WASHINGTON — The Modernizing Foreign Assistance Network fired its executive director in December after discovering the organization’s budget had been mismanaged without knowledge of its three co-chairs.
The coalition, which is dedicated to increasing transparency and effectiveness of U.S. aid dollars, discovered that its executive director had made a number of financial commitments outside of MFAN’s budget.
“This may be the perfect example of why we advocate so strongly for transparency.”— George Ingram, co-chair, MFAN
The budget had been approved by MFAN’s fiscal sponsor, New Venture Fund, which also employs the organization’s executive director and other three employees. MFAN’s membership coalition is led by three co-chairs: George Ingram, Les Munson, and Tessie San Martin.
New Venture Fund currently supports 150 projects, including MFAN, covering a variety of issue areas. Its financing, which helped launch the Malala Fund, allows an organization to spin off to become an independent charity, though some organizations decide to remain with the firm. MFAN, which began at Bread for the World, came to New Venture Fund in 2013.
Ingram, Munson, and San Martin said in an interview with Devex that the former executive director was responsible for working with New Venture Fund to develop MFAN’s budget, and they as co-chairs were not involved in that process. San Martin said they became aware of the budget issues as they were preparing to make some staffing changes.
“As we’re looking at the budget more carefully, the budget that we had received from our fiscal sponsor more carefully, it becomes clear that the burn rate and financial commitments that had been made” were unsustainable, San Martin said. “We were not aware that the burn rate was as high as it was.”
After discovering financial trouble within its organization, MFAN looked to reboot its reporting and accounting systems.
San Martin said MFAN’s budget includes expenses for staff, occupancy, travel and entertainment, and consulting fees. She said the co-chairs became aware of how dire the financial situation was in late November and the former executive director was dismissed on Dec. 5.
The organization’s former deputy director senior policy adviser, Stephanie Cappa, was named interim executive director until Dec. 31. Cappa was already set to depart MFAN for a position with the World Wildlife Fund and therefore the executive director position remains vacant.
“It really was a failure to properly execute the budget,” San Martin said. “It certainly didn’t appear there was a specific pattern” of overspending by the executive director.
The former executive director did not respond to a request for comment.
Lee Bodner, president of New Venture Fund, said that it typically works with an organization to develop an operational budget. Some of the groups it sponsors have more involvement from staff than others, he said.
“At end of the day, New Venture Fund is legally responsible for all project’s operations, so we want to make sure that the project is in compliance with the donor agreements that we’ve signed and that the project doesn’t make financial commitments that it can’t afford to make,” Bodner said.
He said New Venture Fund had been concerned about the budget at MFAN and had urged the former executive director to inform the co-chairs.
“That didn’t happen, to my understanding,” Bodner said. “Looking down the road, we saw some warning signs that there were going to be shortfalls.”
New Venture Fund was “blindsided” when it learned that MFAN had made financial commitments outside the official budget, which accelerated the crisis, Bodner said. He said New Venture Fund will seek to honor those commitments “as much as we can,” and is working with the co-chairs to develop a better oversight process for MFAN’s budget.
Ingram said that although MFAN policy required significant financial commitments to have sign off from the co-chairs, it was not being done.
“There has to be more detailed periodic — and by periodic we’re probably talking about monthly — budget reviews not just with the executive director, as it’s been in the past, but with the fiscal agent who has the real finger in detail,” Ingram said.
“This may be the perfect example of why we advocate so strongly for transparency. If there had been more transparency on the budget, the situation would have been identified six months or a year ago, and secondly, being transparent about what happened now facilitates our getting beyond this.”