The Booker T. Washington Center has appealed to get its federal tax exemption reinstated, but its dispute with the Internal Revenue Service has highlighted deep financial problems at the 91-year-old Erie social-service agency.
The center, at 1720 Holland St., has been so short of cash that it was unable to pay accountants to prepare the type of mandatory tax forms the IRS is claiming it failed to submit.
The IRS in March automatically revoked the Booker T. Washington Centers status as a 501(c)(3) tax-exempt nonprofit because, according to the IRS, it did not file a tax document, known as a Form 990, for three consecutive tax years: 2010, 2011 and 2012.
The centers executive director and its new accountant said it did file the Form 990 for 2010, a copy of which the accountant provided to the Erie Times-News. The accountant, Christopher Elwell, retained on May 2, said he has filed an appeal with the IRS to figure out what happened to that filing and to reinstate the exemption — the revocation of which has already cost the center tens of thousands of dollars in funding.
Elwell said, however, that the Booker T. Washington Center never prepared or filed 990s for 2011 and 2012, which were due in 2012 and 2013, respectively. He said the center did not have the money to pay an accountant to prepare the forms for 2011 and 2012, which Elwell said he will prepare.
It was cash flow, said Elwell, a certified public accountant with Maloney, Reed, Scarpitti Co. LLP in Millcreek Township. They no longer had a relationship with the prior accountant.
That accounting firm, Buseck, Barger, Bleil Co. Inc., of Erie, prepared the Form 990 for 2010, which is dated Dec. 27, 2011.
The Buseck firm also prepared the centers Form 990 for prior years, according to the 990s, which are public documents that detail nonprofits finances. And the Buseck firm performed an audit of the center, dated March 14, 2012, for the 2010 fiscal year, which ended June 30, 2011. The certified public accountant who signed the 990 for 2010, Valerie L. Hartley, was unavailable for comment.
Elwell is the first accountant the Booker T. Washington Center has retained since the Buseck firm finished its work.
We are basically behind in our funds, said William Jeffress, executive director of the center. We were not sure we could afford a full-fledged audit, which is about $10,000.
Jeffress said the center is looking into having its accountant, from now on, perform a less expensive financial review.
Elwell said the centers immediate concern is to get its exemption reinstated. He said the center then must file the other 990s, including the one for tax year 2013, which is due in November. Failure to do so would lead to another automatic revocation.
We are not trying to point any fingers, but we are trying to get clarification and get this resolved, Jeffress said of the IRS.
Jeffress said the center also received a bill from the IRS for some taxable activities in tax year 2010, which also ended June 30, 2011. Elwell said that bill, which the center paid, also indicates the IRS received a 990 from the center for that tax year.
There is no way you could have been able to bill my client without having a tax return on hand, Elwell said.
Aside from the loss of funding due to the IRS dispute, the Booker T. Washington Center has seen its amount of funding drop considerably over the past several years — a result, Jeffress said, of a reduction in government aid nationwide. The center received $703,264 in overall revenue in 2008, $434,140 in 2009 and $479,676 in 2010, according to the available 990s.
The centers expenses, much of them tied to programs, did not decline as much over that period. The centers expenses were $780,764 in 2008 (leading to a $77,500 operating deficit), $566,408 in 2009 (for a deficit of $132,268) and $608,985 in 2010 (for a deficit of $129,309), according to the 990s.
Buseck, Barger, Bleil Co. Inc. noted the Booker T. Washington Centers precarious financial situation in the March 2012 audit.
The Organizations continuing losses and decreases in cash cause doubt regarding the Organizations ability to continue unless they receive additional funding and grants, according to the audit.
The Erie Times-News obtained a copy of the audit from Erie County government through a Right-to-Know Law request. The county at the time required the center to submit an audit to receive county funding.
Jeffress said the Booker T. Washington Center spends 90 percent of its funding on programs, and plans to make a public appeal for funding once it resolves the appeal with the IRS. He said the center, among other things, needs money to fix its roof.
A lot of people think we get state and federal funds and they are flowing like water. Those funds are not flowing, said Jeffress, who earned $49,848 as executive director in tax year 2010, according to the Form 990.
Loss of funds
The loss of the 501(c)(3) status led to the suspension of the centers funding from two of its major sources — the United Way of Erie County and the city of Erie, which passes through federal block grant money to the center. The city and the United Way both require an organization to have 501(c)(3) status to receive funding.
The city alone has withheld $10,030 in federal Community Development Block Grant funding the center was to receive for summer recreational programs this fiscal year, which ends June 30. The amount the United Way has withdrawn was not immediately available, though the agency in fiscal 2010 gave the center $142,686, according to the 990.
Erie County government, another major funding source, is to provide the center $101,995 for anti-drug and anti-violence programs this fiscal year.
Tax-exempt status is not a requirement for county funding, though the director of the countys Department of Human Resources, John DiMattio, has expressed concerns about the centers long-term financial health, and he met with Jeffress on May 20.
DiMattio said Jeffress told him the center would have to consider cutting programs and other expenses to the bare minimum.
ED PALATTELLA can be reached at 870-1813 or by e-mail. Follow him on Twitter at twitter.com/ETNpalatttella.