In my opinion it is reasonable to say that intertwining nonprofit governance with political agendas doesn't always work out well for the players. There is plenty of evidence around the country where politicians have set up so-called independent nonprofits as pass-through vehicles for funds that often circle back into that politician's (or their relative's) pockets. City councils would do well to just ensure that these vehicles are not allowable.
The Mayor's Fund initiated by Mayor Nutter in Philadelphia may well have been another one of these vehicles with the best of intentions but from the Philadelphia Inquirer we learn that good intentions were at some point lost. But while the lessons about politicians and nonprofit vehicles is not new, the Mayor's Fund helps highlight two more lessons. First, when the lens of nonprofit board members do not get their seats based on a passion to mission, fiduciary decisions, those that would be made by others facing similar options, get clouded. I would pose that the decisions made by the board of the Mayor's Fund represent this concept. Next, a nonprofit's mission should clearly inform action. The City Controller, like the IRS or other regulators, has applied this standard while determining if the Fund board has "done wrong". All signs indicate the answer: yes, the board chose to be blind or chose to deviate from mission.
City Controller Alan Butkovitz is asking former Mayor Michael Nutter and former City Representative Desiree Peterkin Bell to pay back tens of thousands of dollars in expenditures as part of his latest audit of the troubled Mayor’s Fund for Philadelphia.
The audit revealed that the fund spent $134,000 on American Express credit cards over five months in 2015 without providing receipts or supporting documentation, and issued $32,000 in grants without the required board approval.
The controller recommended that the Mayor's Fund seek reimbursement for $241,000 in purchases by Peterkin Bell and others connected to the fund that "did not meet the mission of the non-profit," including $22,100 spent on a farewell party for Nutter at the end of his second term.
"There was little, if any, indication from documents and from those who attended as to how this event benefited Philadelphians other than those who were in the mayor's inner circle," Butkovitz said during a news conference Wednesday.
In a statement emailed to the Inquirer and Daily News and later posted online Nutter said that Butkovitz is "desperately fabricating an issue where there is no real issue" and hadn't "directly sought an explanation from me or the individuals whose integrity his reports impugn."
"I have always taken fiscal management and accountability seriously, and these principals were the hallmark of my Administration," Nutter wrote. "The allegations by the City Controller are completely false and baseless."
The review comes seven months after Butkovitz accused Peterkin Bell of treating the nonprofit's assets as a "slush fund" in a separate report. Peterkin Bell responded at the time by filing a defamation lawsuit against Butkovitz, which was later dismissed in Common Pleas Court.
Butkovitz said Wednesday that the fund had been used to circumvent the city's fiscal controls and procedures.
"You have this relationship between city government and a nonprofit which is dominated by board members who are subordinates of the mayor and it functions as a way of offline budgeting or of paying for expenses without either needing an appropriation from City Council or oversight by the city’s financial watchdogs.”
Butkovitz said his office has shared its review with the city's Board of Ethics, the District Attorney's Office, and the state Attorney General's Office.
• The 2015 Tree Lighting Ceremony ran up a $72,921 tab -- five times the average cost of previous ceremonies. Peterkin Bell approved $45,000 in grants for the event, none of which were approved by the Mayor's Fund board. The controller's office found $15,100 worth of payments that could not be verified. Some invoices were written by people associated with the Mayor's Fund, rather than vendors.
• One of the fund’s credit cards was used to pay for a "Purpose Not Position Dinner” event at the Hyatt Bellevue for 15 people hosted by Peterkin Bell. The event, titled after a slogan Peterkin Bell often uses on social media, cost $2,195.
• Out of five months of American Express credit card expenses, totaling $242,097, only $108,500 was properly accounted for.
Nutter wrote that he is "confident that all of these dollars were spent for allowable purposes, and of course, the proper receipts and record keeping should be available."
"The report’s findings and recommendations will be shared with Mayor’s Fund Board of Directors for their consideration. ... Today’s report and recommendations provide critical guidance to the Fund in these ongoing efforts, and the Fund thanks the Controller for his continued attention to this."
Mark Zecca, who worked as a city attorney for 20 years, said the fund served as a bookkeeping operation that collected money from the mayor's annual city fund-raiser under then-Mayor Ed Rendell in the 1990s.
Zecca argued the fund should operate as a city entity, since most of its board is made up of city officials. That could mean facing City Council approval for budgetary matters and abiding by checks and balances set by the city treasurer and the controller's office.
"When you avoid the general fund, you avoid transparency and democracy," Zecca said. "There should be no Mayor’s Fund off the books of the city treasury. It’s just a recipe for mischief."
The Kenney administration and the Mayor's Fund's current board have argued that the fund must exist as a separate nonprofit in order to receive and manage grants from charities that can't or don't want to give directly to the city.
An invitation was edited to emphasize that the event would also honor SERVE Philadelphia and PowerCorpsPHL, two programs that had received grants from the Mayor's Fund. "Apparently there is a lot of discussion going on now about the use of The Mayor's Fund," read an email among executive staffers, according to the controller's report. "SO, we made a few minor edits to the invite and have let [then-chief of staff Everett Gillison] review it."
Gillison did not respond to a request for comment.
Rendell said official parties at the beginning and end of a mayor's term are typically paid for by the mayor's own political action committee, which was the case when a dinner was held in Rendell's honor when he left the Mayor's Office in 2000.
"The Mayor's Fund is supposed to benefit the city of Philadelphia," he said. "It would be hard to argue that a going-away party for the mayor or anyone else benefits the interests of the city."
Rendell called the questionable spending a "minor transgression" that "should not detract from [Nutter's] significant record of having an ethical administration. But again, [the party] isn't in the mission of the fund."
Butkovitz recommended strengthening board oversight and improving the fund’s credit card policy. He also called on the fund to eliminate a reserve account that had been used as discretionary spending for the City Representative's Office.
The Kenney administration has merged the reserve fund with the grants fund so that there is now one pool of money for grants. The new administration has made some other changes to the fund since the controller’s August report.
Butkovitz’s review also suggests that nearly $100,000 in hotel and travel expenses made by the fund in 2015 might be in violation of city ethics laws that require city officials to disclose gifts received, including travel.
“A review of financial disclosure forms for the mayor, former chairwoman and former chief of staff found there were no accommodations paid with the Mayor’s Fund monies disclosed on their reports,” according to the report.
The accommodations included 25 hotel rooms on which the fund spent $52,000 in 2015 for various city employees and some of their relatives to stay at the Marriott across from City Hall when Pope Francis visited the city as part of the World Meeting of Families. The fund also paid out $44,665 for Nutter, Peterkin Bell, Gillison, and other cabinet members to travel and stay in Rome when they first tried to persuade the pope to visit Philadelphia.
In his statement, Nutter accused Butkovitz of being "obsessed" with trips and hotel stays tied to the papal visit. "I am more troubled, however, by the Controller's persistent determination to 'litigate' this matter through press conferences," Nutter wrote.
Butkovitz argued that if the trips and hotel stays were not official city business, they should have been disclosed as gifts, per city and state ethics laws.
"Just because it is not city money, does not mean it should be treated as a grab bag of cash with no oversight or accountability," he said.