A Homestead Non-Profit Used Taxpayer Funds To Pay Off IRS Debts, Auditor Says

galata logo.jpg

Back in 2008, Galata Inc., a social service agency that assists minorities and low income residents in Homestead, was one of 37 local non-profit organizations that received a no-questions-asked Miami-Dade County grant. Galata got $500,000 from a $30 million pot that was part of the county's Building Better Communities general obligation bond program. The organization told Miami-Dade officials it would use the money to pay off most of a $531,000 mortgage on its 5,000-plus square foot recreational center at 916 North Flagler Ave. in Homestead.


But five years later, an audit by the Miami-Dade Inspector General's Office is accusing Galata of misusing some of the funds. 


The review found that the social services agency used some its grant proceeds, which were generated through property tax revenue, to pay the IRS $77,307 for payroll taxes Galata did not remit to the federal government between 2005 through 2007. At the time, the non-profit organization had been hit with tax liens. The inspector general also hammered Galata for using the county grant as collateral to get into more debt.


"Galata's use of GOB funds in this manner was clearly unauthorized by its grant agreement," Inspector General Chris Mazzella wrote in his January report. "There is no doubt that Galata was fully aware of what it was doing." 


Mazzella claims Galata's Executive Director, Joseph Louis, admitted to using grant money to satisfy its IRS tax liens. Banana Republican put a call into Louis for comment. We'll update this post if he does.


According to the inspector general's audit, Galata was supposed to be left with only a $31,000 mortgage debt after using the $500,000 it received. However, Galata only used $400,000 to pay down its loan.


The inspector general alleges Galata never told county budget administrators that it paid off the mortgage by refinancing the property with a new $355,000 mortgage two months after getting the county grant. As a result, Galata's debt on the recreational center has only been reduced by $207,805 instead of $500,000 as originally intended by the agency's grant agreement, according to the audit.


"In effect, Galata used county funds that were dedicated to paying down a specified mortgage to, instead, provide itself with transitional financing," Mazzella wrote. He recommended the Office of Management and Budget go after Galata to recoup the $77,307, plus another $21,693 the non-profit used on administrative expenses.  


Follow Francisco Alvarado on Twitter: @thefrankness

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