Executive Summary
The Philadelphia Activities Fund, Inc. (Fund) is a nonprofit organization established in 1994 by the City of Philadelphia (City) to support nonprofit and community-based organizations that provide recreational activities to Philadelphia residents. The Fund provides grants up to $7,500 to nonprofits and community organizations focused on recreational activities that are selected through a grant application process. The Fund is governed by a six-member Board of Directors (Board), which includes several members of City Council. The City’s Department of Parks and Recreation is responsible for administering the grants awarded by the Fund.
Following 2019 reporting that the Fund’s 501(c)(3) status had been revoked by the IRS nearly a decade before, Board Chair and Councilmember Brian O’Neill requested that the Office of the City Controller conduct a review of the Fund.
The Controller’s Office’s review aimed to examine the Fund’s governance, fiscal/cash management, and the grant awarding process and grantees for the period of July 1, 2015 through June 30, 2020 and provide recommendations for improvement. The Controller’s Office engaged J. Miller & Associates to assist with the review.
REPORT FINDINGS
While the Department of Parks and Recreation is responsible for administering the grants awarded by the Fund, the Board is responsible for all operational and fiscal decisions relating to the Fund including final approval of all grant awardees. However, the review found that the Board did not provide adequate oversight of the Fund’s operations. The Board was inactive from July 1, 2015 through June 30, 2017 and did not meet regularly to manage the organization. Instead, District Council offices awarded all grants for their districts without oversight or involvement from the Board. Though the Board was reconstituted in 2017, issues with oversight were noted throughout the review period.
The review also found issues with the Fund’s fiscal and cash management, including the lack of an accounting function and inadequate recordkeeping. The review found that the Fund failed to prepare financial statements and budget reports, file its 990s, and reconcile its bank accounts from July 1, 2015 through June 30, 2020. While outside the review period, it should be noted that the Fund lost its 501(c)(3) status as a direct result of not filing its 990s. As a result of improper fiscal management, the Fund also disbursed more funding than was available to several Council districts in 2016. To ensure all awarded grants were paid, the Fund requested and received a $100,000 loan from Philly Races, Inc., another nonprofit managed by the Department of Parks and Recreation. As the Board was inactive during this period, the over expenditure could not be reported to the Board for intervention. Additionally, the review identified inadequate recordkeeping, resulting in data discrepancies between the grants paid per internal records and the grants paid per the IRS Form 1023 for fiscal years 2017, 2018 and 2019.
Moreover, the review found several instances of non-compliance in the grant awarding process established by the Fund. For example, the contract between the Fund and the grantee states that the grantee is required to submit several financial reports to the Fund in order to be eligible for future funding. This requirement includes the annual financial statement for the awardees and an Identification of Funds report, which details the use of the funds, the number of people served, and a description of the programs funded. Despite these requirements, there was no penalty for grantees who did not provide the required reports. Additional findings on the grant awarding process include:
- Grants were awarded to for-profit organizations. Of the 150 approved grant recipients reviewed, the Fund awarded grants to 27 for-profit organizations, totaling more than $100,000.
- Grants were awarded outside of the Fund’s original stated purpose. In the sample of 150 grantees approved for funding during this period, 43 did not appear to directly promote the recreational activities defined by the Fund.
- Funds were awarded to grantees that provided their grant applications directly to District Council offices, instead of the Funds’ office.
- Funding was awarded to an organization that was not based in Philadelphia.
- Of the 150 grantees reviewed, 21 applications could not be located.
RECOMMENDATIONS
To improve oversight of the Fund, we recommend that the Fund develop and implement stronger policies and procedures regarding the management of the Fund, including the grant awarding process and the Fund’s financial management. We also recommend that the Fund establish and document the roles and responsibilities of the Board and Fund staff. Additional recommendations can be found in the body of this report.