WEDNESDAY, Aug. 6 — The Bernero administration has terminated all funding to the Lansing Neighborhood Council after an audit found “serious irregularities in the accounting and cash management practices.”
The action has effectively killed the 34-year-old nonprofit formed to coordinate and support the activities of neighborhood organizations. It provides a number of services on behalf of the city, such as trash cleanup and building board-ups. It receives at least $54,000 a year.
The audit “revealed a variety of serious irregularities in the accounting and cash management practices of the LNC,” Bob Johnson, director of the Planning and Neighborhood Development Department, said in a letter dated Friday to City Council President A’Lynne Boles.
As a result, the city is “terminating all funding and service contracts with the LNC, effectively immediately,” Johnson wrote. He said the city will take over managing LNC services and payments to contractors.
Johnson noted the audit findings had been turned over to the Lansing Police Department for further investigation.
Johnson wrote that the city provides “most if not all funds that the support the operating expenses of the LNC.” As a result, he said, “we anticipate that they will no longer be able to employ staff or provide services to the community.
“While this is certainly regrettable, it is in the best interests of the City to sever all ties with the LNC at this time and then to work with neighborhood leaders toward establishing a new citywide neighborhood organization.”
The audit, conducted by John C. DiPiero of Hemlock, was sent to Dorothy Boone, development manager for the Planning and Neighborhood Development Department. It is not clear why the audit was conducted, other than “to try to answer specific questions” related to the organizations operations, the letter says. It describes the audit as an “independent outside audit” commissioned by the department.
DiPiero made several discoveries in his audit.
He said that both employees of the council — executive director Cheryl Risner and her assistant, Jennifer Fuentes — received 3 percent raises in November 2012. Both employees were issued checks paying them for the 3 percent raise, backdated to 2010. Risner received two checks for the backdated pay raise.
Risner was paid $45,000 with a 10 percent salary payment to cover retirement. Fuentes was paid $30,000 with the same retirement costs.
The audit report says that Risner said there had been only one back-pay check — despite having provided both checks to him. One check was written in March 2013 and the other in September of 2013.
“She actually gave me a copy of the second check and claimed that was the only retroactive pay check issued; it could have been an oversight, but I believe it was intentional; when I inquired about the retroactive pay amount, she could not remember the amount authorized,” he wrote.
DiPiero report said the president and the treasurer of the board that oversees the council had different stories on whether those raises were retroactive to 2010. The president did not recall any of the pay-raise issues; while the board treasurer did recall the pay increase, but “did not remember any mention of back pay.”
The council’s website identifies the president as Kathy Tobe, president of the Churchill Downs Community Association, and the treasurer as Nancy Mahlow, who heads the Eastside Neighborhood Association.
The audit revealed that cash flow into and out of the organization was “nonexistent from December to present; a negative cash position existed for those months.”
He found that the organization had a “weak” procurement policy requiring bids and that it was not following even that policy. He noted that the two major contractors — Teen Challenge, which does board ups for the city, and Eric’s Trash Removal — were sole-source, no-bid contracts.
He also found the organization was paying the two employees for their lunch hours. The two employees of the organization were scheduled to work eight hours a day, from 9 a.m. to 5 p.m., but provided one hour for lunch. This meant the organization was paying both employees for five hours a week each of time that they did not work. The employees were also allowed to accrue as much sick time, compensation time and vacation time as they chose.
In a third finding on the operations of the organization, the auditor noted that minutes for meetings were missing, and those minutes that did exist were “very haphazard and disorganized.” He noted that the minutes that did exist did not follow any particular format and lacked bills or financial information. They also did not contain include information on what was approved or rejected and what the votes were.
In addition, he notes that the bylaws of the organization require 11 members of the board for a quorum, even though the organization’s board currently has only six people.
“The Board has virtually no oversight of the operations; this is a Director driven agency,” DiPiero concluded.