The state secretary of state's office is questioning
the accuracy of tax returns recently filed by Happy Days and Special Times, a
Lowcountry charity best known for its efforts to comfort children with cancer.
The state's inquiry comes as the embattled nonprofit faces mounting
challenges, including:
-- The departure of its founder.
-- The withdrawal of a major financial donor.
-- The resignation of three board members.
-- A petition from dozens of Happy Days' supporters demanding the resignation
of other board members.
-- New revelations that the organization's stated income from this fiscal
year could be off by as much as $200,000.
The Happy Days board met to discuss these and other issues Tuesday, just one
day after the charity officially parted ways with founder Deborah Stephenson.
Some current and former board members have accused Stephenson of mismanaging the
charity's money.
Some of those allegations form the basis of the state's inquiry. The state
wants to know why the Charleston-based organization's 2003-2004 financial
statements are at odds with comments made by some board members, secretary of
state spokeswoman Dona Maria Ayers said Tuesday.
In its Aug. 18 letter to Happy Days, the secretary of state's office
questioned why the charity's filings don't mention alleged financial
irregularities that some board members have reported to the state or raised
publicly. Among the allegations are that Stephenson used Happy Days' credit card
and van for personal use and accepted unauthorized pay increases.
Stephenson concedes that the charity's bookkeeping was sloppy, but she denies
any intentional wrongdoing.The charity simply could be ordered to amend its tax
filing. But if the state's questions go unanswered, Happy Days could face fines
and, possibly, the loss of its ability to solicit donations in South Carolina,
Ayers said.
Happy Days has until Tuesday to address the state's concerns.
That could be tough given the condition of the charity's finances. The
board's new treasurer, Lee Hoffman, a certified public accountant, said it never
has taken him as long to prepare a tax return as it did recently with Happy
Days.
"A tax return shouldn't take 37 hours," Hoffman said during the board
meeting.
Hoffman said the organization's future depends on getting its finances in
order. The board voted to spend up to $10,000 to bring in an outside accountant
to organize Happy Days' books.
Once that happens, board members hope to subject the financial records to an
independent financial audit, something that has happened only once in the
charity's 23-year history.
"If we are going to stay in business, we are going to need to bite the
bullet," Hoffman said.
Happy Days' finances are in such disarray, the organization can't account for
some $200,000 in reported income this fiscal year, acting board Chairman Rob
Marchant said. He said the charity's account postings don't jibe with what the
organization actually took in through donations.
But the lack of a clear financial picture is only one of many hurdles before
the board. Three board members resigned from Happy Days this week, continuing a
trend of abrupt departures that have hounded the charity for the past several
years.
Jeff Nickles, who resigned from the board Monday, said he was fed up with
what he perceived as micromanaging by a group of board members.
"It's not going to be the same without Debby," he said. "I think it will be a
shell of itself."
The organization also could be harmed if financial backers pull away.
Charleston County and state officials have said they might withhold, or at the
very least scrutinize, any future donations to the group.
Heather McDonald, a longtime Happy Days volunteer and donor, said she no
longer will give money to the organization. "My money goes with Debby" said
McDonald, who said she gave about $100,000 to Happy Days over the past two years
alone.
Marchant downplayed the charity's problems, saying that the board already has
lined up two new board members and that the loss of McDonald's donations, while
important, won't cripple the charity.
"This is a transition period," he said after the board meeting. "We can't
wait for this unpleasantness to be over and get back to concentrating on the
kids."
Stephenson, meanwhile, said she is considering starting a new charity for
children with cancer.
"I'm not sure what to do," she said Tuesday. "I'm just devastated."
She scoffed when told that the board plans to consider offering her a
severance. "I would never take it."
Staff writer Michael Gartland contributed to this
report.
