EOB shutdown is becoming a possibility

By Timothy Pratt

Friday, April 2, 2004 | 11:31 a.m.

On the eve of two federal inquiries into the Economic Opportunity Board, a bank has reduced the agency's line of credit and a state official said his staff is making plans in the event that the Las Vegas Valley's largest nonprofit agency has to shut down.

The bank action is just the latest revelation regarding the extent of the organization's problems.

Citing various defaults under an existing contract, the Bank of America has reduced the Economic Opportunity Board's line of credit from $3 million to $2 million and made access to that credit more difficult, according to a letter obtained today by the Sun.

The letter, dated March 31, was hand-delivered to Michael Husted, the highest ranking employee at the EOB until he resigned Wednesday. Officials at the bank refused to comment on the letter.

In it, Joda L. Gibson, bank vice president, said the EOB, in its capacity as borrower from the bank, has breached the business loan agreement dated July 8 2002, by not having "financial personnel necessary to administer grants" and not providing "timely written notice" of the January 30 firing of the agency's chief financial officer.

It says the EOB also did not "promptly inform the (b)ank in writing" of federal investigations that will begin next week, and did not comply with "accounting provisions" of a state-administered grant from which $2.1 million has gone missing.

"Because of these defaults," the letter says, "the Bank is immediately reducing the line of credit available to you ... until the Bank has reasonable assurances that the issues ... are being dealt with in a satisfactory manner..."

State Sen. Joe Neal, the EOB's interim spokesman, did not return calls seeking comment this morning.

Board member Chester Richardson said he thought the bank's moves "would greatly assist us in better accountability and fiscal restraints ... (and) help us tighten our ship."

As for the defaults cited in the letter, he said, "things have been happening pretty quickly to keep everybody in the loop.

The bank's action and other recent developments -- including the loss of five administrative staff members Wednesday -- made the future of the agency seem more up in the air than ever. For four decades it has been providing services to thousands of low-income people, mostly minorities.

"We don't want to be knee-jerk in responding to anything," said Mike Willden, director of the state's Department of Human Resources and liaison for one of the two federal teams arriving Sunday to investigate the EOB.

"But the bigger issue is, there are thousands of families that depend on the EOB for services ... and that's going to be paramount in our response to next week's review."

Willden oversees the state funding of the child care assistance program, the EOB's largest. The program has $20 million in state and federal funds, and is the source of one of the agency's troubles -- $2.1 million unaccounted for since some time last year, or perhaps earlier. The program helps 10,000 children throughout the valley.

The state also gives the EOB money for three other programs, including the Women, Infants and Children (WIC) nutrition program as well as drug and alcohol treatment programs. It was immediately unclear how many people are in those programs.

The state revealed earlier this week that it would be putting out a public request for ideas on how to run the child care assistance program in the coming weeks, a first step to possibly turning the program over to different agencies.

But Willden said he is also making plans in case services need to be handled by another agency or agencies in the meantime.

Willden would not give specifics of his contingency plans.

After next week's review, he said, he will know "whether it's time for a corrective action plan or a transition to other providers."

His agency is paying $17,500 for one of the two reviews with discretionary federal funds. The review will be done by a team of seven consultants linked to the Health and Human Services Department, the parent agency for the federal child care assistance funds: three certified public accountants, one Head Start expert -- another program HHS funds, and three general management experts.

The team will look into the agency's board, staff, internal controls, financial management, property acquisition and records, Willden said.

Both teams will arrive in Las Vegas on Sunday and expect to spend about five days investigating the nonprofit agency.

The second review will be carried out by the Head Start bureau and its consultants -- a team of 14, Willden said, including Windy Hill, who oversees the more than 1,600 early childhood programs nationwide.

Hill said in an interview from Washington earlier this week that the EOB review will be only the second in which she has personally participated since taking over as associate commissioner of the Head Start bureau in 2002. That's an indication of how serious the situation in Las Vegas is, she said.

The EOB's Head Start and Early Head Start program is the agency's second largest, with more than $12 million in federal funds going to help 1,800 children. It has received negative reviews from the federal government since 1997, but Hill said the reviews have always stopped short of declaring the program "deficient," which would have put the EOB on a timeline to fix the program or give it up.

She said on several occasions in recent weeks that her agency should have been more aggressive with the EOB.

"Clearly more needs to be done in evaluating our management and oversight," she said. "It really isn't time to get it right -- it's way past that time."

According to federal policy, the Head Start bureau can send in a contractor to run a program if an agency like the EOB gives up the grant voluntarily. Then a competition for the grant can be held again at a future date and the agency can compete for the grant. But if the grant is taken away from the agency, then it is not eligible to compete again.

Willden said that the agency's loss this week of its assistant director, human resources manager and the former business manager for the Head Start program, as well as two other employees, will not make next week's reviews any easier.

"If you don't have any people that can answer questions ... it makes it that much more difficult," he said.

"The good news is that the teams are coming.

"The bad news is that the teams are coming."