The American Accounting Association reassured its members last week about its legal standing after a professor raised questions about several errors in the series of entities set up by the group of accounting educators and researchers.
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The dustup started with an academic paper by Wm. Dennis Huber, a professor at the Minneapolis-based online Capella University, which was published in the Journal of Forensic & Investigative Accounting. In the paper, “Does the American Accounting Association Exist? An Example of Public Document Research," he noted that the organization, which dates back to 1916, had been re-incorporated in 1935. In 1995, it was incorporated in the state of Florida as a foreign corporation, and was administratively dissolved in 1996 by the Illinois Secretary of State for failure to file an annual report.
“At that time, they paid a penalty,” he said in an interview. “They had been operating here in Florida without authorization so they had to pay a penalty and it became a foreign corporation. The following year the Illinois Secretary of State dissolved the corporation. They continued to operate in Florida, even though their Illinois domestic corporation was dissolved. They continued to file IRS Form 990’s claiming tax exemptions based on the corporation that had been dissolved. They had tax-exempt property in Sarasota, Fla., based on the corporation that had been dissolved.”
However, even though it ceased to exist as a legal corporation, the organization continued to do business for six years and then tried to correct the situation by creating a new not-for-profit corporation in Illinois with the same name in 2002, according to Huber. The AAA did not inform its members of many of these events, Huber noted, and did not follow all the required legal procedures. Apparently there were also some governance irregularities in subsequent years with the absence of an elected board of directors. He said he tried to find out answers from AAA officials before publishing his paper, but they essentially brushed aside his concerns.
Huber circulated a link to his paper via email to the press in recent weeks after writing to AAA members over the past year.
The AAA, in a communication with its members last week, criticized Huber’s email-writing campaign, but essentially admitted to many of the findings. They also named another accounting professor, Larry Crumbley of Louisiana State University, in their response, as he had also been writing to AAA members about the matter.
“Over the last 12 months, many of you have received a series of emails from Dr. Larry Crumbley and Dr. Dennis Huber, sent from their personal email lists,” said the communication, signed by officials on the AAA’s executive committee. “These messages raise questions related to governance procedures and the legal standing of the American Accounting Association, unfairly maligning individual volunteers, and impugning the integrity of the Association. Allegations and misleading information have also been sent to organizations outside the AAA.”
Despite denials of some of the details in the allegations, the AAA’s response did confirm some of Huber’s findings.
“The fact that the AAA had lost its incorporated status was discovered by AAA leadership in 2002,” they wrote. “Apparently, the advice given to the AAA at the time for how to correct the situation was to create an entirely new corporate entity by filing new articles of incorporation, rather than reviving the 1935 corporation. That approach, while not generally the preferred way to re-establish corporate status, could have been viable had the assets, liabilities, memberships, etc. of the 1935 entity been transferred to this new corporation, but that transfer never occurred. As a result, the AAA continued to operate as the 1935 entity, albeit unincorporated. The 2002 corporate entity never became operational, existing as nothing more than an empty entity since its creation. Also in 2002, AAA mistakenly ‘corrected’ its registration in the State of Florida, paying a penalty of $2,100 to refile and realign our registration in Florida as a foreign entity with the errant 2002 entity in Illinois. Florida required that the Association use what they label a ‘Fictitious Name’ or ‘Cross Reference Name,’ because at that time the name ‘American Accounting Association’ was already in use. The AAA chose ‘American Accounting Educator's Association’ doing business as American Accounting Association per state filing requirements. AAA leaders in 2002 were unaware that a confusing duplicate entity had been created in Illinois.”
The AAA executive committee said it was in the process of fixing these and other problems that came to light. “We are in process of filing necessary paperwork to align our Florida registration with the appropriate Illinois corporation which should involve a filing fee of about $52.50,” they wrote. “There will not likely be a fine, as the Florida State Department's Bureau Chief noted that this is a simple and common administrative correction and we have obviously been registered and filing appropriate annual reports, 990s, etc. She provided all necessary forms to withdraw our current registration in Florida to the incorrect Illinois entity, and qualify to be properly filed in Florida in alignment with our revived 1935 corporation in Illinois.”
However, Huber said he remains skeptical. “I do not have any reason to believe that what they’re doing is complying with corporate statutes,” he said. “The board of directors on June 6 dissolved the corporation—of which I am a member and there are problably 7,000 or 8,000 other members—without telling anybody, without asking anybody to vote on it, and they reactivated the previous corporation that had been dissolved. So I called them on that also. I said you can’t do that because the members need to vote on it. Their response was that there were no new members in the new corporation because they never made it operational, they never transferred the membership, and it was just a shell. Well, that’s just a bunch of BS.”
An AAA official who asked not to be identified said the organization was puzzled by Huber’s stance and characterized the problems as “an administrative hiccup common in the nonprofit world.” After the association failed to file the necessary paperwork in the state of Illinois for six years, from 1996 to 2002, and was dissolved by the state, the group began taking steps to get its status in order. The group began working with an attorney to fix the problem, but it made the error of filing new articles of incorporation instead of reviving the original charter from 1935. However, the AAA continued to file the proper tax forms and has been informed that it simply needed to file new paperwork in Illinois and Florida essentially admitting to the errors. It will cost about $51 to file the new paperwork in Florida, and there will be no fine involved. The group has been filing its annual report and taxes, Florida officials confirmed to them. In Illinois, the cost of filing the extra paperwork only comes to about $200.
Huber feels that the organization has a responsibility to clear up the mess. “They’re saying these are just innocent mistakes,” he said. “OK, but these are mostly accounting professors. They’re supposed to be teaching accounting ethics to their students. If they were auditing a company that had these kinds of errors, they would not overlook it, but yet they want the errors to be overlooked by their own corporation, and I just can’t agree with that. If it’s wrong, it’s wrong.”