A little more than a week after it sent up a vague alarm about troubled finances, Know Your City is sharing more about the scenario that had the six-year-old Portland nonprofit thinking about shutting down for good.
The group’s executive director and board treasurer tell the Mercury that Know Your City changed accountants in 2014, leading to near disaster when six quarters’ worth of payroll taxes weren’t filed with the state or federal government.
“When this switch was done that’s when the problem arose,” says Luis Torres, Know Your City’s treasurer. “There was a miscommunication.”
Torres and Cameron Whitten, the group’s unpaid executive director, won’t say who the accountant was, or how much Know Your City owes in back taxes. Whitten says the accountant in question is a professional, but did not have previous experience with nonprofit organizations.
The new information comes as Know Your City pushes an end-of-year crowdfunding campaign, shooting for $12,000 it says can put the organization—known for walking tours, historically themed comic books, and community forums—back on track. To date, it’s raised about a third of that goal.
It also comes as the group’s co-founder and former executive director, Marc Moscato, has been vociferous in defending his leadership of Know Your City. He told the Mercury last week he was baffled by the group’s cryptic suggestions there were improprieties in the way Know Your City was run, saying that the group faced only run-of-the-mill funding challenges during his time at the helm. Moscato couldn’t immediately be reached for comment on the group’s latest revelation.
According to Whitten and Torres, Know Your City began getting letters from the Oregon Department of Revenue, Oregon Employment Department, and US Internal Revenue Service in September—the first sign, they say, that not all was right with the group’s taxes. They soon learned that payroll taxes hadn’t been paid in the last three quarters of 2014 or first three quarters of 2015, Torres says. Know Your City, already facing some funding challenges, immediately cut all paid staff to avoid further problems as it set to figure out the scope of the situation.
It’s currently petitioning for a waiver of penalties on the back taxes, and has set up payment plans.
“We’re at a point now where it doesn’t matter who did and who didn’t do whatever,” Torres says. “We are where we are.”
“We’re at a point now where it doesn’t matter who did and who didn’t do whatever,” Torres says. “We are where we are.”
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Awesome, that must be really great comfort to the past executive director who your new exec very publicly all but called either stupid or crooked.
It’s a shame to see an org with a worthy mission run by people who don’t seem to be up to the task.
As soon as I saw Cameron Whitten was the one making vague accusations I had a feeling that he was probably jumping the gun and it would all turn out to be false. I wonder if Moscato will sue, my guess is no but only because Whitten’s lack of a steady income has made him judgement proof. Whitten likes to see his name in print a little too much if you ask me, and this time he has damaged someone else’s reputation instead of just his own.
What do you do when you want to defame the former ED, but he doesn’t like it? Defame the accountant!
(Fyi: Being a nonprofit doesn’t affect your payroll withholdings.)
BONUS RANT: The ratio of libel/slander/defamation cases actually brought compared to the number of those cases online commenters imagine exist is probably something like 1 to 10,000,000.
I wish a little MS Word FAQ paper clip could pop up any time one of those words is typed online. It might say, “a lawyer for this is $300 an hour with a $5K or $10K retainer, harm is extremely difficult (and expensive) to quantify, and since insurance doesn’t cover private people running their mouths and judgments are dischargeable in bankruptcy, 99.999% of cases like this don’t pencil out. If you’re not wealthy, you may as well operate as if these words and concepts aren’t real.”
The explanation does not make sense. If the former accountant was doing the payroll taxes then the former accountant was also doing the payroll. If the new accountant wasn’t doing the payroll taxes then the new accountant wasn’t doing the payroll either, and about two weeks after the changeover the employees would have mentioned something when their paychecks didn’t arrive. That’s why God invented ADP and Paychex.
I was the founder/director of a tiny nonprofit that made $5k, $10k and $20k in subsequent years before I decided to fold it. I only bothered to pay myself once: $1800 from a $5000 grant. It came out to $1100 in salary (that’s before personal income taxes) after the various payroll taxes, unemployment insurance and a ton of paperwork.
I considered hiring myself through a temp agency to save on paperwork. Their standard deal was that they take 40% of whatever you’re budgeting for staff costs, handle all the payroll taxes and other expenses for you and pay the staff the other 60%. I probably should have done that but I just found it hard to swallow.
Note that none of this includes benefits. God forbid.
Marc is an entrepreneurial idea man; maybe he got sloppy on his organization’s taxes, I dunno. I did – I’m probably on the state’s Most Wanted list for failing to pay our $20 a year charity registration fee just because the associated form required looking up some numbers, writing them down and putting something in the mail. Most small business managers, for-profit and non, probably do stupid things like that. Keeping a little enterprise alive requires a zillion completely different tasks, you’re going to flub some of them, and keeping in the government’s good graces rarely seems pressing.
Cameron, meanwhile, is a can-do idealist. I don’t know the details here but I do like them both, and I like Know Your City’s mission and approach, so I’ve been happy to chip the organization $10 a month to help give it a little breathing room.
I’m not defending whatever fuckups may or may not have been involved here (including my own with my other organization) but stuff like this is par for the course, unfortunately, for a lot of the little enterprises that help make Portland interesting. Pick your poison.
@MichaelAnderson, with that said, there are very good free resources out there for fledgling Oregon nonprofits to help them avoid rookie mistakes, e.g. Nonprofit Association of Oregon (which has a really good FAQ).
I think we can infer from all the articles on this so far that KYC is doing a decent job of meeting its basic responsibilities for a NP, but it looks to have run into the same wall that most professionalizing passion projects run into: getting real, substantive work done dictates almost constant fundraising, which means more overhead, which means more fundraising, which means more…
My guess is that most of the successful NPs (excluding ones that start as the pet projects of wealthy founders) decide that it makes more sense to put resources into directors who are more experienced at running a NP and fundraising than they necessarily are passionate about the particular mission. My guess is the NPs that have trouble are more often the ones that hire execs who are less experienced, but passionate enough that they’ll work hard for very little pay.
It’s obviously a very tough problem to solve, so KYC has my sympathy – you can’t really tell a quality would-be exec “if you join us, you’ll make an acceptable salary…. once you raise it for yourself.”
Thanks for clarifying this Dirk – appreciate your coverage of this issue.
As the article addresses, the issue here is an accounting issue not financial mismanagement on behalf of staff. The former KYC accountant is a CPA but did not complete the taxes correctly and it has unfortunately has hurt the organization. And while regrettable, managing payroll and filing taxes was not in my my purview as Executive Director (I’m not a trained accountant and it would be a conflict of interest). The case could be made that the former and current board as well as staff have some responsibility to bear in their lack of oversight but it’s difficult to really blame anyone as nobody was aware there was an issue.
I will say I am disappointed the organization chose to communicate this issue to the public in this manner but we are moving on. I have met with the board and we are seeking to put this behind us by putting new systems in place to ensure the organization has a legacy and will be financially sustainable into the future.
I thank everyone for their support of the organization over the last 6 years of my directorship, and for our community’s continued support of this vital organization. I have nothing but pride for all the amazing things we were able to do together, and can’t wait to see what the organization does next.