Questions over benefactor's millions donated to Steel Valley schools
January 20, 2013 5:00 AM
The foundation created by Bill Campbell, a Homestead native who made a fortune in technology, has allowed for numerous academic and structural improvements throughout the Steel Valley School District, such as this remodeled science classroom at the middle school.
Since 2000, Bill Campbell, a Homestead native, has donated about $8.7 million to a tax-exempt education foundation for Steel Valley schools.
By Mary Niederberger Pittsburgh Post-Gazette
Bill Campbell, chairman of the software firm Intuit and a Homestead native, is a man who hasn't forgotten his roots.
Since 2000, Mr. Campbell has donated more than $8.7 million to a tax-exempt education foundation that has provided numerous academic and structural improvements to the Steel Valley School District. He also put several hundred thousand more dollars into a second tax-exempt organization aimed at improving academics in the district.
The visible signs of Mr. Campbell's largesse are obvious in Steel Valley.
There's a $1 million middle school gymnasium named after his late brother James; an athletic field named after his late father William V. Campbell, superintendent of the former Homestead School District; and a $4.5 million addition to Barrett Elementary in Homestead.
In addition, the district has received more than $1 million in new computers and other technology from Mr. Campbell or the Campbell Family Foundation, located in Palo Alto, Calif.
But in recent months, questions have arisen from school board members and a Munhall resident about how Mr. Campbell's millions have been spent and whether those in charge of them have benefited financially.
Questions on expenditures
The questions started in the fall from three quarters: inquiries from resident Donna Dreshman about payments from the foundation for $15,885 in improvements at a $36,500 dek hockey rink that was less than a year old; questions from Donna Kiefer, a school director and retired school custodian, about payments for meals served at summer academic and football camps; and a school board decision to no longer accept and approve financial reports from the education foundation because of a lack of bidding and school board control.
From those questions came the revelation last month that the Steel Valley Foundation for Education -- the recipient of Mr. Campbell's $8.7 million -- lost its tax-exempt status on May 15, 2010, after 10 years of operation. According to the Internal Revenue Service, the status was revoked because the foundation failed to file an annual 990 form for three consecutive years.
The inquiries also revealed that school Director Joe Ducar, president of the foundation's board, sold meals from his Homestead restaurant, Duke's Upper Deck, to the district on two occasions last summer: to a summer camp, operated in part with Mr. Campbell's funds in 2008 and 2009, and to the district's annual football camp.
District payments for the meals -- invoices for $1,500 and $1,700 -- were stopped when Mr. Ducar returned the first check in September and withdrew the second invoice in response to school board objections.
The meals for the summer academic camps were paid for by the I-TEAM, the second nonprofit set up in 2007 largely with Mr. Campbell's funds.
Mr. Ducar said that he provides the meals annually to the football camp via a private agreement between himself and Mr. Campbell. He does not view this as a conflict for him in his roles as school director and president of the foundation board.
A June 2008 email indicated the payment for the football camp meals that year was $21,000.
Mr. Campbell could not be reached for comment. But his financial adviser, Tom Baenziger, confirmed that Mr. Campbell works closely with Mr. Ducar and that Mr. Ducar has Mr. Campbell's full support in his efforts with Steel Valley Foundation for Education.
Mr. Baenziger said he was not aware that the education foundation had lost its tax-exempt status, but said that fact would not change Mr. Campbell's support of Mr. Ducar or the education foundation.
Public records on the I-TEAM show its president and executive director, Edward Wehrer, now Steel Valley superintendent, was paid an $80,000 annual salary and used I-TEAM funds to pay tuition for him to earn a master's of business administration from the University of Pittsburgh, graduating in 2010 before taking the I-TEAM into an inactive status in 2011 because of a lack of funds. He became superintendent last summer.
Mrs. Kiefer said she started to look into the matter because during her years working for the district she saw food from Mr. Ducar's restaurant served at functions and she believed it was a conflict of interest for a school director to do business with the district. She also said she believed it was a conflict for Mr. Ducar to do business with the I-TEAM because its original funding came through the education foundation.
Private or public?
Mr. Ducar repeatedly has defended his right to do business with the school district both in statements at board meetings and in interviews.
"Being that Joe Ducar makes not one penny on the school board and that I get double zero for my work with the foundation and I pay businesses taxes to the Steel Valley School District, I don't see anything wrong with this. Just like any other business calls and asks if they can do business with the school district. Of course, I am going to take business if I can get it," Mr. Ducar said.
He said the meals he provided to the district and the I-TEAM were at the request of Mr. Wehrer.
Mr. Wehrer defended his right to purchase meals from Mr. Ducar with I-TEAM funding, saying the I-TEAM money was private money, not school district funding or education foundation money.
Holly McCann, an attorney familiar with nonprofit organizations, said that money donated to a tax-exempt organization is no longer considered private money.
"It's not your money to spend unwisely when you are a tax-exempt organization. The IRS rules are in place to ensure that the charitable purpose of a tax-exempt organization is protected," Ms. McCann said.
"The big deal is that there is a tax deduction involved and the directors of the tax-exempt organization have a responsibility to make sure the money is spent properly. They can't be used improperly or frittered away."
Though Mr. Wehrer acknowledged he used the education foundation in a "fiscal sponsorship" role to accept donations from Mr. Campbell before the I-TEAM had its own tax-exempt status, Mr. Wehrer would not say how much the I-TEAM paid Mr. Ducar for meals it purchased to provide staff lunches.
The first $257,400 donated by Mr. Campbell to the I-TEAM was funneled through the education foundation because the I-TEAM had not yet been approved as a tax-exempt organization.
Over the course of about three and half years, the I-TEAM would take in $801,538, largely from Mr. Campbell or donors associated with him.
While the I-TEAM filed the proper paperwork to achieve and maintain its tax-exempt status, some of its spending practices raise questions about whether it used the bulk of its funds for the intended purpose of improving academics in the Steel Valley district.
IRS regulations require nonprofit organizations to spend the large majority of their funds on their stated mission and bar individuals associated with the organizations from realizing private gain from the nonprofit.
"A nonprofit must use its money to further its mission and a nonprofit's funds cannot be used for personal or private inurement," said Scott Leff, associate director of the Bayer Center for Nonprofit Management at Robert Morris University.
During its time in operation, the I-TEAM ran two popular three-week academic camps for students in the Steel Valley district, some teacher training and an annual scholar-athlete banquet.
Mr. Wehrer said it failed to operate a third camp as planned in 2010 because he could not generate any local funding. He said he failed to live up to a promise that the organization would be financially independent after two years.
The approximately $140,000 remaining in the I-TEAM coffers is designated specifically for the annual scholar-athlete banquet.
Though he didn't have enough funding for a 2010 summer camp, Mr. Wehrer continued to attend graduate school and received his MBA in December 2010. He said he also tried during that time to generate funds for the I-TEAM by writing grant proposals.
The total amount of education expenses Mr. Wehrer listed on I-TEAM 990 forms in 2008, 2009 and 2010 was $66,945. He said most of that went for his graduate tuition that covered the MBA as well as nonprofit CEO training at Pitt's School of Social Work and some staff training.
Though Mr. Wehrer in his application to the IRS for tax-exempt status stated he would perform a salary survey of other like organizations and document the information and any votes taken to establish compensation, he would not provide the Post-Gazette with any of that documentation and gave inconsistent accounts of how his salary was set.
Mr. Wehrer moved the I-TEAM into a dormant phase in 2011 and quit drawing a salary.
In January 2012, he became acting executive director of the Carnegie Library of Homestead, a post he held until being appointed superintendent in a 5-4 vote in June at a salary of $101,050.
He has no education background but was hired under a new state law that allows people with business degrees to serve as school superintendents.
As superintendent, Mr. Wehrer sits on the education foundation, the organization that provided the initial funding for the I-TEAM.
According to the bylaws
In his new position, Mr. Wehrer has a vested interest in straightening out the affairs of the education foundation and in an effort to do so gave the Post-Gazette full access to all foundation records held by the district.
Those records include a June 21, 2011, letter from the IRS indicating the foundation's tax-exempt status had been revoked automatically for failure to file the proper forms for three consecutive years. The notice said the IRS hasn't received any response to a previous notice that asked the foundation to file the proper paperwork by May 15, 2010.
It warned that the district could no longer accept tax-deductible contributions and gave instructions on what actions to take to get the tax-exempt status restored.
Both Mr. Ducar and Mr. Wehrer were surprised the letter was in the district's file. While it predated Mr. Wehrer's time with the district, Mr. Ducar was president of the foundation in 2011 and he said no one from the district business office, which keeps the foundation's record, ever alerted him to the notice.
Mr. Ducar said he is continuing to accept donations from Mr. Campbell, including a $25,000 check earlier this month.
He said he has paid an attorney using some of those funds to work on getting the tax-exempt status restored retroactively.
Also among the records kept by the district is a copy of the education foundation bylaws that were submitted to the IRS when seeking a tax-exempt status. The bylaws state that the foundation board would at all times include at least three school directors, along with the district superintendent and three members of the community at large. The bylaws state the treasurer of the foundation is to be the director of operations/board secretary of the school district.
The bylaws also state that vacancies on the foundation board are to be filled by the school board.
In a June 12, 2001, letter to the IRS regarding the foundation's tax exempt status, former district business manager John Yaklich outlined the composition of the foundation board and stated: "Thus control over the expenditures of the foundation rests with representatives of the school district."
Mr. Ducar, who is currently the only school director on the foundation board, said he was unaware of any bylaws for the foundation or that the school directors were supposed to control the financial matters of the foundation.
Mr. Ducar, by his own description, has been the sole operator of the foundation for a number of years and the sole contact with Mr. Campbell. He said he single-handedly supervised all projects financed by the foundation, including the construction of the $4.5 million addition to Barrett. He pointed proudly to the fact that the construction project added classrooms and a gymnasium to the Homestead school without costing taxpayers a dime.
Foundation records kept at the office show copies of emails in which Mr. Ducar makes requests for donations, sometimes as large at $1 million at a time, and those requests are promptly met with a check from Mr. Campbell or his family foundation.
Mr. Ducar said while the education foundation does not hold regular board meetings, he has consulted with board members on the phone before spending money. He said he gave contracts repeatedly to local vendors to keep Mr. Campbell's money in the community.
In recent years, most of the foundation's checks have been signed by Mr. Ducar and school board President Beth Cannon, who had been a member of the education foundation board until her resignation last month for personal reasons.
Mrs. Cannon said in an interview this week she was never given a copy of the foundation bylaws and never consulted on any foundation decisions about which vendors to choose for projects. After she agreed to be on the foundation board, she said, she was frequently asked to be the second signature on checks issued by the foundation and that the checks were presented to her at school board meetings by Mr. Ducar and former business manager Mark Cherpak.
"I assumed they had been vetted and were appropriate because they came through the business office. I always checked to make sure they were made out to the right people and they were payment for work that was done," Mrs. Cannon said.
School director Michael Terrick -- who last fall publicly questioned why the school board was being asked to approve the education foundation reports when it had no control over the expenditures -- said there were too many large expenditures made without bids by the foundation for the board's comfort.
That led to the board's refusal to continue to vote to accept the reports.
Now Mrs. Cannon, as president of the school board, said she will review the education foundation's bylaws to see how much control the school board should have over the foundation. Mr. Ducar said he also will review the foundation bylaws.