In the wake of instantly launching on November 3 the Hurricane Sandy New Jersey Relief Fund (HSNJRF), Governor Christie and his wife, who serves as Chair of the fund, appear to be on shaky legal ground and to have created a foundation which is not advisable, which is rife with potential conflicts of interest, and which need not provide much transparency.
The legal status of this organization remains in question regarding both State and Federal law. The NJ Charitable Section of the Attorney-General’s office says it is not a registered charity. The IRS has announced an expedited review and approval process for organizations seeking 501 (c) (3) tax-exempt status to provide relief for victims of Hurricane Sandy. The process, nonetheless, requires time for document review and does not guarantee tax-exempt status. The application Form 1023 asks numerous questions regarding different types of conflicts of interest and political activity. An e-mail response from Christie’s relief fund [email@example.com] says it is “a registered 501(c) (3) organization,” but does not mention whether it has been granted tax exempt status – important for donors. In fact the IRS database for exempt organizations does not include HSNJRF nor the Employee I. D. number 36-4745729, which HSNJRF is using.
Is the existence of this new fund advisable?
The IRS reminds people, “Existing charitable organizations are frequently able to administer relief programs more efficiently than newly formed organizations, since they tend to already have fund-raising and distribution infrastructures in place.” It would seem vainglorious of Christie and his wife to create a new fund when so many other established, experienced non-profits are already delivering services. How can his fund dispense monies better and promptly without experience in the mechanics of establishing needs, who and how much to fund, monitoring the grantees’ performance, determining outcomes, avoiding waste, fraud, and abuse, and complying with extensive legal, regulatory, and accounting requirements?
All too many disaster relief funds have been highly successful at raising money only later to be revealed as incompetent, negligent, self-serving, and even fraudulent. Christie’s own fund is already off to a rocky start by claiming legal status it may not yet have and implying it can accept tax-exempt donations when it appears to lack such authority.
Conflicts of interest
The conflicts are many and the separation between the fund, the Christies, and state government are murky. AT&T and Hess Corp which regularly lobby the State have already made large contributions. The fact that companies may well contribute to this fund to curry favor with the governor and that those who receive monies from the fund may feel indebted to the governor is discussed in more detail here. A 501 (c) (3) organization is not designed nor allowed to be a political instrument. Announcement of the fund’s launch was made via a release from the governor’s press office, in effect opening the gateway for large corporate donations and enhancing in the mind of the public the image of a concerned, caring, activist governor who also may well run for re-election. The facebook page has a video promoting donations to the fund and paid for by Comcast and Cable Vision which lobby for favorable regulations. People in need are urged to call a state hotline number.
In the email response mentioned above the foundation says “100% of the money donated to the Relief Fund will go towards relief.” Does that mean Christie will pay himself all operating costs or the State will pay the operating costs? An organization which already has $8 million pledged or received like HSNJRF, will have substantial expenses to conduct its business and would typically use a per cent of donations to cover the costs. The conflicts of interest and the lack of separation and independence from political activity seem murky at best and could result in the foundation being unable to claim non-profit status as well as result in unneeded controversy, lawsuits, and even prosecutorial investigation.
Go below the fold for information about the lack of transparency
Transparency or the lack thereof
What a 501 (c) (3) must report on its annual IRS Form 990 is remarkably lacking in detail or transparency, and the organization can establish a fiscal year which can allow it up to 15 months to file the report. Relief groups report most of their revenue under a single category – “contributions, gifts and grants” – as a total figure and are not required to itemize their donors. They report their operating expenses (rent, salary, etc.) as separate items, but they lump together in a single figure their grants (Program Expense) and are not require to list the individuals or organizations that they fund. (Their audited financial report might reveal a few funders and grantees, but is still very limited in details.)
A non-profit which started business in November 2012, like Christie’s fund, could have a fiscal year of November 1, 2012 through October 31, 2013, and would have an automatic additional 90 days to prepare the 990 report – well beyond the November 2013 elections.
The governor appears to be doing a great job of raising money for a worthwhile cause. However, his actions raise substantial concerns.