Questionable nonprofits selected to receive City Council money

Posted December 18, 2014 By Harry Stevens

New York City Council members and good government advocates alike have hailed a recent series of reforms to the council’s discretionary funding process, which for years had been beset by mismanagement and scandal. But a review by The New York World found several organizations selected by members of the council to receive public funds this year despite running afoul of the IRS’s financial reporting requirements.

Thousands of organizations are slated to receive a slice of the $50 million City Council discretionary fund, which lets council members steer money to nonprofit entities. Nearly all of those nonprofits file their tax returns and make them public, as required by law.

However, the World identified nearly two dozen nonprofits selected to receive more than $150,000 in council money whose tax-exempt status is currently revoked for failing to file tax returns for three consecutive years.

The list includes a tenants association in Manhattan, an African dance troupe in Brooklyn, a youth football team in the Bronx, and a volunteer ambulance service in Queens.

The Internal Revenue Service revoked the Woodhaven-Richmond Hill Volunteer Ambulance Corps’ tax-exempt status back in 2010, but that hasn’t stopped Councilman Eric Ulrich from trying, unsuccessfully, to steer taxpayer money to the service in four of the last five years.

“We still hold out hope every year that they’ll get their tax-exempt status back, but so far this year, it looks like it hasn’t happened yet,” said Ulrich’s budget director Greg Mitchell. “I hope they get it back as quickly as possible so we can get them some allocation of discretionary money.”

A City Council spokesman said none of the organizations identified by the World has received funding and that nonprofits whose tax-exempt status has been revoked will not receive public funds.

Federal law requires tax-exempt organizations to publicly release records of their revenue sources and expenditures to show “why they’re entitled to be exempt from taxes when the average person is decidedly not,” said Marcus S. Owens, who spent 10 years leading the IRS’s exempt organizations division and is now a lawyer at tax-compliance firm Caplin & Drysdale in Washington, D.C.

The revocation of tax-exempt status “can have pretty disastrous consequences for an organization and actually can be seen as a violation of the directors’ fiduciary duty to protect the organization,” Owens said. “Loss of tax exemption can mean pretty much the end of road for some charities.”

The tax forms serve as a critical tool in allowing the public to determine how effectively the organization is fulfilling its stated mission.

“The American people have said, ‘We are going to forgo tax money that we could get from your revenue in order for you to do good things for society,’” said Chuck McLean, a senior researcher at GuideStar, an organization that tracks the performance of nonprofits. “The onus is on these organizations to be transparent and let us know how they’re using our money.”

But the Woodhaven-Richmond Hill Volunteer Ambulance Corps has forgone such transparency. Its tax returns are unavailable on any public database, and the organization ignored requests to provide its three most recent returns, as required by law, or to discuss its tax-exempt status.

Between 2008 and 2010, when the IRS revoked its tax-exempt status, the ambulance corps collected more than $50,000 in public funding. And state records indicate that the Department of Health paid the ambulance corps $5,900 between July 2013 and May 2014, years after the organization’s tax-exempt status was revoked.

In September, Ulrich and other elected officials settled for hosting a pasta dinner to raise money for the struggling organization.

“We want to fund them, but we can’t until they have their IRS status back,” Mitchell said, adding that he was not concerned about the organization’s lack of financial transparency. “We’ve never had a reason to suspect anything,” he said.

The World also identified at least 30 other organizations selected by members of the council to receive discretionary funds whose tax-exempt status had been revoked by the IRS but was recently reinstated.

Organizations can regain tax-exempt status by filing the missing tax forms and requesting reinstatement.

“I would be a little wary of an organization that did not file for a number of years, because it is indicative of poor internal controls,” McLean said, while noting that the IRS does occasionally make mistakes.

The list of recently reinstated organizations includes the Scandinavian East Coast Museum, in Bay Ridge, Brooklyn, which requested public money to fund its annual Viking Fest, complete with Norwegian folk dancers and a replica Viking ship. In recent years, Councilman Vincent Gentile has set aside $17,000 in discretionary funding for the museum, including $3,500 for this year’s Viking Fest, even as it repeatedly failed to file its tax returns.

The IRS revoked the museum’s tax-exempt status on May 15, 2013.

However, records from the city Comptroller’s Office show that in September 2013 the city still paid the museum more than $3,000.

Museum President Victoria Hofmo blamed the revocation on a negligent accountant.

The IRS reinstated the museum in June 2014. Even so, the museum’s tax returns remain unavailable. When asked to provide the organization’s most recent three tax returns, Hofmo said, “I don’t have to prove myself to you.”

Gentile’s $3,500 request for Hofmo’s museum was recently cleared by the council.

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<h1>Questionable nonprofits selected to receive City Council money</h1>New York City Council members and good government advocates alike have hailed a <a onclick="javascript:pageTracker._trackPageview('/outgoing/www.capitalnewyork.com/article/city-hall/2014/04/8544519/long-overdue-mark-viverito-introduces-new-rules');" href="http://www.capitalnewyork.com/article/city-hall/2014/04/8544519/long-overdue-mark-viverito-introduces-new-rules">recent series of reforms</a> to the council’s discretionary funding process, which for years had been beset by <a onclick="javascript:pageTracker._trackPageview('/outgoing/www.nydailynews.com/news/crime/new-york-city-council-chicanery-bounds-slush-fund-scandal-stretches-seabrook-article-1.197380');" href="http://www.nydailynews.com/news/crime/new-york-city-council-chicanery-bounds-slush-fund-scandal-stretches-seabrook-article-1.197380">mismanagement and scandal</a>. But a review by The New York World found several organizations selected by members of the council to receive public funds this year despite running afoul of the IRS’s financial reporting requirements.
Thousands of organizations are slated to receive a slice of the $50 million City Council discretionary fund, which lets council members steer money to nonprofit entities. Nearly all of those nonprofits file their tax returns and make them public, as required by law.
However, the World identified nearly two dozen nonprofits selected to receive more than $150,000 in council money whose tax-exempt status is currently revoked for failing to file tax returns for three consecutive years.
The list includes a tenants association in Manhattan, an African dance troupe in Brooklyn, a youth football team in the Bronx, and a volunteer ambulance service in Queens.
The Internal Revenue Service revoked the Woodhaven-Richmond Hill Volunteer Ambulance Corps’ tax-exempt status back in 2010, but that hasn’t stopped Councilman Eric Ulrich from trying, unsuccessfully, to steer taxpayer money to the service in four of the last five years.
“We still hold out hope every year that they’ll get their tax-exempt status back, but so far this year, it looks like it hasn’t happened yet,” said Ulrich’s budget director Greg Mitchell. “I hope they get it back as quickly as possible so we can get them some allocation of discretionary money.”
A City Council spokesman said none of the organizations identified by the World has received funding and that nonprofits whose tax-exempt status has been revoked will not receive public funds.
Federal law requires tax-exempt organizations to publicly release records of their revenue sources and expenditures to show “why they’re entitled to be exempt from taxes when the average person is decidedly not,” said Marcus S. Owens, who spent 10 years leading the IRS’s exempt organizations division and is now a lawyer at tax-compliance firm Caplin & Drysdale in Washington, D.C.
The revocation of tax-exempt status “can have pretty disastrous consequences for an organization and actually can be seen as a violation of the directors’ fiduciary duty to protect the organization,” Owens said. “Loss of tax exemption can mean pretty much the end of road for some charities.”
The tax forms serve as a critical tool in allowing the public to determine how effectively the organization is fulfilling its stated mission.
“The American people have said, ‘We are going to forgo tax money that we could get from your revenue in order for you to do good things for society,’” said Chuck McLean, a senior researcher at GuideStar, an organization that tracks the performance of nonprofits. “The onus is on these organizations to be transparent and let us know how they’re using our money.”
But the Woodhaven-Richmond Hill Volunteer Ambulance Corps has forgone such transparency. Its tax returns are unavailable on any public database, and the organization ignored requests to provide its three most recent returns, <a onclick="javascript:pageTracker._trackPageview('/outgoing/www.njnonprofits.org/irs_disclosure_regs.html');" href="http://www.njnonprofits.org/irs_disclosure_regs.html">as required by law</a>, or to discuss its tax-exempt status.
Between 2008 and 2010, when the IRS revoked its tax-exempt status, the ambulance corps collected more than $50,000 in public funding. And state records indicate that the Department of Health paid the ambulance corps $5,900 between July 2013 and May 2014, years after the organization’s tax-exempt status was revoked.
In September, Ulrich and other elected officials settled for <a onclick="javascript:pageTracker._trackPageview('/outgoing/www.timesnewsweekly.com/news/2014-08-28/Local_News/FUNDRAISER_AIDS_CORPS.html');" href="http://www.timesnewsweekly.com/news/2014-08-28/Local_News/FUNDRAISER_AIDS_CORPS.html">hosting a pasta dinner</a> to raise money for the struggling organization.
“We want to fund them, but we can’t until they have their IRS status back,” Mitchell said, adding that he was not concerned about the organization’s lack of financial transparency. “We’ve never had a reason to suspect anything,” he said.
The World also identified at least 30 other organizations selected by members of the council to receive discretionary funds whose tax-exempt status had been revoked by the IRS but was recently reinstated.
Organizations can regain tax-exempt status by filing the missing tax forms and requesting reinstatement.
“I would be a little wary of an organization that did not file for a number of years, because it is indicative of poor internal controls,” McLean said, while noting that the IRS does occasionally make mistakes.
The list of recently reinstated organizations includes the Scandinavian East Coast Museum, in Bay Ridge, Brooklyn, which requested public money to fund its annual Viking Fest, complete with Norwegian folk dancers and a replica Viking ship. In recent years, Councilman Vincent Gentile has set aside $17,000 in discretionary funding for the museum, including $3,500 for this year’s Viking Fest, even as it repeatedly failed to file its tax returns.
The IRS revoked the museum’s tax-exempt status on May 15, 2013.
However, records from the city Comptroller’s Office show that in September 2013 the city still paid the museum more than $3,000.
Museum President Victoria Hofmo blamed the revocation on a negligent accountant.
The IRS reinstated the museum in June 2014. Even so, the museum’s tax returns remain unavailable. When asked to provide the organization’s most recent three tax returns, Hofmo said, “I don’t have to prove myself to you.”
Gentile’s $3,500 request for Hofmo’s museum was recently cleared by the council.

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