A little-known founda- tion created to support Texas' $3 billion fight against cancer has operated with oversized overhead expenses, much of which were paid to a consulting firm run by a politically connected lobbyist, records obtained by the Houston Chronicle show.

The donor-funded Cancer Prevention and Research Institute of Texas Foundation, intended principally to boost top administrative salaries at the state's cancer-fighting agency, has spent more than $800,000 on its own management, public relations and lobbying expenses during its three-year existence, the records show.

Administrative fees consumed more than a third of the foundation's $1 million budget last year - an outsized figure for an organization dedicated to fundraising, according to nationwide studies and experts.

"Of the 6,000 charities we rate, the vast majority spend 15 percent or less on administrative expenses," said Sandra Miniutti, chief financial officer of Charity Navigator, a watchdog website. "If anything, fundraising charities tend to spend less on overhead, not more, since they operate as a pass-through."

Get a breakdown: Connecting the cancer agency dots

Most administrative fees went to the consulting firm of Jennifer Stevens, an Austin-based lobbyist and fundraiser who serves as the foundation's executive director.

Marc Palazzo, a "crisis management" consultant recently hired by the foundation board, declined to disclose contracts but said the firm received "less than 17 percent" of the foundation's $3.9 million in revenues - or about $660,000.

Established by the Legislature in 2009, the foundation's primary aim is to supplement salaries of the chief scientific officer and chief executive of the Cancer Prevention and Research Institute of Texas, which dispenses publicly funded grants. That agency itself has come under intense scrutiny recently because of questionable grant-giving practices.

$230,000 dinner events

Three political appointees who oversaw CPRIT simultaneously ran its foundation.

Stevens was chosen as the nonprofit's executive director by James Mansour, in 2009, when he chaired both boards. Mansour hired Stevens because she worked as chief fundraiser for TexasOne, a nonprofit based in Gov. Rick Perry's office that has paid for the governor and others to travel the globe in pursuit of tourism and economic development prospects.

"Jennifer was highly qualified for the position," said Bill Miller, a spokesman for Mansour. "Her other work was never viewed as a conflict. She has done great work wherever she has been and the foundation was lucky to get her."

After being named the foundation's executive director, Stevens served as a paid lobbyist for a pharmaceutical company and other clients and continued to raise funds for the governor's nonprofit and others, records show.

"My firm is engaged on a wide range of issues for a diverse group of clients, none more important than the role we have played in successfully establishing the CPRIT Foundation," Stevens told the Chronicle. "Supporting the mission of CPRIT and being part of the effort to fight cancer is important to me personally and a responsibility we take very seriously."

Under Stevens' leadership, the foundation expanded its mission, hiring a federal lobbying firm to raise awareness of its work and soliciting sponsorships from big pharmaceutical companies and myriad donors for annual cancer conferences and elaborate dinner events that cost as much as $230,000 each, records show. Over time, administrative fees multiplied more than seven times over the $40,000 reported in 2009-2010.

It was only after CPRIT's chief scientific officer, Dr. Alfred Gilman, resigned in October that the activities of the unusual foundation that supplemented his salary by $500,000 came into question.

High overhead costs

Because of an exemption that the Internal Revenue Service granted in error, the foundation was not required until last year to file public financial documents called 990s that are submitted by most nonprofits, according to an IRS letter obtained by the Chronicle.

But faced with a flurry of lawmaker questions and an upcoming state audit, the foundation released meeting minutes and financial documents to the Chronicle. Minutes do not show whether board members formally designated a treasurer or approved budgets, though Palazzo said they did so. The board obtained liability insurance only after a 2012 emergency meeting regarding the agency's current crisis.

Last year's administrative expenses totaled $342,827 - including a $309,500 retainer to Stevens' firm, JHL Company, for "strategic oversight, staffing, employee benefits, rent, equipment and supplies," Palazzo said. The foundation spent an additional $84,000 for "development expenses," "strategic communications" and "public affairs" and $179,136 on event management.

Taken together, those overhead expenses exceeded the $390,667 in salary supplements paid to cancer agency employees that year.

Though Stevens served as CPRIT's executive director, she worked as a paid lobbyist for a pharmaceutical company and other corporate clients even as she met with legislators to urge them to support CPRIT, records show.

She and her two for-profit consulting companies simultaneously raised funds for CPRIT, for a private school and for an arm of the Austin chamber of commerce as well as for TexasOne. During her first two years at the foundation, tax records show Stevens' firm received $383,000 from TexasOne.

Palazzo said: "In both capacities she has a proven record of success and has earned the respect and confidence of leaders and advocates throughout the state."

Stevens worked for TexasOne from 2004 to 2011. Tracye McDaniel, a former governor's office employee who worked with Stevens for the first three years, called Stevens "hardworking and a straight shooter" who brought "integrity" to the process of coordinating nonprofit fundraising with official government work.

Potential for conflicts

Experts, however, said both TexasOne and the CPRIT Foundation - each of which raises money to help cover state employees' pay and expenses - are unusual. The inter-related board oversight of the two organizations and the roles of the foundation executive director raised the potential for conflicts, they said.

"These connections are what I'd be most concerned about - it seems too cozy," said Elizabeth T. Boris, the founding director of the Center on Nonprofits and Philanthropy at the Urban Institute. "Conflict of interest would be the real issue, especially if there's not transparency in reporting."

If transparency were a goal, the foundation never would have been established, said state Rep. Garnet Coleman, D-Houston, a longtime member of the Public Health Committee.

The law authorizes state agencies to accept gifts and grants, Coleman explained.

"But then they're subject to the open records law," he said. "Setting up a foundation suggests they wanted to be secretive."

$100,000 for PR

In the last two years, the CPRIT Foundation reported spending $100,000 on "public affairs" - in part to retain a Washington-based lobbying firm for "outreach" to federal government officials - and spent another $3,162 on "legislative education" in Texas.

Palazzo said the foundation wanted representation "to raise CPRIT's profile and mission within the cancer community at the federal level." It "incurred no lobbying related expenses" at the state level, he said, and characterized its "Cancer Day at the Capitol" and other activities as "purely awareness and education."

Marcus S. Owens, a Washington-based nonprofit attorney who formerly headed the tax-exempt division of the Internal Revenue Service, said the foundation's lobbying should be disclosed and limited to avoid potential problems with its nonprofit status.

"Lobbying is something that will get a charity in trouble - and when the leader is a registered lobbyist it seems like a good chance that there's a lot of lobbying going on," Owens said.

Support for cancer research is a good idea, says Craig McDonald, head of the Austin-based watchdog Texans for Public Justice. But hiring a lobbyist and "political operative" to run state-related foundations and entrusting so much public money to a small group of political insiders has been a mistake, he said.

"Now the scientists might suffer for the sins of the politicians."