Questions Surround Eligibility of Organization Seeking Nearly Half Of Irvine’s Discretionary Charitable Funds

An item on tonight’s consent calendar will earmark what will result in $22,500, nearly half of Irvine’s charitable funds, to one organization. Will this enhance the quality of life for Irvine residents or businesses?

Irvine’s Community Partnership Funds (CPF) are typically $50,000 per fiscal year, with each Councilmember allocated $10,000 to distribute among various nonprofit organizations.

The CPF program aims to enhance to the quality of life in the Irvine community by supporting nonprofit organizations contributing to the well-being of Irvine residents and businesses through charitable, health, safety, philanthropic, cultural, educational, or other quality of life-enhancing purposes.

However, a significant portion of the CPF’s yearly budget is currently earmarked for the Korean American Chamber of Commerce of Orange County (KACCOC), raising questions. Historically, grants ranged from $500 to $1,000 and were directed to established Irvine nonprofits such as:

  • Irvine Children’s Fund
  • Irvine Youth Athletic Association
  • Assistance League of Irvine
  • Families Forward
  • Irvine Adult Day Health Services
  • Irvine Swim League
  • University, Northwood, Woodbridge, and Irvine High School Athletics
  • South Coast Chinese Cultural Association
  • Irvine Historical Society

October 10, 2023 Consent Calendar

On the consent calendar for tonight’s City Council meeting, Mayor Farrah Khan and Councilmembers Tammy Kim and Mike Carroll submitted memos requesting significant funding to the KACCOC to support the 2023 World Korean Business Convention held in Anaheim. This marks the largest CPF grant request by any Councilmember in Irvine’s recent history to one organization, and three separate requests were submitted on the same day.

Items on the Consent Calendar typically pass without discussion unless a Councilmember requests their removal. However, members of the public may still provide comments on consent items.

The grant requests include:

  • Mayor Khan requesting $7,500 to the KACCOC in support of program costs for the 2023 World Korean Business Convention.
  • Councilmember Carroll requesting $7,500 to the KACCOC for the same purpose, and another $7,500 to Families Forward, exceeding his annual allocation of $10,000.
  • Vice Mayor Kim requested $2,500 for the 2023 World Korean Business Convention, in addition to her previous $5,000 grant for the same purpose, when combined will total $7,500 to KACCOC.

If approved tonight, Irvine will allocate a total of $22,500 to one organization for a convention in Anaheim — nearly half of the $50,000 annual CPF budget.

Critics are questioning what Irvine residents and businesses will gain from funding this convention. Mayor Khan’s memo indicates that the funding will support the 2023 World Korean Business Convention, potentially providing the city with opportunities to “participate in the Breakfast Forum and have a booth” at the event.

These requests come on the heels of the previous September 26th City Council meeting where Vice Mayor Kim’s request to allocate $50,000 in unused Irvine Recovery Plan Funds to sponsor the 2023 World Korean Business Convention Event was denied by a 3-2 vote (For: Kim, Treseder; Against: Khan, Agran, Carroll).

Background

The CPF Program was established in 2008, with each City Councilmember receiving an equal annual allocation of $10,000. In November 2021, a subcommittee composed of Mayor Khan and Councilmember Carroll was appointed to review and recommend updates to City Council Policies and Procedures. Revisions to the CPF were adopted under Resolution No. 22-69, receiving unanimous approval on July 26, 2022, from Mayor Khan and Councilmembers Agran, Carroll, Kim, and Kuo.

Questions have arisen regarding whether these grant requests align with the program’s intended purpose. Critics are evaluating whether the KACCOC fulfills the criteria of providing a “charitable, health, safety, philanthropic, cultural, educational, or other quality of life-enhancing purpose” for Irvine residents and businesses.

Councilmembers are expected to consider requests for financial assistance from organizations based on factors such as the project proposal, community need, organization’s background, and eligibility.

Concerns are raised regarding how grants to the KACCOC benefit the Irvine community and whether these benefits justify such a large percentage of Irvine’s CPFs going to one organization compared to benefits received from the numerous other longstanding Irvine organizations that will only receive a fraction of the remaining CPF dollars.

Resolution No. 22-69 provides further clarity on the intended use of CPF funds, emphasizing the importance of enhancing the quality of life for Irvine residents and businesses through eligible nonprofit organizations. It also underscores the City Council’s discretion in evaluating each request based on available funds and merit:

WHEREAS, the City will make funds available for allocation to qualified nonprofit organizations that actively and effectively enhance the quality of life for Irvine residents and businesses; and

WHEREAS, The City Council will consider requests for financial assistance from eligible nonprofit organizations benefitting Irvine residents or businesses that are tax-exempt under Internal Revenue Code Section 501 (c)(3); and

WHEREAS, due to limited resources, not all requests may be funded, in whole or in part. It is the City Council’s intention to evaluate each request and, based upon available funds and the merits of each request, provide funding to those organizations that address City priorities as determined by the City Council; and

SECTION 2. The service or program proposed by each request for funding should:

a. Serve a charitable, health, safety, philanthropic, cultural, educational, or other quality of life enhancing purpose that contributes to the quality of life of Irvine residents and/or businesses.

SECTION 3. Eligible applicants may request grant funds by submitting a written proposal to the City Council detailing the:

a. Project proposal
b. Level of funding requested
c. Community need
d. Organization’s background

SECTION 4. City funds shall be used only for the purpose and/or program duly authorized and in accordance with the request.

SECTION 5. Funding of a CPF grant will not constitute a precedent or commitment for future funding. Disbursement of funds to eligible nonprofit
organizations is subject to the approval of the City Council at its sole and absolute discretion.

SECTION 6. Organizations receiving an individual grant of $1,000 or more shall be required to enter into a funding agreement.

SECTION 7. All funding recipients will be required to provide verification of nonprofit status, description of proposed funding and a post-expenditure report to the City describing how the funds were spent and project accomplishments.

Questions of EligibilityThe CPF Program requires eligible nonprofit organizations must be tax-exempt under Internal Revenue Code Section 501 (c)(3). According to Mayor Khan and Councilmembers Carroll and Kim, KACCOC is a qualified 501(c)(3) tax-exempt organization. However, as the most recent publicly available IRS filing shows, KACCOC is a 501(c)(6).

According to Donorbox.org, a fundraising platform for nonprofits, “the distinct difference between 501(c)(3) and 501(c)(6) organizations is in their underlying purposes. The goal of most 501(c)(3) organizations is charitable, while 501(c)(6) organizations are mainly business or membership nonprofits.

The IRS does not see 501(c)(6) organizations as charitable organizations. Instead, these organizations are formed to support their members’ business activities.

501(c)(6) organizations have less strict regulations regarding lobbying.

Below is a comparison table listing more differences:

City Councilmembers Are Expected to Consider:

  1. Brown Act Violation Concerns
    • Was there a collaboration between Mayor Khan and Councilmembers Carroll and Kim to make this request?
    • Or was it a coincidence that their Memos were all submitted on the same day?
  2. Project’s Proposal – What is Benefit to Irvine
    • How many Irvine residents or Irvine businesses will benefit from supporting a convention in Anaheim?
    • What will be the community benefit to giving 45% of the annual CPF budget to one organization?
    • How does paying $22,500 to participate in a Breakfast Forum and a booth at a convention enhance the quality of life for Irvine residents/businesses?
  3. Community Need
    • What is Irvine’s need that will be met by the convention?
  4. Costs to Irvine
    • How many city employees will be needed to staff the booth for the four-day convention?
  5. Eligibility
    • Perhaps the most significant question remains: Is the KACCOC eligible for this funding? The CPF was intended to support charitable 501(c)(3) nonprofits, not to promote business interests. KACCOC is a 501(c)(6), which the IRS does not consider a charitable organization.