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Monday, August 31, 2009

Solving the Slush Fund Abuse

The City Council slush fund abuse can be solved with one act:  the City Council can require that all government grants to non-profit organizations go towards the benefit of their intended beneficiaries, and specifically exclude salaries, consulting fees and other service fees to organizers, friends and family members. 

This would stop the creation of multiple non-profits for little or no reason other than to collect government grants and then just as rapidly wheel the funds out to their management.

The State Legislature should follow the same example.

The conditioning of government grants on compliance with "strings attached" has plenty of precedent.   Public campaign financing, for one, places many restrictions on how campaigns can use public funds.   And in the private sector, lenders and investors often condition their financing on a long list of permitted uses and forbidden uses.   A violation is a serious's called a default. 

The use of such positive covenants and negative covenants is so commonplace in financing transactions that, in my opinion, the absence of such covenants for many government grants must be viewed as intentional.

If such a law had been on the books several years ago, a certain Bronx elected official would not be heading to federal prison after his sentencing, scheduled for October 2009.

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