Carmel committee begins audit of city-affiliated nonprofits, orders documents and timeline

The newly formed Affiliate Review Committee met for the first time Monday and voted to make City Councilor Ryan Locke chair as it launched a review of the governance, tax status and financial oversight of four nonprofit entities affiliated with the City of Carmel.

The committee — convened by Mayor Sue Finkham and composed of council members and mayoral appointees — directed the mayor’s office to request a standardized document package from each affiliate and set a March 1 deadline for the materials. The materials the committee said it will review include articles of incorporation, bylaws, the organizations’ tax-exemption applications and IRS determination letters; the mayor’s office said cloud access to the packet should be available to committee members in about a week.

The review responds to questions about the legal relationship and financial transparency between the city and affiliates such as Carmel Christkindlmarkt (CCI), Promote Carmel Inc., Carmel Midtown Community Development Corporation and Carmel City Center Community Development Corporation. Marilee Springer, a nonprofit tax lawyer retained to brief the committee, told members that CCI is organized as a Type I supporting organization under federal tax rules and therefore is controlled by the city and must operate “exclusively for the benefit of, to perform the functions of, and to carry out the purposes of the City of Carmel.”

“Type I supporting organizations are essentially a parent–subsidiary relationship,” Springer said. “The city is the parent, and CCI is a controlled subsidiary.” She added that CCI’s articles and its IRS application anchor its charitable purpose to cultural and educational programming tied to Germanic heritage, and that the entity’s market operates on city-owned property and has not been represented to the IRS as privately owned by CCI.

Committee members raised questions about reporting and operational accountability. “Ultimately, from an outcome standpoint, what I would like to see this organization do is use a standardized script to actually look at management practices, operations and reporting,” said committee member Joe Wood. Dr. Hannon (committee member) pressed for metrics to judge whether affiliates are meeting their charitable missions and whether budget decisions leave the city subsidizing activities beyond the intended scope.

The committee discussed statutory limits on municipal employee outside work — described in the meeting as Indiana’s criminal statute addressing “ghost employment” — and an executive order issued in 2007 by former Mayor Jim Brainard that allowed limited volunteer time for city employees. Springer told the committee that city employees from the street department had contributed an estimated 8,000 hours supporting CCI operations in a recent year. Those hours, she said, included 37 employees who individually exceeded the 75-hour-per-year threshold established in the prior executive order, with an average excess of about 131 hours for those workers.

The mayor’s office reported it had asked each affiliate for a larger set of records modeled on what an auditor would request; the office said three of the four core documents are publicly available and that it had requested the remainder be produced by March 1 so the committee can perform a fuller financial and risk review in upcoming meetings. The city’s chief financial officer also queried department heads for an estimate of the value of city staff time devoted to affiliates and provided a rough figure of $7,900,000 as an aggregate estimate of that contributed time.

The committee agreed it will distinguish between two categories of city relationships with nonprofits: “relational” partnerships that require ongoing, two‑way coordination (for which a memorandum of understanding is appropriate) and transactional grant funding (for which standard grant agreements and performance reporting suffice). Springer advised that the city should receive at minimum balance sheets, income statements and some form of audited or agreed‑upon procedures financials from affiliates, plus meeting minutes and performance reporting tied to each entity’s charitable mission.

At the meeting’s close, the committee voted to place items on the next meeting agenda: governance reviews of the remaining three entities named in the enabling resolution; delivery of the spreadsheet listing other city-related nonprofits and grantees; and a financial review of Promote Carmel Inc. That motion was seconded and approved by roll call as recorded in the minutes.

Next steps: the mayor’s office will publish the requested document packet to a cloud host, committee members asked for an executive summary and spreadsheet-style comparison of affiliates to be provided ahead of the next meeting, and the committee set a schedule to complete in-depth reviews of Promote Carmel and the two community development corporations in March, April and May.

Votes at a glance - Ryan Locke nominated and approved as committee chair. Motion: “I move to nominate Ryan Locke as chair.” Mover: Theresa Ayers. Second: not specified. Outcome: approved (recorded as “Aye”). - Motion approved to review the remaining three entities’ governance, to circulate the spreadsheet of nonprofits and to review Promote Carmel’s financials at the next meeting. Mover: Mayor Sue Finkham. Second: Joe Wood. Outcome: approved (recorded as “Aye”).