SHEPARDSON STERN & KAMINSKI LLC -- WHO ARE THESE GUYS?

So, the recently filed JFNA 990 Return disclosed a FY 2014-2015 $1,000,000 contract to the Consulting Firm, Shepardson, Stern + Kaminsky, "SS+K" if you will. I don't know what SS+K did for JFNA, and neither do you, but here is how that Firm described itself:

"Shepardson Stern + Kaminsky LLC operates as a creative agency. It offers research services in the areas of competitive analysis, experience architecture, analytics, and brand positioning aspects; social services, such as engagement, channel and content planning, community management, and blogger outreach programs; brand services, including mobilization and activation services; marketing services, such as online and offline advertising, original content, and brand experience services; and visual services, including design, identity, and brand architecture services."

These are big-time players, with an amazing client list, and they describe themselves as follows: "creatively driven, truth inspired and mission based." They're clearly great. And, a plus, the SS+K offices are just 12 minutes by foot from 25 Broadway. (Oh, if only JFNA were "creatively driven, truth inspired and mission based.")

OK, now we know whom SS+K is. The question: what the hell did they do for JFNA, for the federations, for $1,000,000? Huh? A small box on the 990 describes their work as the "Project Connect Production." Ever hear of it? Was there an RFP? Was there competitive bidding for this $1,000,000 contract? Did the JFNA Board approve this $1 million consultant contract; did the JFNA Executive Committee? What the hell was/is it? I have found no evidence that this Contract -- this $1 million dollar deal -- was ever approved by any JFNA governance vehicle. It just happened, apparently. 

But, then there was this:

I emailed Pam Zaltsman and requested a copy of the SS+K/JFNA Contract:

"Dear Pam,

I hope all is well.

Pam, could you please email a copy of the SS+K (Shepardson Stern + Kaminski) contract executed by or for JFNA sometime in 2014?

Many thanks,

Richard"

That request was made on August 6. and Pam's immediate response took my breath away. Here''s what she wrote::

"Hi Richard,

SS+K worked on an Israel Advocacy project which was funded by an anonymous donor.  Due to the confidential nature of the agreement and the project I am not at liberty to share the contract with you. 

Pam" (emphasis added)

Friends, I have known Pam as a wonderful professional, first at UJA and, then, JFNA -- but her response opens an entire new can of worms. Is JFNA laundering funds for special donors? Doesn't JFNA have to assure that funds flowing through it (as is the case with allocations to JAFI/JDC/ORT) are applied for qualifying charitable purposes? Why would an "anonymous donor" not fund an "Advocacy project" directly with SS+K? And, as a 501(c)(3) how does JFNA execute "confidential agreements?" How many more  "confidential agreements" for "anonymous donors" are there? 

Friends with greater knowledge of non-profit law than I have advised me that JFNA's service to a donor as a conduit is illegal. Further, JFNA's response ignores the legal reality that the donor's demands notwithstanding, his/her donation when made became the absolute property, perhaps with conditions -- conditions that would have to have been approved pursuant to JFNA's codified Gift Approval Policy -- was it?  The then expenditure of the donor's gift was strictly and solely a JFNA expenditure for which JFNA was and is responsible. 

Here's one apt analysis:

"But what if the fiscal sponsor is really just a pass-through? What if it automatically turns the money over to the non-exempt entity without exercising any discretion or control? Will the arrangement still hold up? Will the contributions still be tax-deductible?

As it turns out, for almost sixty years, the IRS has said that fiscal sponsorships are acceptable unless the tax-exempt group is a “mere conduit” for the distribution of the money. If it is a “mere conduit”, meaning it has no discretion or control over the funds, the arrangement fails and the transaction is treated by the IRS as one directly between the donor and the non-exempt entity, and therefore it is not tax-deductible. (See Rev. Rul. 62-113 1962-1 C.B. 10. See also IRS 1996 CPE Text ”Conduit Organizations – Charitable Deductibility and Exemption Issues” by  Ruth Rivera Huetter and Bill Brockner http://www.irs.gov/pub/irs-tege/eotopice96.pdf)."

This stinks.*

It's possible that the CEO, good old Smilin' Jerry, felt/feels so enabled, that he would authorize a $1,000,000 conduit with no lay approval process? In all events, just who at JFNA authorized this "arrangement?" Board Chair Michael Siegal? CEO Silverman? Renee Rothstein? Mark Gurvis? Kathy Manning (just because)? You? Nobody? And...no questions asked. When I asked Pam where the offsetting income appeared in the 990, she pointed to a "Program Services" income entry -- yet it really wasn't that was it? 

If you ask: "Do you really believe that that Budget approval authorized the execution of a $1,000,000 contract by JFNA with a third party on behalf of an undisclosed donor without Executive Committee or Board action, you will be told: "We'll get back to you." 

The potential for abuse in this "process" is so notorious that one wold expect, in a "normal" non-profit, that heads would roll. But, this is, of course, JFNA. Who was aware of this, who approved it, who monitored the application of $1,000,000? Were any questions asked?

This has to be explained...and, then, it has to stop.

Rwexler


* I later asked Pam Zalzman, JFNA CFO, for a copy of Deborah K. Smith's Consulting Contracts. The response:: "JFNA does not distribute its contracts"