CHCA, CHCF reach settlement with Attorney General’s Office
Details of an agreement reached between the state Attorney General’s Office, the Chestnut Hill Community Association and the Chestnut Hill Community Fund were revealed in open session at Thursday night’s CHCA Board of Directors meeting.
The agreement, spelled out in a document called an “Assurance of Voluntary Compliance,” detailed the findings of a recently concluded investigation into the activities of the association’s board between 2001 and 2006.
Jean Hemphill, president of the community fund and an attorney with Ballard Spahr in Center City, presented the terms of the settlement to the board and members of the public. The resolution requires that a payment of $5,481.50 be made to the Commonweath of Pennsylvania.
This amount includes $2,900 for restitution of a grant, received in 2005 from the state Department of Community and Economic Development that the investigation determined was not properly accounted for by the Community Fund. It also includes a $500 civil penalty, $2,000 to cover the costs of the Attorney General’s investigation and $81.50 for filing fees.
The cost will be split evenly between the Chestnut Hill Community Association and the Chestnut Hill Community Fund.
The settlement document stated three conclusions of the Attorney General’s investigation: (1) that the Chestnut Hill Community Fund did not properly account for a portion of the 2005 grant from the state, (2) that the Chestnut Hill Community Association solicited funds without being registered as a charity, and (3) that contributions to the community fund were “commingled” with operating expenses of the CHCA.
The discussion, led by Hemphill, centered on the second conclusion and addressed the question of whether or not the community association is a federal tax-exempt charity. According to Hemphill, the association has never thought of itself as a charitable organization. That designation has always belonged to the Chestnut Hill Community Fund, which is registered as a 501(c)(3) tax-exempt charity.
The Attorney General has concluded that the activities of the community association are charitable in nature and, therefore, according to Pennsylvania law, if the association wishes to continue to solicit funds from the public and hold events (like the Black and White Gala), it will need to register as a charity.
“This comes as a surprise to many,” said Hemphill, who noted that even the association’s accountants were surprised by this interpretation of the law. “However, the Attorney General is the interpreter of that law, and we believe it is appropriate to honor his interpretation.”
The third conclusion, regarding the commingling of funds, was a violation of the Pennsylvania Charities Act, which requires that money for charities must be kept separate. According to Hemphill, the Attorney General found that a community association credit card account was used for expenses relating to the Black and White Gala. Because this account was not immediately reconciled with the Community Fund, the investigation concluded that this constituted a commingling of funds and, therefore, violated the Charities Act.
“The biggest issue at hand here is paying the money,” said Hemphill, “but this is the settlement, and we want to move on, close this chapter and put the activities of the board prior to 2006 behind us.”
She said that she and others have worked hard on governance issues relating to the administration of the community fund and the financials of the community association. With this settlement, she added, “we are in good shape.”
Details of the improper accounting of the 2005 grant were not discussed at length at Thursday’s meeting. The grant was intended for improvements made to Town Hall, but portions of the grant also went to improvements to a building across the street. Hemphill noted that once they became aware of the irregularity, an offer was made to repay the misspent portion of the grant to the state. This repayment offer received no response from the state.
Once Hemphill completed her comments, and members of the board were given the opportunity to speak, board president Walter Sullivan opened the discussion to members of the public. Before doing so, he cautioned that comments could only be limited to the settlement document before the board.
The only member of the public to address the board was former board member Ed Feldman, whose outbursts threatened frequently to disrupt the proceedings. Feldman addressed Sullivan directly, stating that the issue of the CHCA soliciting funds without being properly registered as a charitable organization, had already been brought to the board’s attention.
“It should not have come as a surprise,” he said. “All allegations identified in the Attorney General’s investigation were brought to the board’s attention by the Oversight Committee.”
The Oversight Committee, of which Feldman was a member, was responsible for much of the information that was ultimately sent to the Attorney General after its chairman, Jim Foster, former board president Ron Recko and others hired an attorney in 2008 when they believed that the association’s board was not doing a thorough job of investigating widespread financial problems that had occurred between 2001 and 2006 — the scope of the Attorney General’s investigation.
The CHCA board voted to accept the settlement agreement and approved a resolution granting approval to pay half of all fees required by the settlement. In accepting the settlement, the CHCA and CHCF do not admit to any wrongdoing.
Sullivan expressed his belief that the conclusions of the investigation and the resultant costs represented the “tiniest piece of peanuts” for what he termed a small technical violation.
Other items of interest:
• Fiscal year 2011 budgets for the Chestnut Hill Local, the Chestnut Hill Community Association and the Chestnut Hill Community Fund were all approved. David Mansfield, treasurer of the community association, reported that as part of the FY 2011 budget for the Local, the paper is expecting to increase revenue received from Internet banner ads placed on the Local’s Web site (www.chestnuthilllocal.com) from $1,550 in FY 2010 to $50,000 budgeted for 2011. He also reported that the paper would seek to pursue “enterprise reporting,” featuring in-depth articles requiring research and attract known names to write for the paper. Board Member Ann Spaeth suggested that there should be more of an effort made to get local businesses, especially those who are members of the CHCA, to buy ad space in the Local.
Budgets for both organizations were ratified at the meeting.
• Jennifer Reed, author of the Local’s Eco-Logic column and secretary of Green in Chestnut Hill (GRinCH), reported on the organization’s efforts in its first year of activity, which included Green Seminars hosted for the Chestnut Hill and Mount Airy business associations, recycling assemblies held for students at the Jenks School and a Christmas tree recycling program that collected more than 250 trees. Its goals for 2010 include starting a recycling program at the Jenks School and establishing a series of sustainable and green practices for all current and future Chestnut Hill Community Association projects. GRinCH president Amy Edelman addressed questions relating to appropriate trash and recycling practices for Chestnut Hill businesses.
• The Community Fund Drive, which ended on March 31, reported a total collection of $100,601.