text: Owner of virtually unregulated nonprofit day cares had million-dollar compensation, records show - al.com
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  Owner of virtually unregulated nonprofit day cares had million-dollar compensation, records show
  Published: Mar. 30, 2017, 11:10 p.m.
  NEW!
  By
  Kelly Poe
  The executive of the nonprofit that runs four virtually unregulated day care centers in Montgomery received compensation of $1.33 million in 2015, the most recently available IRS documents show.
  United Family Services Outreach's Director Jesse Thomas' 2014 compensation of $1.29 million put him between two hospital CEOs as among the highest paid nonprofit leaders in the state in 2014, according a Wall Street Journal analysis of IRS records. The only other nonprofit workers in Alabama who earned more than a million dollars per year in compensation were all either doctors, hospital administrators or Southeastern Conference leaders. No social services administrators had compensation that high.
  The day cares operated by Thomas weren't always run under the umbrella of a nonprofit. In 1997, Thomas incorporated Thomas Child Care Centers Inc., a corporation that was dissolved in early 2013.
  A former location of Sunnyside Child Care in Montgomery now sits vacant after an incident in 2015 in which 86 children were sent to the hospital for food poisoning after eating lunch at this day care and another Sunnyside location.
  In 2010, the state Department of Human Resources suspended one of Thomas' day care's licenses pending a hearing after a child was found in a day care van for more than two hours during the summer, according to Alabama DHR. That child's guardian sued the centers, and that lawsuit was eventually settled.
  Thomas didn't go through with that hearing. Instead, he opened day cares later in 2010 under the nonprofit UFSO using the state's exemption for religious day cares. The exemption allows day cares to operate with virtually no oversight. Eighty-six children were treated for staph they contracted while in the care of Sunnyside Child Care Center in the Summer of 2015 - the Department of Health later found the toxin in food served that day.
  UFSO has no congregation, pastor, worship services, or religious elementary school, despite operating under the church exemption, according to a legal complaint on behalf of the parents of those children. AL.com asked Thomas about this via email, and he did not respond to this question. UFSO said on its mission statement that its mission includes providing services like family reunification, job readiness training, and parenting skills.
  'Something that's clearly off'
  AL.com spoke to two attorneys who represent nonprofits who said United Family Services Outreach's financial forms filed with the IRS, or Form 990s, were poorly filled out with several important pieces of information missing.
  "Normally what we do in a situation like this is look at other nonprofit organizations of similar size and similar programming and similar geographic location, of course, and see what they're paid, what the compensation is," said Bruce Hopkins, an attorney who practices nonprofit law and a professor at the University of Kansas School of Law. "I don't know, I just can't imagine that someone with this kind of entity is being paid that much ... on the face of it, it looks excessive."
  Matthew Journy, an attorney at GKG Law in Washington, D.C. who specializes in nonprofit compensation, said Thomas' compensation appears "Clearly excessive."
  "The 990s are poorly done, they're incomplete, they miss key information, and the organization doesn't appear to qualify to be a public charity, or to qualify to be a 501c3," Journy said. "They appear to have excessive payments to Jesse Thomas."
  The 2015 990 also lists payments between $4,637 and $20,712 to five different Thomas family members described as contract services.
  Thomas, speaking in an email through his attorney Andy Donaldson, said the listed compensation is incorrect.
  "We are not however going to answer questions about our personal finances," Thomas wrote in an email. "United Family Services continues to prepare accountings for agencies that we receive funding from. Those statements have been accepted and if there have been questions concerning the allocation of funds or how funds were used we have provided that information to the satisfaction of that agency to the best of our knowledge."
  UFSO reported total revenue of $1.88 million in 2015. That would make Thomas' listed compensation a full 71 percent of the nonprofit's earnings for the year. UFSO listed its total expenses for 2015 as $1.76 million, which would make Thomas' listed compensation about 76 percent of the nonprofit's total expenses.
  "To be honest with you, I have no idea how this organization actually received its recognition of charitable status," Journy said.
  While the UFSO lists Thomas' compensation as $1.33 million, it lists a payment of the same amount to "Sunnyside Childcare/Jesse Thomas" as an independent contractor. Donaldson said he understands that the money in question is used for the cost of running the centers, for expenses like utilities and teacher pay, not a salary that Thomas keeps, but he stressed that he couldn't talk about the compensation because he is not an accountant. AL.com asked to speak to UFSO's accountant, but AL.com was not provided with contact information for the accountant by publication.
  Nonprofit organizations are required by the IRS to accurately report the compensation of their executives on their 990s under penalty of perjury and make them available for public inspection.
  "They've reported them as compensation, and signed and stated the returns under penalty of perjury as compensation," Journy said. "They have told you (Al.com), not under penalty of perjury, that it is not their compensation, so take that as you will."
  Journy said even if that $1.33 million payment is to run the day care centers, it appears based on the 990s that if any of that money goes toward Thomas' compensation it would be required to be reported on one of the forms called the Schedule J, which details compensation from related organizations. The form deals only with compensation, and the form again lists Thomas' compensation as $1.33 million.
  "There's something that's clearly off here," Journy said. "The money doesn't appear to be used for charitable purposes, as is required. It doesn't appear the organization should be exempt. To the extent that the organization is exempt, this seems like a good example for the IRS to use excise taxes on Thomas."
  Hopkins also said that if Thomas was in fact compensated $1.33 million in 2015, he would be a good candidate for excise taxes.
  The IRS can require a nonprofit executive to pay excise taxes if it deems the executive has received excessive compensation from a charitable organization. The IRS can decide what it deems to be a reasonable amount, and require the person to return the remaining amount of his or her compensation to the organization and, in addition, require a 25 percent tax on what it determines to be the excessive amount.
  Tax dollars
  Another day care in Montgomery operated by United Family Services Outreach, this one on Norman Bridge Road.
  UFSO lists its sole source of revenue as "Childcare tuition/CNP program." CNP presumably stands for Child Nutrition Programs, a program of the federal government that provides child care centers money for breakfasts and lunches for low income families. AL.com asked Thomas' attorney if CNP stood for Child Nutrition Programs and did not receive a response by publication.
  State records show that in the 2015 fiscal year the nonprofit received $632,345 in federal grants. That number has only grown since then: records show that in 2016 UFSO received $639,087, and have received $226,414 so far in 2017.
  DHR records show that UFSO has received more than $3 million in reimbursement through the Child Care Subsidy Program in the last three full calendar years. In 2015 it received $1.1 million, and in 2016 $1.13 million, records show. The program aims to provide low- and moderate-income families with equal access to child care services.
  On that June 2015 day where children were infected with staph, there were at least 300 children in two of the four locations, according to multiple sources. Eighty-six of those children received emergency medical treatment; 30 had to be admitted to hospitals for further observation or treatment. That lawsuit was eventually settled.
  Donaldson said in an email that UFSO doesn't advertise, and receives children through word of mouth or requests from DHR to enroll children at a center. It also provides clothing, blankets and other supplies to those in need, he said. The summer Day Care Center at Sunnyside is free for children to attend, he said. There's no charge for children to attend that center when it's open in the summer.
  'Figuring things out'
  Delores Selmon, now 40, worked for the day cares as an administrative assistant under the director of one of the day care centers, but she said her day-to-day job varied. She was usually in charge of making sure children were checked in and keeping track of payments made and who owed money, but she also filled in for days where the center was short-staffed. Some of those duties included cooking, filling in for childcare workers on their lunch breaks, and occasionally driving the center's van.
  "My job varied day-to-day," Selmon said. "One day I might be cooking in the kitchen, the next day I might be in the classroom."
  Selmon got the job through a relative of her husband's, and worked there from September 2013 through July 2014.
  Driving the van made her uneasy, Selmon said. Sometimes there would be more children in the van than there were seats, she said, and there weren't car seats for children far too small to safely drive without them. Selmon said she was terminated shortly after she told her supervisor she was uncomfortable driving the van.
  It was typical for only one person to staff the infant room, where there'd be at least 18 babies at a time, Selmon said. It was also typical for one person to staff the toddler room, which again would usually house at least 18 children, she said. DHR licensed day cares require a ratio of no more than five children younger than 18 months to every child care worker and no more than seven children between 18 months and 2.5 years to every worker.
  Thomas said through his attorney that he cannot discuss Selmon's employment due to legal constraints except to confirm that she was indeed an employee. Thomas also said in an email that Sunnyside denies each statement Selmon has made for this article. Donaldson also told AL.com that UFSO's day cares are consistent with DHR's recommended ratio.
  "I had never worked at a day care before, and I came from California, and I knew the laws were different," Selmon said. "When I started really figuring things out, I felt like I was doing a lot of their dirty work and not really realizing it."
  2015 UFSO 990_Redacted by Kelly Poe on Scribd
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