Monday, February 23, 2009

The AP Targets the Army Emergency Relief Fund 
accusing it of hoarding vast reserves of cash.

Between 2003 and 2007 — as many military families dealt with long war deployments and increased numbers of home foreclosures — Army Emergency Relief grew into a $345 million behemoth. During those years, the charity packed away $117 million into its own reserves while spending just $64 million on direct aid, according to an AP analysis of its tax records.

That's not necessarily a bad thing ... especially as one steers a charity or pension fund (or personal reserve, for that matter) into a period of low interest rates, which decrease the returns available on capital. In order to generate a given level of benefit, one needs a larger sum invested.

And not to put too fine a point on it, but haven't these people ever heard of the function served by an endowment?

Tax-exempt and legally separate from the military, AER projects a facade of independence but really operates under close Army control.

Objection, your honor. The use of the term "facade" is prejudicial. AER is what it is. There is no "facade." Nobody in his right mind thinks that the AER is the Army. And as a matter of fact, the AER is NOT the Army, though it has military officers on its board.

On the other hand, the "facade" is so carefully constructed that the organization's own home page specifically says that the charity operates through commanders.

Founded in 1942, AER eases cash emergencies of active-duty soldiers and retirees and provides college scholarships for their families. Its emergency aid covers mortgage payments and food, car repairs, medical bills, travel to family funerals, and the like.
Instead of giving money away, though, the Army charity lent out 91 percent of its emergency aid during the period 2003-2007. For accounting purposes, the loans, dispensed interest-free, are counted as expenses only when they are not paid back.

The AP writes that the fact that 91 percent of aid is in the form of interest-free loans, rather than grants, is a bad thing. It's not. Remember that the people the charity serves are active duty military. By definition, these people are employed, have access to quality health insurance, and enjoy pay raises every year. Job security for our active component is strong (our activated reserves are not quite in the same situation, though.)

This makes the AER's population fundamentally different from the population served by most charities. A prudent steward of the fund would use loans rather than grants, where appropriate.

I know that functioning as a prudent steward of capital might be a foreign concept to newspapers these days, but bear with me.

They have the ability to repay loans - particularly those made interest-free. When the soldier pays back the loan, that money is available to help the next soldier.

Furthermore, while it is true that the Army's soldiers are still operating under the strain of fighting two wars, this in and of itself counteracts some of the need, because soldiers themselves are able to save more money while on deployment, thanks to a combination of tax-free income and a variety of special pays and allowances, free food, and no Ski-Doo or Harley Dealership in sight for the length of their deployment.

Let's take a look at the disbursements, according to the AP:

Make no mistake: AER, a normally uncontroversial fixture of Army life, has helped millions of soldiers and families. Last year alone, AER handed out about $5.5 million in emergency grants, $65 million in loans, and $12 million in scholarships.

That's $77.5 million in benefits to soldiers and their families in one year, against a capital base of $214 million - a payout rate of 36 percent, in an environment in which 10-year Treasuries are yielding less than 3 percent.

To put this in perspective, a typical endowment fund, until recently, assumed only about a 10 percent rate of return (which was nuts) and a payout rate of about 5 percent.

Furthermore, the charity operates on a demand-pull basis. It makes funds available on the say-so of commanders - as it should be. If commanders don't request the assistance, then donations go to the reserve. The charity has little choice, other than to start giving away money to people who aren't requesting the assistance. But then it would become quite a different thing.

Sure, at some point, maybe it would make sense for some of those reserves to be donated to the MWR program or some other organization. But we aren't at that point yet, in my view. Nor are we at the point where the whole program can be funded from the earnings of that capital reserve without spending down principal. If interest rates rise and stay high, that will help (though more homes will be foreclosed on!).

But in my view, the AP's criticism of the AER is unwarranted.

As for the command's involvement in getting soldiers to pay back the loans, I absolutely do not see why that is a problem.

As a commander, if I put my good word on the line sticking up for a soldier, vouching for his good character and the legitimate need (and yes, I've done so before), then I'm going to make sure he pays back the loan. It's my responsibility as a commander to keep the program in place and in good shape so that the assistance will be there for the next soldier who has a need.

What the AP also fails to understand is that the commander gets a letter in the mail every time a soldier is late on his AAFES STAR-program account, and the command has to come down like a ton of bricks if a soldier is late on payment to a government travel card.

The involvement of troop commanders in debt collection is nothing new or controversial - and indeed the role used to be much bigger.

Splash, out


ADDED: The article says that "most charity watchdogs view 1-to-3 years of reserves as prudent, with more than that considered hoarding."

The problem with that statement is that most charity watchdogs are riddled with libtards who wouldn't recognize sustainable financing if it bit them on the ass. The AER's 12-year reserve is much closer to sustainable.

ADDED: Don't miss Rustmeister's Alehouse today! His take on the reporter: "you're a douchenozzle, Jeff. Your hit piece on AER might read well with the latte sippers, but here, it's just so much crap."


Plays well with seditionists, though.

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A charity that gives a hand up, not a hand out. Good.

A charity that spends its money the way I spend mine. Good.

A charity that teaches discipline and responsibility, re-enforcing those attributes that are critical to military success. Good.

Looks like one of the rare charities I can see myself donating to. Thanks for the clarification.
Reading the comments to that piece was an object lesson in media manipulation. Because of the tone of the article, most of the comments were indignant that a charity shouldn't be giving away all of its money.

I'm really starting to hate the media.
Thanks for the link!
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