An independent audit of Oklahoma City's bombing relief fund has revealed no improprieties related to the disbursement of donated funds.
Auditors did, however, suggest that trustees of the Disaster Relief Fund should consider changing their controversial decision to reallocate $4.4 million to projects not directly related to assisting bombing survivors.
“There may be a portion of the funds that could be redirected back to the Disaster Relief Fund and put to use while still maintaining compliance with IRS standards,” auditors with BKD, LLP, a Springfield, Mo.-based forensic auditing firm, said in their 151-page report.
Auditors found no legal wrongdoing.
“The Disaster Relief Fund's practices and procedures were consistent with IRS guidelines for disaster relief,” auditors said. “Testing disbursements did not reveal uses of donations for anything other than their designated purpose.”
About $49 million in private donations and federal assistance poured into the Oklahoma City area after the April 19, 1995, bombing attack on the Alfred P. Murrah Federal Building that left 168 dead and hundreds injured.
Much of the money was quickly spent but about $14.7 million eventually was consolidated into the Disaster Relief Fund administered by the Oklahoma City Community Foundation to provide for the long-term medical, educational and living needs of bombing survivors.
About $11.2 million has since been disbursed by the fund to assist 1,033 survivors and others affected by the bombing.
But nearly $10 million remains in the fund — thanks to about $10.9 million in investment earnings off the donations, auditors said.
Public reports last year that the fund still has about $10 million — nearly 18 years after the bombing — sparked criticism from some survivors who contended requests for reimbursement for legitimate bombing-related expenses sometimes were denied and not everyone was treated equally.
Auditors looked into those complaints.
“Some of those who indicated they had been denied assistance have received thousands of dollars in financial assistance from the Disaster Relief Fund and other agencies since 1995,” auditors stated. “The overwhelming majority of requests for assistance we reviewed were approved, although denials for some types of assistance did occur in some instances.”
Some denials could better be described as requests for more information, auditors indicated.
A few survivors fell “between the cracks” when fund administrators lost track of them, auditors said.
Auditors noted some children of bombing survivors received larger stipends for graduate studies than others as the size of stipends gradually increased from $1,000 a semester in 1997 to $10,000 a semester in 2009, before dropping it back down to $5,000 a semester in 2011.
Trustees gradually raised the stipend when it became apparent that investment income would likely cover the increased expenses but dropped it back down when they became concerned that the funds might be depleted too rapidly, auditors said.
Uses unrelated to bombing
Trustees upset many bombing survivors when they decided to reallocate about $4.4 million in investment income from bombing donations to purposes that would not directly benefit survivors.
Trustees designated that the reallocated funds be used to:
• Establish a $2 million endowment to train community people on how to respond to future disasters.
• Establish a $1.5 million endowment that would provide annual earnings to the Oklahoma City National Memorial for survivor support and activities.
• Set aside $400,000 to assist other communities that experience disasters and $500,000 for long-term studies on things like how money can best be used to assist survivors of disasters.
Auditors questioned the reallocation.
“The decision to reallocate the funds, while laudable in its intent, was potentially a problem from a public and donor perception standpoint,” they said. “It cannot be ignored that a certain amount of frustration would result from survivors who were told years earlier that ‘funds were running low' for living expenses, only to discover that $4.4 million had been reallocated from the Disaster Relief Fund and provided to help other causes.”
Auditors indicated it is still possible for fund administrators to get back all but about $20,000, which was spent on out-of-state tornado victim assistance efforts. They suggested trustees consider doing that.
Dividing up funds
Some survivors have advocated that remaining funds be divvied up among survivors and the fund disbanded.
Doing that could pose problems, auditors said.
“Based on the IRS guidance, it appears that the Disaster Relief Fund as an exempt organization would likely be in violation of federal tax laws if it began liquidating the funds that are left among the survivor group in a manner similar to compensation funds,” auditors said. “Nothing in the governing Disaster Relief Fund documents indicates its purpose was to be a compensation fund to be shared among survivors.”
Auditors suggested that trustees seek a private letter ruling from the IRS that would resolve “what can and cannot be done with the remaining funds.”
Other recommendations that auditors suggested trustees consider included:
• Establish a written policy for survivor appeals.
• Formalize a policy for use and distribution of remaining funds.
• Implement a consistent outreach policy to make sure no survivor falls between the cracks.
• Hire experts to project the amount of fund money needed to cover future medical costs, mental health expenses and educational costs of bombing survivors.