AGENCY'S FINANCES TROUBLED.
URBAN LEAGUE'S RECORD OF FINANCIAL MISMANAGEMENT PLACES PROGRAMS IN DANGER
By Anthony J. Gottschlich, Springfield News-Sun
February 3, 2002
The Springfield Urban League and Community Center boasts a four-decade history of serving the poor and disadvantaged in this community, giving shelter to the homeless, a helping hand to troubled youths and a second chance to ex-cons, among other charitable efforts.
Recently, it has a history of another sort, one leaving the nonprofit organization in financial straits and its mission in jeopardy, a month-long Springfield News-Sun investigation has revealed.
According to a review of court documents, tax returns, audit reports, agency contracts and internal correspondence, as well as interviews with local and state officials, the News-Sun has learned that the Urban League:
- Until last Tuesday afternoon had not provided state-required workers' compensation insurance to its employees since Sept. 1, 1996. Also, it did not pay unemployment premiums to the state of Ohio several times in the 1990s, which forced the state to file liens against the organization.
- Breached its contract with the Clark County Department of Job and Family Services because of the workers' compensation lapse. The department terminated its $74,000 contract with the Urban League last week. Other contracts could be in jeopardy for the same reason.
- Sought and, at times, received reimbursement from the city of Springfield and Clark County Family and Children First Council for services it allegedly did not provide or could not prove it provided.
- Withheld income taxes from employee paychecks in the 1990s, but didn't pay the taxes to the state of Ohio and city of Springfield until years later.
- Is the subject of two lawsuits in which the plaintiffs are seeking reimbursement for broken lease agreements. Local attorney and businessman Tom Lagos is seeking $20,000 in back rent for a building the Urban League leased for its bingo operations; Ameritech Credit Corp. is seeking more than $15,000 for a broken lease on a new telephone system.
- Went from nearly $3,000 in the black in 1999 to nearly $235,000 in the red in 2000. Revenues were reported at nearly $564,000 that year.
In a Jan. 25 interview, Urban League officials said the unpaid income taxes and unemployment premiums are paid now, and they are working on rectifying the workers' compensation lapse. They attributed their financial troubles to inherited debts, cash flow problems, irresponsible former employees, fundraising challenges and a decrease in revenue from bingo operations.
"Things are rough. We're not denying it, things are rough," said Donna Brino-Blackwell, the Urban League's executive director since 1992. "But all of us around this table" are committed to bringing the organization out of financial difficulties.
The News-Sun interviewed Brino-Blackwell at the Urban League's headquarters, 521 S. Center St. Four board members, the operations manager and two other interested parties, one of whom refused to give his name, also attended the interview. All objected to this story and to questions about the Urban League's financial management.
The News-Sun obtained four annual audits — conducted by the Dayton accounting firm Alexander & Company in 1997, and the Columbus firm Robert Hemphill and Associates in 1998, 1999 and 2000. The audits point to a number of Urban League debts and accounting problems.
The licensed charity, which is exempt from federal income taxes, has been "in and out of favor" with the Ohio Bureau of Workers' Compensation for much of the last decade, said Rob Glenn, the bureau's spokesman.
"When an employer is not paying their premium and we at the Bureau of Workers' Compensation need to pay for lost time or for a medical claim, the employer must pay that back to us dollar for dollar," said Glenn, who said two Urban League workers had been injured on the job during the lapsed period.
On Tuesday, after the News-Sun interview and Job and Family Services' action to terminate its contract, the Urban League paid $7,000 to the bureau — about 25 percent of its outstanding debt — and entered a repayment plan with the bureau and Ohio Attorney General Betty Montgomery's office, the state's top bill collector.
"Since they've entered an arrangement with us, they have a 30-day certificate of coverage," said Glenn. "In 30 days, if they haven't made a payment, then they've lapsed again."
Four bureau liens totaling $22,700 remain open at the revenue recovery section of Montgomery's office, said spokesman Christopher Slagle. The Urban League has repaid three other liens to date, he said.
If Job and Family Services had known about the insurance lapse, it wouldn't have entered a contract with the Urban League in the first place, said Geoffrey Steele, the department's assistant director.
"In this case we didn't know that going in," Steele said.
The department funds the Urban League's E.C.H.O. program, or Ex-Offenders Can Have Opportunities, which is designed to give ex-convicts job training, job referrals and other life-skills training.
Steele sent a letter on Jan. 23 to the Urban League asking for proof that it carried workers' compensation insurance. Five days later, Job and Family Services terminated its contract.
"You gotta follow the law," Steele said in an interview. "It doesn't get any more complicated than that."
Brino-Blackwell immediately responded with a letter to Job and Family Services, assuring the department that the Urban League had recently established a payment plan with the workers' compensation bureau and that its insurance was reinstated.
"With the submission of this letter we also confirm that the SUL&CC will continue to remain in full compliance with both the (Job and Family Services) contract requirement and what is most important, all of our other fiduciary responsibilities to the state of Ohio," she wrote.
Compliance or noncompliance, it was too late, Steele said. The damage was done.
In the Jan. 25 interview, Brino-Blackwell said she thought the workers' compensation and other payroll tax issues had been settled.
"We had a former employee, I won't mention his name, that was supposed to handle that," she said.
Added Leah DeArmond, the Urban League's operations manager: "We set up an agreement with Paychex (a national payroll company with an office in Dayton) to pay payroll taxes. We were under the understanding that those taxes were paid through the company."
Making that claim is a "cop-out," said Paychex' Dayton branch manager Karey Anne Cauley.
Paychex operates on two payroll systems, she said — one that automatically deducts payroll taxes from an employer's bank account and one that notifies the employer of the payroll taxes due.
"In every payroll package there's a report that says these payments either have been made or you are responsible for these payments," Cauley said. "So for a client to say we thought Paychex was taking care of something, it's really a cop-out."
Contract conflicts
It appears the insurance lapse violates contract requirements with the Ohio Department of Development, Betty Montgomery's office, the Eastern Miami Valley Alcohol, Drug Addiction and Mental Health Services Board and the Clark County Family and Children First Council, the latter of which severed its ties with the Urban League last year.
Brino-Blackwell signed a contract with the Ohio Department of Development in July last year. The terms included that the Urban League would comply with workers' compensation requirements and other payroll taxes. It also affirmed the Urban League had no outstanding debts to the state.
The contract — which provides $48,400 to the Urban League for its homeless shelter, the Craig House at 1417 S. Limestone St. — states that any false statements made to secure the grant could be grounds for a charge of falsification, a first-degree misdemeanor, which carries a maximum penalty of a $1,000 fine and six months in prison.
"If this information is verified by the appropriate authorities within the Department of Development, we'll take corrective action under the grant," said Marlo Tannous, the department's chief legal counsel.
Corrective action could involve terminating the grant, sending an audit team to the Urban League and possibly referring the case to the appropriate legal authorities, such as the county prosecutor, Tannous said.
Brino-Blackwell insisted she didn't try to deceive the state.
"We have never, ever, never — since I've been sitting here on this board and sitting here as director — ever went into an obligation or contract with a funding source to deceive them," she said. "Never."
Another state agency, Attorney General Montgomery's office, has funded the Urban League's Victims of Crime program for five years. The latest contract is for nearly $56,500.
After learning of the workers's compensation lapse, the office sent a letter on Jan. 25 to the Urban League warning it to comply with the law within 60 days or risk losing its funds.
The insurance lapse brought into question the integrity of the Urban League, its Victims of Crime program and the Attorney General's office, said Montgomery spokesman Joe Case.
"We were troubled by the fact that they hadn't been making payments in years," Case said. "That's not something that we're required to ask when somebody applies for grants. You assume that organizations like this, (which) come highly recommended in the community by judges and prosecutors, are in good standing."
Fiscal accountability
The Urban League may have violated its contract with the alcohol, drug addiction and mental health board on several fronts: the workers' compensation lapse, the league's apparent financial problems and its failure to notify the ADMH board of lawsuits filed against it, such as the suit filed in December by Ameritech Credit Corp., the suit filed in January by Tom Lagos or the state liens.
"I think this organization is in trouble," said Paul VanderSchie, ADMH's chief executive officer. "I think they are in serious fiscal trouble. Consequently, we have them on a very tight fiscal accountability system."
The ADMH grant provides $143,000 a year to the Urban League for the Next Step program, a drug and alcohol prevention program.
"What happens with these organizations, particularly organizations that target poor people and minorities, is that the need is so great that when their funding streams start drying up, they have trouble adjusting and they extend their faith that somebody else will step in because of the over-riding need," said VanderSchie. "And when they extend their faith and nobody steps in, then they get in trouble."
The tight accountability system, which includes a reimbursement-based funding system, makes it difficult for the Urban League, too, VanderSchie said.
"The procedures we have for the reimbursement method with them is at a greater level of accountability than we have with others right now," he said.
The Clark County Family and Children First Council didn't know about the insurance lapse, but it had other concerns with the Urban League.
In the fall of 2000, the Urban League billed the council about $6,300 for salaries and expenses connected to the league's teen pregnancy prevention program.
There was a problem with that bill, however.
"It was explained to Ms. DeArmond at the time of her inquiry that the expenses are not reimbursable in light of the fact that no program services were provided during that time period," said Marilyn Demma, the council's executive director, in a Dec. 11, 2000, letter to Brino-Blackwell.
Urban League officials didn't immediately recall the billing issue, but Treasurer Cheryl Steptoe-Simon replied, "If we had a person working, we would have had to pay them."
The council, which funded the program with more than $110,000 over 41/2 years, ended its relationship with the Urban League in July.
"We chose not to fund the Urban League because over the several years that we had attempted to evaluate that program, we were not able to evaluate the program," Demma said. "It was not that we evaluated the program and came out of that with poor outcomes; rather we were not able to evaluate the program. That had to do, in my opinion, with staff turnover and participant turnover."
Evaluating the after-school program hinged on the ability to match pre- and post-program testing of the participants, which would gauge if the program was achieving its goals, Demma said. But the Urban League couldn't provide matched tests, she said.
"We have reason to believe that programming took place, but there were problems with consistency," she said. "That, in turn, meant we were unable to subject the program to evaluation."
Canceled checks
The city of Springfield faced similar billing concerns.
In 1988, the Urban League entered its first contract with the city for federal emergency shelter grant funds.
The money, about $20,000 in 2001, primarily funds the Urban League's homeless shelter, the Craig House. For a time, it also helped fund a rental assistance program, where the Urban League would pay the first month's rent for a client and then provide a canceled check to the city for reimbursement.
It didn't always work that way.
Correspondence between the city and Urban League in 2000 shows the Urban League would seek reimbursement for rent payments it had not made. It would provide the city with copies of checks that were written but not issued to the property owners, and then later cancel the checks, city officials said.
In time, the city caught on.
"We realized they had requested reimbursements for things they really hadn't paid," said Jackie Jaudon, the city's finance director.
When the property owners didn't get their rent payments, "they started calling us," Jaudon said.
"The Urban League was telling them that they couldn't send them because we hadn't given them the money."
The city conducted an audit in early 2000.
In a February 2000 memo, Ella Morgan of the city's housing and neighborhood services department wrote:
"One of the first questions that was asked to Leah (DeArmond) was how and when the checks are issued to the landlords. Leah explained that the checks are issued to the landlords by the housing coordinator, then she sends us the request for payment. However, as I matched the bank statement with the request for payments that we had paid, there were several checks throughout the year that had not cleared the bank, and the funds were not available in the bank account for them."
The city pressed the Urban League for a full accounting of its shelter grant funds, including canceled and voided checks. It cut off payments to the Urban League from late May to November that year, ended the Urban League's rental assistance program, and then issued a lump-sum payment when officials received the documents they wanted.
The city also took back $3,415 in reimbursements the Urban League couldn't account for, Morgan said.
Brino-Blackwell, DeArmond and others at the interview were puzzled when asked about these events.
"That was the time with that ex-employee," said Brino-Blackwell, talking to DeArmond. "Remember that problem with that?"
The News-Sun agreed to give the Urban League 41/2 days to research questions they couldn't immediately answer. They were reminded of those questions Tuesday, but didn't follow through. Instead, the Urban League's chairman, Ronald E. Ross, faxed the News-Sun a letter Wednesday afternoon, stating, "After discussion and careful deliberation, it was decided that a further evaluation of that request (for responses to unanswered questions) was in order."
The city has checked records with other agencies it funds, said Jaudon, but "this is the first time we had to go into this depth."
"It was putting us in jeopardy," she said, "because we were reimbursing on incorrect information they were giving us."
Jaudon said the Urban League paid its tax bill to the city in July 2001, after the city had cut off reimbursements to force payment. The amount of the tax bill is confidential information, but the tax debts to the city and state go back as far as 1996, according to the audits.
"Hopefully, we've gotten everything under control," Jaudon said.
Audit troubles
Audit reports and court records point to other financial troubles, as well:
- The Urban League withheld pension money from at least one employee's pay in 1999, but didn't pay the pension fund. The audit doesn't indicate how much was withheld or how many employees were affected.
"I've never read that in the audit we have," said DeArmond.
Ross, the chairman, was baffled on that one, too.
"We don't have (a retirement plan)," he said.
- The Urban League's board and officer liability insurance was canceled in 2000 because the league stopped paying the premiums. Urban League officials said they corrected this lapse and the board is now covered.
The audit report for 2000 points to a number of "material weaknesses" with the Urban League's financial management: unreconciled liability accounts, incomplete accounting data in the books and no formal inventory of the league's fixed assets. Past audits point to an excessive number of cash accounts and the borrowing of funds between accounts.
Those issues have been corrected, DeArmond said.
The National Urban League monitors its affiliates and holds them accountable for addressing issues, concerns or corrective actions, said Annelle Lewis, the National Urban League's senior vice president for affiliate development.
"Any concerns we have are between the National Urban League and the affiliate," Lewis said.
She said the Springfield Urban League, one of 111 affiliates across the country, has been moving in a "very positive direction as it relates to programs and how they serve the community."
Last year, the National Urban League gave Brino-Blackwell the Whitney M. Young Jr. Leadership Award for Advancing Racial Equality. The award, presented in Washington, D.C., included $10,000 cash for the Springfield Urban League and $1,000 for Brino-Blackwell.
"We are aware of the affiliate and its program, and again of the positive work that it has done, is doing and will continue to do to assure it maintains its 21st Century status," Lewis said.
Local Urban League officials shared that sentiment, and said the News-Sun was unfairly targeting the organization.
"The thing about it is the Urban League has done a whole lot of things for this community and we shouldn't be broke down saying, `They have done this, they haven't paid this' ... ," said Ross, chairman since 1997. "We're doing what we can do to do right."
Brino-Blackwell said that 19,000 people walk through the agency's doors each year, including repeat visitors.
The Urban League employs about 20 full-time staff members, according to a September 2000 staff list, the latest roster obtained by the News-Sun.
The Urban League inherited debts when it merged with the South Center Street Community Center in 1988, Ross said. But programs are running well, people are getting served and all program dollars are accounted for, he said.
"We are not the only organization struggling like this," said Steptoe-Simon, the treasurer, who accused the News-Sun of trying to "kill" the organization. "But I see only one organization being singled out for the article."
That view was shared by others.
"We're managing our debt, and I think it is a community issue, because this is a community organization," said board member Wali Muhammad. "The whole thing is ... the city of Springfield and the News and Sun has not been kind in dealing with our organization and reporting properly, and this is another instance of this."
Board member Eddie Chambers, director of minority affairs for Wittenberg University, asked, "Why is this news?"
"If you had uncovered theft, negligence or fraud _ this is not the case here _ then perhaps it would be news," he said.
Added Steptoe-Simon: "For the record, it is none of what he just said that contributes to any of our debt."
The financial difficulties, Steptoe-Simon and others said, are because of growing competition for funding sources, a shrinking economy and the challenge of being a minority-based charity.
"We are a black-based organization and it's hard for us to get money," Steptoe-Simon said. "So if there's anything I would say is that the people who are really concerned can step up to the plate and help us financially."
The Urban League took an especially hard hit, she said, when its bingo operations ceased in late June last year because of growing competition and expenses.
After expenses, the bingo games brought in $187,000 in 1999, about $175,000 in 2000 and nearly $79,000 last year, according to the Urban League's bingo license applications. The games resumed in December.
Another challenge: The funding agencies operate on a reimbursement basis, meaning the Urban League must pay for services up front and then wait for the reimbursement checks to come in.
"You're constantly trying to play catch-up to pay off those debts," Steptoe-Simon said.
Despite the challenges, Brino-Blackwell said the Urban League's mission remains strong.
"The mission definitely is not in jeopardy at all," she said. "We have some problems, we have some cash flow problems, we've had those for awhile, but no, the mission definitely is not in jeopardy."
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