Tax filings show CAPSLO does not report sales of donated goods

May 6, 2013

By DANIEL BLACKBURN, KAREN VELIE and JOSH FRIEDMAN

They’re small items: razors, socks, sometimes tampons. Community Action Partners of San Luis Obispo (CAPSLO) sells those goods, donated by local and national businesses, to the homeless people it serves, current and former employees say. But CAPSLO hasn’t accounted for those sales, either internally, or on its federal tax returns.

CAPSLO and a fund raising affiliate, Friends of the Prado Day Center, report on tax returns that the nonprofits do not sell donated items. And while nonprofits are required to collect sales tax on sold items, sources say and documents show that CAPSLO’s homeless services does not make the collections.

It is the latest question to be raised about reporting requirements for CAPSLO and its supporting nonprofits under California law.

Friends of Prado seeks to raise money to help pay for CAPSLO’s homeless services employees, according to its 2010 tax return. That return was obtained following numerous requests by CalCoastNews to view the document and the nonprofit’s mission statement. Friends of Prado refused to provide the nonprofit’s mission statement for more than a month even though federal tax rules require that the statement be available for review by anyone.

Friends of Prado attorney Ty Green, with Adamski Moroski Madden Cumberland & Green, sent an email saying other than the tax forms the nonprofit is required by law to provide to the public, Friends of Prado would not be opening its books to the public.

The charitable trust doctrine requires that a gift to a charitable organization must only be used for the expressly declared charitable purposes. The restriction applies regardless of whether the donor expressly imposed the restriction or the organizations transfers those assets or dissolves.

But Friends of Prado does not list on its tax return expenses for items purchased for children through the Dambly Children’s Fund, a fundraising arm of the nonprofit operated by local philanthropist Burke Dambly and CAPSLO Homeless Services Director Dee Torres that claims to have one purpose, to buy clothing and school supplies for homeless children. It works under Friends of Prado’s nonprofit tax exemption.

Friends of Prado Board members have not responded to questions about accounting for donated gift cards and money to the Dambly Children’s Fund and instead asked that all questions be forwarded to their attorney — who said no questions would be answered.

Shortly before publication of this report, Dambly agreed to provide an accounting of the Children’s Fund to CalCoastNews. He also said he plans to shift the fund into a foundation “sometime this year.”

In 2008, CAPSLO commissioned a “written assessment” of homeless services conducted by an independent consulting firm. The finished document, according to the 2009 San Luis Obispo County Grand Jury, “described serious deficiencies in each of three homeless services programs: case management; the Prado Day Center; and the Maxine Lewis Shelter” — for all practical purposes, the entire homeless program under Torres.

“The assessment was not distributed externally, not to CAPSLO’s governing board, nor to county or city government officials who provide substantial grants to the nonprofit for homeless services,” the Grand Jury reported.

In the minutes of the Oct. 28, 2010, CAPSLO Board of Directors meeting, former board member Jim Patterson asked why in-kind services were not reported in the audit. CAPSLO’s Finance Director Joan Limov said she had spoken to the Friends of Prado Board who agreed to begin recording in-kind donations as required by law. However, both Friends of Prado and CAPSLO do not account for donated items on their tax returns.

A CalCoastNews series has examined questionable case management practices, a lack of fiscal accountability, and other administrative practices of Community Action Partners of San Luis Obispo and its homeless assistance program.

Now, prominent local attorney and longtime homeless services advocate James Duenow is stepping up his call for in-depth performance and forensic audits of CAPSLO.

A probe “absolutely needs to be done by an independent auditor, a specialist,” Duenow said.

As part of its homeless program, CAPSLO operates two facilities providing aid to needy individuals – the Maxine Lewis Homeless Shelter and the Prado Day Center, the latter being the city’s only day service center.

CAPSLO regularly highlights its alleged success stories; tales that several former employees say are often constructed and accompanied with staged photos. Several homeless sources say they have agreed to be photographed in exchange for gift cards.

In a 2008 email from Lillian Judd, CAPSLO’s director of planning and development, to CAPSLO’s David Lichti, Judd asks Lichti to take some pictures to accompany photos of a man with his children for a homeless services’ success story.

“Perhaps you will find a place that has trash, toilet paper and such strewn around to more accurately display the stark reality of living outdoors,” Judd says in the email. “Or, if necessary, stage it for the photo and then clean it up. The other photo could be a hand pushing open a door that gives a look into a comfy apartment. You are setting the stage to deliver the message that no one has to live like this, and now he is not.”

The wealthy nonprofit has resisted an in-depth, outside audit of its spending and accounting practices despite testimony of numerous former and current employees, clients, donors and others who have alleged financial improprieties. Some of those assertions center around Torres, who reportedly fails to routinely properly account for certain kinds of cash, in-kind and product donations, and has been accused by former employees and ex-boyfriends of appropriating homeless resources for her personal use.

CAPSLO’s public response to the allegations to date has been to hire a prominent international law firm to threaten CalCoastNews sources and to launch a marketing campaign complete with newspaper inserts and promotion videos.

CAPSLO’s moves were not well thought out, Duenow said.

“The biggest mistake they made was to hire that lawyer, and the dumbest thing he did was to serve that letter on people. But what really bothers me,” Duenow said, “is that when this lawyer was hired, he had to have been given instruction from them. They are using taxpayers’ money to hire these guys, and this is a big law firm with offices all over the world. They don’t work cheap.”

In January, newly elected San Luis Obispo County Supervisor Debbie Arnold took a seat on CAPSLO’s Board of Directors and in February asked the board to approve an extensive outside audit. Her fellow board members rebuffed her request and elected instead to send letters to officials of the city and county of San Luis Obispo, asking both agencies to audit CAPSLO’s financials.

Both entities rejected CAPSLO’s request.

The problem with the audit request was that it would have been based on documentation provided by CAPSLO, Duenow said.

“It doesn’t do much good to just look at their books, because they produce the books. It has to be done by an independent person or group,” Duenow said. “It needs to be a good performance audit.”

Performance audits focus on complete examinations of operations, management systems and procedures of a nonprofit entity.

CAPSLO Chief Operating Officer Jim Famalette did not respond to questions on why the organization has not conducted a performance audit.

“It is important that these groups be transparent,” said attorney Duenow, who has devoted four decades to volunteer community homeless service.

Duenow is concerned about the future of a proposed county homeless center that CAPSLO wants to build, he said.

“There is something here that doesn’t smell right,” he said. “And the new homeless center is just dead in the water until CAPSLO settles this.”

Duenow has discussed CAPSLO with a number of large donors, he said.

“I talk to them all the time, they say they’re not going to give CAPSLO a penny more until there is transparency,” he said. “I hope this all gets straightened out. We need CAPSLO, we really do. Who else is going to do it?”