Continuing Coverage
The Atlanta Journal-Constitution first looked into allegations of financial mismanagement in the Gwinnett County Association of Educators in 2011. The complaints included that the organization paid thousands of dollars to a treasurer to perform administrative and consulting duties, although IRS guidelines say public charities can’t financially benefit insiders such as officers in a substantial manner. A firm found an audit of finances for 2008, 2009 and 2010 wasn’t possible because the organization lacked formal accounting, complete banking records and internal controls.
Nonprofit rules
The Internal Revenue Service requires nonprofit organizations to file paperwork with them annually. A nonprofit loses its tax-exempt status if it doesn’t file any paperwork with the IRS for three consecutive years. A nonprofit operating without its tax-exempt status could face an audit and fines.
An influential statewide organization that represents about 35,000 teachers when they are in trouble is having some troubles of its own.
Since 2011, 64 chapters of the Georgia Association of Educators have lost their federal nonprofit status, the Atlanta Journal-Constitution has found. The state association, meanwhile, had a deficit in net assets of about $1.8 million as of August 2012, according to federal income tax documents reviewed by the AJC.
The GAE, the local affiliate of the National Education Association, is largely viewed as the most politically active teachers group in the state. It has a strong lobbying presence at the state Capitol, consistently pressing lawmakers for more money to support public education. Its unwillingness to support Gov. Roy Barnes’ re-election bid in 2002 was seen by some political observers as a factor in his surprising defeat. The GAE once sued the state over teacher pay. Last month, the GAE endorsed Democrat Jason Carter’s candidacy for governor.
GAE leaders told the AJC they’re working with the local associations that have lost their nonprofit status and say the deficit is not cause for concern. They said negative numbers appear on tax documents because GAE now includes long-term health care costs for retired employees on its federal tax forms.
Others, though, are worried.
“This is our membership money. It’s really gotten out of hand,” said Nicole Trimble, a frustrated Gwinnett board member.
The Gwinnett association is a target of the most vocal GAE critics. Some past and present Gwinnett association board members say there are revenue discrepancies of about $60,000 between federal income tax documents in recent years and what leaders have told members.
In Georgia, one of many Southern “right-to-work” states, unions and businesses cannot force employees to join or financially support a union. GAE was created to operate much like a union to represent the interests of teachers.
Most members join, however, to receive legal representation, if necessary.
The association has 241 offices statewide. Some chapters have annual budgets near or slightly more than $1 million, with nearly all of their money coming from dues from teachers, who pay as much as $40 a month, local board members say. The state association’s annual expenses, according to tax records, are about $10 million.
GAE officials said some chapters, mostly outside metro Atlanta, have lost their nonprofit status in recent years due to poor organizational skills, by failing to file the paperwork needed.
Some chapters, though, have continued to operate despite losing their nonprofit status. The Bartow chapter,for example, lost its status in January but posted an announcement on its website this month that it was looking for school representatives. A nonprofit operating without its tax-exempt status could face an audit and fines, said IRS spokesman Mark Green.
Officials representing the Bartow association did not return telephone calls or emails for comment.
The AJC first reported on the troubles with the Gwinnett chapter in 2011. A group of teachers complained that the association paid thousands of dollars to a treasurer to perform administrative and consulting duties, although IRS guidelines say public charities can’t financially benefit insiders, such as officers, in a substantial manner.
An accounting firm found an audit of finances for 2008, 2009 and 2010 wasn’t possible because the chapter lacked formal accounting, complete banking records and internal controls. Leaders created a grievance committee to investigate allegations of financial mismanagement.
Critics say nothing has changed since 2011. Former treasurer Byron Howard said the Gwinnett organization claimed it had a balance of slightly more than $35,000 in 2012, but reported in tax documents it was about $70,000. Howard said the bylaws require an annual audit, but leaders indicated on several recent annual tax documents that no independent audit had been done.
The Gwinnett association’s co-presidents, Jan Goddard and Jeanette Griffin-Kimber, after initially indicating they would respond to the AJC’s requests for comment, referred all inquiries to GAE legal services director, Mike McGonicle. He and new state president Sid Chapman said a recent audit of the Gwinnett group showed there were no financial irregularities.
“It came back clean,” Chapman said.
The state leadership declined to share the audit with the AJC, stating GAE is a private organization.
They also disputed claims by Howard and others that a trip to a Democratic Party gala before President Barack Obama’s second inauguration in 2013 was not approved by the board. Howard said board leaders spent about $4,000 on the trip. State GAE leaders said they could not discuss in detail many of the complaints from the Gwinnett organization’s critics because those matters are typically handled by the local organization.
They say the recent audit shows the Gwinnett association is operating responsibly and critics are unwilling to accept “good news.” “They just don’t like the answers they’ve been getting over the years,” McGonicle said.
Howard’s wife, Janet, a former board member, said in one interview: “The reason we’re doing this is it’s the right thing to do and the members deserve to know how their money is being spent.”
State leaders said they are working with the local associations to restore their federal nonprofit status. As for the statewide association’s own finances, they said the retiree health benefit costs are not having an impact on GAE operations, but they are having discussions about keeping the organization fiscally strong for the future.
GAE leaders compared it to government agencies that also have had to face up to tough conversations in recent years about rising health care and pension costs for retirees.
Robert Yetman, who specializes in nonprofit accounting tax issues, reviewed some of GAE’s federal tax records for the AJC. He said the organization has some long-term financial challenges because of those retiree obligations.
“They’re kicking the can down the road,” said Yetman, who teaches at the University of California-Davis Graduate School of Management. “But they have a lot of company.”
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