Monitoring service agencies' finances can be a challenge, CDA director says

The CDA considers itself more of a partner with small, struggling nonprofit agencies. Enforcement is a last resort.
By ROGER G. SMITH
CITY HALL REPORTER
YOUNGSTOWN -- Social service agencies make up about 15 percent of the city Community Development Agency's nearly $7 million budget.
Yet, financial oversight of those agencies is the most challenging part of the department's responsibilities, said Jay Williams, CDA director since October 2000.
Kevin Kralj, director from 1996 until he left in mid-2000, declined to comment on his tenure.
There is little doubt that such nonprofit agencies do good and needed work, Williams said.
Bringing nonprofits into compliance with federal regulations, however, isn't easy, he said. They often have small staffs and boards of directors with limited experience and expertise, he said.
Williams considers CDA more of a partner to the agencies than an enforcer. CDA serves a guide or a place of reference to help them handle the funds, he said.
Trying to help first
Instead of punishing nonprofits when there is a problem, CDA does what it can to help such groups before taking tough enforcement steps, Williams said. He described cutting off funding as a last resort.
"It wouldn't do anyone any good to cut them off at the knees," he said. "It's not something done lightly. There's no joy in that."
That philosophy largely explains why CDA has handled Gleaners Food Bank the way it did.
Records show CDA pushed the food bank -- to no avail -- since the fall of 1999 to fix conflicts of interest on the board of directors, a critical oversight issue.
Records also show CDA notified Gleaners in summer 2001 about financial problems dating back almost a year. CDA gave the food bank almost eight months to address the issues before cutting off funding.
Despite attempts to fix the problems, the city now faces repaying the federal government $36,000. That's how much money was given to Gleaners over two years that is unaccounted for.
To Williams, that pattern of patience doesn't constitute lax city oversight. Rather, CDA gave Gleaners every chance to come into compliance before being left with no choice but to cut off funding, he said.
As much as CDA considers itself a partner, the department doesn't have the staff to do accounting work for the agencies, he said. For years there was just one compliance monitor to oversee all CDA funding. Three months ago, at Williams' urging, the city let him add an assistant monitor.
"We cannot run the administrative part of their agencies for them," he said.
Taking steps
Instead, CDA takes what Williams calls incremental steps toward getting an agency into compliance. Some agencies take longer than others. Most of the 30 nonprofits that receive funds do a good job and don't need much help, he said.
To avoid problems, CDA requires background from agencies when they apply such as information on staff and board members.
Williams acknowledged that the information is taken at face value and isn't verified. There just is no staff to do that, he said.
Agencies sometimes are turned down for funding because CDA or city council knows that such organizations couldn't handle the money correctly, he said. Williams admitted the process is subjective.
The city tries to become familiar with the agencies and then CDA monitors them after the fact, he said.
That's why Williams said he lobbied for an assistant compliance monitor. He also is the one who hired an accounting firm to do the management review that verified the Gleaners' accounting problems.
The first couple of years that Gleaners received city federal money there were no problems.
City council, which ultimately decides which agencies receive CDA funds, gave Gleaners $24,000 for 1997-98 to pay for roof and truck repairs. Council approved $35,000 for 1998-99 for the food bank's Pyatt Street building and equipment.
Records show that CDA reviewed Gleaners' spending and everything was done right.
When problems began
Trouble started when council Gleaners $107,000 in 1999-2000 for salaries, trucks, freezers and coolers and utilities and $70,000 in 2000-01 for similar capital items.
CDA stopped reimbursing Gleaners from its 2000-01 funding in early 2002 after the accounting problems emerged and neither the agency nor its board addressed them. That balance sits at $30,617.
Council also gave the food bank $40,000 for 2001-02 for operations. CDA hasn't released any of the $40,000 because of the problems and won't until they are solved.
Williams will talk with the city law department shortly about the legal side of the Gleaners case. The main question is how to recover the $36,000 at issue.
State auditors say the city didn't do anything wrong and are suggesting that Gleaners be pursued for the money, Williams said. Criminal charges, if any, are up to prosecutors, he said.
Meanwhile, Williams expects CDA's focus on more closely monitoring agencies will prevent a future Gleaners.
"I can't imagine any other organization where you will see something of this nature again," he said.