Stung by our blog of July 13 in which we showed that PR Society of America is deficient in its financial reporting,, VP-PR Art Yann has mounted a defense of the Society’s practices.

His letter, posted on this website last week, is also at the end of this blog.

PRSA, by the way, never carries a word of ours on its website. It launched a full-page attack on us in Tactics in 2008 and refused us any rebuttal space.

Yann’s letter says that booking dues as cash is “acceptable.”

It may be permissible under GAAP (Generally Accepted Accounting Principles) but is not permissible under rule 958-605-2-1 of FASB (Financial Accounting Standards Board).

The word “acceptable” begs the question of why isn’t PRS following the “best practice” in this regard?

PRS literature is loaded with the phrase “best practices,” meaning do the best possible thing and not just something that meets minimal or legal requirements.

Since the Society repeatedly cites what other groups are doing, and especially the professional groups, it should note that the ABA, AICPA, AMA, ASAE and IABC all defer at least half of their dues. That is the “best practice.”

Big CPA Firms Duck PRS

Yann says it’s false to say none of the “Big Four” CPA firms will work for PRS. They used to, but not any more.

Ernst & Young was the CPA firm for a number of years until 1991, when PRS suddenly decided to drop 324 dollar figures from the “audit.”

For some reason never given, E&Y departed the next year, replaced by Deloitte & Touche. Howls from members brought back about two-thirds of the numbers for the 1992 audit.

Among the numbers permanently left out were what the staff spends on meals, hotels and travel for itself; legal costs, and board of directors’ costs.

D&T departed in 2001 after chair Steve Pisinski’s one-year effort in the 2000 audit to “be in compliance with the method used by the ASAE” by booking dues income as earned.”

PRS then went back to the old system for 2002 as the DD plummeted from $813K to $566K (artificially boosting “net assets”).

Sobel & Co., Livingston, N.J., replaced D&T.

PKF Is Not a $2.4B Firm

Yann says current auditor PKF “is a well-respected firm working in 125 countries and with $2.4 billion in aggregate fee income.”

PKF/New York is part of an international network of independent PR firms with offices in 470 cities in 119 countries. The network has $2.4B in income, not PKF/NY.

The website of PKF/NY does not say how many employees it has. Calls to it in previous years have not been returned. The firm’s website says it has a practice in the hospitality as well as other industries.

CPAs Wracked by Scandals

Yann and fellow PRS staffers may regard work of CPAs as Holy Writ but not us.

E&Y was fined a record $400 million in 1992 because it falsely audited federally insured banks and S&Ls that failed. Four of the banks alone cost the U.S. about $4.5B.

The 11/25/92 New York Times said that E&Y got a “bargain” because it faced hundreds of millions in lawsuits that could have put it out of business.

D&T, meanwhile, was hung out to dry in a cover story in the Dec. 14, 1998 Forbes entitled “Tax Shelter Hustlers.”

Forbes reprinted a pitch letter of D&T that promised companies relief from federal and state taxes for up to five years with D&T getting 30% of the savings as commission.

Getting such a cut of the take is unethical.

The firm created complex tax shelters that skirted legality and took years for the government to analyze. If caught, the companies merely had to pay the taxes.

Financial columnist Floyd Norris of NYT has repeatedly blamed CPAs for the economic meltdown. His column July 15 said the rating services of Moody’s, Standard & Poor’s and Fitch “came across as incompetent, conflict-ridden and craven” for their roles in the collapse. His 9/11/09 column was headlined, “Accountants Misled Us I into Crisis.”

The fifth big CPA Firm, Arthur Andersen, was erased in 2002 for its role in the Enron scandal.

Far better than any CPA firm or on-staff CPA would be senior members working at h.q. who could see how the money is spent and who would speed financial reports.

PR pros for many years have been banned from their own h.q. unless their loyalty to fellow staffers is unswerving. There was only one PR pro from 1982 until 1993—Donna Peltier

Where Is Audit Chair Ball?

Yann does not address the problem of audit chair Cheryl Ball not being on the national board.

PRS told in 2007 that it is “committed” to the principles of Sarbanes-Oxley.

Those principles demand an audit chair with financial expertise who is on the board and who is supported by two financially-savvy assistants.
Ball has some financial background since she passed the Series 7 and 24 of the Financial Industry Regulating Authority.

However, her website refers to the “NASD” which was merged in 2007 into FINRA. So how up-to-date is she on financial matters?

Her expertise is in securities trading and is a different sort of expertise than possessed by CPAs and Certified Financial Analysts.

Her website characterizes her as a “visionary marketing communications professional.”

Yann Should Debate In-Person

Yann should debate us in person instead of trying to do this via e-mails. The least he should do is put this blog on the Society website.

He accuses us of improperly listening to Society teleconferences. Those teleconferences should be open to members and non-members as well as the press since PRS claims to speak for the entire industry.

Yann also feels we should not record the Assembly or take pictures of it. Such rules interfere with press coverage and are un-American.
Yann’s rebuttal sounds like it was written by a lawyer.

The Society is paying far too much for bad legal, accounting, parliamentarian and PR advice.

Legal costs were $299,000 for 2007-09, far above the $20,000-$60,000 costs of previous years.

It’s bad legal advice because it said New York State allows proxy voting unless there is a specific bylaw against it. Such a bylaw existed when PRS adopted Robert’s Rules.

Parliamentarians, instead of being hired for the day of the Assembly from the nearby area, are now retained for months in advance of the Assembly and perhaps year-round. This compromises their objectivity.

Consultants Play the Right Tunes

Their advice plays the tune that board/staff wants to hear. For instance, when members asked on a teleconference last year why the Assembly couldn’t be audiocast, parliamentarian Colette Trohan said that would disturb the legislative process.

She also advised that “scope of notice” would be violated if a second requirement were added to the proposed bylaw that would have allowed non-APRs to run for office for the first time in about 35 years.

That doomed the proposal since the 2009 Assembly had already defeated the proposal with only one requirement.

Yann claims that PRS provides “complete transparency and full disclosure of financial information in accordance with all applicable deadlines and legal requirements.”

Sure. It waits until the last legal minute to file its IRS Form 990 and has deprived the Assembly of this document two years in a row. The 990 is not on GuideStar until the next year, meaning members wait two years to find out how much the top eight staffers made plus other key information.

Neither Murray nor the board will disclose terms of his contract until about two years later. That is not “complete transparency and full disclosure.”

Also, reporters are barred from seeing the PRS audit or quarterly reports. What’s “full disclosure” about that?

Below is the Yann letter:

Mr. O'Dwyer, while a free press is essential to our country, principles and profession, not everything—or everyone—wrapped in the mantle of "journalism" is right or ethical, as the News of the World scandal demonstrates.

But then again, it would appear that your organization condones such practices, given that records from our teleconferencing vendor show that telephone numbers registered to the J.R. O'Dwyer Company connected to PRSA teleconference calls without PRSA's permission five times between May 22, 2007, and May 12, 2009.

You've now repeated the lie that PRSA's auditors "quit" so often that you've clearly come to believe it's true. Yet, when Gary McCormick and Bill Murray met with you last Spring, they answered this allegation.

They explained to you that PRSA routinely seeks competitive bids for professional services, including audit services, to manage costs. They also explained that it's common for organizations to change auditors periodically as a way of maintaining the auditor’s independence.

Moreover, you should realize that the very nature of an independent audit does not permit the auditor to follow "orders" (e.g., Arthur Andersen and Enron), so your allegation that Deloitte & Touche "wouldn't go along with … not deferring dues income" is patently false. In the event that an auditor deems an accounting policy or practice unusual or unorthodox, it will qualify its opinion with an exception.

You'll note that PRSA's financial statements are "unqualified"; in other words, the auditor takes no exception to our accounting policies or practices and certifies that our financial statements are presented fairly.

You've also propagated the falsehood that none of the "big four" accounting firms are willing to work with PRSA. Mr. McCormick and Mr. Murray answered this allegation as well. Given the size of our business, PRSA prefers to work with midsize firms that want our business.

Still, our current auditor, PKF, is a well-respected firm working in 125 countries and with $2.4 billion in aggregate fee income.

Over the years, PKF and other independent auditors—as well as the Internal Revenue Service—have reviewed our finances. All have concluded that PRSA gives proper value to deferred dues on its balance sheet, in keeping with Generally Accepted Accounting Principles (GAAP). Dues payments to PRSA are nonrefundable, and accounting standards state it is acceptable to book nonrefundable revenues upon receipt. Certainly, the IRS is a better and more scrupulous judge of what constitutes proper accounting than you.

Detailed PRSA financial statements are also reviewed internally by our Finance Committee, Audit Committee and Board of Directors, and are made available to our members.

Despite this complete transparency and full disclosure of our financial information in accordance with all applicable deadlines and legal requirements, you continue to pursue your vendetta against PRSA through baseless allegations of financial impropriety, just as you personally attack the individuals who have fiduciary responsibility for the Society.

Though certain our requests will continue to be ignored, we again ask that you stop publishing false and defamatory information about PRSA and relentlessly interfering in the employment and educational relationships of our volunteers. In the meantime, as you continue to demand recompense for perceived past wrongs, your readers will decide your true motivations and intentions for themselves.

You expect PRSA to engage with you as if you were a professional journalist, to which we say, comport yourself as one, and then we'll talk.