Draft audit: NEON made ‘inappropriate decisions’ about salaries, new hires

Chiquita Stephenson
Norwalk Economic Opportunity Now CEO Chiquita Stephenson.

Updated 10:20 p.m.: PDF of audit attached

NORWALK, Conn. – Norwalk Economic Opportunity Now (NEON) added staff and handed out pay increases to employees when it should have been obvious to management that the Norwalk-based social service agency was in dire financial trouble.

That assertion is one of the more damning statements contained in a draft copy of a Connecticut Department of Social Services audit provided to NancyOnNorwalk by the DSS. The audit covers the period of Jan. 1, 2012 to June 30, 2013. It will not become official until NEON has had a chance to respond and the response has been considered. NEON had two weeks to respond from the date of the letter sent with the draft; that period ends Tuesday, Oct. 22.

The draft report, dated Oct. 7, 2013, titled “Audit of Norwalk Economic Opportunity Now, Inc. Financial Position as of June 30, 2013,” states that “Our review disclosed that NEON’s financial situation as of June 30, 2013, does not provide reasonable assurance that NEON is in a financially sound position.” It goes on to say that financial records showed net liabilities of $3,631,752 and assets of just $684,936.

Further, it said, “subsequent to the June 30, 2013 balance sheet date, the financial situation of NEON has worsened to the point that the payroll expenses for the period ending September 27, 2013 could not be met,” which led to DSS advancing funds. “Further, NEON has made numerous requests for ‘emergency’ assistance so that financial obligations can be met in which the Department was put in a position so to advance the quarter ended September 30, 2013 grant awards prior to the funds becoming due.”

The audit goes on to say NEON had written $800,000 in checks to vendors that had not been mailed because the cash to cover them was not available; $150,000 in benefit payments were overdue, and there was a projected negative cash balance of more than $1M for the period ending Dec. 31.

Among the reasons for the financial crisis, the draft report said, was NEON management’s failure to make necessary decisions to reduce expenses since the start of the transition to merge NEON and Stamford anti-poverty agency CTE in January 2012. NEON Board of Directors Chairman Michael Berkoff and interim President and CEO Chiquita Stephenson recently acknowledged that programs that were not funded were kept alive because the agency knew people depended to them. Specifics were not given.

Stephenson did not respond to a request for comment and additional information.

The draft report said “inappropriate decisions” had been made beyond the failure to shut down unfunded programs. “Salaries of certain staff employees increased significantly during the year,” the report said. It went on to say new positions were created and the salaries of some staff “significantly exceeded the salary of the employees who held the same or similar positions.”

Total staff on the payroll increased from January 2012 to June 2013 in the Norwalk office, working out to annual increase of approximately $805,919, the report said. Details of who received raises was not included in the draft, and Stephenson did not respond to a request for that information.

Plans to improve the situation failed to pass muster with the auditors as well.

“NEON’s plan to balance the budget deficit with donations and contributions totaling approximately $2 million was not reasonable,” auditors wrote. “This plan was provided to us on July 24, 2013.”

The report also said that, while the expenses were not significant, “NEON continued to spend money not related to providing direct assistance to those in need,” citing travel expenses to attend conference and food for board and committee meetings.

NEON received a letter from the Department of Social Service dated Oct. 10 that informed the agency it had been designated an “agency at risk” and was in danger of losing its certification and programs. On Oct. 11, the Department of Corrections cancelled its contracts with NEON for the agency to operate halfway houses.

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


6 responses to “Draft audit: NEON made ‘inappropriate decisions’ about salaries, new hires”

  1. Lifelong Teacher

    It would be very interesting to see which employees: received those significant increases; were added to payroll; and what, if any, relationships they have to current and former NEON leadership.

    Adding anyone or granting increases, when the agency was in such dire financial straights, was a travesty.

    Will this mess ever stop? Someone needs to just disband it and start over. Give HeadStart to a legitimate organization.

  2. The Norwalker

    Sometime programs that are performing well inside of a organization in trouble have to execute scheduled salary increases. If the employee salary increases were for Administrative, Headstart or any other program in trouble then that would be questionable.

  3. piberman

    What’s interesting is that our local state legislators ganged up to demand the resignation of former NEON CEO Joe Mann a year ago. But have remained strangely quiet while evidence keeps accumulating of major league mismanagement and revolving Boards of Directors. When Mr. Mann was asked to step aside it was claimed funds had been misspent on unathorized activities. Now it seems a far more grievous set of financia management errors have occurred since his departure. But no one’s accountable. And our once “concerned” state legislators are no where to be found. Looks like they had their “photo op” and headed for the hills. But its election season so “why worry” ? Clearly our state legislators are concerned for “all their constitutents”.

  4. jlightfield

    Joe Mann left NEON with a position of having 1.8 million on the bank. The crew that were going to “fix” things, sure did a nice job of wiping out the cash leaving 358k as of June, which we now know is zero, or close to it.
    Where is the call for current management to step down? Remember how concerned we were over 400K of misallocated expenses?
    The wayback machine provides a glimpsehere:

  5. The Norwalker

    Continuing to run the Headstart Program without funding would have consumed that 1.8 million in the bank very quickly.

  6. Neoscam

    Are the executives still getting their pay and pay increases on time or are they stiffing themselves as much vendors and the rank and file?
    How long before deserved indictments are handed down?

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