Last week, this Nerd’s Eye View blog highlighted a series of discrepancies between the published Audited Financial Statements of the Financial Planning Association (FPA), and an alternative version of FPA’s finances that were presented to chapter leaders in its recent “Overview of National Finances” webinar. With a gap of nearly $8M between what FPA’s Audited Financials reported in the past, and what the FPA was currently reporting, the discrepancy raised concerns about both where the “missing” dollars actually were, as well as why the FPA would be reporting financials to members that differed from the organization’s already-published Audited Financial Statements.
In a response to members, the FPA has clarified that (as predicted in the prior blog post itself) the financial reporting gap can be largely explained by a change in FPA’s method of accounting with respect to how the chapter portion of annual dues are collected and remitted to chapters, which led to a previously undisclosed and unpublished restatement of FPA’s financials for 2007 to 2012. Such that, fortunately, it appears there is no “missing” money.
However, rather than following up by proposing changes to adjust FPA’s financial and audit controls to ensure that, in the future, members do have access to all relevant financial information about FPA’s financial health, the FPA leadership chose instead to personally attack this blog, questioning the accuracy of our numbers (even though all the numbers were quoted directly from FPA’s own Audited Financial Statements!) and our integrity for not “fact-checking” those Audited Financial Statements. Apparently forgetting that the organization’s Audited Financial Statements are supposed to be the factually accurate statement of record in the first place, such that “fact-checking” them should never be necessary, and that it is not a best practice – nor consistent with FPA’s own Information and Transparency Policy for members – to keep a second, unpublished, undisclosed set of restated books for prior financial years. Even if those books are otherwise financially accurate.
The FPA also objected to the fact that our prior article pointed out how non-standard and non-transparent financial reporting practices can also lead to, or be associated, with fraud, and in turn interpreted the article as an accusation of fraud. Yet the reality is that the article was not an accusation of fraud – thus why it correctly posited an alternative explanation about the financial discrepancy in the first place – but nonetheless, engaging in non-standard and non-transparent financial reporting is a fraud risk for the organization. Which is why it is standard practice (and indeed, part of FPA’s own Information and Transparency Policy) to procure and publish Audited Financial Statements to members to begin with. In other words, pointing out that poor accounting practices can lead to fraud isn’t an accusation of fraud; it’s an explanation of why adopting best practices in accounting standards is so important to maintain the financial integrity of the organization in the first place. The entire foundation of an organization having its own financial statements audited is to trust… but also verify.
Accordingly, in today’s blog post, we have published a “hypothetical” response – that I would have hoped to see from the FPA leadership to acknowledge the changes that it still needs to make with respect to its financial and audit oversight controls to ensure better financial transparency to members – along with the FPA’s actual response to our previous article (for those FPA members who wish to understand the finer details). Because in the end, I am still first and foremost a dues-paying member of the FPA, and the only reason I take the time to raise concerns about the organization is that I believe it’s crucial for the profession for the FPA to succeed as an organization. Which starts with being financially transparent and accountable to its members in the first place, in accordance with accounting and audit best practices, and FPA’s own Core Value of Stewardship.