B-148144.OM, MAY 11, 1981

B-148144.OM: May 11, 1981

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WE CONCLUDE THAT OUR OFFICE DOES NOT HAVE ANY AUDIT OR REVIEW RESPONSIBILITIES WITH REGARD TO THE FINANCIAL TRANSACTIONS AND REPORTS OF THE FOUNDATION. THE DAV WAS INCORPORATE BY ACT OF CONGRESS AS A PRIVATELY FUNDED. WE STATED THAT GAO'S AUTHORITY TO AUDIT DAV IS LIMITED TO A BASIC REVIEW OF THAT CORPORATION'S ANNUAL FINANCIAL REPORT. THE DAV SERVICE FOUNDATION IS A NONPROFIT CORPORATION WHICH WAS ESTABLISHED IN 1931 AS A NONPROFIT CORPORATION FOR THE PURPOSE OF "FURTHERING THE PROGRAM AND SERVICES" OF THE DAV. WAS TO ACT AS THE INCORPORATED TRUSTEE FOR DAV FOR ALL FUNDS AND PROPERTY AS MAY BE DERIVED OR ACQUIRED BY DAV OR THE FOUNDATION ON BEHALF OF DAV. THE FOUNDATION'S SPECIFIC RESPONSIBILITIES ARE SET OUT IN A DECLARATION OF TRUST BETWEEN DAV AND THE FOUNDATION.

B-148144.OM, MAY 11, 1981

SUBJECT: GAO'S AUDIT RESPONSIBILITIES RE DISABLED AMERICAN VETERAN SERVICE FOUNDATION (B-148144-O.M.; CODE 916830)

DIRECTOR, AFMD:

THIS RESPONDS TO A REQUEST FROM MR. DONALD NEFF, A MEMBER OF YOUR STAFF, FOR OUR VIEWS ON THE NATURE AND EXTENT OF THE GENERAL ACCOUNTING OFFICE'S (GAO) AUDIT RESPONSIBILITIES IN REGARD TO THE DISABLED AMERICAN VETERANS SERVICE FOUNDATION. FOR THE REASONS INDICATED BELOW, WE CONCLUDE THAT OUR OFFICE DOES NOT HAVE ANY AUDIT OR REVIEW RESPONSIBILITIES WITH REGARD TO THE FINANCIAL TRANSACTIONS AND REPORTS OF THE FOUNDATION.

MR. NEFF'S REQUEST STEMS FROM THE CLOSE AFFILIATION BETWEEN THE FOUNDATION AND THE DISABLED AMERICAN VETERANS (DAV), A FEDERALLY CHARTERED CORPORATION OVER WHICH GAO HAS CERTAIN LIMITED AUDIT RESPONSIBILITIES. THE DAV WAS INCORPORATE BY ACT OF CONGRESS AS A PRIVATELY FUNDED, NONPROFIT CORPORATION DEVOTED TO ADVANCING THE INTERESTS OF "ALL WOUNDED, INJURED AND DISABLED AMERICAN VETERANS." (36 U.S.C. SEC. 90A ET. SEQ.) IN OUR MEMORANDUM B-148144-O.M., DATED NOVEMBER 23, 1976, WE STATED THAT GAO'S AUTHORITY TO AUDIT DAV IS LIMITED TO A BASIC REVIEW OF THAT CORPORATION'S ANNUAL FINANCIAL REPORT, AS AUDITED BY A CERTIFIED PUBLIC ACCOUNTANT, TO VERIFY THE REPORT OF RECEIPTS AND EXPENDITURES (SEE 36 U.S.C. SEC. 90I).

THE DAV SERVICE FOUNDATION IS A NONPROFIT CORPORATION WHICH WAS ESTABLISHED IN 1931 AS A NONPROFIT CORPORATION FOR THE PURPOSE OF "FURTHERING THE PROGRAM AND SERVICES" OF THE DAV. THE FOUNDATION'S CERTIFICATE OF INCORPORATION SHOWS THAT ITS SPECIFIC ROLE, AS ORIGINALLY ENVISIONED, WAS TO ACT AS THE INCORPORATED TRUSTEE FOR DAV FOR ALL FUNDS AND PROPERTY AS MAY BE DERIVED OR ACQUIRED BY DAV OR THE FOUNDATION ON BEHALF OF DAV. THE FOUNDATION'S SPECIFIC RESPONSIBILITIES ARE SET OUT IN A DECLARATION OF TRUST BETWEEN DAV AND THE FOUNDATION, WHICH WE UNDERSTAND PRESENTLY LIMITS THE FOUNDATION'S ROLE TO THE HANDLING OF FUNDS DONATED TO IT FOR THE BENEFIT OF THE DAV.

WE HAVE FOUND NO REFERENCE TO THE FOUNDATION IN EITHER DAV'S STATUTE (36 U.S.C. SEC. 90A ET. SEQ.) OR ANY OTHER FEDERAL STATUTE. FURTHER, THE DAV'S LEGAL COUNSEL HAS EXPRESSED THE OPINION THAT AS SEPARATELY INCORPORATED NONPROFIT CORPORATIONS, THE DAV AND THE FOUNDATION ARE "SEPARATE, INDEPENDENT, AND AUTONOMOUS LEGAL ENTITIES." WE ALSO UNDERSTAND THAT THE DAV AND THE FOUNDATION MAINTAIN SEPARATE ACCOUNTING RECORDS AND PREPARE SEPARATE FINANCIAL REPORTS. TAKING THESE FACTORS INTO ACCOUNT, WE CONCLUDE THAT GAO DOES NOT HAVE ANY AUDIT OR REVIEW RESPONSIBILITIES WITH REGARD TO THE FINANCIAL TRANSACTIONS AND REPORTS OF THE FOUNDATION. CLEARLY, GAO'S LIMITED REVIEW RESPONSIBILITIES REGARDING DAV DO NOT EXTEND IN ANY WAY TO THE FOUNDATION.

DIGEST

GAO HAS NO AUDIT OR REVIEW RESPONSIBILITIES WITH REGARD TO DISABLED AMERICAN VETERANS SERVICE FOUNDATION. WHILE FOUNDATION IS CLOSELY AFFILIATED WITH DISABLED AMERICAN VETERANS, A FEDERALLY CHARTERED CORPORATION OVER WHICH GAO HAS LIMITED AUDIT RESPONSIBILITIES (SEE B-148144-O.M., NOVEMBER 23, 1976), TWO NONPROFIT CORPORATIONS ARE CONSIDERED "SEPARATE, INDEPENDENT, AND AUTONOMOUS LEGAL ENTITIES." DAV AND FOUNDATION ALSO MAINTAIN SEPARATE ACCOUNTING RECORDS AND PREPARE SEPARATE FINANCIAL REPORTS.