La Crosse-based ORC Industries, a nonprofit that’s allowed to pay some of its disabled workers less than the minimum wage, was sitting on assets worth over $200 million and paid its president Barb Barnard $804,000 in 2018.
The tax-exempt charity makes tarps, tents and clothing for the U.S. Department of Defense and was founded in 1966. According to the company’s website, ORC’s mission is “to advance the independence, productivity and self-sufficiency of people with disabilities through employment opportunities.”
Nonprofits like ORC sometimes have assets that might look large on paper but are predominantly based on the value of property they own and need to operate. But ORC’s assets in 2018 included $121 million in stocks and mutual funds, over $20 million in bonds and treasury notes, and $40 million in “savings and temporary cash investments.” ORC’s total revenue was $12.9 million in 2018, the most recent year for which public records are available.
“Once fixed assets like land, building, and equipment are excluded, this charity is sitting on more than 18 years worth of its annual spending, based on 2018 reporting,” said Laurie Styron, the executive director of CharityWatch in Chicago. “That’s too much. At current spending levels, this charity has enough assets to continue operating until the year 2036 without raising another penny from government contracts or other revenue.”
In addition to Barnard’s $804,000 compensation package, which Styron described as “unusually high,” ORC also rented a building from Barnard for $68,000 in 2018. The rent the company pays its own president for the use of the building, which is located in Westby, increased by 38% from 2008 to 2018, according to public records. Styron said the public should know if the lease agreement was made at arm’s length from Barnard, to avoid the appearance of a conflict of interest.
However, asked by The La Crosse Independent to comment on her pay, the organization’s assets, and the rental agreement, Barnard responded: “I would prefer not to comment on any of that.” She was speaking from Texas, where ORC has a commercial laundry business.
Kelly Iverson, an attorney in La Crescent, sits on ORC’s board of directors. Asked for comment on Barnard’s salary and the nonprofit’s large assets, she responded: “I’m not going to make any statements on any of that.”
FEDERAL SPOTLIGHT
ORC, and Barnard’s pay packet, have been the subject of criticism before. All the way back in 2005, her compensation as ORC’s president was singled out in a U.S. Senate report on sheltered employment programs for disabled workers. Barnard’s total compensation was $682,000 in 2003, the year referenced in the Senate report, compared to an average at the time of $126,000 for similar organizations.
According to ORC, more than 75% of its employees are disabled. The organization is legally allowed to pay some of those workers less than the minimum wage under the Fair Labor Standards Act of 1938, a loophole that was designed to help disabled workers gain independence but has frequently come under criticism since then.
In the past, Barnard’s pay has been justified by some of ORC’s board members due to the large amount of business she brought to the organization and the complexity of running the operation. But Barnard’s compensation increased by 6% between 2017 and 2018, even as ORC’s revenue fell by 39% over the same period, according to the company’s self-reported financial records. In 2008, ORC’s revenues stood at an impressive $52 million but have dropped since then to $12.9 million in 2018.
Despite the fall in revenue, ORC had a healthy surplus of $2.3 million in 2018 and the value of its assets has soared from $121 million in 2008 to $206 million ten years later, which could be viewed as a conflict with the organization’s nonprofit mission.
Defense contracts
ORC has tried to diversify its business to be less reliant on government contracts over the years, including by buying Redfeather, a Colorado company that makes aluminum snow shoes.
However, much of ORC’s revenue still comes directly from the U.S. Department of Defense, although the value of those contracts has steadily declined. In 2008, ORC secured $38 million in government contracts but by 2019 the figure had fallen to $7.3 million.
In order to secure government contracts, ORC worked with a firm called Source America, which is based in the Washington, D.C., suburbs. ORC paid Source America $384,000 in 2018 to assist with winning federal government contracts.
“Unusually high”
Aptiv Inc. is another nonprofit in La Crosse that works with individuals with disabilities that had a similar level of income to ORC in 2018, although its operations are quite different. Mary Kessens, Aptiv’s CEO made around $230,000 in 2018, compared to Barnard’s $804,000. Aptiv’s revenue was $10.1 million for that year, compared to ORC’s $12.9 million.
The starkest contrast between the two nonprofits is in their assets. Aptiv had $2.7 million in assets in 2018, compared to ORC’s $206 million. The gulf in executive pay and assets was similarly large at other area nonprofits who support people with disabilities reviewed by The La Crosse Independent.
Barnard’s $804,000 compensation in 2018 included a $327,000 bonus. Tax-exempt nonprofits are required to report in their annual tax filings information about any non-fixed payments to executives, such as bonus pay. The rule is intended to provide transparency about how bonuses are calculated and on what basis they are earned, such as meeting established performance goals.
“In 2018 the president’s (Barnard’s) bonus makes up over 40% of her total compensation, yet the charity hasn’t disclosed to the public how this bonus was computed and what metrics were used to justify it,” Styron said. “We aren’t talking about a $500 bonus here. This is $327,000. Her bonus, alone, is many times the annual compensation of what many nonprofit leaders earn to run an organization. The public deserves more disclosure from the nonprofit’s board justifying on what basis this high level of compensation is appropriate and necessary.”
The federal government allows 501(c)(3) nonprofits like ORC to be exempt from taxation provided they are “not organized or operated for the benefit of private interests.”
Styron said the major issue with ORC having $200 million in untaxed assets is that those assets represent financial resources that could be used for other important needs in society, rather than being hoarded by an individual entity for little apparent public benefit.
“If it is unable to conduct programs to facilitate the spending down of these funds within a reasonable amount of time, the charity’s board should really consider donating significant funds to an organization with a similar mission that can use these resources in the here and now,” she said.
Notes: In addition to Styron, we spoke to a nonprofit expert in Minnesota and one in Wisconsin, both of whom asked to remain anonymous but raised similar questions to those in the article. Barnard’s pay was “completely out of sync with the market for both nonprofit executives in Wisconsin, and even more so for La Crosse, where the cost of living is lower than Dane County, for example,” the Wisconsin expert said. As a comparison to Barnard’s pay packet, the CEO of Dairyland Power in 2018 made $883,000. But that was for an organization that had $482 million in revenue that year, compared to ORC’s $12.9 million.
By Eric Timmons. Send questions or corrections to lacrosseindependent@gmail.com.
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