The $2.1 million question

Friday, March 26, 2004 | 5:58 a.m.

WEEKEND EDITION

March 27 - 28, 2004

These are the major programs operated by EOB Community Action Partnership in Southern Nevada:

Child Care Assistance Subsidy Program

Offers subsidized child care and parental choice of day care providers to income-eligible families who are working, attending school or seeking employment.

Child Care Assistance Resource & Referral Program

Provides free referrals to licensed child care facilities and homes and information regarding community services and programs available for families.

Early Head Start

Serves pregnant women, infants and toddlers up to age 3 in either a home-based setting or center-based setting.

Family Planning

Services include physical exams, pap smears, mammograms, laboratory tests, birth control methods, counseling, pregnancy testing and verification.

Financial Assistance Programs

Provides training and educational opportunities, scholarships for child care development and other related classes, and quality improvement grants for licensed providers.

Foster Grandparent Program

Provides stipends to low-income senior volunteers who give support to children.

Head Start

Provides preschool experience to children ages 3 to 5 from low-income families and seeks to enhance child and family educational, nutritional, psychological and health potential at 17 preschool centers.

Head Start Children's Village

Provides affordable child care services on a fee basis for children up to age 5.

Hollyhock Adult Day Health Center

Provides senior and adult day health care to delay or prevent institutionalization.

Housing and Development

Offers a variety of home programs such as rental assistance and first-time home buyer assistance for homeless, low-income families, single parents, disabled persons and seniors.

Home Center

Provides home buyers with pre- and post-purchase education, down payment assistance and credit counseling.

Immunization and Preschool Physicals

Provides immunizations and checkups for the early identification and treatment of health problems.

Individual Development Account Program

Offers a $2-to-$1 match for qualifying clients to save money for a down payment on a new home, continuing education, or to start a new business.

KCEP-FM 88.1

Public radio station that offers opportunities to publicize agency programs and services, provides weekly talk show programs on EOB services, sponsors food and toy drives, and has a summer intern program for students interested in broadcasting.

Lied Senior Care Center

Provides senior and adult day health care designed to delay or prevent institutionalization.

Maternal Care

Provides prenatal and postpartum care to low-income pregnant women.

Men's and Women's Health Center

Provides testing, treatment and counseling for HIV/AIDS and all sexually transmitted infections, breast and prostate cancer screenings, Hepatitis C testing, inoculations for Hepatitis A and B, and diabetes education.

Micro Business Development

Assists low-income residents who want to start or enhance their own business with technical assistance, business workshops and seminars.

MLK Senior Center

Provides activities for seniors 55 and older, including health monitoring, computer training, Spanish classes, informational seminars, emergency food vouchers, lunches, crafts and referral services.

Preschool Physicals

Provides screenings to non-insured preschool children for a fee of $12.50.

Senior Home Repair

Provides up to $1,000 for minor home repairs for low-income seniors.

Single-Family Home Ownership Construction

With support from Clark County and the cities of Las Vegas and North Las Vegas offers development of single-family homes for sale to low- and moderate-income people.

Single Point of Entry

Designed to answer questions and act as a referral source for seniors and caregivers.

Transportation

Provides para-transit services to individuals with special needs.

Treatment Center

Provides residential and outpatient substance abuse treatment to chemically dependent adults, and also provides adolescent outpatient treatment.

Try-Angles Program

Offers training for child care staff, classroom assessments, mediation, prevention and intervention services and behavioral support.

WIC (Women, Infants & Children)

Provides supplemental food for high-risk, low-income pregnant, lactating and postpartum women, and for children up to age 5.

One of the biggest mysteries in the Las Vegas Valley is the disappearance of $2.1 million in state and federal child care subsidy funds that were given to the EOB Community Action Partnership last July.

What we do know is that sometime between July and January, the money that the Nevada Welfare Division advanced to the EOB went somewhere other than to its intended purpose: subsidies for low-income parents so that they could enroll their children in day care.

What we don't know is what EOB, Southern Nevada's only federally designated anti-poverty agency, did with the money. But we're about to find out.

Auditors from the Department of Health and Human Services, EOB's primary federal funding source, will pore over the agency's books in early April. A separate team of anti-poverty managers from around the country also will review EOB's management structure early next month in a quest to determine what went wrong.

EOB board members won't disclose what they know since the money trail remains under investigation. State Sen. Joe Neal, D-North Las Vegas, a board member and EOB's designated spokesman, conceded that he didn't know the answers to most questions about the agency's financial situation.

Since 1991, when Congress passed legislation that allowed states to distribute funding for child care services to anti-poverty agencies, Nevada has had a contract with EOB to subsidize eligible parents.

The way it is supposed to work is that the state advances money -- a mix of state and federal funds -- to the EOB, which the agency then uses to reimburse child care centers that provide services for EOB clients. The EOB then submits a monthly bill and a caseload report so that the welfare division can track and justify the expenditures.

When the welfare division attempted to square its own books in January, it discovered that the EOB couldn't account for the $2.1 million that had been advanced the prior year. The EOB is now repaying the money to the state.

Jerry Allen, chief of the welfare division's child care unit, said at least part of the problem could be attributed to accounting changes made by EOB last fall.

Allen speculated -- but does not have proof -- that the agency used the $2.1 million to fund other programs that were short on revenue and, in the process, violated the contract with the state.

"We've got a good system of checks and balances but we're still looking into all of this so I'm not in a position to say if there is a weakness somewhere," Allen said. "We're definitely studying this to see what we can do differently."

Whatever the cause of the missing $2.1 million, the size of EOB's financial problems are "rare" for such service providers, Paul Dole, board chairman of the Community Action Partnership in Washington, said. The association's membership includes EOB and most of the nation's other anti-poverty agencies.

"I'm sure it has happened in other cases but not to that extent," Dole, executive director of an anti-poverty agency in Kentucky, said of the missing money. "$2.1 million is a large number. Like any corporation you will have times when people mess up with bookkeeping but $2.1 million is rare."

It's rare because anti-poverty agencies generally are more tightly scrutinized than other charities due to their dependency on government grants, Dole said. Agencies that don't spend their funds properly typically are at risk of losing future funding.

Even when -- or if -- the mystery surrounding the missing money is resolved, there are at least three reasons why the private nonprofit organization, which changed its name last year from the Economic Opportunity Board of Clark County, remains vulnerable to financial disarray:

EOB owes its existence to the federal Economic Opportunity Act of 1964, which was pushed by then-President Lyndon Johnson as the centerpiece of his war on poverty.

The federal law enabled communities to designate their own community action agencies -- governed by local residents -- to receive government funds to operate anti-poverty programs.

On April 5, 1965, the local EOB opened with a staff of four and a $25,000 program grant. Today it has 700 employees, 27 separate funding sources and 30 programs to administer.

The growth in anti-poverty programs -- and one of the reasons EOB is a lot larger than it used to be -- has to do with changes in the way the federal government has decided to deal with the poor.

"We used to be comfortable giving people money to make them less poor," Arizona State University professor Laura Peck, who has studied anti-poverty agencies, said. "But now, we believe we should be more restrictive in handing out money. Instead, we hand out services that enable people to make more money. It's a hand up, not a handout."

EOB's programs range from prenatal care and housing assistance to transportation and drug treatment services for its low-income clients. It provides most of its services directly to clients at 35 facilities scattered throughout the valley, though it also subsidizes individuals who turn elsewhere for services, such as to child care centers.

"We're not winning the war on poverty but we're trying to keep up," Neal said. "The EOB has excelled with its Head Start program, affordable housing and drug rehabilitation.

"But we've only had partial success in child care. We have not had sufficient funding to take care of all the child care needs. We have a lot more single working mothers than we had in the 1960s."

According to its 2002 annual report, the latest year for which figures are available, EOB processed 56,686 requests for service. Two-thirds of the agency's clients are black or Hispanic. More women than men are served and the largest age group of clients is infants and children up to 5 years old.

EOB has grown rapidly to meet the needs of the valley's low-income population -- agency revenues nearly doubled from $26.1 million in 1997 to $50.2 million in 2002. Much of that revenue increase was attributed to federal and state money the agency got for Head Start, prenatal care and other health programs, and child care subsidies. From 2000 through last year, the agency's Head Start enrollment jumped from 500 to 1,700 children.

But the amount of spare money EOB has had left over from one year to the next declined from $16.2 million in 1999 to $4.8 million in 2002. There is speculation that at least part of this decline has to do with increasing amounts of rent that the agency is paying for its North Rancho Drive headquarters and to run some of its programs.

For 2002, the agency on its Form 990 tax return reported $51,091,562 in total expenses, which is nearly $5.8 million less than the $56,852,634 cited in its annual report for the same year.

EOB's auditor and tax preparer, Wipfli Young LLC of Madison, Wis., won't comment on its client's financial standing, company spokesman Kelly Lietz said. But Lietz said his company has not been contacted by any federal or state agency in connection with EOB and plans to do its next audit of the agency in April and May for financial activity that occurred in 2003.

The latest independent audit of EOB, performed for 2002 by Wipfli when it was known as Williams Young LLC, turned up one major area of concern: several agency bank accounts that "were not reconciled to the general ledger during 2002 in a timely manner."

The audit disclosed that the bank accounts in question were reconciled by the time Williams Young had completed its field work. But the auditor found that the situation indicated a weakness in the agency's internal financial controls.

Proper controls

"EOB should have proper controls in place to ensure that cash balances are fairly stated and reconciled in a timely manner," the audit stated. "Not having procedures in place to properly reconcile bank accounts to general ledger cash balances indicates a weakness over cash control and could result in materially misstated financial statements."

Because the 2003 audit has not yet occurred, it is not known whether the agency has sufficiently corrected that problem.

Neal, a seasoned politician who is used to dealing with mammoth state budgets, said he could not explain why the agency's fund balances have been shrinking from one year to the next or why the expenses listed on EOB's 2002 tax return don't jibe with its annual report for the same year. He also said he did not know the percentage of the agency's budget that was devoted to outside contracts.

According to agency bylaws, the board treasurer is the authorized signatory for the disbursement of EOB funds and "shall make such reports and accounting of the financial affairs of the Economic Opportunity Board as shall be required by the board from time to time."

Board treasurer Eloiza Martinez, an assistant vice president of Wells Fargo Bank and president of the Latin Chamber of Commerce, declined comment.

"We don't know fully what's going on," Neal said. "I'm going to have to admit that the board is in the dark on a lot of this. That's why we have asked the state Human Services Department to come in and look at this.

"We don't have answers on the contracts because frankly we don't know all the contracts out there."

Part of the problem could be with the makeup of EOB's board.

The board is supposed to have 15 members, though it is currently one member short because a seat reserved for a county commissioner is vacant. There are four other elected officials on the board: Neal, Las Vegas City Councilman Lawrence Weekly, North Las Vegas City Councilman William Robinson and Henderson City Councilwoman Amanda Cyphers.

Five members represent low-income residents: board chairman Claude Logan, the Clark County Detention Center's inmate food service provider; Chester Richardson, a casino security employee; former Assemblyman Gene Collins; the Rev. Marion Bennett, a church pastor, and Henry Herbert, a former Head Start parent.

Five members represent the private and public sectors: banker Martinez; Darryl Martin, director of Clark County Social Service; Vicente Herrera of the Latin Chamber of Commerce; Hannah Brown, president of the Urban Chamber of Commerce, and Pamela Henry of the Head Start Parent Policy Council.

The way the board is constituted is in accordance with the 1964 federal law. But Garth Winckler, past president of the United Way of Southern Nevada, said the EOB is "a little old fashioned" in terms of the makeup of its board.

"I'd rather have a working board that has a commitment to the cause and adds something to the management of the organization," he said. "I know some of the people on the board and they're certainly committed.

"But if you had managers on the board, you would have professional management. There is a role for service recipients to have a voice but you need managers when you're dealing with risk management and checks and balances."

EOB gets about 90 percent of its revenue from federal, state and local government grants. The balance comes from private contributions from agencies such as United Way of Southern Nevada and from fees clients pay for certain programs on a sliding-scale basis depending on their income.

In a June 2002 memo prepared by then-EOB chief financial officer R. Keith Latham, it was recommended that board members get more active in fund-raising because of his belief that the agency did not have enough money in its general fund reserve to pay for emergencies.

Because agency fund-raisers were costing more money than they were bringing in, Latham said board members needed to do more than simply attend board meetings. He also suggested that the board "may need to reorganize itself" with members who could attract financial support for the agency.

'Passive participation'

"Passive participation in agency fund-raising activities no longer gets the job done," Latham wrote. "The board members must become active in fund-raising and put their full support and influence behind any fund-raising activity that the agency undertakes."

In the wake of the EOB's latest financial woes, a group of anti-poverty agency managers from other states -- called the Mid-Iowa Peer to Peer Technical Assessment Team and directed by the federal Department of Health and Human Services -- will come into Las Vegas the week of April 4 to review EOB's management structure and help improve the board's performance.

The team will be funded through $17,500 in federal community service block grants that have been distributed to the Nevada Department of Human Resources. The EOB board sought the assistance last month by contacting the human resources department which, in turn, asked for the team's help.

"What will make the board better is a board that is properly trained in the role of a community service agency," Richardson said. "This is a step in the right direction and will end up being a win-win opportunity for our clients, our agency and our funding sources."

When Weekly attended a community action agency conference in New York two years ago, he said he was struck by the number of other boards around the country whose members included accountants, lawyers and other professionals with managerial skills.

"They have their finger on the pulse when it comes to fiscal responsibility," Weekly said. "We probably need to look at the makeup of our board and for future boards we need to make sure people can step up."

Numerous boards

Like other elected officials, Cyphers serves on numerous boards as a representative of her city. She chairs the Southern Nevada Water Authority Board, one of the most powerful and respected boards in the state because of its influence over water policy.

But in the nine months that she has been on the EOB board, she said she has observed disturbing trends: unproductive in-fighting among board members coupled with a tendency to drift into administrative issues that she said should have been handled by the agency's executive director.

"I have concerns about any board that tries to get involved in administrative matters instead of focusing on policy," Cyphers said. "I have seen nothing but constant bickering on this board. It's a very frustrating board to be on. I feel it's a waste of my time."

It came to a head last month when the board agreed to conduct a closed-door session to review the firing of finance director Debra Santos by then-executive director Marcia Rose Walker, who later resigned. Walker became executive director in 2000, and Santos was named finance director in late 2002.

Cyphers said she voted against the board majority both because she felt it was wrong for them to even discuss the issue -- she said she believed Walker had the authority to fire her finance director -- and because the board wanted to do so without the meeting being recorded.

Cyphers refuses to attend another board meeting until she gets legal clarification from the Nevada attorney general's office as to whether the EOB is violating state open meeting laws. She also said she didn't like the way board members treated Walker.

"When I talked to her on the phone she told me that one of the board members was yelling at her in front of other people," Cyphers said. "It was inappropriate behavior. You have to treat people with common decency.

"If I'm the executive director and making changes and the board is undermining what I'm doing and a board member is screaming at me, I'd probably leave, too."

Richardson had another take on Walker, saying that she "failed to show leadership and wasn't forthright with what was actually going on with the agency's obligations."

"She increased our programs but didn't have the capabilities to administer those programs. She clearly didn't have the managerial skills to manage an agency this size."

Santos, contacted by phone, and Walker, contacted in person at her home, both declined comment.

Among its financial obligations, the EOB submits periodic and detailed billing statements, cash flow information and caseload data to the sources of its funding. The sources of funding are then supposed to review this documentation to ensure that the money is properly spent.

One potential problem is that when one multiplies EOB's financial reporting obligations by 27 funding sources, many of which require monthly reports, it adds up to a lot of paperwork and potential bureaucratic red tape for the agency to process.

Dole said the large amount of paperwork can be problematic for an organization the size of EOB.

"States have a tendency to require a lot more than the feds do," Dole said. "Things can get backed up when the federal government changes requirements, because some states are a little bit slow to adopt the changes. Some programs want you to send them a copy of every invoice. It will drive you crazy."

The problems at EOB have already created plenty of "buzz" among the 54 anti-poverty agencies that belong to the California/Nevada Community Action Partnership, executive director Lynn Victor said.

Victor, whose organization is based in Sacramento, Calif., said the shock is due in part to the positive reputation Walker, the former EOB executive director, enjoyed among her peers in both states.

"I just feel confident that she will be completely exonerated," Victor said. "I found her to be a knowledgeable executive director."

The controversy over the missing $2.1 million has forced the EOB to take a fresh look at the services it provides.

"We're going to have to take a long look at all the programs in terms of what is working and what is not," Weekly said. "This has hit everybody over the head. It's just a sad day when an agency that has done so much for so many people is in a crisis situation. All you can do is roll up your sleeves and fix it. This is very fixable."

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