By Timothy Pratt

Sun, Dec 9, 2007 (2:22 a.m.)

Urban League Chief Financial Officer Vincent Austin had just said, "All we need is for people to say, 'Another minority agency went down the tubes because they didn't know how to manage money.' "

The local history he was invoking included last year's meltdown of the Economic Opportunity Board, for four decades the valley's main source of services for the poor.

Within minutes of Austin's comment, Urban League President Ray Clarke looked around the boardroom table and asked, "Everybody have all the audit pages?"

The dozen board members traded question-mark glances. Valerie Dunn, chairwoman of the board's audit committee, piped up. "No, we don't."

So went a bizarre scenario in the second monthly meeting of the board created to oversee the organization poised to take over many of the EOB's cradle-to-grave services, along with millions of dollars in local, state and federal funds.

At its first meeting Oct. 24, board Chairwoman Jacqulyn Shropshire handed out the Urban League's first audit to members - minus pages 14 to 23, the ones that described what the auditor called "significant deficiencies" and "material weaknesses."

In the weeks following that meeting, Dunn, who had seen those pages, e-mailed the state Health and Human Services Department about the findings. The state monitors $2.8 million in federal money passed on to the Urban League, most of the organization's $4.1 million annual budget.

A state official wrote Clarke and Shropshire on Nov. 7, saying he was "very concerned that it appears there was not full disclosure of the findings to the full board of directors."

Fast forward a few weeks to the Nov. 28 meeting, where board members still were in the dark.

Shropshire followed Clarke's question about whether all board members had the full audit with the quizzical, "I thought everybody did."

A few minutes later, they did, finally looking down at the bad news, a full two months after the audit had been completed.

How did this happen? Hard to say.

Shropshire said at the meeting and afterward that she takes "full responsibility" for the whole thing. But that doesn't make the series of events any less confusing.

When the pages in question were handed out Nov. 28, board member Ray Specht asked, "Why didn't we get the whole report before?"

Shropshire said she thought certain pages were for management only. She added that she got handed the audit shortly before the October meeting and hadn't had time to review it. But the auditors had sent the audit to the Urban League a full month before.

Shropshire said in an interview after November's meeting that she was vacationing in Aruba the month before, adding, "I'm not an accountant."

She also said she sent out the pages in question to all board members in the days after the October meeting, explaining, "I wanted the board to see it before it hits the press." The organization's board meetings are open to the public, so reporters could have seen the findings if they had been distributed at the October meeting.

Still, at November's meeting, several board members had yet to see the full audit. And Shropshire continued to refer to the missing pages as a "management letter" - until Mike Torvinen, deputy director of fiscal services at Health and Human Services and author of the Nov. 7 letter, corrected her via speaker phone from Carson City.

Finally, then, the findings were reviewed. They included the fact that the Urban League had paid $18,000 for the salary of an employee with a grant not meant for that purpose and that there was no paperwork showing how much the organization's 2006 fundraiser had brought in.

The findings also included the discovery that bank transactions were not being recorded on a timely basis and that bank statements were not being reviewed by a third party, meaning top managers could write checks to themselves and no one would know. It also was noted that the organization had no procurement policy.

Despite the findings, the auditor found no evidence of misappropriation of funds. But auditors do not review all transactions for such audits.

The state has directed the organization to develop policies by Dec. 31 to correct the problems noted in the audit.

Shropshire said policies also would be developed for sharing information such as negative findings from audits or reviews with the board in a timely fashion.

Boards of such organizations have fiduciary responsibilities and need to be informed whenever there's a problem, Torvinen said.

"It's not going to be pleasant if the board isn't aware and there is a problem later," he said.