News: CJ Exclusives

State Senator Didn’t File Tax Forms

Ballance’s successor in the NC Senate secured state grants while a state employee

Like former congressman Frank Ballance, his predecessor in the state Senate, Sen. Robert Holloman, D-Ahoskie, failed to timely file federal tax forms for the Nebo Family Life Center, a state-funded nonprofit organization that he runs. Holloman was a full-time state employee, the pastor of a church, and a Hertford County commissioner at the time his nonprofit received two state grants totaling $175,000.

Holloman also failed to file financial statements with the Joint Legislative Commission on Governmental Operations and the State Auditor’s Office as state law requires for organizations receiving more than $25,000 a year.

The financial information he eventually did file with the IRS is inconsistent with information Carolina Journal obtained from the N.C. Department of Correction, the agency that wrote him the checks.

Reached by telephone last week, Holloman said he could not explain details of how the $175,000 was spent because “most of our stuff is with the Justice Department.” Holloman had been called to testify to a federal grand jury in the investigation of Ballance and the John A. Hyman Memorial Youth Foundation, a nonprofit run by Ballance. Holloman said he would provide information to CJ when he retrieved his files from the Justice Department.

According to an overview of the 2001 legislation session prepared by the Fiscal Research Division, the General Assembly appropriated $100,000 for the fiscal year beginning July 1, 2000 and $75,000 for the year beginning July 1, 2001, for a “community program in Northampton County that works with substance abuse offenders.” Holloman confirmed to CJ that the funds went to The Nebo Family Life Center, Inc. While the language in the legislation implies the funding is for people actually convicted of drug offenses, Holloman said the program is for all people. The IRS documents he filed also indicated that a large part of the money spent by Nebo was for teenage-pregnancy counseling.

Holloman filed articles of incorporation for the Nebo Family Life Center with the North Carolina Secretary of State on Sept. 11, 1998. He listed himself as president and the organization’s address the same as Nebo Baptist Church in Murfreesboro, where he is pastor. Public IRS records show the organization received the tax-exempt status in 1999.

According to IRS rules, a nonprofit must file a return if the organization has annual gross receipts of more than $25,000. The organization must make the returns available for public inspection. The returns can also be accessed over the Internet at a site called guidestar.org, a national database of nonprofit organizations.

On Oct. 27, 2003 the IRS received returns from Nebo for the calendar years 1999, 2000, 2001, and 2002. The returns were postmarked Oct. 24, 2003 – coincidentally two days after State Auditor Ralph Campbell, Jr. released a scathing audit of the Hyman Foundation.

The IRS Form 990, Return of Organization Exempt From Income Tax, is due 5 1/2 months after the close of an organization’s selected reporting year. Since Nebo uses the calendar year, all four years were late. Holloman said he filed the forms late because “we finally got it together and got it in. This was something new to us. We are a new organization. We do not have a lot of professional people. We are trying to help people and we got people volunteering and we just got everything together we needed to do and filed it.”

Holloman also could not explain why he listed the state funds as direct public support instead of government grants on the 2000 return. He also could not explain why he showed revenue only in the year 2000 even though the $75,000 state grant came the following year.

The IRS forms also reflect compensation paid to all seven board members. The amount varied from year to year. In 2002 Holloman received $2,400; board member Roger Eason of Murfreesboro received $9,325; and board member Lois Bradley of Woodland received $18,500.

The federal indictment of Ballance documented a total of $393,000 that Holloman’s church and affiliated programs received through the efforts of Ballance. In addition to the $175,000 directly from the legislature, Nebo received $218,000 in state funds from the Hyman Foundation from 1994 to 2002.

Holloman started work with state government in October 1984. When he left in December 2001 he was with the Department of Crime Control and Public Safety as a community service area supervisor in Winton. In early 2002 he filed for the 4th District Senate seat that Ballance was vacating to run for Congress.

In addition to his state government job, Holloman was elected twice to the Hertford County Board of Commissioners. He served from 1992 to 1996 and from 2000 to January 2003, when he resigned to take his Senate seat.

Holloman’s current legislative district includes all or parts of Gates, Halifax, Hertford, Northampton, Vance, and Warren counties. He won the Democratic primary this year and is unopposed in the November general election. His district for 2004 has changed and includes all of Bertie, Chowan, Gates, Halifax, Hertford, Northampton, and Perquimans counties.

When the Ballance indictment was announced, U.S. Attorney Frank Whitney said the investigation would continue. State Auditor spokesman Dennis Patterson said that if a nonprofit organization received money directly from the state, the law allows the State Auditor’s Office to inspect the organization’s financial records. “If there is a complaint, it is something we may look at,” he said.

Timeline for state funds going directly to Nebo

Sept. 11, 1998 – Holloman incorporates Nebo Family Life Center.

March 31, 1999 – IRS approves 501(c)(3) status for Nebo. IRS reporting requirements are detailed in the determination letter.

Jan. 7, 2000 – Nebo receives $30,000 grant from Hyman Foundation. Receipt of that money would require Nebo to file Form 990 by May 15, 2001. IRS report was not filed until 2003.

July 1, 2000 – General Assembly increased the Department of Correction budget $100,000 in nonrecurring funds for community-based substance-abuse program for offenders (money was for Nebo).

Sept. 8, 2000 – Holloman requests the Department of Correction to release $100,000 to the Nebo Family Life Center.

Oct. 17, 2000 – The Department of Correction issues a $100,000 check to Nebo.

July 1, 2001 –– The General Assembly appropriates $75,000 for Northampton County substance-abuse program that had received $100,000 the previous year.

Dec. 1, 2001 – Holloman requests the $75,000 payment from Department of Correction.

Jan. 17, 2002 – The Department of Correction issues check to Nebo for $75,000. Holloman fails to report $75,000 state grant in 2001 or 2002 IRS forms when they were eventually filed.

April 15, 2003 – First Carolina Journal news story appears saying Ballance failed to file IRS reports for his nonprofit.

July 11, 2003 – Boone’s Tax Service in Rich Square completes Nebo’s Form 990 for the tax years 1999 to 2002. Holloman signs all forms that day but does not send them to the IRS.

Oct. 22, 2003 – State Auditor’s Office releases an audit of Ballance’s John A. Hyman Memorial Youth Foundation. Audit notes that Ballance failed to file required reports with the IRS and that Nebo was a recipient of Hyman Foundation grants.

Oct. 24, 2003 – Holloman sends IRS 990 forms for calendar years 1999, 2000, 2001, and 2002. Forms state that Nebo Family Life Center received $206,335 in revenue in the calendar year 2000. No revenue was reported in the other years.

Carolina Journal was at the forefront of early investigations into the finances of the Hyman Foundation and failure to comply with state and federal laws and regulations. The CJ exclusive series on the affair and the 51-page indictment can be found here.

Don Carrington is associate publisher of Carolina Journal.