The Nonprofit Problem

John S. Carter and the Independence Seaport Museum is just another one of those Philadelphia stories that will be forgotten in a couple of months, if not weeks.*

Resulting from an FBI probe of none other than Vince Fumo, the Seaport Museum filed a lawsuit in Massachusetts state court against its former president, John S. Carter. The lawsuit alleges that John S. Carter, the former President of the Independence Seaport Museum, embezzled from the museum $2.4M. I suspect the suit will settle quietly out of court and this story will disappear into the mists of the Mayoral election and the checkered history of anything to do with Penn’s Landing.

Here’s a few facts from two of the articles, one that ran in last Tuesday’s Inquirer and the other from today’s.

• John S. Carter was paid $301,000 a year to serve as President of the Seaport Museaum.

• John S. Carter lived in a 5,000-square-foot Society Hill townhouse.

• The Seaport Museum paid $1.6M to purchase the townhouse.

• With the proceeds of his $300K per year salary, John S. Carter bought a 3,000 square-foot Cape Cod vacation home that is adjacent to the fairways of the Oyster Harbor Club.

• He paid $615,000 for the Cape Cod vacation home.

• The Cape Cod vacation home is currently on the market for $2.2M and will likely net John S. Carter a tidy little profit.

• In 1992, John S. Carter purchased a “turbo-charged Saab” with money provided by the Seaport Museum.

• John S. Carter charged $594,000 to three museum credit cards.

• The Seaport Museum spent over $500,000 to purchase and maintain a fleet of yachts that John S. Carter

• The Seaport Museum has received millions of dollars in funds from the Commonwealth of Pennsylvania.

• Vince Fumo is a member of the museum’s board of directors.

• Although “out of the reach of most potential customers,” Vince Fumo was one of the few who chartered boats from the Seaport Museum’s fleet of yachts.

• Vince Fumo paid for at least one of the $22,000 trips.

• Vince Fumo paid the $22,000 only after he got wind of the FBI’s investigation of whether he received improper gifts from the Seaport Museum.

With the tidy little profit earned from the sale of the Cape Cod residence, seems to me Carter should have no problem coming up with the cash needed to settle this little bit of nastiness.

With Carter's $300,000 a year salary and all those millions allocated by Fumo to the coffers of the Seaport Museum, seems to me those funds would have gone a long way to putting a few more cops on the street or maybe giving a deserved pay raise to "the legion of underpaid attorneys in the Philadelphia DA's office.

For several months now, I’ve been trying to put together a post on Philadelphia's non-profit problem and Carter finally got me off my lazy ass to do only slightly more than running my mouth at some bar over some beer. That said, I'm just going to dip my toe into one tiny part of the nonprofit problem, the case of nonprofits that receive City tax dollars. And just because the Seaport Museum is a Fumo issue doesn't mean that the Nonprofit Problem is a Fumo related-issue. It's much bigger than Fumo. It's how business is done in Philadelphia. And it's the single biggest obstacle to good government facing Philadelphia.

Because of the alleged problem of overcoming the bureaucratic inertia imposed by Philadelphia’s vast system of patronage, many of the important functions of local government have been delegated to Philadelphia's non-profits. How many groups are organized to address the homeless problem? And what exactly does the PIDC do other than provide Mayors with plumb BoD positions to where they may appoint their contributorssupporters? And what politician worth his salt isn't operating a half dozen or so of some sort of CDC charged with organizing some semi-annual, glorified block party?

Suffice to say, there are a lot of mom & pop nonprofits operating out of storefronts and home offices. $5K here, $50K there, and the $$$s add up.

Not only do a myriad of nonprofits receive direct city expenditures, they also receive tax appropriations. For example, I understand that the city allows businesses to provide "economic development grants" to non-profits. My understanding is businesses provide a big pile of cash to some .org and, in exchange, the business gets a giant tax write off. Anecdotal evidence suggests that that little, if any, of this money ever goes into economic development.

Even in a completely legit nonprofit, money allocated to their budgets is not spent dollar for dollar on addressing the issue the group is meant to address. Some percentage of every dollar is allocated to paying its overhead costs. Admittedly, in the case of the Seaport Museum, its “overhead” was a little higher than most. Even assuming John S. Carter is alone in his propensity to take a little off the top, a little consolidation would likely go a long way to reducing overhead and ensuring our public and private contributions go a bit further.

Seems to me a little oversight would also benefit the City. How many other John S. Carters are out there? How many former political operatives turned nonprofits directors have received sweet severance packages? How many former political operatives, who worked for pennies for some pol, took sweet gigs at some nonprofit that gets some sweet grant only to see that sweet grant get gobbled up by that same sweet severance package?

How many wives, girlfriends, sons or daughters got the same deal?

Here's a hint, it's not just Vince Fumo who runs his political machine in this manner.

Without any method of peering into the finances of the myriad of nonprofit organizations operating in Philadelphia, the question is unanswerable.

Why not condition the receipt of public funds upon each group providing an annual financial plan to the City that could be made public in a central clearinghouse maintained on the City’s website?

Detractors of such oversight may argue that the creation of such plans would impose too heavy a burden on groups already stretched thin by meager budgets. I would counter that if a group is unable to create such a plan, it probably is not qualified to address whatever issue the City has tasked it with.

Apparently, I am not alone in my suspicion that this city has a few too many non-profits for its own good.

Addressing citizen feedback gathered at many of the Inquirer’s forum’s held as a part of its Great Expectations: Citizen Voices on Philadelphia's Future project, Chris Satullo wrote:

“Many cited the city's huge and varied nonprofit sector as a strength. True, others replied, but there's such a thing as having too many little groups working the same problems; it's confusing and wasteful."

As I see it, the "confusing and wasteful" thing isn't an externality of having too many little groups. The confusing and wasteful is the whole point of why we have too many little groups. The whole thing is designed to be confusing and wasteful. Philadelphia's nonprofit sector is our Tammany Hall. Can't give $100K to your guy, give $100K to your guy's pet nonprofit that has just happened to hire a new executive director who may or may not be your guy's side piece.

Even if a pol is too principled to shake down donors, the system still works. Say you're a pol in a pinch for cash. You can steer a few grants to your pet nonprofit who has just happened to hire your former campaign's spokesperson who a couple months later decides to part ways as the beneficiary of a six-figure severance payment. Philadelphia's nonprofit sector pretty much provides Philadelphia's political class an infinite opportunity to steer public dollars to their personal piggy banks.

This all happens. Yet, aside from hushed comments over some late night drink, nobody seems to talk about it.

Yeah, I know there are laws against all of it. But, it's not like the Feds have shown anything more than a sporadic interest in prosecuting such shenanigans. I mean, it's not like the local AUSAs don't have their own political aspirations that may or may not involve obtaining the support of one of the many kings of Philly's many fiefdoms... or the USA himself did or did not find himself where he is without a little gravity assist from the handful of political luminaries that sit atop Philadelphia's web of "nonprofits."

A couple weeks back, the Committee of 70 issued an Ethics Agenda and asked the mayoral candidates to commit to it. The Agenda made no mention of nonprofits.

As the troubles at the Seaport Museum demonstrate, there is no oversight of the multitude of nonprofits that are supported by the City by either direct or indirect payments. If the 'ethics' issue is to be addressed, light must be shone upon this rather sizable black hole in the City’s budget. As it does with campaigns and PACs, the City should require nonprofits that receive City funds to file annual reports accounting for their expenditures.

While such a requirement would be a step in the right direction, it would in no way cure Philadelphia of its larger Nonprofit Problem wherein politicians routinely use the nonprofit space as a means to circumvent campaign limits or to simply enrich themselves and their cronies. That's a whole bigger ball of wax.

In other news, if anyone has seen the Comcast guy that was supposed to show up a my house this weekend, let me know. It's only a month or so till pitchers and catchers report.

*And then repeated ad infinitum with different names.