Documents show problems have dogged EOB for years

By Timothy Pratt

Tuesday, March 23, 2004 | 11:06 a.m.

A review of minutes and other documents from the embattled Economic Opportunity Board suggests that there were signs of the nonprofit agency's current troubles more than a year ago.

The agency, which oversees a $60 million budget and about 30 social service programs, has been under fire since it was revealed that $2.1 million from a child-care assistance program was not accounted for, obliging the EOB to pay the money back to the state. That money was supposed to be used to pay child-care centers to help low-income families.

The agency's Head Start programs have also been under scrutiny, and the federal Department of Health and Human Services is investigating.

According to documents obtained by the Sun, as early as January 2003 there were clues that money from the child-care assistance program was being mismanaged, when a child-care center sought help at a board meeting because the EOB was taking longer than usual to pay it.

Other issues brought up in board of directors meetings included concerns about problems named in a federal review of the Head Start program; the need to correct deficits in other programs; and credit cards issued to staff members whose use and payment were unclear.

State Sen. Joe Neal, D-North Las Vegas, a board member and acting spokesman for the EOB, did not return calls Monday seeking comment. Last week he said, "We're just a board -- we plead ignorant to a lot of stuff that's going on."

Las Vegas City Councilman Lawrence Weekly, the board's vice chairman, painted a similar picture.

"If anybody on the board had any inclination of what was going on, it wouldn't have gotten to this point," Weekly said. "This blindsided everybody."

But the Rev. Chester Richardson, a board member who represents low-income people, said according to his review of the agency there have been problems long before this latest flap. The minutes of board meetings show several questions were raised that may have been evidence of the problems.

Richardson also went to the HHS earlier this year asking for an investigation of a "serious case of fraud, waste and mismanagement" in the child-care assistance and Head Start programs.

Apart from the missing $2.1 million and a $300,000 deficit in the Head Start program, the complaint mentions a memo written by Chief Financial Officer Debra Santos to the executive director "about mismanagement of federal funds and possible fraud." Santos was fired shortly thereafter, the complaint notes.

The complaint also mentions "over 25 credit cards being used by staff that are paid by federal funds. However, not one Board member has ever seen a credit card bill."

State officials have launched an investigation into the use of state funds in EOB's programs.

Health and Human Services officials overseeing the Head Start programs have asked board members and key staff members to come to San Francisco today for a meeting to discuss the EOB's problems.

The EOB, which was created as an anti-poverty organization in 1964, handles a number of programs, including senior day care, early childhood education, job training and drug rehabilitation.

Most of its budget comes from federal grants, with other funding from the state, some local government grants and private donations.

Clues about problems with the child-care assistance funds, about a third of the agency's total budget, were apparent as early as the Jan. 26, 2003, board meeting, Richardson said. Brenda Chaney, of Smart Start Child Care, "had concern with turnaround time" in the EOB's pay, according to the minutes.

Richardson, then in his first meeting as a new board member, asked, "if there is any way to re-examine turnaround time of the checks we issue to providers."

Willia Chaney, Brenda's mother and director of Smart Start, said Monday that the EOB had gone from paying about $20,000 a month to her center in less than 30 days to taking as long as 45 days.

She said she had spoken at least twice with then-Executive Director Marcia Rose Walker, who recently resigned. Chaney sent her daughter to the board after not getting any results.

Richardson said this weekend that the situation "was an early clue to what was going on."

Richardson said the agency had been playing a sort of shell game for years, taking money from successive federal or state grants and using it to pay for costs unrelated to the grants.

The system worked, Richardson said, until Walker was brought in as new executive director, resulting in new accounting staff being hired, and the agency's budget doubled. Both happened in the past five years.

"They were able to do it with no serious problem ... but then things started to break down," he said.

On May 21 Walker presented the board with the 2003 review of the Head Start program that the Health and Human Services Department had recently completed. The federal government reviews Head Start, an early childhood program, every three years. The EOB received more than $12 million for Head Start this year.

Walker said in the meeting that HHS had gone over the review, including "findings," or problems with the program. "Staff is currently working on these areas, many of which have already been corrected," she said. Richardson asked to receive a copy of the HHS report, according to the minutes.

Nearly three months later he still had not received the report, Richardson said. On Aug. 9 Richardson filed a Freedom of Information Act request for the report with HHS, as well as for the EOB's plan to correct Head Start's problems, he said.

On receiving the report weeks later, Richardson began seeking earlier Head Start reviews, since the 2003 review said several problems had been identified in the 2000 review.

The 2003 review said "management was not able to articulate any specific directions or guidance provided by the Board, as part of its fiduciary responsibility, to ensure that appropriate internal controls are implemented to safeguard federal funds."

The review also noted: "it appears that Head Start is financing senior food services until reimbursement is received," possible evidence of the shell game Richardson described.

As far back as the 1997 review, the HHS recommended that the EOB establish separate bank accounts for each program -- "to assure that ... Head Start funds are not being used for other program costs."

At the time the EOB wrote in a response to the federal government that it was opposed to the suggestion, since doing so would "result in a very inefficient operation.

"The Fiscal Services Division is aware that Head Start funds are not to be used to fund other programs," the response said.

"Unfortunately, we did not maintain all of the documentation necessary to demonstrate this ..." it said.

In a Jan. 12 executive board meeting, Chairman Claude Logan said he was interested in working to set up "a master plan so we don't co-mingle funds," a reference, Richardson said, to the idea of opening separate bank accounts that was suggested by the federal government years earlier.

"They still haven't set up separate bank accounts," Richardson said.

When asked about problems with Head Start, Weekly said, "When you sit on these boards and you get these reports from staff there are times when issues come up ... you ask questions ... and you get answers that everything is all right."

Henderson Councilwoman Amanda Cyphers, who is the most recent addition to the board, having joined in June, said she found the monthly meetings "a very frustrating process."

"With all the bickering and the infighting on the issues, I never leave feeling I have accomplished anything."

Cyphers said she was "concerned about what happened to put them in this situation in the first place, and being proactive to prevent it from happening again."

In other board minutes detailing meetings in April, June, October and January, the EOB's community radio station, KCEP, and its growing deficit were discussed. That deficit is now at $300,000, Richardson said. A plan to curtail the deficit was introduced in January, eight months after the issue was first raised.

At the Feb. 26 board meeting, Richardson asked about "certain methods of Fiscal Affairs operations such as credit cards, purchase orders and expenditures."

Walker said agency credit cards had been "recalled."

Richardson sent his complaint via e-mail to an HHS hotline on Feb. 11 asking for an investigation.

In an interview last week Windy Hill, associate commissioner for the Head Start bureau, said that a tip from the HHS hotline had helped her reach the decision to send a team to review the EOB's finances and management in early April.

Richardson said he was "not out to kill the agency."

"Our services are unique, and deserve to be continued despite an ignorant board," he said. "If EOB should lose programs or services, then we should all bear the burden and step down."