When Leadership Fails the Mission: What San Diego's Urban Corps Teaches Us About Personal Inurement and Board Responsibility

Last week, I was interviewed by The San Diego Union-Tribune about a troubling situation involving a San Diego area nonprofit, the Urban Corps of San Diego County.

The organization’s CEO, Kyle Kennedy, allegedly directed Urban Corps staff—young people enrolled in its workforce development program—to renovate his personal investment property. According to records reviewed by the paper, the project took nearly a year, involved up to 26 staff members, and cost the organization over $90,000.

And rather than being terminated, Kennedy was placed on a performance improvement plan, or “PIP”.

I told the Union-Tribune what I’ll repeat here: this is not a gray area. This is personal inurement.

What Is Personal Inurement?

Personal inurement occurs when an “insider”—someone in a position of control within a nonprofit—uses the organization’s resources for personal gain. It doesn’t have to be egregious. It doesn’t have to be repeated. One act is enough.

And based on what’s been reported, this was no accident or misunderstanding. It was a months-long personal project funded and staffed by a nonprofit whose mission is to serve vulnerable youth—not to build the real estate portfolio of its CEO.

The IRS rule is simple and absolute: No part of a 501(c)(3)’s net earnings may inure to the benefit of any private individual. That includes excessive salary, perks, use of charitable assets, or—in this case—free labor and materials spent improving a personal investment property.

This is the very definition of inurement. And the consequences aren’t just theoretical—they’re severe and very real. The IRS has the authority to revoke a nonprofit’s 501(c)(3) tax-exempt status, which can dismantle years of mission-driven work and trigger back taxes on previously exempt income.

But it doesn’t stop there.

Individuals who benefit from inurement—like a CEO who misuses staff or funds—can face intermediate sanctions under Section 4958 of the Internal Revenue Code, including excise taxes of 25% to 200% of the excess benefit. In certain cases, board members and officers who knowingly approved or failed to correct the transaction can also be held personally liable.

This isn’t just a slap on the wrist. It can be a legal and financial wrecking ball.

Governance Failure, Not Just Executive Misconduct

It would be easy to place all the blame on Kennedy. And from what’s been reported, there’s plenty for him to be held accountable for.

But an even bigger issue from a governance perspective is what the Urban Corps board did after they learned about the misconduct.

They commissioned an investigation. The claims were substantiated. Two board members resigned in protest. And still, the board allowed Kennedy to stay—on a performance improvement plan.

Let me be blunt: a PIP is not a remedy for personal inurement. That’s not how you clean up a governance failure of this scale.

Boards are not there to protect executives. They’re there to protect the mission, the integrity of the organization, and the public trust. When that duty is breached, it’s not just bad optics—it’s a failure of fiduciary responsibility.

That said, I want to recognize the directors who did speak up—and ultimately stepped down—when they saw the board fail to act decisively. It takes courage to walk away from a cause you care about in order to uphold your values and fiduciary responsibilities. That kind of integrity should be applauded.

When board members hold the line on ethics, they’re not just protecting their own reputations—they’re protecting the credibility of the entire sector.

Why This Matters for Every Nonprofit

The Urban Corps story is local, but the warning is national.

Any nonprofit—large or small, established or emerging—is vulnerable to this kind of breach if there aren’t clear policies, strong oversight, and a culture of accountability. If your board rubber-stamps executive decisions, if financial controls are weak, or if documentation is left to the “honor system,” you are one decision away from being the next cautionary tale.

I’ve worked with hundreds of nonprofit organizations. I’ve seen how hard founders, CEOs, and board members work to serve their communities. But good intentions don’t excuse legal violations. And when things go wrong, good governance isn’t optional—it’s the only thing that protects your exemption, your reputation, and your impact.

Final Thoughts

As I told the Union-Tribune: “This is pretty egregious. It really is the fox in the henhouse.”

Using nonprofit resources for personal enrichment doesn’t just violate IRS rules—it violates the core of what the sector stands for.

So here’s the question every nonprofit board should be asking itself right now: Would we know if this were happening in our organization?

And if the answer isn’t a confident “yes”—it’s time to do something about it.