Quinn Disputes Daily News' 'Conduit Groups' Story, News Isn't Having It

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By Azi Paybarah

May 5, 2008 | 6:47 p.m

At a press conference in Brooklyn yesterday, I asked Christine Quinn about the Daily News story saying the City Council improperly funneled money to illegitimate charities using “conduit groups.”

At the time, Quinn said the practice was legal, practical, and ongoing for a number of years.

Quinn also said there were a number of inaccuracies in that story. So, after the event I emailed her spokeswoman, Maria Alvarado, to ask specifically what they thought the inaccuracies were.

Alvarado emailed me a point-by-point response later, which rests on the notion the council wasn't trying to hide the practice. Also, they say that city law doesn't require groups receiving taxpayer money to be registered as 501(c)(3) nonprofits.

Here's the email, with the News passages in quotes:

“The City Council has secretly moved millions of taxpayer dollars to unregistered charities through ghost groups that often have ties to the lawmakers themselves”

They were not secretly moved. Beginning in FY08, all groups that were the ultimate recipients of Council funding were in fact reflected in the budget resolution or our subsequent transparency resolutions.
There were no ghost groups. All groups that received funding were actual groups, many times community organizations that provide important services.

“This latest budgetary sleight of hand allows the Council to get around the city's requirement that nonprofits receiving public funds must be registered charities.”

There is no city requirement that a group has to be a registered charity, nor is there an Attorney General requirement. Some small or specialized groups are exempt, for example educational organizations.

“For years, the so-called "fiscal conduits" haven't been listed in public records even though they were paid fees with taxpayer funds to handle the distributions.”

The City entered into contracts with any and all organizations that were used as fiscal conduits. So, there are public records on all fiscal conduits. Additionally, those fiscal conduits that also received discretionary funds by line item were listed in Schedule C, although not as a fiscal conduit.

"Three fiscal conduits listed on an internal 2007 Council budget document do not show up on the list of discretionary funds released to the public that year."

In the past, fiscal conduits were not listed in the budget. This is an area for planned reform.

For the record, Greg Smith, editor of the Daily News investigations team, stands by the story. When I emailed Quinn's analysis to Smith, he replied:

Note the phrase “beginning in FY 2008.” So what happened before that?

City agencies require that most non-profit groups that receive city funding be a registered charity. Check it out.

This is the best one. They say, those fiscal conduits that also received discretionary funds by line item were listed in Schedule C, although not as a fiscal conduit.

But if a group didn’t receive discretionary funds, they weren’t listed. Try and find the three fiscal conduits we mentioned in Schedule C for 2007.