Archive for Friday, August 14, 2015

Just Food continues to wrangle with $50,000 tax bill in wake of Farmer’s resignation

August 14, 2015

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Even though former Mayor Jeremy Farmer resigned from a charity after failing to pay $50,000 in federal payroll taxes, it is the Just Food board that will face the ire of the Internal Revenue Service, an expert on nonprofits said Friday.

“When the IRS goes after somebody, they go after the board,” said Brent Never, an assistant professor of nonprofit leadership at the University of Missouri-Kansas City. “They are the fiduciary agent. They are the ones who sign on the bottom line.”

Lawrence learned Monday that Just Food, the city's largest food bank, had an employee tax liability of $50,000. Just Food leaders also said Monday they were investigating whether the agency owed additional back taxes to the Kansas Department of Revenue.

On Friday, Just Food board president Kristi Henderson said the board had engaged an accountant with the McFadden Group to review the payroll tax issues with the IRS and the state.

“They have been in contact with both to determine and address any deficiencies,” Henderson said. “Current withholdings with both the IRS and the state are being paid timely.”

The IRS contacted Just Food about the tax liability a few weeks ago, Henderson acknowledged for the first time. She did not specify exactly when.

After Farmer, who had been the executive director, stepped down this week, Elizabeth Keever, Just Food's chief resource officer, was named interim executive director.

Farmer's salary in 2012 was about $30,000, but the board gave him an almost 100 percent raise the next year to nearly $60,000, according to board financial records.

City officials also have raised questions about charges that were made to Farmer's city credit card, mostly related to travel expenses. Farmer reimbursed the city on Tuesday for about $1,100 in personal expenses that he charged to the city's card.

On Friday, Henderson said Farmer had a debit card with Just Food but it's unknown if he had any outstanding charges.

In addition, Farmer submitted Just Food's 2014 income tax return to the United Way, one of the agency's donors, but not to the IRS, Henderson acknowledged this week. An attorney described the tax return as “a draft” and said it was subject to change.

On Friday Henderson said the McFadden accountant had filed an extension and that the return is due in November.

Never, the UMKC assistant professor, said the food bank was a large business. Its gross receipts totaled more than $1 million in 2012. That had doubled by 2014 to $2.2 million.

“There needs to be real financial controls for an agency this size,” Never said.

Never said he was a professor in Illinois when the IRS learned that a smaller charity had failed to pay payroll taxes over several years to the amount of $60,000.

“This little board had no idea the executive director was doing this,” he said. “The IRS gave them 30 days to come up with $60,000. These people had to get second mortgages on houses, sell cars, that sort of thing.”

Never said unless there is fraud, the failure to pay taxes is an administrative procedure that will be handled by the IRS.

“It is not criminal,” he said.

Never said he hoped the board had insurance to protect it from liability.

“That basically covers them from any kind of wrongdoing done under their watch,” Never said. “This other example of the Illinois charity, they were too small to even think about that.”

When asked about insurance, Henderson said, “Insurance policies typically do not cover tax liabilities of an organization or individual.”

Henderson said Just Food is continuing to provide food for the needy.

"The departure of our executive director has not changed the commitment of Just Food, its board, staff and volunteers in helping meet the needs of our community," she said.

Comments

David Holroyd 2 years, 3 months ago

The question is not whether Mr Farmer has liabilities for use of the debit card, that is simple to answer. The debit card would cause money to come from the bank account of Just Food.

The bigger question what purchases did he make with the debit card? Bank statements show that. The treasurer of the Board should be able to figure that out real easy? As a banker she can read the bank statements. Did the former CEO purchase the food for the cooking classes. If so, the receipts tied to the debit purchase will show what was purchased. Pretty simple.

Keep in mind that the 2.2 million dollar operation is not from cash assets deposited but the bulk of the total rather "in kind" donations of food and services. Does the total for "in kind" donations on the Just Food return match the actual amount that the donor claimed as a taxable donation ?

For example if a local grocer donated food and the former CEO showed a value of $25,000 and donor actually claimed less then the CEO was inflating values to make this Just Food look on paper and tout it as growing from obscurity to become the largest food bank.

All the while the actual cash donations never actually grew much.

I hope that "funny business" did not occur

Bob Forer 2 years, 3 months ago

I didn't realize the board members could be personally liable if the money isn't in the Just Food account to pay the back taxes. I now understand why they are proceeding with due deliberation and have hired an attorney. Accordingly, I retract any statements I previously made which are inconsistent with this recent understanding, and I wish the board members the best of luck in resolving this problem without incurring one cent of personal financial exposure.

Lets not forget that Farmer fooled and deceived thousands of people in town, not just this board of directors.

Bob Forer 2 years, 3 months ago

Perhaps it is time for Charles Branson to call in the KBI and the Attorney General's office to investigate Farmer's apparent wrongdoing. At the minimum, Charles is professionally acquainted with Farmer. They both recently attended a conference in Washington, D.C. and Farmer and he had dinner together according to Farmer's expense vouchers. Since Charles knows Jeremy, the best practice, in my opinion, would be for him to hand over any possible criminal investigation to outside authorities to avoid even the slightest appearance of impropriety.

Marc Wilborn 2 years, 3 months ago

I still believe the best course for the community to take is to support Just Food as the current and prior Board members deal with this thorny issue. This would at least relieve them from the daily concern of providing for the people that they, and the community, care for.

Richard Ballard 2 years, 3 months ago

Kris Kobach is just up the farmers turnpike a ways living in a barn.

Call him in on it!

He's always looking for something else to do.

Derek Coyne 2 years, 3 months ago

Am I the only one that thinks Karen's articles are a summary of everything other reporters have already discovered? I feel like she's just trying to steal Caitlin and Chads scoops. I hope Caitlin and Chad don't relinquish their info. Karen seems to be riding that pee wee herman wave still.

Bob Forer 2 years, 3 months ago

I really don't think there is a rivalry amongst the reporters. I am pretty sure they work as a team. And besides, Chad was recently named managing editor of the newspaper and he has the final say. His columns are very popular, he is a laid back decent guy, and I sincerely doubt, with he at the helm, that there is any overt competition or discord. Newspapers have a tendency to summarize ongoing stories from time to time, on the assumption that not every reader is able to read every article, every day. .

And finally, this article brings up one new and very important point--that the individual members of the Board of Directors of Just Food are personally responsible for the finances of the organization. This puts into prospective and gives a legimate reason why the Board has hired counsel. I am a retired attorney, and I didn't know this. If I were in their shoes, I would hire an attorney as well.

David Holroyd 2 years, 3 months ago

If I were on the board I would have made certain that the revised draft of Administrative procedures for Just Food had been re revised and adopted., The draft dated November 27, 2014 was it approved? If so, when? Was it adhered to?

Under Debit Card Transactions , Debit cards are currently issued to the Just Food Executive Director only

ATM cash withdrawals are prohibited. WE'RE THERE ANY?

each Debit card transaction to be accounted for/ approved using the "Receipt for Expenses" form (attached) and include the transaction receipt and signed off ( on y)? board treasurer or board chair. DID THIS OCCUR ? FYI People's Bank is the depository for Just Food, according to the draft copy.

Insurance is with CEK

Two board members had every chance to understand the finances!

Sue Hack's husband would provide insurance and Maley Wilkins bank would have the bank account.

Under checks:

Once bi weekly (upon meeting with Treasurer) generate a "bills payable" invoice from Quickbooks.

Was the DRAFT revision adopted in full or any part of it?

If so, there is NO way there could not have been a payment made for payroll taxes.

This board was just plain sloppy!

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