Watchdog: Follow the Money

Firm running California federal charity drive misspent millions in donations, including buying a house

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Watchdog,California,OPM,Waste and Fraud,Luke Rosiak,Follow the Money,Budgets and Deficits,Nonprofits,Scams,CFC

At least half of the $4 million in expenses claimed by the California arm of the federal government’s workplace charity campaign was spent on inappropriate or unknown items, according to a government watchdog report.

The Sacramento Metropolitan Arts Partnership received the contract to administer the Combined Federal Campaign in California for many years despite constant overruns, according to the Office of Personnel Management's inspector general.

Auditors "find it astonishing that it believes the charities of the CFC were not damaged... monies due to them were used by MAP for expenses that were expressly unallowable."

The board of federal employees overseeing it did not even meet for most of the year.

Sacramento MAP charged the entire down payment on a house to one year’s federal charity haul, and then charged the same program rent for the use of the house.

The house was sold at a large profit shortly after Sacramento MAP's connection to the CFC was severed. The down payment and profit have not been returned to the CFC.

In 2010, MAP spent $847,903 to raise $3.9 million for charity. In 2009, it spent $679,153 even though it only budgeted $518,475. It raised $4.4 million that year.

In 2011, Sacramento MAP spent $32,317 on "conferences, conventions and meetings," $22,000 on "donor recognition awards" and $15,000 on "special events."

Conference expenses included staying multiple days after the conferences ended and flight upgrades.

Expenses were so high despite the fact Sacramento MAP didn’t have to pay the salaries or benefits for the dozen federal employees known as “loaned executives” who staffed the CFC full-time for five months each year. Their compensation is covered by taxpayers.

The IG report is the most recent of a growing list of examples of how the CFC has been transformed from a workplace charity appeal into a way for hundreds of government employees to be exempted from doing their jobs.

The CFC's transformation has also created a path for hangers-on to make handsome livings, with waste and overhead resulting in only a fraction of funds contributed by government workers actually making it to the intended charities.

Sacramento MAP diverted $4 million in contributions to pay for fundraising expenses between 2005 and 2012, of which nearly $2 million was singled out by the IG as being improperly spent.

The $2 million included $770,000 that represented spending grossly over budget, even though no one had approved the deficit, a newly released audit found.

The group’s executive director, Michelle Walker, was paid $141,000 and also billed the charity for a car, tax records show.

Sacramento MAP told the federal government that it did virtually no work other than administer the federal charity drive, so it deducted almost all of its expenses, such as rent and salaries, from CFC’s proceeds.

But the group also did work on eight other charity drives, almost all for local California governments, and took 15 percent of proceeds from each of those, seemingly to cover the same costs, the Washington Examiner found.

Spinning off of a city-county agency to promote the arts in Sacramento that Walker headed, the group became little more than a holder of lucrative fundraising contracts, performing virtually no arts work, according to an Examiner review of 10 years of tax disclosures.

Walker died last year at 53. She was eulogized as "a sistah-friend" who "encouraged African-American artists of Sacramento to position themselves for public art projects."

Those left behind told auditors there was no one else to take responsibility or explain. Yet, Sacramento MAP paid more than $500,000 a year for many years for “Fees for services (non-employees): Management,” according to tax forms. It left blank a section of the forms where large vendors should be listed.

In October 2010, Sacramento MAP withdrew $190,000 from the bank and later told auditors it spent $112,000 on a down payment on the building and did not know where the other $78,000 went.

“[Sacramento] MAP states that the purchase of the building was a ‘wise investment’ because it saved the CFC ‘over $22,000 since the building was purchased’” by lowering the rent it charged from $1,920 to $1,196, the IG said. “However, the CFC had to pay $112,563 to save the $22,000.”

In June of this year, Sacramento MAP sold the house, which it bought for $255,000, for $318,000, land records show.

Sacramento MAP claimed its high administrative costs were acceptable because charities often have administrative expenses of 25 percent.

But MAP wasn’t running an actual substantive charity, with all its attendant costs, but merely functioning as a pass-through layer that took money from employees that was then distributed to their chosen charities.

“[Sacramento] MAP’s ‘reasonable’ expense ratio to pledges of 15.8 percent would rank it 64th out of 66 PCFOs with pledges greater than $1 million,” the IG said.

Auditors “find it astonishing that it believes the charities of the CFC were not damaged... monies due to them were used by [Sacramento] MAP for expenses that were expressly unallowable.”

In a tiny sample of 2011 expenses, the IG found numerous inappropriate expenditures, seemingly representative of a much broader pattern, though it noted that "we could not determine whether 98 percent of the expenses... were legitimate CFC costs due to a complete lack of documentation.”

Sacramento MAP spent $64 on flowers for a federal employee who was detailed to work for it, which it said was to "further relationships" with the "loaned executives."

That echoes the rationale of Global Impact, another CFC contractor that said detailees needed "motivation," seemingly indicating that federal employees who were exempted from having to go to their government offices for up to six months viewed it as a vacation, even though taxpayers continued to pay their full salaries, and would work only if given additional perks.

Longtime Sacramento MAP board president Gerry Kamilos, a Sacramento real estate developer, did not return requests for comment about why he didn’t flag abuses earlier.

Instead — presumably using CFC money, since it says it was virtually its only income source — Sacramento MAP hired Kenneth I. Schaner, a lawyer who represented Global Impact, to defend the apparent diversion of CFC money.

Schaner said he did not know what happened to any of the money and neither did Kamilos, and declined to make available the accountant who would.

Yet he said that he did have enough information to know that, in fact, Sacramento MAP had under-billed the government by $80,000. The IG said the organization provided no justification for that figure.

Schaner also sent a written statement saying that, despite tax records showing a hefty salary and perks for its leader, Sacramento MAP “receives no profit or compensation for its services.” It also noted that OPM gave the group an award for “innovative service.”

The Examiner in May documented how Global Impact spent money on luxuries such as an in-office masseuse at its luxurious office suite on the banks of the Potomac River, which the firm said was necessary because its employees' jobs were so “stressful.”

OPM said at the time that Global Impact was not representative of any other CFC contractors.

In the Global Impact case, OPM downgraded the remunerative measures recommended by the IG. It took away one contract from Global Impact but allowed it to keep a second one. OPM declined to answer questions about what it would require Sacramento MAP to repay.

CFC contractors report to boards of full-time employees known as Local Federal Coordinating Committees, but in Global Impact’s case, those board members themselves essentially dipped into charity funds for high-priced meals but otherwise abandoned financial oversight of the program.

Likewise, auditors said that Sacramento MAP’s board rarely met and the group appeared to think it, and not the board it was subordinate to, was in complete control of the program.

The dozen full-time federal employees who worked five months out of the year on the Northern California CFC fundraising drive represent perhaps another $500,000 in annual costs footed by taxpayers.

Counting that cost, in 2010, for example, the bureaucratic costs of just one layer of the government’s three-layer charity drive program amounted to 35 cents out of every dollar given to charity.

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Luke Rosiak

Senior Watchdog Reporter/Data Editor
The Washington Examiner

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