revenue the Foundation made $1,092,514 in grants (this is from where the 53% of total revenue number comes), $114,600 paid out in income and $188,000 in “other expenses,” including legal fees and administrative fees. Of the $1,092,514 the Foundation made in grants, $394,505 was donated in the United States and accounted for in the Foundation’s 990 (the Foundation only needs to list donations larger than $5,000 in the 990). Here is where some of those grants went:
- $15,000 to the City of Coeur D’Alene. The City of Coeur D’Alene not only hosts Ironman Coeur D’Alene, it also helps WTC pay for the event. Based on a recent article Coeur D’Alene pays nearly $100,000 to host the event and Coeur D’Alene is considering whether to continue hosting the event based on the cost and lack of additional financial support from WTC and the Foundation.
- $40,000 to the Madison Area Sports Commission. The Madison Area Sports Commission is a 501(c)(3) whose mission is “to promote sports travel and donate to youth sports.” In 2012 the Madison Area Sports Commission took in $333,000 made grants totaling $33,000, paid out $26,700 in advertising, $68,500 in “bid fees and sponsorships,” and $56,000 in “other expenses” including $22,983 for Contract Event Management and $28,000 in Management and General Expenses.
- $10,000 to the Louisville Sports Commission. The mission of the Louisville Sports Commission is “to attract quality sporting events to Louisville that increase economic vitality, enhance the quality of life and promote healthy lifestyles in our community.” In 2012, the Louisville Sports Commission had revenue of $1,500,000, paid out no money in grants but did pay $508,000 in compensation and $971,000 in other expenses including $117,563 for an “Ironman Event.”
Based on this information it appears that the Foundation is making donations to organizations who in turn provide services back to WTC/Ironman to the tune of six figures each. We have been asked several times whether this practice is legal. The unsatisfying answer is “it depends.” We don’t have information about contracts between and among WTC, the Foundation and these local organizing committees. Without more information, it is not a question that can be answered. In addition, even if these practices do violate various IRS regulations, there is no “private right of action,” meaning only the IRS can seek to enforce various regulations, individuals cannot.
In addition to grants to 501(c)(3)s the Foundation has also paid out significant sums of money to for-profit organizations. Clearly a not-for-profit can pay money to for-profits so long as those payments further the mission of the organization, for example a not-for-profit running race paying out money to a for-profit race timing company or tee shirt vendor. Transactions such as these are at arms length and are completely acceptable. Here, the situation is a bit different. In 2010 and 2011 the Foundation listed Diana Bertsch as a director of the Foundation (Ms. Bertsch is also the race director of Ironman Kona). Ms. Bertsch was not listed as a director in 2012 but it appears that she still holds that position. In 2012, the Foundation made a payment of $27,000 to JMB Management, LLC (“JMB”). JMB offers project management and construction management services. The sole shareholder of JMB is John Bertsch, Diana Bertsch’s husband and the Director of Public Safety for Ironman Kona. The transaction could be a completely appropriate arms length transaction, we just don’t know, however, it does look suspicious when a Foundation Board member’s husband receives $27,000 from the Foundation.
Finally there is still the issue of the $2.5 million loan made by the Foundation to WTC. On December 8, 2014, I sent an email directly to Mr. Deschenes asking about the composition of the Foundation’s Board of Directors, the relationship between and among the various sports commissions, WTC and the Foundation, the $2.5 million loan and the payment made to JMB. Mr. Deschenes was kind enough to respond as follows:
Thanks for your note. I will keep to myself my thoughts about the quality and fairness of your original blog post. The IRONMAN Foundation is a 501c(3) organization which complies fully with all IRS requirements. But mostly, we do a lot of good in the communities where we are active – and we are proud of our track record. Beyond that, I have no further comment.
My best regards,
When all is said and done, the Foundation has an issue with disclosure. Speaking again and again with athletes and donors, people believe that ALL of the funds given to the Foundation go back to the community. They don’t, but its close to impossible to find this information in the public realm. We needed to pull and comb through hundreds of pages of 990s and we still don’t have all the answers. That not something most people are able to do. The Foundation owes its athletes and donors a clear explanation about where the funds go and athletes and donors should feel comfortable asking where the money is going and should expect to receive a reasonable response.