The Oregonian Newspapers "Investigate" JWOD

In 2004, writers for Newhouse News Group publishing through the Oregonian Newspapers, conducted a review of the JWOD/AbilityOne program after allegations arose in the State of Oregon regarding unfair competition practices between the small business community and the state set-aside program. Their reports led the writers, Les Zaitz, Brian Denson and Jeff Kosseff, to an examination of the federal program’s employment practices, the definitions of severe disability that qualified participants, and eventually, compensation strategies in the JWOD program.

Subsequent reports[1] focused on the executive compensation packages of the top 20 producers under the program utilizing the gross numbers reported on annual not for profit IRS Form 990 filings submitted for the year 2004. For the fiscal year in question, the Advocacy and Resources Corporation was number six in on this list of producing agencies due to increases in partnering programs with the Department of Agriculture. Wi thout the benefit of significant analysis or elaboration, Denson and Kosseff’s reports intimated that the growth in wages during the years 2004 and 2005 of grouped executives at the helms of the organizations under scrutiny was related to opportunistic practices’ amounting to private inurement or ‘self-dealing’[2] and that the nationwide executive group as a whole, was engaged in practices designed to benefit themselves at the expense of both the government and the severely disabled employees served by the JWOD program.

Their body of work cited the disparity between wages paid to persons with very severe disabilities compensated under the Fair Labor Standards Act (FLSA) [3] for ‘Sub minimum Wage’ and hourly wage to wage packages paid to executives, without acknowledging the very different job skills, responsibilities, capabilities and education required or the market conditions under which services and products were contracted for in the JWOD environment. Their ‘analysis’ and exploration of the issues failed to acknowledge the complexity of the organizations, the essential management skills required, or the wide variation in contractor requirements and business models. They also failed to acknowledge the difference in regulatory requirements in reporting ‘not for profit’ wages and benefits as opposed to ‘for profit’ compensation, imposed by the Internal Revenue Service through the use of Generally Accepted Accounting Practices (GAAP).[4]

The circulation of this series of articles raised questions which resulted in increased discourse across the country that helped to clarify that a wide range of compensation practices in the program appropriately existed which were dependant on geographic region, agency size, contract management requirements and populations served, and overall, reflected a complex variety of agency financial strategies and resources. The increase in scrutiny also exposed conditions that, in at least one case, agency management may have financially benefited by their relationship to a not for profit that was being operated without regard to compliance with the direct labor record keeping requirements for participation in the JWOD program. Subsequent investigations of the agency in question yielded information that oversight by the JWOD program had been lax and that violations of direct labor regulatory record keeping requirements had been repeatedly unenforced.

Based on this example, ‘the JWOD baby got thrown out with the bathwater’ and every agency’s collective leadership on this list of twenty found themselves forced to examine and defend agency practices to their various constituencies, whether warranted or not. By implication and through media reports, these allegations in all of their reprinted and variously edited forms, filtered into the community in which ARC operated and ultimately, into ARC’s government contract environment.

[1] Denson, B., Kosseff, J. CEOs benefit as charities boom. The Oregonian Online, Tuesday October 18, 2005.
[2] “Self-Dealing” is defined by the Internal Revenue Services in document no. 200813043, issued 3/28/2008.
[3] United States Department of Labor, Fact Sheet 39 – Fair Labor Standards Act (FLSA) – Sec 14(c) Subminimum Wage Compensation of Disabled Workers.
[4] The standard framework for accounting principles generally referred to as ‘Generally Accepted Accounting Principles (GAAP)’ and found at this url: www.fasab.gov/accepted