Expense reporting at Patriots’ Gateway confuses monitoring Web site

StoryImage( ‘/Images/Story//Auto-img-114245510111572.jpg’, ‘Photo by Melissa Wangall’, ‘Patriot's Gateway Community Center on South Fifth Street is funded with taxes and federal grants. Now its financial reporting is in question by CharityNavigator.org.’);

A change in the way Rockford’s Patriots’ Gateway Community Center (PGCC) reports its expenses to the U.S. Department of Treasury has the charity-monitoring Web site CharityNavigator.org scratching its head.

PGCC is listed on the Web site CharityNavigator.org, which is a nonprofit site that rates charities based “on their organizational efficiency and their organizational capacity.” According to the site: “We use a set of financial ratios or performance categories to rate each of these two areas, and we issue an overall rating that combines the charity’s performance in both areas.”

According to an e-mail from CharityNavigator.org Director of External Relations Sandra Miniutti, the site uses a tax document called Form 990, a financial statement charities are legally bound to make publicly available. The 990 forms used for this article were obtained from the Web site Guidestar.org.

On PGCC’s 2002 Form 990, salaries and wages were filed under management and general, i.e., administration costs. CharityNavigator.org defines administration costs as the “percent of its total budget a charity spends on overhead, administrative staff and associated costs, and organizational meetings. Dividing a charity’s administration expenses by its total functional expenses yields this percentage.” According to PGCC’s 2002 Form 990, 51.6 percent of expenses were program costs, and 39.5 percent were administration costs.

On PGCC’s 2003 Form 990, the year cited on CharityNavigator.org, salaries and wages were again listed under administration costs. Of PGCC’s total 2003 expenses, 50.7 percent are claimed for program expenses, and 43.3 percent are used for administration costs.

On PGCC’s 2004 Form 990, PGCC’s salaries and wages were switched. They are now listed under program services, a variance from the 2002 and 2003 fiscal years. This gives the PGCC an 82.9 percent program cost and an 11.3 percent administration cost. The remaining 5.6 percent of costs are listed under fund-raising. Miniutti said in an e-mail: “…This is not typical in this sector. We do not see charities moving all of their salaries from one classification to the other.”

Lori Hoadley, PGCC secretary and attorney, said: “This is a volunteer board, and we all just donate our time. I know there’s some allegations out there that we’ve received compensation and that’s simply untrue. Not only do we donate our time, but for those of us who have the ability to do so who serve on the board, we will also donate services of the businesses we’re associated with.”

The CharityNavigator.org’s Web site does not list any reparations for board members.

Jim Flodin, executive director and CEO of PGCC, said: “I don’t handle a dollar here. It all goes through other people. I’m trying to keep the place clean and running.”

Flodin said there are many volunteers and only one full-time employee on staff. The remaining staff members are part-time, most making $7 to $8 per hour.

Hoadley said: “The administration expenses encompass all of the operational budget. It’s not [just] salaries. What it does include is all of the operational expenses of running this building. It includes the salaries [of the employees], but overall, that’s a small expense. It also includes our mortgage interest payments and payments on the building itself. We have a $1.4 million debt that’s still outstanding on the building. You can imagine those payments are quite hefty. That’s the largest portion of the administration.”

These costs are included as administration costs because, as Hoadley said: “It’s not capital improvements because it’s already an existing debt. The administration expenses, I’m guessing, the church-based ones, they probably already own their building.”

Sacred Heart Center based in Virginia, a two-star charity according to CharityNavigator.org, used 80.4 percent for program expenses and 12 percent for administration costs. St. Mary’s Center, a four-star charity, used 88.1 percent of expenses for program costs and 6 percent for administration costs. Sacred Heart and St. Mary’s Center are both nonprofit community centers. St. Mary’s Center rents its building. A spokesman relayed that the Center does not include rent in the administration costs.

Middle Tyger Community Center in Lyman, S.C., a two-star community center, does not pay rent because the local school district lets the center use the building free of charge. The center’s administration expenses consist of staff salaries.

Messages were left with other community centers that were compared with PGCC, but were not returned in time for publication.

Line 36 on the 990 Form is allotted for “…total amount paid or incurred for the use of office space or other facilities, heat, light, power, and other utilities…mortgage interest, real estate taxes…” according to the Department of the Treasury guidelines for the Form 990 found at Web site www.irs.gov/pub/irs-pdf/i990-ez.pdf. PGCC does not have any amount of money entered on this line. Line 41 is attributed to interest defined by the Department of Treasury as “…total interest expense for the year,” continuing, “Do not include any interest attributable to rental property or any mortgage interest treated as occupancy expense on line 36.”

Miniutti said in an e-mail: “According to the IRS guidelines for completing the Form 990, mortgage interest payments should be included in line 36 (occupancy). It looks like Gateway put those expenses under line 41. Regardless, they’ve classified this expense as a program fee, not an admin fee.”

High functional expenses for PGCC during this fiscal year include costs for construction. On the 2003 form, $175,819 is listed as construction costs for the community center. Of that sum, $12,240 is listed under program costs and $22,056 listed under administration costs. Total administration costs were $227,101, with $163,755 spent toward salaries and wages. Total functional expenses for 2003 were $524,069.

Sacred Heart Center and St. Mary’s Center split the cost of salaries between program costs and administration costs with the majority expenditure under program costs, a usual pattern for charities, according to Miniutti.

From the March 15-21, 2006, issue

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