posted on: Thursday, December 01, 2005

The Washington Post’s excellent recent series on the proclivity of the District of Columbia municipal government to award no-bid contracts willy-nilly to politically connected players has captured a nonprofit miscreant. In “Lavish Spending, Little Reward” (http://www.washingtonpost.com/wp-dyn/content/article/2005/11/27/AR2005112701055.html), the Post’s David Fallis and Dan Keating describe the work of the Foundation for Educational Innovation (FEI), run by one Archie Prioleau.

Alice Rivlin, a former member of the Congressionally-appointed board overseeing the District’s finances, described Prioleau as “a wonderfully motivated, well-intentioned, marvelous guy, but…his vision was bigger than his capacity to deliver.” Actually, his nonprofit did deliver, but for Archie rather than for the District or for the young people he was supposed to be training for technology employment.

According to the Post reporters, “for two years, Prioleau hired a…company he runs, paying it about $213,000 for consulting work to his nonprofit organization. The company, FEI Enterprises Inc., had a similar name and shared offices with his nonprofit organization. Prioleau headed both and, at times, his wife and his brother were officers in both firms.”

The rather obvious possibility of self-dealing at FEI didn’t seem to bother District officials, but his failure to deliver on grants passed through the District from the Department of Labor, HUD, and the Department of Commerce and scandals concerning his work with training young people through DC’s Division of Employment Services and the DC Public Schools mounted until FEI, that is FEI-the-nonprofit, collapsed. HUD is seeking restitution from the District, not Prioleau, for $1.7 million in training funding it advanced, though it’s not clear that Commerce and Labor will seek to get back their funding.

The HUD money takes us back to more possible instances of nonprofit conflict of interest and self-dealing. One of Prioleau’s allies was former DC councilmember and Southeastern University president Charlene Drew Jarvis, who got Prioleau named to the university’s board of trustees, rapidly followed by the university awarding FEI $50,000 for space it could use at one of Prioleau’s training facilities. Jarvis also happened to be the city official who signed for the disputed $1.7 HUD grant on behalf of the Council, subsequently given a clean bill of health by the Rivlin-chaired financial control board.

What makes the Post series, focused on the District’s contracting problems, not on nonprofit accountability, of interest to NCRP? It’s what wasn’t contained in the article that bears of the accountability issues that should concern all nonprofits.

Apparently, neither the Post nor NCRP could find evidence of 990s filed for Prioleau’s Foundation for Educational Innovation after 1997, yet FEI was pulling in government contracts despite lacking this core document that every nonprofit worth its salt (and taking in or spending more than $25,000 annually) files with the Internal Revenue Service.

Maybe the District of Columbia’s contracting officials weren’t motivated to look for a 990, but certainly foundations should have been, right? It’s part of their due diligence process to know that a nonprofit is on the up-and-up at least in terms of filing competently prepared IRS form 990s, attesting to their consumption of public and tax exempt revenues.

Apparently, some foundations were asleep at the switch with Prioleau’s nonprofit. A quick tour of the Foundation Center database reveals that FEI scored grants between 2000 and 2003 from philanthropic grantmakers such as the Sprint Foundation ($80,000 in 2000), the Kansas City Community Foundation ($100,000 in 2001), the Freddie Mac Foundation ($30,000 in 2003), and the Fannie Mae Foundation ($35,000 in 2000, $35,000 in 2001, and $65,000 in 2003). The Utah-based Novell Corporation reportedly made donations to FEI, and the Community Foundation grant might have been additional money from the then Kansas-based Sprint. A 2000 press release from Microsoft claims that it gave FEI a cash grant of $14,000 plus $300,000 in software for one of Prioleau’s ill-fated technology programs. And the Meyer Foundation in DC gave FEI a $75,000 cash flow loan to bridge money from the District’s Housing and Community Development department, likely the funds that the U.S. Department of Housing and Urban Development is demanding the District repay.

One nonprofit executive reading the “Lavish Spending” article gasped at the enumerated FEI misdeeds, indicating that there’s no way her organization would ever imagine treading the path that FEI did. And that’s what NCRP said in the Post about FEI’s potential self-dealing: “if it looks like self-dealing, it should not be done. Most nonprofits would not even contemplate anything like this.”

But something is wrong when so many major corporate and foundation donors seemed to be willing to hand over a check to a guy whose nonprofit hadn’t filed a 990 since 1997 and had a track record littered with accountability problems. DC School Board president Peggy Cooper Cafritz repeatedly warned her public sector colleagues about Prioleau to no avail. Maybe DC contracting officials couldn’t be motivated to act, maybe the foundation program officers at Fannie Mae and Freddie Mac, located within shouting distance of FEI’s purported technology training centers, might not have known the Prioleau story, it’s all possible. Former Federal Reserve vice-chair and founding director of Congressional Budget Office Rivlin obviously didn’t see through the guy. But for all those nonprofits dutifully filing timely 990s, hiring tough-minded firms to do their audits, and watching every P and Q of charitable accountability in order to meet the due diligence requirements of foundations, something appears to have been seriously amiss in the foundation sector’s acceptance of Prioleau’s dubious charitable operations.