Newsom-Linked Non-Profit SF Connect Twice As Inefficient As National Average

Some in the field of nonprofit management consider the IRS Form 990 potentially misleading because some groups knowingly skew their accounting ledgers to make themselves look efficient, and thus attractive to donors.

Carol Silverman, research director of the Institute for Nonprofit Management at the University of San Francisco, wrote in an e-mail that "nonprofits who depend on individual donors (foundations pay much less attention to this) play with how they allocate expenses."

Nora Silver, director of the Center for Nonprofit and Public Leadership at UC Berkeley's Haas School of Business, added that public filings tell only part of the story of any nonprofit's performance. She said the unusually small proportion of SF Connect's budget spent on its programs raises a red flag, but doesn't preclude the possibility the charity did good work.

"This is out of synch with other nonprofits," she said. "You can say that, but it doesn't tell you the whole story. The whole story is not about a profit model; it's about impact. It's about what services were delivered."

There are reasons other than incompetence that a nonprofit director might spend an unusually large portion of the budget on management and operating expenses, particularly during a startup year. For example, SF Connect paid one-time costs of $50,000 to the Volunteer Center, which provides help to nonprofits "with their startup, when they were getting organized," said Jill Blackburn, the center's consulting and training manager.

On the other hand, SF Connect had advantages that could have made Kayhan look like a more effective manager than he actually was. Whereas other nonprofit directors might have to hold frequent and possibly expensive fund-raisers, Kayhan had Newsom to work the phones to solicit wealthy donors, the mayor's Ethics Commission filings show. And SF Connect had Tourk to get the organization off the ground.

The limited scope and usefulness of nonprofits' public filings make the issue of transparency critical for evaluating executive directors' effectiveness. Yet SF Connect seems to have a tortured relationship with the issues of transparency and accountability.The nonprofit obtained multiple extensions to delay the filing of its IRS Form 990. As a result, information about its 2006 activities was unavailable until mid-November 2007, six months after the original deadline.

SF Connect also failed to provide a list of its officers to the California Franchise Tax Board, as required by law. As a result, last August the state suspended its registry, meaning the nonprofit has "lost all rights and powers as a California corporation," a spokesman for the California Secretary of State told me. SF Connect's corporate registry was still suspended as of late last week. This means contracts it entered into can be voided. Additionally, corporations that continue to conduct business during suspension can be subject to state fines.

Not long after the launch of SF Connect, Chronicle City Hall reporter Cecilia Vega caused a kerfuffle in the Newsom camp by asking the mayor to make good on an earlier promise to provide the names of donors to the nonprofit. Kayhan at first blew her off, but later relented. "This is a unique, innovative organization, and we're doing everything we can that's humanly possible to make it as transparent as can be," she quoted him as saying.

That statement seemed a promising portent for asking Kayhan about SF Connect. I asked him if it might be winding down its operations now that he is leaving. "It's definitely not bankrupt," he said, without elaborating.

I asked what his planned budget for 2008 was. He said he didn't recall. I asked what his 2007 budget had been. He said he didn't remember that, either, and that I should speak with Alex Tourk.

Tourk, the husband of Ruby Rippey-Tourk, with whom Newsom admitted in early 2007 to having had an affair, has rejoined SF Connect. He also recently signed on as manager of former state Senator Jackie Speier's campaign for Congress, raising the question of whether running SF Connect is a full-time job.

Tourk sent me a brief e-mail after I'd called requesting an interview. "Since Dar Kayhan's departure as Executive Director, I was asked to join the Board of Directors (on a pro bono basis) of SF Connect and help with its transition as we reassess our priorities and goals for 2008," he wrote.

I again asked Tourk if I could speak with him, but I didn't hear back. And SF Connect board member Lisa Stevens refused, through an assistant, to discuss the organization's fortunes after I sent her a list of questions.

Helpfully, Charity Navigator has advice for situations like these. "Your attempt to communicate with the charity can reveal a lot about the organization," its guidelines for nonprofits state. "It's a big red flag when an organization refuses to answer your questions or to provide financial data at your request."

It's also a big red flag when a mayor attempts to couch himself as a reformer of his city's troubled antihomelessness programs, and then gives every appearance of treating his homelessness bureaucracy as a multibillion-dollar patronage republic.