Financial investigation

MONDAY, Aug. 11 – The Lansing Neighborhood Council’s assets have been frozen as a result of a police investigation into its finances.

The move leaves some local nonprofits in limbo, unable to access their funds, because the LNC was their fiscal agent.

“It’s very inconvenient on people’s lives,” says Edge Brussel, who runs the Lansing TimeBank. The TimeBank works on connecting neighbors to community resources and each other through canvassing, Brussel says.

LNC officials say they were managing funds for 10 to 12 organizations. They could not be more specific because they say they can no longer access files due to the investigation. Groups affected include neighborhood watches and start-up neighborhood organizations, as well as the TimeBank.

Start-up nonprofits sometimes partner with established 501(c)(3) organizations giving them access to grant money, which is then administered through the veteran organization.

Lansing Police are investigating the LNC after a review found “serious irregularities” with the accounting and management practices of the organization. The city has ended its contracts with the LNC as a result of the investigation. Those included a $54,000 federal grant for community development – such as training neighborhood organizations’ board of directors. Another contract involved the LNC administering billing for contractors working for the city’s code enforcement. 

TimeBank relied on LNC to cut expense checks, including salaries for three staffers. Brussel says the TimeBank has about $7,000 in grant money that the LNC was administering. As a result of the frozen accounts, her staff is agreeing to work for the next month knowing that there may not be a paycheck.

The investigation in April was prompted by complaints of nonpayment, according to Bob Johnson, director of the Planning and Neighborhood Development division in the city. He says he received a call from the owner of Eric’s Refuse noting LNC had not paid him over $25,000 for services that were rendered for the city. On April 15, Johnson met with LNC leadership. He says they admitted to arrearage and said it was due to a steep decline in revenues from December to April.

“They were basically robbing Peter to pay Paul,” says Johnson.

Board members say they were unaware of the accounting practices, nor the outstanding balances due contractors until an emergency board meeting on April 30.

“I was shocked,” says Monica Zuchowski, vice president of the organization. She has served on the organization’s board since 1995, holding positions such as vice president and president during many of those years.

Following the April 30 emergency board meeting, board leaders met with employees weekly to establish stronger financial accounting systems and to update organizational policies. The board also took over management of bill payment, according to board leaders.

The review, from outside CPA John C. DiPiero, was submitted to the city on June 14. The city previously referred to the report as an audit and is now calling it a review. Johnson says the city was already in the process of terminating the relationship with LNC, when on July 28 another contractor informed city officials they were owed nearly $10,000 for services rendered.

“We let everybody know that we needed to act, and we needed to act now,” Johnson says.

On Aug. 1, Johnson met with LNC leaders, along with Randy Hannan, chief of staff for Mayor Virg Bernero, and informed them they would end all funding from the fiscal year ending in June and not renewing.