Promote Carmel dissolved after city review finds governance gaps, unpaid liabilities

The Carmel Affiliate Review Committee heard a legal and fiscal report March 27 that concluded Promote Carmel Inc., the nonprofit that ran the All Things Carmel store, was insolvent without ongoing city subsidies and that its governance and recordkeeping failed basic nonprofit “hygiene.” The Promote Carmel board decided to dissolve the organization and filed articles of dissolution with the Indiana Secretary of State.

The findings, delivered by legal reviewer Mary Lee Springer, said Promote Carmel was incorporated on Feb. 12, 2020 and later received an IRS determination that it is a tax‑exempt public charity. Springer summarized tax and governance problems the review team found and said the organization “operated at a loss every year since its creation” and relied on city grants to stay open.

The committee was told that the city provided roughly $1.2 million in subsidies to Promote Carmel between 2020 and 2024 and that the nonprofit’s annual grant arrangement included a $96,000 payment each year. In 2023 the city subsidy to Promote Carmel rose to about $430,000, documents submitted to the committee show. After the store closed, city staff and accounting identified at least $116,000 in expenditures paid to wind down the operation; an additional unresolved liability tied to a donor‑restricted $50,000 charitable gift remains, and city staff said roughly $30,000 of that restriction appears unpaid today.

Why it matters

The review framed the issue as one of public accountability and donor intent: taxpayer dollars flowed to sustain a retail store that competed in the private market while donor‑restricted funds appear to have been used for other purposes. Committee members raised questions about whether city employees and city legal counsel were too involved in the nonprofit’s day‑to‑day operations and about the absence of clear, enforceable reporting tied to city grants.

Key findings

• Tax and corporate status: The nonprofit filed for federal exemption and received an IRS determination; the reviewers concluded Promote Carmel functioned as a 501(c)(3) public charity funded largely by fees and city subsidies. The review also found inconsistent tax classifications and mixed language in governance documents that used terms and clauses copied from other entities.

• Governance and oversight: The three directors who served on Promote Carmel were appointed by the mayor and removable by the mayor. The review said city staff — including members of the mayor’s office and the marketing department — regularly directed day‑to‑day activity and that the nonprofit lacked independent systems of oversight. Mary Lee Springer told the committee that corporate governance documents did not make explicit delegation of authority or an adequate “delegation of authority matrix.”

• Conflicts and roles: The report identified overlapping roles that raised conflict‑of‑interest concerns: Dan McFeely, who authored a letter to the Promote Carmel board describing a 2023 bailout, simultaneously served as president of the Carmel Jazz Festival during the years in question and had a consulting contract with the city’s marketing department. The review said that, when people hold multiple roles across the city and the affiliate, the board should apply a conflict‑of‑interest and conflict‑of‑loyalty process.

• Financial controls and inventory: The city’s consultant flagged inventory controls as “unreliable,” citing failures to record purchases, inconsistent consignment tracking and an absence of periodic counts. The consultant stopped performing inventory control work because of those weaknesses; city staff said some original records were later found in staff members’ homes or on various electronic devices.

• Donor‑restricted gift: A 2022 grant agreement required Promote Carmel to place a donor’s $50,000 gift in a segregated, interest‑bearing account for a planned peony garden. In a letter placed in the meeting exhibits, Dan McFeely wrote that the funds “were needed to help with the Jazz Fest bailout with a promise to restore it the following year.” The review concluded that using restricted funds for another purpose violated the grant agreement and donor intent and is a liability of Promote Carmel, though the city said it is considering making the donor whole as a matter of public policy.

Decisions and next steps

The Promote Carmel board voted to dissolve the corporation and wind down the All Things Carmel store. Mary Lee Springer told the committee that the articles of dissolution were filed this week and accepted by the Indiana Secretary of State; the city will publish the statutorily required notice of dissolution so any additional creditors or vendors can file claims. City financial staff said they have paid roughly $116,000 in immediate close‑out expenses (lease termination, vendor payments, utilities and related items) and that the remaining cash on hand and outstanding liabilities are still being reconciled.

Statements from the meeting

Legal reviewer Mary Lee Springer summarized the organization’s status: “Promote Carmel Inc is a legal entity. It is a nonprofit corporation that was incorporated on February twelfth of 2020.”

The letter authored by Dan McFeely and included as an exhibit said, in part, “we were asked to financially assist the Carmel Jazz Fest event, which lost a substantial amount of money and was unable to pay its bills.”

Zach Jackson, chief financial officer and controller for the City of Carmel, cautioned that the final tally of claims was still fluid: “I can’t say for sure that 30,000 right now will solve everything.”

Committee response and policy work

Members and city staff framed the hearing as both a report on Promote Carmel and a starting point for a wider policy response. Committee members repeatedly urged development of a standard “hygiene” checklist for any nonprofit affiliate that receives city funding: annual audits or other financial review if city support exceeds a threshold, written conflict‑of‑interest policies, explicit delegation of authority in bylaws, scheduled reporting to the city and clearer budgetline tracking so large appropriations cannot be moved across accounts without review.

The committee also asked staff to compile and prioritize a short list of other affiliates that have an ongoing relationship with the city (by funding or by governance nexus) and to propose a risk‑based schedule for reviews — focusing first on entities that receive the most city funding or that present the largest legal or financial exposure.

What the committee did not do

The committee did not conduct a forensic audit tracing every dollar historically. Review members and counsel said they chose to focus staff resources on fixing current governance and on the immediate wind‑down and vendor/donor remediation rather than on retrospective forensic work that would incur additional costs.

Where this goes next

City staff and corporation counsel said they will publish the dissolution notice, continue to reconcile inventory and vendor claims, and present a prioritized list of other affiliates and recommended oversight measures at a subsequent committee meeting. The committee requested clearer budget reporting ties to affiliate grants and a formal checklist that would be required when the city contemplates new affiliate relationships or annual appropriations.

Ending

Committee members described the work as a broader governance exercise: they said the Promote Carmel review should produce checklists, reporting standards and remediation steps that reduce the chance of similar problems in future affiliates while preserving a path for legitimate philanthropic and promotional activity tied to the city.