Editor’s Note: We have posted multiple updates on the Finances of the Ironman Foundation, as well as our efforts on fundraising through the Foundation’s “Your Journey, Your Cause” program. To see these, please visit:
or here: http://www.somerandomthursday.com/mission-accomplished/
In 2012 I raced Ironman Florida using an “Ironman Foundation Slot.” Back in November of 2011, I was unsure if I wanted to do Florida again and I didn’t register on site. By the time I got home all the general entry slots were sold out, so I purchased a Foundation slot. The way a Foundation slot works is that you pay double the entry price. In 2012 I believe the price was $1300 plus active fees. $650 of the fee went to WTC and the other $650 went to the Ironman Foundation (a 501(c)(3) not for profit organization) as a “charitable donation.” This is how the Ironman Foundation describes the program:
In an effort to enhance the well-being of those in the communities where IRONMAN triathlons are held, The IRONMAN Foundation provides charitable support to a variety of local non-profit organizations that recognize citizens in need and support The IRONMAN Foundation’s mission. The Foundation provides grant funding opportunities as a way of leaving a little of IRONMAN’s legacy behind after race day. IMF works with community leaders to identify capital improvement projects and provide funding to support various initiatives. All proceeds from The IRONMAN Foundation Community Fund Program support this program.
The proceeds from this program provide grant funding opportunities to non-profit organizations in the communities where our IRONMAN branded events are held.
I haven’t thought about the Foundation much since 2012, but recently two events have piqued my interest in it. First, Ironman recently posted an ad for a job at the Foundation and the primary objective of the position was to drive profits for WTC — that’s interesting when the position is at a not-for-profit foundation. Second, this past weekend general entry slots for Ironman Arizona sold out on-site, so the only slots available for those individuals who did not travel to Tempe are from third party vendors (e.g. Endurance Sports Travel) or Ironman Foundation Community slots. While I am not of the mindset that all of the money raised by a 501(c)(3) organization must go directly to the organization’s mission (here’s a great Ted Talk on the topic), I am of the mind set that a 501(c)(3) needs to be clear about exactly where the money is going.
In the case of the Ironman Foundation this appears to be a bit of the problem. Using the website GuideStar, I was able to download and review the Ironman Foundation’s tax returns for 2010, 2011 and 2012, as well as, as audit report from 2012 (the Ironman Foundation has not provided GuideStar with its 2013 tax returns and I cannot find them anywhere). I am neither and accountant, nor a tax attorney, but from my lay person’s vantage point there were several things in these documents that caused me concern:
1. All of the members of the Ironman Foundation’s Board of Directors are WTC employees / officers. Based on the available filings there are no independent directors — the Foundation is completely controlled by WTC. The IRS’s guidance on governing 501(c)(3)s states:
Irrespective of size, a governing board should include independent members and should not be dominated by employees or others who are not, by their very nature, independent individuals because of family or business relationships. The Internal Revenue Service reviews the board composition of charities to determine whether the board represents a broad public interest, and to identify the potential for insider transactions that could result in misuse of charitable assets.
By itself, the lack of independent directors doesn’t mean that the foundation is being mismanaged or that there are insider transactions, but it does raise questions about transparency at the Foundation and control of its mission.
2. The Foundation takes in considerably more money than it gives back in community grants or donations. We’ve all seen articles and press releases like the ones here, here and here — the Ironman Foundation gives back to [INSERT NAME HERE] Community. The impression that many individuals, myself included, have/had is that when you purchase an Ironman Foundation Slot for a race, the charitable portion of the race entry fee would go back to the community. I think in many cases people believed that it would go back to specific community they were racing in (in my case, Panama City Beach, Florida). Based on the Foundation’s tax filings, that does not appear to be true. In fiscal year 2010 the Foundation took in $2.64 million and paid out $1.12 million. In fiscal year 2011 the numbers were $1.9 million and $1.09 million and in fiscal year 2012 $.93 million and $.44 million (fiscal year 2012 looks low because the Foundation changed its accounting year so fiscal year 2012 only covers approximately September through December of 2012). Based on these numbers about half of the money raised by the Foundation went back to the communities. While the Foundation does not need to spend all of the donations it receives on local communities, it does owe its athletes and donors an explanation as to where this money is going (just look at the trouble the Red Cross has gotten into with regard to shifting donations from one cause to another).
3. The Foundation made an approximately $2.5 million low interest loan to WTC. In 2011/2012 the Foundation made a $2.5 million loan to WTC at an interest rate of 5% (it is unclear whether this was a lump sum loan or a revolving credit line). From the documents I have access to, it does not appear that WTC gave the Foundation any security for the loan such as mortgage or lien. Here is a description of the loan from the Foundation’s 2012 private audit:
The existence of this loan raises the question of inurement. The Internal Revenue Code forbids the use of the income or assets of a tax-exempt organization to directly or indirectly unduly benefit an individual or other organization that has a close relationship with the 501(c)(3) or is able to exercise significant control over the 501(c)(3) (this is known as “inurement”). Any time assets of the organization flow through to benefit the organization’s insiders (in this case WTC, who holds all of the positions on the Foundation’s Board of Directors), inurement is an issue. We don’t know enough about the terms of the loan, the security offered (if any) and the repayment to be able to fully analyze the situation but it does raise a huge red flag and is another example of the lack of transparency at the Foundation.
4. The Foundation’s 2013 Tax Returns Are Unavailable. Both myself and others have made several attempts to locate and review the Foundation’s 2013 tax returns. Under the Internal Revenue Code, the Foundation must make its tax returns available for public inspection and copying. The Foundation has not met this obligation. Like the previous points, the issue again appears to be one of transparency and communication. Perhaps the Foundation and WTC are doing everything on the up and up, but we don’t know — in fact we can’t know — because the information is not available. [ETA — I have learned that depending on filing of extensions the Foundation’s 2013 returns may not have been due until 11/17/14, which would explain why they are not available].
5. The numbers don’t line up. Again, let me state I am not a CPA, but the numbers on the Foundation’s tax returns don’t appear to line up. In its tax returns, the Foundation is specifically excluding “custodial funds” (funds WTC has allegedly taken in on behalf of the Foundation). It looks like WTC and the Foundation may be transferring custodial funds back and forth for tax purposes and this practice is of questionable legality. Once again, without additional information it is difficult to determine what is happening.
So, what’s my advice to athlete’s considering purchasing a Foundation slot for Arizona (or for any other sold out race), go ahead and make the purchase but realize that you may just be paying WTC twice.