Sixty Percent of Slover Foundation Budget Goes Toward Administration

Paul Fraim. Photo credit: Virginian-Pilot

The Slover Literary Foundation, a tax-exempt charity set up to support Norfolk’s flagship Slover Library, plans to spend more on salaries next year than on direct aid to the library, the Virginian-Pilot reports today.

The Slover foundation will spend almost 60% of its fiscal 2018 budget on administrative costs including a $150,000 salary for former Norfolk Mayor Paul Fraim, according to figures Fraim provided the Pilot. The highest-rated charities on Charity Navigator tend to spend 10% or less on administration, the newspaper notes.

Foundation board members argue that the salary paid to the 67-year-old Fraim is worth it. The former mayor brings a vast network of relationships to the foundation and can make things happen. His skills and connections have helped bring high-profile events to the library such as a NATO panel and a “future of the Navy symposium as well as guest speakers, music, and youth programs.

Slover is one of 13 public libraries in Norfolk. The city has tried to make it a cultural destination with technology, architecture and events.

Bacon’s bottom line: Read the Pilot article on the pros and cons of paying Fraim a $150,000 salary. I can see both sides of the story. But I’m mainly interested in a different point: Whether the salary is justified or not, transparency is vital. If a charity or non-profit benefits from tax-exempt status, it owes an obligation to the public. Tax exemptions, after all, are an indirect subsidy from taxpayers.

Most charities report this data in 990 forms. But The Slover foundation did not release the data for four years. Reports Eric Hartley:

Until now, it had been difficult for donors or other outsiders to evaluate the Slover foundation’s spending. Founded in 2008 to raise money to build a downtown library, the organization did not make its finances public between 2013 and this year. Its outside accountants said it was not required to, unlike most charities, because it was a “supporting organization” to the city government.

The justification for not releasing the financial information is specious. If anything, its affiliation with the City of Norfolk means it should be held to the same Freedom of Information Act standards as Virginia government! Who could be blamed for suspecting that Fraim avoided so long releasing the information to avoid embarrassment of having it appear in the Pilot?

There’s a bigger point here: the lack of accountability of non-profit organizations generally. Nonprofits are required to basic financial information in 990 forms. But non-profits have minimal government regulatory oversight. They have no shareholders to answer to. They receive little press scrutiny. (The Pilot’s coverage of Slover is a rarity). And boards of directors are typically clubby conclaves of well-heeled members of the business and political elite who don’t want to rock the boat.

I’m reminded of a recent column by Walter Williams, an economics professor at George Mason University, who wrote of university trustees:

Every board of trustees has fiduciary responsibility for the governance of a university, shaping its broad policies. Unfortunately, most trustees are wealthy businessmen who are busy and aren’t interested in spending time on university matters. They become trustees for the prestige it brings, and as such, they are little more than yes men for the university president and provost.

The same critique extends to many government boards and nonprofit boards. There are always exceptions — in my coverage, I’ve seen a few individuals willing to ask tough questions — but they are rare. I sometimes wonder if the best way I could “give back” to the community when I retire is to convert Bacon’s Rebellion into a platform for covering governance of Virginia’s foundations, charities, universities and health systems. I’d be interested to know what readers think of the idea.

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15 responses to “Sixty Percent of Slover Foundation Budget Goes Toward Administration

  1. maybe not much different either from all these anonymously-funded “think tanks” and advocacy groups… either.. eh?

  2. Larry,
    Would you care to explain why think tanks are not different from what Jim is talking about. While you’re at it, perhaps you could play devil’s advocate (no pun intended) for a moment and think of the reasons why they may indeed be different and on what basis.

    • re: why they are different…

      good question!!!

      so two parts here:

      1. transparency of funding sources

      2. – the purpose and value of what it is spent on…

      I tend to not be particularly trusting of ANY organization that will not disclose the source of it’s funding – .. left, right no matter.

      and I tend to be further less trusting of those that are both anonymously-funded groups who seem to have a particular philosophical or ideological bent.

      In the case that Jim discusses – we actually have a fair amount of information about the sources of the funding and how it is spent – but Jim is questioning the heavy administrative expenses… and I’m pointing out that with some groups – you actually know almost none of that. You don’t know where their money came from nor what it is spent on.

  3. I have been mailing for over 2 years that we should revoke the tax exempt status for hospitals. Talk about a killing. They have massive funds that are being used to fund political things that have nothing to do with healthcare (like our neighbors’ VB Mayors’ choo choo).

    • I’ve never understood the need to tax exempt hospitals. If you don’t make a profit there’s nothing to tax. If a hospital runs its business at a 0% pre-tax margin there are no taxes to be paid. Is it real estate taxes or some other taxes that are in question here?

  4. re: transparency…

    I’ve pointed out before that if you wanted to know – for your own local school system – how they spent their local discretionary dollars on non-SOQ-mandated staffing… it’s a nearly impossible job.

    There is seldom any accounting of what the local discretionary dollars are actually spent on – in terms of teachers and courses.

    So I’d add that to Jim’s list… along with those anonymously-funded groups.

  5. I’m surprised the IRS has not threatened to revoke the tax exemption status given the ratio of compensation to total expenditures.

    • I don’t think the IRS cares about that at all.. you’d have the govt deciding the “worth” of these groups and their directors.. but hey I know some non-profit think tanks you might see me that idea on… 😉 – oh wait.. wasn’t that the IRS “scandal”?

      • Larry, as you probably know, every tax exempt entity must file an annual return with the IRS. Such an organization cannot be operated to benefit any individual beyond an incidental benefit. And no part of an organization’s net earnings may inure to the benefit of an insider, which would include an officer of the organization.

        The IRS published a guideline/explanation: “A section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization.”
        https://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Inurement-Private-Benefit-Charitable-Organizations

        This very blog article might even trigger an IRS audit. It should.

        • TMT – you’re confusing tax-exempt with non-profit. There are various categories of tax-exempt.. with different reporting requirements and a non-profit does not have to be tax-exempt nor report on that basis.

          https://cullinanelaw.com/difference-between-nonprofit-and-tax-exempt/

          you should know this guy…

        • this particular organization is classified as tax-exempt but Charity Navigator (a major rater of charitable organizations) indicates that Slover are not required to file a “full” 990 which means less than full information is required to be filed:
          Why isn’t this organization rated?

          This organization is not eligible to be rated by Charity Navigator because it is not required to file the full IRS Form 990. As a result, we lack sufficient data to evaluate it. Visit the Methodology section of our site to learn about our criteria for evaluating charities.

          https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=32

          and just to go a bit further – the Sierra Club has TWO separate entities… one that IS tax-deductible that does not engage in political activities – and the other one that is not tax exempt because it DOES engage in political activities:

          https://www.sierraclubfoundation.org/faq

        • After reading that section of the law the only thing I could think was “Lock her up!”

  6. re: the “worth” of a group or folks working in that group.

    While I’d actually agree that some groups and some paid directors and staff seem too “well funded and compensated”… who am I or anyone else and least of all the government to decide that?

    Do you REALLY want Jim Bacon or TMT to “decide” what the “worth” of some group is?

    And if someone REALLY wants to get into asking what some group or group leaders are “worth”:

    Christian Leaders That Make More Money Getting Out Of Bed Than You’ll Make All Year

    Peter Popoff – 100,000,000
    Joel Olsteen – 55,000,000
    and a bunch more..

    Popoff regularly claims that when people send him money that they are then “showered” with thousands of dollars out of the blue they never expected”!

    http://dustoffthebible.com/Blog-archive/2015/10/28/15-religious-leaders-that-make-more-money-getting-out-of-bed-than-youll-make-all-year/

    you give these folks donors more tax cuts and guess where they’ll spend it!

    This also IS the “private sector”… right?

    Of course such discussion is ALSO about the “worth” of govt… I’ll admit.

  7. They key question, in my mind, is what’s the budget of the foundation? If it’s $15m per year then its a moderately complex operation and you might need to pay $150,000 for the type of exec who can run it (1%). If it’s $1.5m it’s highway robbery.

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