Bankruptcy of D.C. nonprofit could factor in city’s June election

The bankruptcy of a D.C. nonprofit that dispenses taxpayer funds to after-school and anti- violence programs is fast becoming a campaign headache for both candidates in the city’s most high-profile June ballot contest.

The organization at the center of the storm, DC Trust, is dissolving to cover debt from exorbitant spending on and by staff, including the misuse of organization credit cards.

The trust is responsible for keeping afloat more than 70 nonprofit organizations citywide. But it lacks funds to pay millions in promised grants unless it closes immediately and cuts lavish operating costs, including six-figure salaries and a $26,000-a-month lease in a trendy Northwest neighborhood.

[Board members say mismanagement has bankrupted D.C. nonprofit]

Misappropriations from the trust have been a source of scandal for decades. But nonprofit organizations and aides to D.C. Mayor Muriel E. Bowser (D) say the trust’s insolvency can be traced to the administration of former mayor Vincent C. Gray, who is challenging incumbent Ward 7 council member Yvette Alexander in next month’s Democratic primary.

Gray and others, in turn, are claiming a lack of oversight by Alexander, who chairs the council committee that is supposed to oversee the trust. She canceled a hearing last week that could have put its leaders under oath in the wake of the bankruptcy. She also has close ties to two nonprofits that receive funding from the trust, including a board position she has not disclosed that appears to be in violation of city ethics rules.

During Gray’s four years in office, the trust received tens of millions of dollars from the city in midyear budget shifts, with little guidance as to how it should be spent, Bowser officials say.

Those shifts, known as reprogrammings, made it nearly impossible for even close observers to understand how much money the trust was receiving.Board members say the shifts allowed managers who have since resigned to mask astronomical overhead costs of roughly 45 percent.

“Funds were transferred over to the trust without appropriate and clear direction for what the money went to — without accountability,” said Bowser spokesman Michael Czin.

Gray’s office also pushed the trust to manage technology procurements and other projects outside its areas of expertise, Bowser aides said.

Gray said that as mayor, he was most focused on making sure money from the trust went to reputable causes after former council member Harry Thomas Jr. embezzled more than $350,000 awarded for youth baseball.

“We worked hard to get the trust to a place where people felt good about it again,” Gray said. “Reprogrammings, that’s a way of doing business . . . there are often issues that arise and work you want to get done and making those changes, that’s part of the process.”

Alexander canceled a scheduled hearing on trust operations last week, a day after The Washington Post reported that the trust would dissolve. Instead, she took testimony from nonprofits worried about losing funding. At one point, she told leaders of the Take Charge Juvenile Diversion Program she would make sure they and others continued to get paid. Alexander previously served on the organization’s board and is a close friend of its founder.

On Wednesday, Alexander advanced a budget proposal that would divert $2 million from a city account to the Washington Tennis and Education Foundation, another nonprofit that receives funds from the trust and where she is a a board director.

Although city council members are supposed to identify connections to any organizations in which they or family members or serve as an “officer, director, partner” or even volunteer, Alexander did not publicly disclose her ties to the nonprofits — either during last week’s hearing or on ethics disclosure forms.

Council attorneys also often recommend that lawmakers recuse themselves from budget decisions and votes on legislation involving organizations from which they might benefit financially. Alexander said neither board position was paid, but the tennis foundation is in Ward 7 and many political donors to her campaigns are also on the board.

Alexander said she resigned from the board of Take Charge when she took over the health and human services committee two years ago, on the advice of council attorneys. She did not say if she sought advice about the tennis foundation position, but said she stopped paying the board’s $500 annual dues and did not consider herself an active member.

As of Wednesday, she was still listed as a board member on the websites of both groups, al though the director of Take Charge said the listing was outdated.

Aides to Bowser have indicated they may move much of DC Trust’s grant-making authority back to city government. That move would give the council final say on the awards.

“This is a disaster,” said Judy Estey, director of grants for Dance Place, a nonprofit that receives funding from the trust said during last week’s hearing, slamming the D.C. government for failing to hold the DC Trust accountable. “How this comes as a shock, I don’t know. Didn’t anyone know . . . what was going on?” she said. “I’m asking the D.C. Council to take responsibility.”

Gray criticized Alexander this week for canceling the hearing on the trust. “That’s a legislator’s job, to create an environment where all the facts are put on the table,” he said.

She brushed off the critique, saying she was waiting for results of an audit and would conduct a full airing before the council adjourns for summer recess. At a candidate forum Tuesday, Alexander urged voters to keep her in office or risk having Gray on the council with no seniority.

“I will hold a hearing, and I will get to the bottom of this,” she said of the trust.