Although officials planning Macon Mayor Jack Ellis' Saturday farewell gala promise entry fees will benefit Ellis' charity for children, the mayor has declined to release any information that shows where past donations to his foundation came from or how the money was spent. "You're not going to look at anything. You're not going to see anything, period," he said recently, when he found out The Telegraph was asking about the C. Jack Ellis Youth Foundation's finances. "Don't even question me about crap like that. ... We're raising money for children from families with special damn needs."
The foundation's stated purpose is to "provide support for youth enrichment and development for children with physical and learning disabilities or other challenges in the U.S., Caribbean or abroad (Africa)."
Ellis' farewell celebration is billed as a charitable fundraiser for the foundation. In addition to the $50 admission price, the event seeks sponsorships of $500 to $5,000 with a goal of raising $75,000. Organizers are planning to spend about $20,000 on the party itself, said Maria Taylor, an administrative assistant in Ellis' office who is chairwoman of the Farewell Celebration Committee for Mayor C. Jack Ellis. She said money that remains once party costs are paid will be donated to the foundation. Checks are asked to be made payable to the farewell committee, which party officials said has its own bank account.
The panel of Ellis supporters will then cut a single check to Ellis' foundation, said Taylor and Keshia Walker, president of the Atlanta company that directs day-to-day activity of Ellis' foundation and 14 others like it.
Ellis says he has intentionally kept his distance from the farewell committee to avoid any suggestion that the money might end up in his pocket. He said he is not even sure who all of the committee members are, except that it seems to be people who previously have supported his political campaigns.
Walker, of Insights Marketing, said it is up to the committee how much money it retains when the party ends and how much it sets aside for charity.
"You should talk to the gala about their accounting," she said. The foundation will be happy to take whatever money it is given, she added. Like Ellis, Walker said she would not release the foundation's financial transactions to this point.
"There's no reason to," she said. "There's been nothing that's been questioned or scrutinized, nor should there have to be."
Taylor and another committee member will provide financial oversight, keeping track of how much money is raised and what happens to it, Taylor said. Still, she would not divulge any of the committee's accounting details.
"It's not open to you all because you all are not supportive of (Ellis)," she said, referring to The Telegraph. George Muhammad, who is in charge of entertainment, said as much cash as can be raised at the party will be funneled to the foundation after expenses are paid.
"It's been made clear that that's what the money is going to be used for," he said.
Where does the money end up?
The check the party committee earmarks for Ellis' foundation will be donated to an account managed by a Virginia-based umbrella organization - a public charity called the National Heritage Foundation. The National Heritage Foundation at that point takes ownership of the funds. But Ellis is able to direct payments from the account, which is the C. Jack Ellis Youth Foundation, to the recipient of his choice. By law, the NHF has the power to overrule the mayor's disbursement requests and says it will only direct the funds to another qualified organization.
The NHF is a tax-exempt 501(c)(3) nonprofit that administrates accounts for more than 9,000 smaller foundations around the country. In turn, those smaller foundations claim a share of the NHF's tax-exempt status and do not register independently with any state or federal agencies.
Ellis suggested that even though party-goers will write checks to the party committee and not to the foundation, they still could qualify for a tax break because the committee can send a list of donors along with its check to the NHF.
The NHF may not be directly in charge of the fundraiser, "but we know that (donors') money, ultimately that's where it went," the mayor said.
Ellis' youth foundation, like others, is not incorporated on its own and does not adhere to the same public disclosure requirements as tax-exempt charities such as the NHF. The NHF and other tax-exempt nonprofits by law make public the IRS 990 form they file every year when reporting their financial condition to the federal government. John T. Houk, NHF president, said his organization's tax forms serve as "kind of a conglomerate" report that encompasses all of the various foundations tied to the NHF.
But there are no details about the individual foundation accounts included in the NHF's IRS 990 report, and Houk said privacy concerns prevent him from opening Ellis' books to the public.
He said the mayor's foundation balance currently is less than $100. He said it is difficult to say how much money has been disbursed since Ellis created the foundation in the spring of 2006. He suggested a "ballpark" amount of $10,000 before adding "that's not an accurate figure."
The Georgia Children's Museum received a donation at some point, the president said, as did Macon Links. Houk said Ellis has not been compensated with money from his account.
"Looking at the accounting for this thing there's no payments to any individual really," he said.
Houk and his immediate family occupy the top leadership positions in the National Heritage Foundation, which was started by his father. It has more than 100 employees. The NHF reported $46.8 million in income last year, down from $65.5 million in 2004. About $34.5 million of last year's revenue came from donations that the smaller foundations turned over to accounts managed by the larger organization.
The NHF spent $50.4 million last year on program services, up from $33.6 million two years prior. The foundation ended 2006 with total net assets worth more than $218 million.
'Why do people have be shown things?'
The arrangement Ellis has with the NHF is called a donor-advised fund. It's a system that has been around for decades but only gained legal definition last year when Congress sought more oversight of the funds with the Pension Protection Act of 2006.
"They've been tightening up on them somewhat recently," said David A. Brennen, a law professor at the University of Georgia who specializes in the taxation of nonprofits. The IRS has sought more reporting requirements for the funds, he said, similar to what they expect from private foundations.
Donor-advised funds have provided a popular way for people to donate money without creating their own private foundation.
"It's kind of the wave of the future," Brennen said. Among the largest are those operated by Fidelity Investments and The Vanguard Group.
Prior to the act, donor-advised funds were subject to a range of potential abuses, according to The Panel on the Nonprofit Sector. The panel includes two dozen philanthropic leaders who first convened in 2004 at congressional encouragement to study ways to beef up oversight and governance of charitable organizations.
Among the problems the group reported before the law was passed were donors using their accounts to pay grants to themselves or relatives for things such as tuition or tickets to charity events. In other cases, public charities had used donor-advised assets to reimburse donors or fund advisers for travel costs and other expenses supposedly related to the investigation of potential groups they might give money to.
The act, which President Bush signed in August 2006, was written to curtail those past abuses. It prohibits grants to individuals and for non-charitable purposes. The law also forbids donors from reclaiming money they place into their accounts or collecting income the dollars might generate.
There currently are no mandates for minimum payouts from donor advised accounts. A donor's contribution becomes tax-deductible immediately after it is placed into the account, regardless of how long it stays there. Money remaining in an account is invested by the fund's administrator.
This year, the IRS continues to cite in its list of "Dirty Dozen Tax Scams" the use of tax-exempt organizations to improperly shield income or assets from taxation.
"This can occur when a taxpayer moves assets or income to a tax-exempt supporting organization or donor-advised fund but maintains control over the assets or income," the IRS states. An IRS spokesman in Atlanta, citing agency policy, declined to discuss individual organizations or taxpayers.
Ellis was incensed when he first found out The Telegraph had asked the NHF about his youth foundation. He said he would not provide access to any information without a court order. He accused the newspaper of acting on racist motivations, going on to suggest it had made its fortune more than 150 years ago from slavery-related advertising. Nobody would care how his foundation was run if he were not a black man in a position of power, he said. "Why do people have to be shown things?" he said, before hanging up on a Telegraph reporter. "That's a damn plantation mentality."
