San Diego Pride continues to suffer from a scandal that broke Tuesday regarding an alleged misuse of the nonprofit’s funds. as time passes it’s becoming clearer that the ramifications of the controversy may be far reaching.

Since the story first broke the California Franchise Tax Board has received 11 complaints regarding San Diego Pride and will likely open an investigation.

Though stating he couldn’t reveal details regarding pending or ongoing cases, he indicated that the complaints have not been taken lightly.

American tax law very clearly differentiates between taxable and tax-exempt contributions, and the ways in which they can be used. Using finances intended as a tax-exempt contribution for other purposes outside the general scope of business operations is oftentimes illegal. And in many cases it could even be considered a form of money laundering.

Former Pride Executive Director Ron deHarte states he does not believe any laws were broken.

“Though I disagreed with the [$5k gift to Board Chair Phillip Princetta], I met with the CPA after learning of it to make sure a 1099 would be issued,” said deHarte. “I felt it was documented from an accounting standpoint, and the appropriate taxes would be paid on it; therefore I didn’t feel our nonprofit status would be in jeopardy.”

Not only is San Diego Pride reeling with the effects of ramifications spawning from decisions made by its Board, but other LGBT nonprofit organizations may suffer collateral damage.

Travis Cleveland, Secretary for the Empowering Spirits Foundation (ESF), a San Diego based LGBT nonprofit corporation, says his organization has received numerous inquiries from concerned members over the San Diego Pride issue.

Dolores A. Jacobs, CEO of the San Diego LGBT Community Center also expressed concern over the matter as she’s received numerous phone calls and emails from individuals, particularly non-LGBT individuals, thinking The Center and Pride are interrelated.

This is another example of how important it is for nonprofits to understand the full impact of the actions. Mismanagement effects everyone, not just the bad actors

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Posted in Stephen's Blog