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Nonprofit professionals express concerns about Philly Fighting COVID controversy impacting other nonprofits

January 28, 2021 Category: FeaturedLongPurpose

Disclosures

This article is a collaboration between Generocity and its sister site, Technical.ly.

Updates

Updated information about Dena Driscoll (Jan. 29, 2021 at 9 a.m.)
Philly Fighting COVID has been at the center of controversy this week after it was reported that it had accumulated doses of the COVID-19 vaccine to administer to the community, only to hoard them for personal use. But it is its move from a 501(c)3 nonprofit to 501(c)4 social welfare group designation that has raised eyebrows in the nonprofit world.

The organization is the brainchild of Andrei Doroshin, a 22-year-old Drexel graduate student, who founded PFC to use 3D printing for PPE, and later pitched it to the City of Philadelphia as perfectly suited to run the city’s mass vaccination sites. On Thursday, Doroshin admitted to taking doses of the COVID-19 vaccine that were supposed to be distributed, and administering them to his friends.

South Philly-based nonprofit fundraiser and comms professional Dena Driscoll first heard about Philly Fighting COVID in spring 2020. With more than 10 years of experience in the nonprofit sector, she was immediately curious when the group so quickly announced itself as a nonprofit — something she says is not easy to establish within days or weeks. D

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Driscoll assumed the organization had a fiscal sponsor to support its work, and since she found that people were pleased with the work PFC did at the time, she didn’t give the fledgling organization more thought.

When news broke in January 2021 about PFC’s questionable activities, however, the doubts she had originally experienced came rushing back.

“I went to their donation page,” she said. “I wanted to see who their donors were, how they were processing donations and how they were listing if a donation was tax deductible. That was the first time I noticed that they were listed as a 501(c)4.”

Screen captures from website, archived on the Wayback Machine, show that PFC described itself as a 501(c)3 not for profit at least until November of 2020, By the January 15, 2021 archived version of the website, the designation had changed and the organization was listed as a 501(c)4 organization.

The designation as a 501(c)4 matters.

Under IRS rules a 501(c)3 designation indicates that the organization is a charitable, religious or educational nonprofit, whose lobbying and political activities are very limited and its donors disclosed. Donations to these organizations are tax-deductible. Donations to 501(c)4s, on the other hand, are not deductible because these social welfare organizations can engage in lobbying, and receive unlimited money without having to disclose all donors — leading to what Driscoll and others call “dark money PACs.”

Generocity columnist Tivoni Devor said the organization’s quick start with no contract was a glaring red flag.

“Most city contracts are reimbursement-based, especially nonprofit,” he said. “You have to front the money, show work and receipts and get reimbursed. You have to have the cash flow to float for the 30-90 days.”

In choosing the 501(c)4, Devor believes that Philly Fighting COVID was attempting to circumvent the need to access a line of credit from a bank to supplement lack of funds.

Shifting its designation from a 501(c)3 to a 501(c)4 allowed the organization to change its profit model and also hide who donates to their organization, and in what amount.

Driscoll agreed that PFC changing its 501(c)3 designation over such a short period of time is troubling.

“It was baffling from a nonprofit perspective to see them use the terms interchangeably on their website,” she said. “There seemed like there was nothing about their employer ID number or anything on the internet.”

Driscoll added that the change in designation could also have consequences for the people that donated to the organization. Nonprofits typically give their donors letters affirming their donations for tax purposes. With the organization under heavy scrutiny, Driscoll suggests that PFC donors may want to consult with a tax professional about including the donation when filing personal income taxes.

Driscoll also said that while there are 501(c)4s that do great work, she is concerned that PFC’s controversy could affect the public’s trust in nonprofits, especially at such a precarious time for so many of them.

“What I find really disturbing, as someone who fundraises for nonprofits, is that they’re eroding the trust,” she said. “People are taking it at face-value that they are a nonprofit. That’s a word we hear a lot. Is it unheard of for there to be a nonprofit and for-profit arm of organizations? No. I wasn’t completely baffled by the idea. But they have to explain [it].”

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