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organization. It is our understanding that the
1986 budget totals $520,000 including grant
commitments of $100,000. You expect to fund this
ambitious budget with the excess of revenues over
expenses from the direct-mail campaign. What will
the Council [petitioner] do if the excess of
revenues over expenses does not materialize at the
level expected?
The General Fund must borrow heavily from the
Donor Development Fund [Escrow Account] to finance
the budget, and if required to repay such
borrowings it is doubtful the General Fund would
have the ability to make the repayments.
Over a 7- to 8-month period beginning in or about July 1986,
petitioner discussed with W&H its concerns regarding petitioner’s
full recourse liability to repay the excess draws taken and
petitioner’s inability to receive unqualified opinions from the
certified public accounting firm with respect to petitioner’s
future annual financial statements. On October 23, 1986, Watson
sent a letter to petitioner’s executive director stating W&H’s
position with respect to petitioner’s repayment of the excess
draw liability, stating in pertinent part, as follows:
This letter is to confirm our discussion relating
to program draws from the UCC escrow account.
* * * * * * *
As we understand it, UCC’s concerns surround the
procedure by which this [50 percent of] net income
[from housefile mailings] is transferred to your
regular operating account.
Rather than receiving the exact amount as
determined by the 50% formula, UCC, with W&Hs
knowledge, is taking a fixed amount each month. When
the final net income figure becomes known some months
later, UCCs draw from the escrow account can be greater
than it should be.
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