Two Los Angeles Nonprofits Fined by the City’s Ethics Commission

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February 11, 2016; Los Angeles Times

Nonprofits that spend a big chunk of their time and energies on advocacy – especially those taking positions on contentious issues—need to dot all their i’s and cross all their t’s when reporting their activities to government ethics regulators.

The Los Angeles Times reports on two nonprofits that could face fines of more than $47,000 from the L.A. City Ethics Commission because they failed to accurately report how much they had spent on lobbying at City Hall.

The commission’s staff has proposed a $30,000 fine for the Los Angeles Alliance for a New Economy (LAANE), an influential organization aligned with labor that has successfully pushed to raise workers’ wages, and $17,500 for the Hospital Association of Southern California, a local trade group.

The commissioners are scheduled to vote on the proposed fines next week. If they approve, the $30,000 fine for LAANE could be the highest penalty that they have imposed for lobbying disclosure violations since the commission’s inception in 1992.

The Times reported a last year that LAANE had failed to fully disclose its lobbying activities—several of its employees had registered as lobbyists, but the organization failed to report any payments to those employees or any related expenses. LAANE acknowledged that it hadn’t properly filled out the forms, calling it a mistake.

Later, LAANE submitted reports that showed it had spent more than $175,000 on lobbying from October 2011 through September 2014, none of which had previously been reported. LAANE lobbied city officials on a variety of issues, and its executive director told the paper that it fixed its mistakes as soon as they were aware of them, and would not contest the fine.

Ethics Commission investigators found similar problems in the lobbying forms filed by the Hospital Association, which has advocated for exempting hospitals from the city’s revision of its trash hauling system and opposing the formation of a city health department. It had registered with the city and filled out forms but failed to accurately report how much it spent, reporting no expenditures for nearly two years, said the article.

In fact, the Association spent more than $108,000 during 2013 and part of 2014. Both groups could have been fined even more, but staff went easy on them because they cooperated with investigators, had no history of previous violations, and appeared to have simply misunderstood the rules, which are notoriously complex.

Critics of LAANE, such as business advocates, had called attention to the amount of money the group spends on lobbying because IRS rules governing 501(c)(3)’s say that lobbying cannot be a “substantial part” of a nonprofit’s activities. This restriction did not apply to the hospital association because it is a 501(c)(6), and has more latitude.

LAANE told the Times that it had fully reported its lobbying expenses to the IRS all along, and was well under the threshold of “substantial part.”—Larry Kaplan