by Christian Usera
IN AUG. 2014 The Ann Arbor Independent newspaper ran an article which revealed the Ann Arbor Performance Network Theatre (PNT) had lost its “Right to Solicit” licensure. The piece examined the organization’s finances, as well.
Since then, PNT filed one of the three missing years of tax returns (2013) narrowly avoiding a loss of non-profit status. PNT’s new director John Manfredi has been in contact with the Attorney General’s office in order to reactivate the group’s solicitation registration—even as PNT continued to hold fundraisers without appropriate state licensure to solicit funds.
According to Joy Yearout, the Attorney General’s Director of Communications, “The organization has requested a one-time waiver of the requirement that they provide audited financial statements for the fiscal year (which ended on) 9/30/13. (As of October, 2014) the organization’s solicitation registration has been approved.”
The fact remains that for three years PNT was out of compliance with state statutes by soliciting funds from the public, essentially thumbing its nose at both the IRS and the Mich. AG’s office.
This loss of licensure had a direct correlation to PNT’s debt. Lack of cash flow is why the group’s CPA firm went unpaid and its finances unaudited. The result, according to the IRS, was that the group’s taxes went unfiled for three years, which meant that the AG’s office didn’t receive the proper paperwork for PNT to remain compliant with the law.
According to Ms. Yearout, after The Ann Arbor Independent’s initial inquiry, PNT was contacted by the AG’s office. Subsequently, The Ann Arbor Independent obtained correspondence between John Manfredi, Performance Network Theatre’s current Director, and the AG’s office. On August 20, 2014 Manfredi wrote requesting a valid solicitation registration and a waiver for its missing tax year (2012).
He wrote, “(Our new management team is) catching up on missed state and federal filings. We are requesting a conditional license or waiver regarding the provision of required audited financial statements… (PNT is) simply not in the financial position to acquire audited or reviewed statements at this time as we work through many financial difficulties and the business of restructuring significant debt.”
By ‘significant debt’ Mr. Manfredi is referring to the $400,000 worth of company losses accrued over the better part of a decade. (The recent 990 tax filing for the 2013 fiscal year indicates a $95,000 loss in that year, as well.)
In addition, according to both the AG’s Office and the IRS there are two outstanding tax years that still haven’t been filed. Were there losses in both years (2012 and 2014)?
The actual amount of PNT’s financial losses would depend upon how much capital the organization had in reserve and what the exact losses were for those missing tax years, which, like everything else regarding the organization, PNT officials are trying to claim is “confidential.”
When The Ann Arbor Independent initially contacted John Manfredi, he alleged that when tax returns are filed the documents would be considered “privileged” information.
In Michigan, state laws require 501 (c) 3 entitys to make all tax returns and audit statements public. Manfredi’s assertion that PNT is entitled to keep financial information contained in 990 tax returns and audit statements from the public is contrary to state law.
Manfredi’s refusal to make public PNT’s tax returns and audits means ascertaining the current financial health of the theatre is difficult. Furthermore, it is likely that these tax years are not going to be filed any time soon—assuming PNT’s claim that it does not have the funds to pay a CPA firm to audit its finances is accurate.
The names of the PNT Board members were removed from the theatre’s website. However, they are listed on the 2013 990 income tax form filed with the state and released to The Ann Arbor Independent.
Ron Mauer is named as the Chair of the Board and was Chair when PNT closed abruptly last summer due to a financial crisis. It was Mauer who announced to the public Manfredi’s hiring.
Mauer works for Zingerman’s in the areas of accounting and finance. According to his bio, he has “developed and regularly teaches a number of internal finance classes for Zingerman’s staff and speaks frequently to outside organizations about Zingerman’s financial systems.”
Mauer refused to answer questions about PNT’s finances and why Manfredi was attempting to keep the group’s income tax returns and audits from the public.
In filing PNT’s 2013 taxes after The Ann Arbor Independent’s story hit newsstands, the company avoided automatically losing its non-profit status. In addition, by filing its 2013 990 income tax forms with the AG’s office PNT successfully obtained a solicitation registration.
None of this changes the fact that in Aug. Manfredi claimed in an interview with The A2 Indy that PNT was compliant with “all state and government agencies.”
John Manfredi said when asked to comment for this article: “Given the inaccuracies of your previous article, we have no comment.”
However, later during a phone call with Manfredi he added, “I said that we were compliant with all state and federal agencies and you chose to ignore that.”
Although PNT is attempting to correct its previous mistakes, the lack of openness and transparency triggers still more questions about Manfredi’s leadership. Is Manfredi capable of extricating PNT from its legal and financial difficulties while maintaining the transparency required by law? Then, there are questions about PNT’s debt, its future financial stability and the Board members who refuse to comment on their own oversight of the non-profit.
PNT continues to put on shows and solicit donations through its website, as well as through events and emails.
Sounds like the PNT board of directors needs some serious training on the basics of oversight. What a mess!
Volunteer board service is a tough job because of just such situations. The board trusts the staff. But if there are not checks and balances there can be serious complications like the ones described in this article. A nonprofit’s director should know tax returns are made available to the public and telling a reporter you are compliant with state law when you’re not is always going to come back and haunt you. PNT’s board members have a legal obligation to look after the financial health of the organization.
I would also like to raise the question, “Then why was the entire staff terminated?”
From the public’s viewpoint, it seemed PNT’s management team was the one to blame for the financial crisis. The board seemed very confident (confident enough to fire nearly 10 people) that THEY were not a part of the problem, and would find the proper staff to “run the theatre properly”. Sounds like the board is what is dysfunctional in this organization. I’ve lost all faith in Performance Network and it’s board of directors and hope the theatre closes it’s doors soon.