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Editorial: Children's Theatre fallout spreads

Original post made on Jun 18, 2008

News that there may be an audit-review of all "Friends"-type organizations that provide support for Palo Alto city programs came as a surprise late last week for leaders of the non-profit fund-raising groups.

Read the full story here Web Link posted Wednesday, June 18, 2008, 12:00 AM

Comments (3)

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Posted by Friend
a resident of Barron Park
on Jun 18, 2008 at 7:10 am

The proposed review of all "Friends" groups' relationship to the city is fine. But the emphasis should be on auditing CITY accounting for arts, cultural and recreational programs and the library rather than implying that the support groups, all of which are independent groups, should be audited by the City. If they are involved in public-private partnerships with the City, that is one thing. Otherwise the City should not use tax dollars to audit them. If they are 503b non-profit organizations, then they file tax returns with the IRS and it is only the IRS that should audit them. PTAs are not audited by the school district; they provide support funds for schools to support the budget provided by our tax dollars. Support groups provide countless hours of volunteer time and funds to enhance the programs and facilities the City provides. They do not receive City funds unless there is a public-private partnership with legal documents supporting specific arrangements for e.g. a building project. To suggest that independent contributing organizations should be audited by the City implies that these organizations have done something wrong.
The problems related to the Childrens' Theatre were problems related to City policies of supervision and lack of auditing of finances of City Community Service programs generally. The Friends were involved only because of the special arrangements made for trips and the selling of surplused costumes which would otherwise have been thrown out. The Friends were never involved in compensating staff members or providing the programs at the theatre. Those funds were and are tax dollars and are properly subject to City audit.
While the city at one time had a public-private partnership with the Friends of the Childrens' theatre, a legal agreement worked out between the City Attorney and an attorney representing the Friends who raised almost $1,000,000 to add to the City's facilities, no such partnership has existed since the theatre was completed ten years ago. The City apparently had less formal agreements to act as a conduit for funds to pay for City sponsored trips. This has led to confusion and the need for the City to review its policies and practices. Generally it is good government practice to periodically audit all City departments . That is enough work for any City auditor without monitoring private independent support organizations..

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Posted by Herb Borock
a resident of Professorville
on Jun 18, 2008 at 11:40 am

The current Request for Proposal does not call for an audit of the "Friends" groups, but for a review of the agreements between those groups and the City and an evaluation of the City's processing of remittances.

The Scope of Services in the Request for Proposal for Review of Cash Handling Procedures says:

"Review agreements with outside non-profit "Friends" groups and evaluate whether appropriate financial controls exist within these agreements. ... Part of this review will include an evaluation of remittances and where these are submitted within the City organization."

Sometimes the City has contracts with groups that permit the City to audit those groups finances, but if no such contracts exist, then all the City can do is audit itself.

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Posted by Resident
a resident of Another Palo Alto neighborhood
on Jun 18, 2008 at 11:31 pm

All charities, or non profits, should be audited or overseen by some outside body. A few years back it was United Way that had some corrupt leadership. If any august body is audited and seen to be completely honorable, then I feel sure that donors would feel happier that their money was being used appropriately. Not all donors after all are actually involved in the day to day running of the body. It isn't just a case of being completely above board, but being seen to be completely above board.

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