Last week, Anthony Ball, brought in as an interim director to clean up the mess at Bridgeport, Connecticut’s Charles D. Smith Foundation, resigned, claiming that the foundation is “essentially insolvent.” according to Bill Cummings of the Connecticut Post. See Bill Cummings, The Smith Foundation Tries to Rebuild Organization, Reputation: Records Show Charity Poorly Run for Years, Conn. Post, Nov. 19, 2006. The foundation’s founder and namesake is a former NBA star, once a power forward with the Los Angeles Clippers, New York Knicks, and San Antonio Spurs before retiring in 1997.
Smith created the foundation to aid...
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disadvantaged children, but he failed to keep his eye on the ball, if the allegations are anywhere close to true. And apparently some of them are true, because Smith has acknowledged “serious problems,” according to Cummings. One thing is for sure, the foundation has not been offering its traditional programs, failing, according to Ball, to offer it popular after-school and mentoring programs this past fall. Nor did continue its traditional summer program for kids this year. It also stopped offering two other programs at elementary schools.
Is there anything particularly unusual about the various allegations and problems? Nope. If true, Smith and the board simply failed to play the Big D. The Connecticut Attorney General and local police are looking for fouls.
Ball provided the Connecticut Post internal documents that detail the allegations. Our favorite: The documents allege that the foundation collected payroll taxes, Social Security and Medicare payments, but failed to remit over $428,000 in taxes. If true, someone is not going to be able to simply walk away from at least some portion of the unpaid amount. Presumably some of the unpaid taxes consist of so-called trust fund taxes (income tax withholdings from employees and the employees’ share of FICA and Medicare taxes). Under Section 6672 of the Internal Revenue Code, the IRS can collect unpaid trust fund taxes from the responsible persons who failed to remit the taxes to the IRS. Yes, we are talking personal liability here.
Federal grant money can be a slam-dunk for many charities, but the charity has to comply with the terms of the grant. The foundation allegedly failed to comply with its grant from Fannie Mae, apparently spending $71,000 in federal funds on its operating expenses instead of program requirements.
Connecticut law required that the foundation maintain commercial liability insurance. It did until 2004, when, according to the Cummings’ review of the internal documents, Travelers suspended coverage because the foundation failed to pay the premium. Making matters worse, the foundation allegedly sought reimbursement for the insurance in 2005, but used the money for other purposes.
These sorts of allegations are often followed by allegations of inappropriate personal expenditures and reimbursements. According to the Cummings, the Bridgeport police are investigating allegations that the “former foundation executive director Deborah Sims and program manager Maria Valentin used foundation credit cards to fund lavish personal expenses, such as Caribbean cruises, spa treatments and personal cell phones.”
And the foundation has allegedly failed to register as a public charity with the State of Connecticut. Cummings was able to confirm this fact with the Connecticut Attorney General.
Cummings made what appears to be every effort to verify all allegations. He contacted Fannie Mae, the IRS, and Travelers, among others, to ascertain whether the allegations are true, but he received no meaningful answers. Cummings did find court records that Travelers sued the foundation for unpaid insurance premiums and won a judgment.
On and on the article goes. With all the investigations, we should get some more facts soon. But once again, the two big questions lurk in the background: Where were the internal controls and the board of directors?
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