View Full Version : Audit finds Sharpton's nonprofit on brink

09-07-2010, 08:33 PM
An accounting firm hired by Al Sharpton's National Action Network found the civil-rights group in such financial disarray that it flunked its record-keeping -- and may not even survive, The Post has learned.

The scathing critique was spelled out in a hard-hitting internal audit of NAN's books, a copy of which was obtained by The Post.

"The organization has suffered recurring decreases in net assets -- and has been dependent upon advances from related parties and the nonpayment of payroll tax obligations -- to maintain continuity," the firm KBL concluded in an April 2 audit of NAN's 2008 financial records, the most recent available.
CALLED TO ACCOUNT: The Rev. Al Sharpton with members of his National Action Network at a Martin Luther King tribute in DC.
CALLED TO ACCOUNT: The Rev. Al Sharpton with members of his National Action Network at a Martin Luther King tribute in DC.

The audit, which was submitted to NAN's board of directors, warned, "These circumstances create substantial doubt about the organization's ability to continue."

KBL said it was "unable to form an opinion" on the accuracy of NAN's financial figures "because of inadequacies in the organization's accounting records."

In 2008, federal prosecutors decided to drop a criminal probe into the finances of Sharpton and NAN. But Sharpton -- who also has a lucrative syndicated radio show and a speech-making and consulting business -- agreed to pay back more than $2 million in overdue personal and NAN taxes.

The audit said NAN still owed $1.348 million in delinquent city, state and federal taxes and penalties at the end of 2008. The IRS has filed dozens of liens against NAN over the past decade, including one as recently as April of this year.

Last year, the Federal Elections Commission slapped Sharpton with $285,000 fine, in part for illegally using NAN funds to cover the costs of his 2004 presidential campaign.

Sharpton, the founding president and CEO of NAN, said NAN's finances have improved since the recent audit of its 2008 records.

"We determined not to file bankruptcy but to make NAN solvent, which we clearly have done and will be reflected in [upcoming reports]," said NAN spokeswoman Rachael Noerdlinger.

Sharpton and NAN's board of directors put up "over seven figures" to begin paying down tax arrears, she said.

"By the end of the calendar year 2010, there will be no tax liabilities as per our agreement in '08 with tax authorities," the spokeswoman added.

Meanwhile, the audit found that NAN was a defendant in five lawsuits:

* Alpha International Travel accused the group of failing to pay $50,000 in outstanding bills. NAN settled the case.

* The Peabody hotel in Memphis, where NAN held its 2008 convention, accused NAN of stiffing it out of $70,000. NAN is contesting the charges.

* NAN's Arizona chapter is accused of being a deadbeat tenant. The organization is fighting the claim.

As a nonprofit group, NAN is required to file its financial report with the state attorney general's charities bureau as well as the IRS. NAN has requested an extension to file its 2009 report.

Far from closing shop, Sharpton has opened new NAN chapters across the country the past two years.

But such an expansion is a costly mistake, said one insider familiar with the group's finances.

"Sharpton is the face of NAN," the source said. "The strength of his personality and his ability to mobilize people around issues is what makes the NAN work. Adding chapters doesn't add anything."