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NEON makes pointed response to DSS draft audit; Head Start contract suspended

NORWALK, Conn – The news – and the timing – got worse Thursday for Norwalk Economic Opportunity Now (NEON).

A day after releasing the news that the agency’s childhood development program, located at Norwalk’s Ben Franklin Center, was re-accredited for a five year period by the National Association for the Education of Young Children (NAEYC), the federal government issued a notice of summary suspension “all federal financial assistance awarded to your agency …under the Head Start Act.” The suspension is for at least 30 days.

Stephenson issued a press release Thursday night, saying that the sudden suspension will  create a hardship for parents who depend on Head Start so they can go to work in the morning.

“While NEON has been addressing and responding to Office of Head Start concerns regarding our program, we were surprised to learn of today’s suspension,” she said in the release. “Our main concern is that the sudden closure of Head Start for an indefinite period of time will throw hundreds of area families into chaos, taking away child care at the last minute – which will in turn jeopardize employment for many, and the ability of families to pay rent, put food on the table and buy medicine. We feel this inconvenience could have been avoided had federal Head Start officials worked with NEON to plan ahead for any transition to new management that had been decided. NEON is now working to do everything possible to minimize the inconvenience to our Head Start parents, and is urgently seeking solutions to remedy the indefinite loss of child care services for our families.”

The 11-page letter from the Department of Human Services Administration for Children and Families contained a litany of reasons leading to the suspension, including items from the recent draft audit report from Connecticut Department of Social Services, which was reported on NancyOnNorwalk Wednesday. Specifically cited were assertions in the audit of “inappropriate decisions made by NEON’s management,” and the DSS claim that “the likelihood of NEON becoming financially stable in the short term is remote.”

The letter to NEON is attached at the end of this report.

Those claims and most of the others made in the DSS draft audit drew a sharp and combative response from NEON interim President and CEO Chiquita Stephenson and Board of Directors Chairman Michael Berkoff. In their response, the two pointed the finger back at DSS, Connecticut Association for Community Action (CAFCA) and former president and CEO Pat Wilson Pheanious for the agency’s troubles.

The complete response is attached in multiple pdf’s at the end of this report.

The suspension, the ACF letter said, was to begin at 5 p.m. Thursday, Oct. 24, and may be continued beyond 30 days upon notification. The suspension means that NEON : is immediately prohibited from making any new expenditures or incurring any new obligations with Head Start funds in connection with its direct operation of Head Start services in its service area unless expressly authorized by ACF to do so.”

ACF named Community Development Institute as interim grantee to operate the program.

In the letter, ACF pointed to the Office of the Inspector General audit of NEON’s Head Start program covering 2009-March 2011 and another, more limited covering April 2011-Oct. 21 2011. As a result of those audits, which showed misuse of federal Head Start funds, NEON was required to comply with a set of requirements and/or conditions in order to continue its programs (see Summary Suspension document below, Page 4).

“To date, NEON has not adequately complied with these special award conditions,” the letter said. As recently as Oct. 15, it said, NEON supplied inadequate financial documentation. The unannounced two-day shutdown Oct. 7-8 further highlighted “NEON’s noncompliance with, as well as a non-understanding of, its special award conditions.”

The letter said NEON had $500,000 in unused Head Start funds at the time of the shutdown but had not requested their release. On Oct. 16, it said, NEON tried to withdraw $250,000 but could not because it had not requested prior approval from ACF in direct violation of Condition One of the high-risk designation letter it received recently from DSS’s ACF has not received requests from NEON to draw down funds, ACF is unsure how the agency is paying for the program “if at all,” the letter said.

The letter notes a phone conversation ACF said took place Oct. 18 with Stephenson, who described a “new system” and “restructuring” of the agency’s financial culture, saying that, to meet its financial obligations, NEON “considers all incoming funds, regardless of funding source, and ‘see(s) where [the money] fits’”

The letter pointed out that Stephenson had described a system of comingling funs, “something that is expressly disallowed under the terms of NEON’s Head Start grant.”

It was the misallocation and misuse of funds under former president and CEO Joseph Mann that resulted in NEON being told to refund hundreds of thousands of dollars to the government and the departure of Mann.

In the letter responding to the DSS draft audit, NEON repeatedly pointed to its merger with Stamford anti-poverty agency CTE as a major reason for its financial problems and for it increases in staffing and payroll. It was a merger, NEON said repeatedly, that was mandated by DSS chief Roderick Bremby. NEON said it was taking on CTE’s debt, programs and, during transition, its employees that put the agency behind the financial eight-ball.

NEON also repeatedly pointed to decisions made by former interim president and CEO Pat Wilson Pheanious, who was placed in the position by DSS, as contributing to the problems. It was Pheanious, who’s 18-month appointment ended in early September, who was in charge when the decision was made to continue unfunded programs, and it was Pheanious who was part of the decision to add staff, make promotions and increase salaries, the response letter said.

The draft audit cited Stephenson’s dramatic pay increase and the employment of several of her family members as among the “inappropriate” decisions that caused NEON’s problems.

Stephenson, who was promoted from a mid-level manager to chief operating officer during Pheanious’ term, was paid $66,221 annually as of June 22, 2012, according to the ACF document. On June 22, 2013, her salary was $135,000, a 103.86 percent increase. The previous employee in her position, the document said, was paid $83,641. Stephenson’s new rate was a $51,359 increase over the previous employee’s salary.

Mary Mann, whose job title was changed as duties increased, NEON said, received a 100 percent salary increase, the document said. Mann, the sister of departed NEON chief Joseph Mann, was a program director on June 22, 2012, when she was making $50,000 a year. A year later, as chief program officer, Mann was making $100,000 a year. Daniele Watson Yates, listed as chief financial officer, made $53,040 on June 22, 2012; a year later, her pay jumped to $90,000, a 69.68 percent increase. The previous CFO made $14,000 less, at $76,000, the document says.

A day earlier, NEON was told it’s childhood development program, located at Norwalk’s Ben Franklin Center, was re-accredited for a five-year period by the National Association for the Education of Young Children (NAEYC).

In a press release, NEON wrote, “There are 10 standards programs seeking accreditation must meet that cover various aspects of a well-run quality Early Childhood program. Each standard has several criteria that must be met including: Evidence of staff competence; quality relationships with children and families; safe and welcoming environments and curriculum implementation. Compliance with these standards are assessed through careful study by the NAEYC Assessor who spends significant time in classrooms observing staff, child interactions and implementation of curriculum.”

The programreview took place over a two-day period, Sept. 23-24, consisting of a full day and a half-day, and included classroom observations, review of classroom and program portfolios and a playground inspection.

“It takes a strong team to manage such a large program as this effectively,” the NAEYC assessor said. “NEON staff are working in the same direction, which is a difficult thing to accomplish…”

“Our staff continues doing the hard work necessary to ensure that the children and families that we serve come first, receiving quality, caring education,” Stephenson said. “Excellence comes with great sacrifice, and I salute everyone at NEON’s Childhood Development Program who earned this well deserved recognition.”

Here are the documents referred to in this story:

DSS FINANCIAL RESPONSE 102213

DSS Response Attachments

NEON summary suspension – signed(1)

Audit-of-NEON-Inc-Financial-Position-as-of-June-30-2013-DRAFT-10-7-13

Bremby Proposed Merger

15 comments

jlightfield October 25, 2013 at 7:52 am

NEON’s “pointed” response to the DSS clearly shows management’s lack of experience. The meandering excuses, now leveled back at DSS as to why the state of financial reporting is the way it is, why a lack of financial controls are in place, why no attempt has been made to align revenue (grants) with programs etc..
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The board has utterly failed this organization.
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The lack of experienced management is the one and only glaring reason that NEON’s predicament is what it is.

The Norwalker October 25, 2013 at 8:49 am

The section of this article focusing on Salary Increases is very confusing and needs to be rewritten. Still it does communicate that outrageous salary increases were given to NEON Top Management.

WHAT? October 25, 2013 at 9:38 am

The “sudden suspension” of Headstart? Go back and look at Westcott’s resignation letter, where it states that paramount issues of non-compliance with federal program requirements were concealed from the board. This suspension of Headstart is the culmination of multiple and repeated letters and visits from Headstart that warned of this starting back in June, and much as Stephenson said at Town Hall last night, she kept telling the board that her “standpoint” was there is no problem. This wasn’t sudden, the 6 board members who resigned all at once knew an approaching train wreck when they saw one, and they also knew that Stephenson couldn’t handle it. By the way, who else makes 135k on the strength of nothing more than a high school diploma?

Mark Chapman October 25, 2013 at 2:08 pm

@ WHAT

“Sudden” refers to the fact NEON and its clients only found out about the suspension the day it happened. The fact that this back-and-forth with DSS and federal authorities has been ongoing for months should have been a clue, but the actual suspension came as a shock to those dependent on the program and, apparently, to the people in charge.

WHAT? October 25, 2013 at 2:19 pm

@ Mark Chapman

You don’t know what you are talking about. On September 11th, three federal officials from Boston drove all the way to Stamford to meet with board members before the board meeting also held on that day. They wanted to know why their letters warning of a shut down since June were ignored. This was the first the board heard of the letters, since they were kept from the board. In that meeting, the officials expressly warned that the program was about to be shut down because there was no food and unexplained unpaid vendors. They specifically gave NEON 10 days to fix it or be shut down. After the feds left, Stephenson addressed the board and said those officials were lying and there were no problems and it was not true that food was missing at the programs and that vendors were unpaid. In the three weeks following, the board members who couldn’t believe this ridiculous explanation resigned and the ones that are only there to protect pay increases for the management stayed. Read the federal documents. THIS WAS NOT SUDDEN, this was concealed and ignored and now, as usual, Stephenson just says her “standpoint” is that everything is fine, or in the alternative someone else’s fault, like the City that has nothing to do with Headstart, read the docs.

Mark Chapman October 25, 2013 at 3:02 pm

@ WHAT

Was the meeting with the folks from Boston held in executive session? Hard for us to know that. We have been reporting on the NEON situation all along, taking information from DSS documents, OIG audit, individual board members and past members, NEON officers and clients. Some of these people have not been honest. Some have been spinning. We have reported facts as have been documented and have tried to portray the rest for what it is. Many documents have been attached to the stories.

If you have inside knowledge from, say, being a current or past board member, it is good to share it, even better to do so under your own name as have other past and present board members. That gives the information more credibility.

WHAT? October 25, 2013 at 5:25 pm

It was not in executive session. Why don’t you verify it with the Boston office. You may question whether I am spinning or honest if you like, but I will leave it to anyone reading to determine if they think my version of events as posted above is consistent with Headstart shutting the program down, or did they shut it down because there are actually no problems as claimed by NEON??

Mark Chapman October 25, 2013 at 5:51 pm

Not questioning your honesty or spin. I am pointing out what others involved in this story are doing. My point is that words carry more gravitas when they are backed up by someone who will speak on the record. We did it every day. Some current and former board members have done it. We have information from Boston and we know they came down here and we know they have been demanding information and action that has not been happening. I think that has been show in our coverage over the past several weeks.

M Allen October 25, 2013 at 8:30 pm

I don’t want to deflect attention away from the candidates, but the ongoing saga of NEON requires a bit more light being shined on it than bike lanes. Here is where investigative reporting needs to get deep into it. I’m not saying NEON hasn’t been covered, but when you look at the scope of what has been going on here and the net impact on that segment of the community, a community that can’t do it themselves, I’m just not sure it is getting the coverage it deserves. Not until people show up at city hall and an October surprise make for good news. Not saying you are picking and choosing your stories like that, just saying this is a for real story.

Don't Panic October 25, 2013 at 10:38 pm

Oh, for pete’s sake. Are two reporters working for donations supposed to comb through twenty years of records by themselves? I think the Chapmans have done a bang-up job considering that six board members resigned because they couldn’t get information out of this bunch.
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It could take up to two years to unwind a situation like this…are the parents going to continue to get surprise closings every couple of days while that is taking place?
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It’s about to get really cold for the winter. What are the folks who need energy assistance going to do without NEON to help?

M Allen October 25, 2013 at 11:40 pm

@Don’t Panic – First, maybe rename yourself Panic Now because it should be time someone does.
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No, I don’t blame it on the Chapmans. Not by any means. And combing through records isn’t going to provide crap unless you can do it as a legal investigation and start seizing every record they have and subpoenaing witnesses. Which of course needs to happen, but the media can’t do that. But NEON should be feeling the pressure here way more than local politicians who aren’t responsible for the mess they are in. The problem lies internally and max pressure needs to be applied. The mismanagement is a bigger issue to a vulnerable subset of the population than roads being paved before an election, bike lanes, and other stories that garner so much space and cheap comments from the gallery.
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As you said, winter is coming and people will suffer. Suffering trumps dudes on bikes. Where are the hardcore questions for the candidates. Chief Rilling was there last night. After chanting “open our school” as he walked in and then not knowing how or why anything happened and empathizing with the crowd, it became a photo op because he happened to be in the building and the Mayor wasn’t. I don’t know where the Mayor was and haven’t read a comment yet. But then again, I could imagine the headlines this morning if the Mayor was there. That crowd didn’t want to speak to the Mayor or hear from the Mayor. And it wasn’t an impromptu gathering. It was done for max political effect. It would have been a gotcha moment prime for video because this Mayor, any mayor, wouldn’t have had a solution on that short of notice that could have possibly sated that crowd.
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But back to the reporting: both the Mayor and his opponent should be flat out asked: what should happen to the management of NEON? Would you support a government takeover of the agency? Would you support a criminal investigation? Will you fund NEON with taxpayer dollars in its current state? And hammer for yes or no answers. Because people deserve to know those answers and while being a shoulder to cry on is nice, feeling their pain and doing something about it are two entirely different things. The Mayor has been clear on the funding part, yeah? His answer is pretty obvious. With all due respect to Chief Rilling, now is the time for him to be crystal clear what he would do for NEON right here, right now.

Don't Panic October 26, 2013 at 8:07 am

@MAllen,
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I assume you are also reading the same riot act to The Hour, The Voice, The Citizen-News, La Voz Hispana, The Advocate and The Courant. All are newspapers that have existed while the current situation has been brewing. With your very excellent questions, you may want to consider become a reporter or starting a paper yourself. Have you contacted your legislators about this? I have.
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There is enough information now and the picture is already clear enough to understand that there are really only two choices here. One is to boot out the existing management in favor of folks who understand their obligations to maintain their books properly and to comply with the myriad and complex rules that go with grants and federal, state and municipal funding (who may or may not be as dedicated to the service end of things).
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The other choice is to leave this band of brothers in place (who clearly want to focus on the service side of things) whose heart may be in the right place, but want to run a multi-million dollar operation as if it were a sidewalk lemonade stand.
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Inadequate or lack of response to state inquiries (which provided a roadmap to get back on track) for a couple of years now, while finances slalomed downhill towards disaster means that either choice will just plain be terrible for the people who are relying on NEON.
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One last thought on the coverage here and the accusations of politics. I can remember a dispute between South Norwalk Community Center and NEON. That dispute involved allegations that NEON had appropriated funds and facilities that were not theirs. It involved inadequate record-keeping with regard to which grants were paying for which employees, and for operations without a proper legally-binding agreement in place between the two parties.
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Councilman Pena took a lot of fire for trying to get information from NEON. He was accused of a lot of things, not least of which was being called a liar.
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It would appear that the relationship between NEON and SNCC was managed in the same way as everything else that NEON was doing. I don’t see Mr. Pena doing victory laps about it, or in any way trying to make political hay out of NEON’s misfortune. At the very least, I think NEON owes him an apology for what went down.
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It is time the focus turned away from a relentless stream of reporting on what went wrong, and trying to figure out how quickly and how efficiently it can be made right.

RU4REAL October 26, 2013 at 9:07 am

We need a do over, lets UN merge with CTE and then request Ms. Stephenson to resign, as well as the resignation of ALL board members.
If these folks truly care about the children and their families in Norwalk, they will have zero problem stepping aside.
Forgot many of them aren’t from Norwalk, I think that is an important part of any solution, just as department heads who don’t live here, their decisions don’t have any direct impact on them, which makes it easier to make the wrong decision.

M Allen October 26, 2013 at 11:49 am

@Panic, Can’t agree with you more. Pretty much down the line with what you said. (shortest M Allen response ever)

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