The Chapel Hill News     Sunday, February 24, 2008

APS on a tight leash
Animal-welfare group loses its fundraising license,


By Emily Matchar, Staff Writer
The Animal Protection Society of Orange County (APS) has lost its
license to solicit donations, curtailing its right to raise funding.

The APS has taken down its Web site and suspended fundraising activities
until it gets its license back, according to a letter to the N.C.
Department of the Secretary of State, which oversees charitable donation
licensing.

The organization lost its license for not submitting financial records
on time, said Liz Proctor, spokeswoman for the Secretary of State's office.

The letter said the APS hopes to have the information ready to submit
within a week.

The loss of the state license is the latest in a series of setbacks for
the nonprofit animal welfare organization, which runs a shelter in
Mebane and used to run the Orange County Animal Shelter in Chapel Hill.

Former development director Bob Dills, who resigned in January, said he
was shocked by the APS's financial practices.

"I have never seen a place in a bigger mess in my life," he said.

Dills was hired in September 2007 to coordinate fundraising efforts for
the organization.

"When I saw the financials, my mouth fell open," he said.

Dills said he discovered the APS had no written budget and a checking
account balance of less than $6,000. APS officers routinely voiced
concerns about being able to meet payroll, Dills said.

Officials at APS say the organization is doing fine but have refused
repeated requests to see current tax or budget records.


Background

The APS adoption center on Nicks Road, about 25 minutes west of Chapel
Hill, was built in 2004. It takes in dogs and cats from local county
shelters and rescue organizations and has space for about 18 dogs and 50
cats.

The APS ran the Orange County Animal Shelter off Martin Luther King Jr.
Boulevard from 1979 until 2003, when it lost its county contract after
repeated complaints about management. The contract was worth $489,405 in
fiscal 2004, the last year before management was transferred to the
county. Since then the organization has relied on community donations,
adoption fees and fees for dog training classes.

Tax records show the organization's net assets have fallen dramatically,
from $1,298,272 in fiscal 2003 to $586,741 in fiscal 2006.

The organization has filed extensions on its 2006-07 return, due Nov.
15, 2007. The APS's Form 990, the Internal Revenue Service form for
nonprofits, shows $512,342 owed on a mortgage. The Nicks Road adoption
facility cost a reported $550,000 to build.

Tax records show the APS has been borrowing money from its own board
members or employees. The organization owed its members $97,300 at the
end of fiscal 2005, a debt that grew to $151,800 by the end of fiscal 2006.

Chapel Hill certified public accountant Frank Elmore said it's not
uncommon for struggling nonprofits to borrow from their own board
members. But unless an organization has a solid plan to improve its
financial situation, the practice can be risky and create a potential
conflict of interest -- will board members who loaned the organization
money keep it alive longer than prudent in the hope of getting their
money back?

"You're losing money, what do you plan to do to turn it around?" Elmore
said. "Do you just plan on running it into the dirt?"

Those who have worked with the APS said the organization has provided a
valuable service.

Joe Pulcinella, former director of the Orange County shelter, said he
regularly referred people to APS dog training classes. The nonprofit
also relieved some of the county shelter's space shortage by regularly
taking older, less immediately adoptable animals to the Nicks Road
facility for adoption, he said.

"It was a big help," Pulcinella said.

APS employees still comb the county shelter about once a week, says APS
executive director Tracy Carroll. The APS has a contract to spay and
neuter county animals at its on-site animal clinic; about 20 animals are
brought from the county shelter for the surgery each week.


APS responds

APS treasurer Lida Coleman denied requests to see the group's operating
budget or more current tax records, saying the documents are for
internal use only. She declined to comment on the APS's financial
situation other than to say the organization is in the process of an
audit and has never been late on its mortgage payments.

The Chapel Hill News repeatedly attempted to contact APS board members
Ann Petersen, Kendall Page and Pablo Scolnick by phone but received no
response. When reached by phone, board member Sarah Gray Lamm said she
had no comment.

Board President Suzy Cooke responded to an e-mail request for financial
records also sent to Petersen, Lamm, Coleman and the APS central e-mail
address by writing that APS board members could not respond to specific
financial inquiries. She did write that the loans from officers and
board members have not yet been repaid.

"Our officers and board have stepped up to support APS with donations
and loans because they believe in our mission and want to keep the
organization viable until it becomes self-sustaining," she said.

In a phone interview conducted before APS lost its solicitation license,
Cooke denied that APS was struggling. "We have managed to hold our heads
above water," she said.

Cooke said she did not know what APS's assets are, that only Coleman had
that information. Cooke said she did not have a copy of the APS budget.
Carroll also said she did not have any specific numbers or budget
information.

Neither Cooke nor Carroll could be reached for comment on APS's lost
charitable solicitation license.

"It's certainly detrimental for a nonprofit not to be able to solicit,"
said Gordon Whitaker, an expert on nonprofits at the UNC School of
Government. Whitaker said nonprofits are not obligated to make public
any financial records other than their 990.

"I'm just amazed that they're still operating," said longtime APS critic
Elliot Cramer. "Without the county contract there was seriously no way
they could survive."

Dills says he sees no reason why APS won't disclose its financial
information.

"There's something really screwy," he said. "The last thing you want to
do as a nonprofit is look like you're hiding something."


Contact staff writer Emily Matchar at 932-8742 or ematchar@nando.com.
2008 The Chapel Hill News
---
APS ASSETS
All tax-exempt nonprofit organizations must submit a yearly Form 990,
which provides the Internal Revenue Service with financial information.
Form 990s are public documents.

APS's 990s for the past several years show a steep decline in net
assets. The organization has yet to file a 2006-2007 990.

 2002-2003 -- $1,298,272
 2003-2004 -- $1,163,418
 2004-2005 -- $755,948
 2005-2006 -- $586,741