Wreaths Across America relies on wreath sponsorships to generate revenue, similar to how Girl Scouts of the USA relies on cookie sales: both offer participating volunteers incentives to boost sales and motivate the public to get involved in their charitable cause.

But the Girl Scouts and most other large nonprofits across the country like to release their independent audits alongside their tax forms and annual reports.

Wreaths Across America announced last month that it conducts an independent audit each year by a reputable Maine accounting firm, but repeatedly refused to release its most recent audit, completed in January of this year, when Watchdog requested it.

Spokeswoman Amber Caron initially said that the audit or consolidated financial statements did not have to be published. She later said in an email: “The review includes pricing information from our approved wreath supplier. Wreaths Across America cannot provide confidential, proprietary pricing information to the public for a competitive bidding process. We publicly disclose all required supplier information in our 990. which we have checked annually.”

About 20 states, including Kansas, Minnesota and Illinois, require audits of charities that accept donations to be made public. But they are not legally required to be released in other states, including Iowa and neighboring states Nebraska and Missouri, according to the National Council on Nonprofits.

Watchdog took advantage of Wreaths Across America’s latest audit because charity experts say such audits provide a more unbiased and thorough review of a charity’s finances. Independent audits are subject to generally accepted auditing standards and principles, unlike 990 tax forms, which can provide an incomplete view of a nonprofit’s finances.

Laurie Styron, head of national nonprofit watchdog CharityWatch, and others who analyze nonprofits say it’s highly unusual for large charities not to make audits available to the public.

The Des Moines Register finally obtained Wreaths Across America’s 18-month audit for the calendar year ending December 2022, the last completed audit after it was publicly filed in North Carolina. That audit found that $61.8 million of the $65.7 million the nonprofit received during that period came from wreath sponsorships. And it was revealed that $43.2 million of the charity’s spending in those 18 months was on wreath sponsorships.

However, the audit did not provide any of the information that Caron described as proprietary, such as how much it cost Worcester Wreath Co. to make each wreath or how much Wreaths Across America paid Worcester Wreath for each individual wreath.

The nonprofit declined to release that information. It also does not disclose how much Worcester family members, some of whom run Wreaths Across America and Worcester Wreath Co., are paid by the company or whether that information is shared with board members of the nonprofit.

What the Worcester Wreath nonprofit pays and what benefits it provides to Worcester family members is significant because the U.S. Internal Revenue Service prohibits a public charity from granting an economic benefit to a person capable of exercising significant influence over its affairs to grant advantage. When a payment exceeds the value of the goods or services provided, the IRS requires the charity to report what is known as a “multi-benefit transaction.”

A charity found to be operating on behalf of private interests could lose its tax-exempt status and a “disqualified person” benefiting from it or an organization leader could face the imposition of an excise tax.

Caron said Worcester family members involved with the nonprofit are staying away from any transactions related to the wreath seller.

Caron noted that Worcester Wreath takes a “significant risk that the estimated number of wreaths needed will be met by the donations received.”

Disclosure laws prohibit the IRS from commenting on taxpayers or entities.

Paul Thelen, who directs the Larned A. Waterman Iowa Nonprofit Resource Center at the University of Iowa College of Law, also said the center does not make public comments on specific nonprofits. However, he said all tax-exempt organizations must maintain public trust.

One way trust can be violated, Thelen says, is through private insurance, when an organization’s insiders — directors, officers, employees or others — receive an unwarranted or inappropriate advantage, such as overcompensation.

“A strong conflict of interest policy would require disclosure of personal and financial interests,” he said in a written statement. “It is more difficult for some public charities to address potentially unfair advantages when board members have personal relationships with each other and with the organization’s employees, suppliers or others with whom the charity does business.”

Thelen said the appearance of impropriety could undermine public trust. “In these cases, we encourage organizations to share with the public the steps they have taken to address these concerns.”

This article originally appeared in the Des Moines Register: Wreaths Across America declines to share review with Reader’s Watchdog