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Wisconsin continues partnership with Veterans Assistance Foundation, ranked one of worst in nation

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TOMAH — Wisconsin continues to contract with a nonprofit organization to house homeless veterans despite the group being ranked one of the worst charities in the country for how it raises and spends money.

The Veterans Assistance Foundation, a nonprofit based in Tomah, has received millions of taxpayer dollars from the federal and state government since its founding in 1994. Since at least 2003, it has hired a for-profit company to solicit donations from the public, with only about 11 percent of the funds raised, on average, going directly to veterans.

The foundation was ranked as one the 25 worst charities in the country in a 2013 report by The Tampa Bay Times and the national Center for Investigative Reporting, but it continues to pay hundreds of thousands of dollars it raises from the public to a private fundraising company. The public has given more than $12 million to VAF since 2003.

The VAF has also been given a "C minus" grade by the American Institute on Philanthropy’s Charity Watch report because of its fundraising practices. According to that report, it costs the group $83 to raise $100. The standard cost among nonprofits should be $35, said Daniel Borochoff, president of the American Institute on Philanthropy, a nonprofit charity watchdog group based in Chicago.

“Very few donors would agree to that high of a fundraising cost,” said Borochoff. “You’re talking about other people’s money. You’re ripping off the donating public ... (and) when it’s a hot button issue like veterans, they’ll give.”

In 2014, following news reports ranking it among the worst charities nationwide, VAF paid $901,041 to a professional fundraising company, according to its most recently filed IRS report. Its total fundraising expenses were $1.4 million and the group received only $122,349 of the money raised, according to IRS records.

That year, VAF paid Front Line Support LLC, a professional fundraising company, to make calls asking people to donate to veterans on its behalf. Front Line Support is part of a network of professional fundraising companies owned by iMarketing Solutions, based in Canada. The company makes its money by fundraising for nonprofits, often keeping most of what is donated.

Despite VAF’s fundraising practices, the Wisconsin Department of Veterans Affairs and the U.S. Department of Veterans Affairs continue to do business with the group. VAF is the original holder of a contract to run one of seven transitional housing programs for veterans in the state, which it received when the statewide program was founded in 1994 and every year thereafter.

The state reimburses VAF with federal money for explicit expenses such as food service and transportation, Carla Vigue, a spokeswoman for WDVA, said in an email. The group is only reimbursed after WDVA verifies its expenses, she said.

The group received a $1.2 million contract from WDVA in 2012 to run that transitional housing program. In 2014 it won another $985,000 grant for operational program expenses for housing programs at the state’s three veterans nursing homes in King, Chippewa Falls and Union Grove. Separately, it also won a $619,140 grant from the U.S. Department of Veterans Affairs in fiscal year 2016 to run a federal housing program for veterans and their families.

Additional state grant money has also flowed to VAF. Last year, it received a $25,000 grant from the state to establish homeless veterans programs in La Crosse and Eau Claire. About half of the VAF’s total revenue comes from taxpayers, according to its IRS filings.

Charities like VAF that have longstanding contracts with the government often have an advantage in trying to convince people to give them more money, said Borochoff. The government contract legitimizes them in the eyes of donors, who assume the group has already been vetted, he said.

“The government doesn’t seem to care if the charity isn’t very good in many ways,” he said. “It doesn’t seem to care as long as they fulfill the terms of the government contract, which I find strange because I would judge a group by how it performs overall.”

According to its website, the VAF operates a 60-bed dormitory for homeless veterans within the federal VA hospital in Tomah. Veterans who live in the dormitory sign up for a two-year program where they work with a case manager and get connected to job opportunities, according to the group. The VAF also owns three houses with 12 total beds in Tomah and a 7-bed apartment in Madison.

The group uses the money it gets from the fundraising company to expand housing programs and for job training, said Bob Piaro, who founded the VAF in 1994 and helped WDVA develop the statewide transitional housing program. He also served as chairman of its board of directors until last year. Piaro acknowledged the contracts VAF has signed with for-profit fundraising companies over the last 13 years don’t look good, but said there’s no better way to raise money to help veterans.

“I know that’s reprehensible,” he said. “I know it’s not good at all, but without it we couldn’t do that stuff. We wouldn’t have any growth potential at all.”

With the money VAF has received from its fundraising, about $120,000 a year since 2003, it has bought properties in downtown Tomah to open a coffee shop, a thrift shop and a hardware store. It purchased another apartment complex in Tomah to serve more homeless vets, Piaro said. The group has bought six vans to transport veterans in the program to appointments and jobs, Piaro said. None of the VAF’s shops are open yet, but the group said they will open at the end of the summer.

Don Roach, the group’s executive director, defended VAF’s fundraising and said in an interview that it doesn’t have the staff to solicit money on its own. If 10 percent of donor money is all it can get from fundraising, then “it is what it is,” he said.

“I don’t see what the fault is in it. The grants don’t cover everything we need to assist our vets with,” said Roach, a 26-year Army veteran. “I’m proud of this organization. I’m proud of the things we do and accomplish.”

Roach declined to provide numbers of veterans who have completed its two-year housing program since it began receiving public money for it. He also said he could not provide any of the group’s annual reports, grant agreements or documentation of its finances and how many people have been served by its other programs. He confirmed that the VAF does have a current contract with a professional fundraiser, but declined to provide the contract or discuss the terms.

Pat Honrath is one veteran who has participated in VAF’s federal transitional housing program in Tomah and said he would generally recommend the group to other vets, but said he was dissatisfied with how the organization was managed.

Honrath, a former Army specialist who served for four years, struggles with alcoholism and became homeless in 2013 after spending some time in jail. He lived in the dorm at the VA hospital in Tomah and later moved into one of the organization’s group homes before eventually being kicked out of the program for his alcohol abuse, he said. Honrath now works at Goodwill in Tomah and lives in a house with other veterans not run by the VAF.

He said he paid a program fee and $320 a month in rent when he was living in the VAF house with two other veterans, but didn’t see that money come back to improving the house or enhancing programs. VAF conducted weekly inspections of their house but was slow to respond to maintenance requests and veterans often drank alcohol in the homes against program rules, Honrath said.

“There were quite a few people getting away with drinking there,” he said. “I think they could have done more for the vets than they did.”

The VAF, which says in its mission that it aims to connect veterans with resources and jobs, also failed to help him understand his VA benefits and didn’t help him get connected to resources to help him with his alcoholism, he said. He said he often found out more from the other vets in the program than the case managers he worked with.

“It seems like they didn’t really care about the veterans, as long as they got their money every month and you weren’t causing any issues,” he said.

But some veterans advocates, including several County Veterans Service Officers in the western part of the state, say they have been impressed with the VAF’s work and their commitment to helping struggling veterans.

Charles Weaver is the CVSO in Monroe County, where Tomah is located, and said the VAF staff he works with genuinely care about helping veterans. He said he routinely refers veterans in the county to the VAF and visits their facilities every other week to help veterans apply for benefits.

The group’s fundraising practices don’t bother him, he said, because he sees that the money is spent well. He said the facilities he has seen are well-maintained and have amenities like computers and televisions.

“You can tell they’re taking the money and are doing something with it,” he said. “It would bother me if I didn’t see that … (but) I can see there is toilet paper in the bathrooms, the showers are clean. I don’t see the waste.”

The waste, critics say, is how much money is taken from the public and paid, without their knowledge, to a for-profit fundraising company.

When asked whether the state’s veterans agency has investigated the VAF’s finances, WDVA spokeswoman Carla Vigue said in an email that the state does monthly on-site inspections at the group’s facilities. She said the U.S. Department of Veterans Affairs also does quarterly and annual inspections that review the group’s financial information and case management. Neither the state nor the federal government has found any problems with the Veterans Assistance Foundation, she said.

“VAF has met and continues to meet all of the requirements of the grant agreement for providing services to homeless and at-risk veterans,” she said in an email.

When asked about the VAF’s finances, Walker administration spokesman Tom Evenson declined to comment, referring all questions about the organization to WDVA.

Piaro said WDVA Secretary John Scocos had told him in the past that the VAF’s arrangement with professional fundraisers was not within the agency’s purview.

The state veterans agency did not comment on the VAF's fundraising practices when asked why it continues to award contracts to the group.  

That attitude is emblematic of an agency-wide lack of oversight and transparency, said Rick de Moya, a former division chief at WDVA and a longtime critic of Scocos.

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De Moya, who oversaw the administration of VAF’s grant from 1994 until he retired in 2006 and has been involved in legal disputes with WDVA, said the agency was not diligent in tracking how taxpayer money was spent or where it went.

“The reason we give these contractors money is to benefit Wisconsin’s veterans and their families,” he said. “If (about) 10 percent of that state money which is being funneled through a contractor is reaching veterans, than we’re doing something terribly wrong.”

The agency’s accounting overall is inefficient, making it difficult to follow all the streams of money it administers and is supposed to monitor, de Moya said.

“The WDVA blends the money it has and so it becomes increasingly difficult for any accountant to track,” he said.

When he left the VAF last year, Piaro said he started his own call center in October. His new company now makes the same solicitation calls he paid iMarketing Solutions Group to make for the VAF. Piaro’s company, based in Milwaukee, also raises money on behalf of charities.

Piaro said his profit margin is slim because of expenses like printing, renting space and paying staff. He said now he understands why professional fundraisers need to keep so much of the money they raise for themselves.

“It’s sort of like dancing with the devil,” he said. “I just didn’t believe all the talk, but now I’m doing it and they’re not too far off. I don’t see how (the fundraising companies) make more than 10 to 15 percent (profit) after the expenses.”

Piaro declined to confirm the name of his company, discuss who its clients are or how it makes money. But he maintains that when he was at VAF, the group did not solicit money for homeless programs already funded with public money. He said the group keeps its public grant money separate from the money it gets from the professional fundraiser for its other programs, said Piaro.

“That money is not used in any way, shape or form for any of those three centers we’re under contract with. They are run separately and everything, like it is with grants,” he said.

Despite recommending that VAF continue to sign contracts with solicitors so that it can expand, Piaro broke ties with the group last year because he said there was not enough transparency between the board of directors and VAF staff.

“I’d like to see more emphasis on the veterans than buying all these buildings that we’ve done,” he said. “It was going in a direction I didn’t feel comfortable with.”

Piaro, a disabled Vietnam War veteran, helped Gov. Tommy Thompson’s administration and former WDVA secretary, Ray Boland, develop the state’s transitional housing program for homeless veterans in 1994.

The contract VAF holds was originally “sole source” meaning that state officials have discretion to award the contract to whichever group they choose, but is now a part of the state's Request for Bid Process. That process, according to Vigue, the WDVA spokeswoman, is “meant to create competition among vendors in order to produce lower prices and higher quality goods and services.”

But de Moya said the VAF’s 2012 contract was personally promised to Piaro by Scocos. De Moya said Piaro called him in 2012 asking about the $1.2 million contract.

“He told me that he was frustrated because he had not been awarded a contract that he and Scocos had personally talked about Piaro getting,” de Moya said. “Piaro asked me if I would call (the Department of Administration) and find out why that was happening. I told him I would, but I did not.”

Piaro denies de Moya’s account and said he was never was promised a contract.

“No, that’s not true at all,” Piaro said. “Where he’s getting that I have no idea.”

VAF has gotten the contract fairly, based on its track record of success, every time it has applied, he said.  

WDVA has not made Scocos available for an interview, but Vigue, the agency’s spokeswoman, said VAF has won the contract through the state’s Request for Bid process that it uses with other vendors.

“Why wouldn’t you stay with a person who you know is doing the best?” Piaro said.

Editor's Note: An earlier version of this story misspelled the name of Daniel Borochoff, president of the American Philanthropy Institute. The story has been updated to reflect the correction.

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