Misuse of the Baltimore City Foundation

Anonymous

Fri, 10/30/2009 - 04:06

City Related

Update: November 11, 2009 (see below) 
 
Is there any worse way to skirt government ethics rules and misuse
public money and position than via a charitable organization? And yet
it
happens again and again. This time it happened in Baltimore, according
to the results of an extensive <a href="http://www.baltimoresun.com/news/maryland/baltimore-city/bal-te.foundat…; target="”_blank”">investigation
by the Baltimore Sun</a>.

The Baltimore City Foundation, with over $7 million in its hands, was
founded in 1981 "to raise money, primarily to benefit city programs for
the underprivileged ... projects such as a summer jobs
program for youths, funeral expenses for homicide victims and home
smoke alarms for the needy." It raises money from local individuals and
companies, as well as from foundations such as the <a href="http://www.soros.org/initiatives/baltimore/focus_areas/a_criminal_justi…; target="”_blank”">Open
Society Institute</a> and, in least in one instance, from the state of
Maryland. 
 
Before I tell you what happened to some of the money, I want to discuss the foundation's oversight and transparency practices. 
 
The president of the foundation "insists
that it is the city agencies' responsibility, rather than his
or the board's, to ensure that the foundation money is spent in keeping
with its nonprofit status. When he receives a request from City Hall to
sign a check, it is not his job to challenge it, he said." The board
has to approve an agency setting up a foundation account, but after
that, "the agency raises and spends money at its own discretion." One
board member said, "It's [the city departments'] money. All we are is a
fiduciary holding it for them until it is disbursed." In other words,
the board considers the foundation an extension of the city and
therefore provides no oversight. 
 
The lack of oversight also applies to the city itself. "The annual
financial report
for the city of Baltimore lists the City
Foundation among several groups for which the city claims no financial
accountability 'beyond making appointments.'" In other words, each
department or agency can use the foundation as it pleases, without
being accountable to anyone. 
 
Second, they can do it without anyone knowing. "Even veteran City
Council members say they were unaware of the organization's existence
until contacted by The Sun." There is no transparency. No one is
looking
over the city's or the board's shoulder. And it's hard to get at the
information if you want to take a look, as the Sun did. Records before
2002 have been destroyed. The city keeps
the books, and the foundation president (a long-time city employee)
told the Sun he
could not provide a breakdown of contributions because it would take
too much time for the city
clerk who does the foundation's books (nearly all foundation work is
done by city employees on city time). 
 
So the foundation has become a secret slush fund for the few people who
do
know about it: city officials. Here are three examples of how the
foundation has been cleverly misused, according to the Sun. 
 
<ul>The area's largest builder contributed
$20,000 to the foundation in 2007, intended for city recreation
programs. But city officials spent the bulk
of the money on the mayor's inaugural celebration. And the builder got
a tax deduction, which he would not have received had he given the
money to the inaugural fund. 
 
The Department of Recreation and
Parks placed into the foundation a $1 million private donation to the
city, intended for the building of a
visitors center at Cylburn Arboretum, so that the visitors center
design did
not have to be competitively bid. 
 
Millions of state tax dollars intended for a court
audiovisual system were placed by Baltimore Circuit Court officials
into the foundation instead of a city court account. This enabled the
court to spend the money as it pleased and accrue more than $86,000 in
interest before state
auditors uncovered the arrangement and put a stop to it, citing
improper use of state funds. At least the state was watching its money. 
</ul>
 
The article quotes a city Circuit Court judge, who has been a member of
the Baltimore City
Foundation board for two decades, as saying that any potential
problems with the foundation are outweighed by
"innumerable examples where it has allowed government and nonprofits to
do some important things." Does that mean the judge approves of
employees skimming 10% off the top of charitable donations, because 90%
of the
money goes to a good cause? Not an argument that would hold up in court. 
 
The mayor is a non-voting member of the board. The use of its funds for
her inauguration is a more serious offense than taking gifts from
someone doing business with the city, whom she was dating (see earlier <a href="http://www.cityethics.org/node/606" target="”_blank”">blog post</a>). But her
spokesman has already set out her defense: "if an inaugural event such
as Winter
Wonderland was free and open to the public, the mayor was justified in
using foundation money because she believed that the events benefited
the community." But what about the dozen tickets to the inaugural ball
the
foundation paid for? And the foundation's stated purpose? 
 
The foundation's treasurer is chief of the city's Bureau of Accounting
and Payroll Services. He told the Sun that the city law department told
him not to answer questions. Does the city law department represent an
independent foundation? Doesn't the city's accounting chief have a serious conflict of interest, and don't both of his positions require transparency, even though it's not good for his personal interest? 
 
The Sun article says that other city governments do not
run their foundations this way. "The Mayor's Fund to Advance New York
City oversees grant-writing
and reporting, manages the funds, and works with donors, said Megan
Sheekey, the group's president. Donations are vetted through legal
counsel before acceptance, and funds are spent according to budgets
developed in collaboration with city officials." The NYC fund has a <a href="http://www.nyc.gov/html/fund/html/home/home.shtml" target="”_blank”">website</a>
(unlike the Baltimore foundation) and it's received four stars three
straight years from Charity Navigator. You can even read the fund's
annual report online. 
 
There's also the issue of city employees soliciting charitable
contributions from contractors and the like. "City ethics rules
prohibit employees from soliciting private donations
from anyone who 'does or seeks to do business' with the employee's
agency or whose business is regulated by the agency. Since 2004,
however, the Board of Ethics can grant exemptions in cases where the
funds would benefit an official government program or activity or a
city-endorsed charitable activity. According to records provided by the
ethics board, only 10 such
requests for exemptions have come before it. Of those, two involved the
Baltimore City Foundation, and both were from Fire Department
employees." 
 
City employees interviewed by the Sun said they either didn't know
about the rule or felt soliciting for a good cause was okay, no matter
who gave the money. 
 
Once again, city officials have found clever ways to misuse a
charitable organization. By doing so, they show disdain for state laws,
city ethics laws, and the basic concepts of oversight, accountability,
and transparency. The foundation was frozen this week. Its funds should
be given to the United Way or another reputable charity, and its board
disbanded. 
 
There is talk about taking this mess to the city's ethics
board, but this appears to be extremely complex, with many players, more likely a job for the state prosecutor. But what is most important is what the foundation says about the city government's ethics environment. Many departments and agencies appear to have been willing to make creative use of a supposedly independent charity, and the official position was to avert one's eyes. A city government that institutionalizes misuse of funds and a lack of oversight has serious problems that go far beyond the foundation itself. 
 
Update: November 11, 2009 
<a href="http://www.baltimoresun.com/news/maryland/baltimore-city/bal-md.ci.foun…; target="”_blank”">An article in the Baltimore Sun</a> on the Baltimore Ethics Board's decision not to decide whether to investigate the city foundation mess ends on a very sad note. The board chair "said if the board decided to conduct a review, it would be unclear how much it could do, since it has only one staff member." 
 
What better indication that those who run Baltimore care very little about government ethics than this serious underfunding of the city's ethics board. 
 
Robert Wechsler 
Director of Research-Retired, City Ethics 
 
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