We found out Monday that Detroit Emergency Manager Kevyn Orr’s penthouse living is paid for by Gov. Rick Snyder’s New Energy to Reinvent and Diversify (NERD) Fund. Once again, we should question whether non-profits designed to “assist” public officials--while conveniently shielding donors from the pesky sunshine of campaign finance rules--are appropriate.
From the Kilpatrick Civic Fund to Pugh & You to Bob Ficano’s EDGE Opportunities, we’ve repeatedly seen these funds prove to be ethical quagmires.
"No man can serve two masters" is a time-honored maxim for good reason. One must wonder to whom Kevyn Orr is ultimately beholden: The taxpayers who fund his salary, or the shadowy donors paying for his fancy downtown digs?
That’s a good question, but here is a better one: Why are “non-profits” afforded favorable tax treatment when their benefit to the public is so dubious?
Non-profit organizations are allowed to operate without tax liability because, theoretically, they serve a purpose that would otherwise cost the public treasury. Food banks lessen the cost of public welfare, private schools lessen demands on public schools, volunteer fire departments lessen public safety costs, and so forth.
Like many volunteer fire departments, the NERD Fund is a 501(c)4 non-profit. That means the organization is exempt from paying taxes, but donations to it generally are not tax-exempt. 501(c)4 non-profits are considered “social welfare” organizations.
Thanks to the non-profit database Guidestar, you can view the NERD Fund’s 2011 IRS 990 filing online and see just how much social welfare the NERD Fund provides. The answer appears to be: not a whole lot.
Crunching The Numbers
In 2011, the NERD Fund raised $1,318,100 and spent $865,830 that year.
They had $53,858 in fundraising expenses.
They spent $43,797 on office expenses and $17,622 for expenses listed as “miscellaneous.”
They also spent $48,366 on compensation for their primary officer, Assistant Secretary/Treasurer Rick Dibartolemo. According to the 990, he averaged about 10 hours per week working for the NERD Fund. That would work out to a full-time annual salary of $193,464. That’s more than the $115,000 annual salary Dibartolemo reportedly made in 2012 as an investment administrator for the state Treasury.
The 990 form asks the organization “Describe [its] program service accomplishments for each of its three largest program services, as measured by expenses.” The NERD Fund listed just two items here.
They issued a $130,638 grant that “lessened the financial burdens of government in the state of Michigan by providing a security system and furniture for the state of Michigan residences used by the governor.”
Assuming that the state would have otherwise spent $130,638 on security and furniture for the governor’s residences in 2011, perhaps we can call that a social welfare expense because it saved taxpayer money. Or it was a way for people of unknown motives to buy Rick Snyder some nice furniture. You make the call there. That’s your right as a voter.
The other program service listed by the NERD Fund: $562,866 (including grants of $4,500) for…well…we’ll let them explain:
“To operate exclusively for the promotion of civic action and social welfare by promoting the common good and general welfare of the residents of, and visitors to the state of Michigan. To support public policies on the federal, state, and local levels, that will bring about civic betterments and social improvements to Michigan residents. To support programs aimed at improving Michigan’s business climate and employment opportunities. To encourage and advocate citizen participation in political, civic and governmental events and associated activities. To support activities and programs that improve the quality and effectiveness of government for the state of Michigan. To receive and administer funds to sponsor, conduct research, secure goods and services, or to hold events in conjunction with the promotion"
The description stops there without any sentence-ending punctuation.
Now, that passage may be verbose and long-winded enough to make any mission statement-drafting corporate committee stand and applaud. However, it doesn’t really describe anything a reasonable person would call a “program.”
Non-profit program services are usually something like maintained a park, held a voter registration drive, sponsored a community sports league, or funded art museum field trips for war orphans. “Promotion of…social welfare by promoting the common good and general welfare of residents” is not a program by an reasonable definition of the word. It’s a string of meaningless words designed to sound high-minded without describing what the NERD Fund, you know, actually did with that $562,866...other than promoting promotion.
Incidentally, that particular “program service” must include the NERD Fund’s $252,133 legal bill because, unless you include it with that $562,866 expense, it’s hard to see how the NERD Fund’s numbers make sense otherwise.
Mission Accomplished?
Here’s the troubling thing. It's not like the NERD Fund is working some obscure loophole here. A person could likely find countless organizations (the National Football League, for example) that do not in any way conform to the common understanding of a non-profit--or the public’s expectations for organizations that receive preferential tax treatment--in the IRS' non-profit database.
If these lax non-profit rules make your blood boil, at least we can say this for the NERD Fund: It is unwittingly fulfilling its mission to “encourage and advocate citizen participation in political, civic and governmental events and associated activities.”
Because seriously, it’s time to demand lawmakers raise the bar for non-profit eligibility.
