September 15, 2014;Philadelphia Inquirer

The complexity of hybrid organizations shows up in multiple ways, typically around transparency and accountability. In Philadelphia, Visit Philadelphia and the Philadelphia Convention and Visitors Bureau (PHLCVB), two tourism marketing and development organizations, are largely funded by Philadelphia’s hotel tax. Visit Philadelphia, officially the Greater Philadelphia Tourism Marketing Corporation, gets approximately $8 million of its $11 million budget from the hotel tax.

Visit Philadelphia has encountered some share of problems, notably the embezzlement of $210,000 over five years by its chief financial officer. In bad form, Visit Philadelphia chose not to notify law enforcement authorities, but allowed the CFO (who has now taken a job with another nonprofit, the Benefits Data Trust, which is largely funded by government grants) to simply quit with the promise of restitution. Although we have no information about whether restitution was paid and notwithstanding the failure of Visit Philadelphia to notify authorities, the local district attorney has launched an investigation of the embezzlement on his own.

With the news of the misappropriated funds and the fact of extensive government funding behind the two tourism agencies, the Metropolitan Regional Council of Carpenters—that is, the Carpenter’s Union—has written a letter complaining that there is “virtually no oversight” of the spending of the two organizations and that the tourism agencies have denied the union access to some financial information because “neither organization as covered by Pennsylvania’s Open Record law because they are private nonprofit organizations.” It’s not hard to figure out that the Carpenter’s Union has a major beef with the agencies, particularly the Philadelphia Convention and Visitors Bureau, where they are picketing construction because of the failure of the union and the Bureau to come to terms around a new contract. The Carpenters’ Union has requested a full audit of both agencies.

While this might look like either a problem of a rogue CFO who pocketed $210,000 or a longstanding conflict between the convention center and organized labor, there are significant nonprofit accountability issues involved, including these:

  • Why would Visit Philadelphia not have taken steps to bring its former CFO to justice through legal prosecution—and by failing to do so, inflict her on another taxpayer-supported nonprofit, where she is also CFO again?
  • Given that the former CFO was a direct report to the CEO of Visit Philadelphia, to what extent did that play into the decision of the agency to forego turning her over to the authorities?
  • Given that the two agencies play public roles—and even were the subject of a city controller’s report released last week that called for the two to be merged due to functional overlaps—why shouldn’t these “public” or “governmental” nonprofits be subject to transparency and disclosure standards more like the governmental authorities that use them and fund them for tourism promotion activities?
  • Even as a nonprofit eligible for nonprofit-consistent confidentiality rules, after a $210,000 embezzlement by the organization’s CFO, shouldn’t some of the information requested by the Carpenter’s Union and by the Inquirer be made available for the purpose of enhancing accountability and dealing with the embezzlement problem? The Inquirer was denied access to Visit Philadelphia’s board minutes from January 2012 on, which includes the period when the CFO was permitted to simply leave, the list of agency employees and their salaries, and the contract between Visit Philadelphia’s CEO, who in its Form 990 filing for fiscal year 2012 was paid over $400,000, and related organizations.
  • Does the fact that both of these tourism-related organizations receive (and basically split) the entire proceeds of the city’s hotel room tax put them in a different class of nonprofit because, in essence, they function as arms of the municipal government?

Issues of transparency and accountability aren’t easy for any nonprofit, but they are doubly harder to sort out when the nonprofits involved are basically controlled and funded by government.—Rick Cohen