New York-March 16, 2015. Until recently, Hillary Clinton exuded invincibility preparing to select herself as the first female President of the United States–the nominating process within the Democratic Party seemed a lock; and the general election against any Republican, a foregone conclusion.

Busy writing her latest book and making paid speeches many places, Hillary takes ample credit for the good work and noble aims of the charity that now includes her name; however, she and her fellow Directors need to dig in and finally make consistent and comprehensive disclosures about all of the activities and potential conflicts arising out of Clinton family not-for-profit and profit-seeking operations.

Making sense of Clinton Foundation financial disclosures

One of the first challenges Hillary Clinton faced as she returned to private life after departing as Secretary of State on February 1, 2013 was pitching in to stabilize and improve operation of what became known as The Bill, Hillary, and Chelsea Clinton Foundation when its name was changed in March 2013.

According to the Clinton Foundation Annual Report for 2012 (published in 2013), Hillary Clinton served as a Director of the Foundation during 2013; along with Chelsea Clinton, who served as Vice Chairman and Director; and Bill Clinton, who served as Director “as of November 2013” (see page 60).

One of the key tasks Directors perform is ensuring that financial statements and related tax filings generated by management paint a reasonable picture of underlying reality.

On page 58 of the 2012 Annual Report posted online, the Clinton Foundation attracted grants of $114.6 million, contributions of $113.2 million and generated total revenue of $234.2 million during the 12-month period that ended December 31, 2012. This and related information described below is characterized as “GAAP Basis Condensed Audited Financial Information” in the Annual Report–a characterization that appears to be incorrect.

Six categories are listed as “programs”: (1) Clinton Health (“CHAI”) with $136.4 million in spending; (2) Clinton Global (“CGI”) with $18.4 million; (3) Clinton Climate with $15.6 million; (4) Clinton-Giustra with $6.0 million; (5) Clinton Presidential with $11.7 million; and (6) other programs with $12.8 million.

All told, the 2012 Annual Report suggests that expenditures for programs totaled $200.9 million or 85.8 percent of total revenues whereas management and general overhead spending was $14.8 million (6.3 percent of revenues), fund-raising expenditures were $7.8 million (3.3 percent of revenues), and uncollectible pledges were $3.1 million (1.3 percent of revenues).

The financial figures mentioned in the Annual Report do, at first blush, appear to reconcile with a document in the Financial Report section of the Clinton Foundation website that is described as “Independent Auditor’s Report and Consolidated Financial Statements” for the Bill, Hillary, and Chelsea Clinton Foundation for 2012 and for 2011.

This “independent audit” is dated September 10, 2013 and signed in Little Rock, Arkansas by a firm called B.K.D. LLP–a regional auditing firm with limited international capabilities.

According to the body of the report:

“The financial statements for 2012 and 2011 are consolidated and include the accounts of the Clinton Foundation, CGI and CHAI. All significant intercompany accounts and transactions have been eliminated in consolidation.”

However, figures contained in what purports to be “consolidated” financial statements for the Foundation as a whole do not square with other “audited” information for the core of its operation.

Trouble with the largest element within the Clinton Foundation

The single largest portion of the Clinton Foundation (in monetary terms) is the Clinton Health Access Initiative, which is based in Boston but operates extensively throughout the developing world.

Until 2012, the financial statements for CHAI were audited by B.K.D. LLP out of their Little Rock office–for the year ended December 2012, CHAI switched auditors, selecting a team based in Boston from another U.S.-based firm with limited international capabilities called Mayer Hoffman McCann, PC.

The most significant activity performed by CHAI and by a predecessor Clinton charity that operated in the same field, is working with an unusual organization called UNITAID to distribute certain health products to needy recipients.

In 2006, UNITAID was formed by a group of governments, led by France, the United Kingdom, and Norway; and is supported by the Bill and Melinda Gates Foundation. Governments in the UNITAID consortium take “voluntary assessments” chiefly from airline tickets having a foot inside each participating nation and channel these into a central pool. This pool and links with the World Health Organization are used by UNITAID to achieve price discounts for key health products in negotiations with vendors.

In UNITAID’s financial statements, the Clinton Foundation and CHAI are described as “implementers”–essential organizations that help ensure essential health products reach intended beneficiaries.

Unlike BKD, MHM concluded by May 23, 2013 that CHAI had been acting all along only as an agent in performing work in conjunction with UNITAID—this meant that CHAI’s consolidated revenues and expenses were much smaller than originally reported in BKD’s 2011 audit.

For 2011, BKD’s audit (completed June 27, 2012 but listed as having been updated November 22, 2013) confirmed consolidated revenues of $171.3 million for CHAI, consolidated program costs of $164.5 million, consolidated total costs of $172.7 million, and a consolidated decrease in net assets of $1.4 million.

MHM explains in its report how it believes CHAI was acting performing work with UNITAID:

“CHAI acts as an agent acting on behalf of UNITAID overseeing the various business aspects of enabling the efficient and effective administration of the program. As an agent, CHAI does not record revenue or expenses associated with UNITAID funds….”

So, in contrast to BKD, when MHM looked at CHAI’s 2011 results, they confirmed that revenues were 61.7 percent lower at $65.6 million, that program costs were 64.2 percent lower at $58.9 million, that total costs were 61.2 percent lower at $67 million, and an identical decline in net assets of $1.4 million.

For 2012, MHM concluded that CHAI’s revenues were $89.4 million and that total costs were $77.9 million–$58.5 million (42.9 percent) lower than amounts claimed for CHAI in the 2012 Clinton Foundation Annual Report and “consolidated” financial statements.

Even though CHAI’s unit level audits for 2012 and for 2013 show revenues and program expenses far under levels recorded in 2011 and previously when management and BKD did not deem CHAI to be an agent, Clinton Foundation management and auditors of consolidated Clinton Foundation financial statements still appear to overstate CHAI and consolidated results in material ways.

Subsequent articles will address meaningful discrepancies among the above versions of theoretically audited financial statements with IRS tax filings–before doing so, CHAI’s largest counterparty is worth additional focus.

Potential Trouble with UNITAID

Experienced finance professionals are suspicious about the integrity of financial reports produced by companies such as UNITAID–loose operating controls and far-flung operations dispensing cash and readily marketable products in developing nations open up numerous opportunities for fraud and for corruption.

The financial accounts of UNITAID are available online–its most recent report is dated April 4, 2014 and covers the period from inception through December 31, 2013.

Surprisingly, UNITAID which is based in Geneva, Switzerland, arranged for a person named Maria Gracia M. Pulido Tan, who is described as Chairperson of the Republic of Philippines Commission of Audit, to validate its financial statements as auditor. UNITAID does not appear to have any significant operations in the Philippines. Moreover, Section 6.5 of Ms. Tan’s audit for UNITAID on page 28 suggests that the total amount paid for auditing services to WHO was only $45,000.

It is certainly possible that UNITAID’s disclosures concerning Clinton Foundation program expenditures are in error–for 2011 and for 2012 there are surprisingly large discrepancies that one would hope might have been reconciled long ago.

According to CHAI’s audited 2012 reports, CHAI received $129.2 million from UNITAID in 2011 and spent $105.7 million purchasing commodities (chiefly medicines). In 2012, CHAI received $81.5 million from UNITAID and spent $67.9 million.

In contrast, UNITAID’s audited report claims it disbursed $56.4 million to CHAI in 2011 ( $72.8 million less than CHAI claimed it received).

In 2012 UNITAID’s audited report claims it disbursed $61.6 million to CHAI and another $14.6 million to a joint venture between UNICEF and CHAI, amounts that are either  $5.3 million or $19.9 million lower than figures in CHAI’s 2012 audited accounts.

What did Hillary know and when did she know it?

If Hillary Clinton can not be bothered enough to fix messes at a charitable organization where she must have been able to exercise profound influence, why should America trust her to lead the substantially larger project before us of right-sizing our bloated government and restoring our international standing?

What will sink Hillary’s presidential aspirations, in the end, is not simply a long list of issues and scandals, but a growing awareness among sentient voters that the Clinton Family and its numerous hangers-on cannot be trusted to operate the levers of greatest power ever again.