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DSS final audit report takes hard line with struggling NEON

NORWALK, Conn. – The Connecticut Department of Social Services is not buying what Norwalk Economic Opportunity Now’s former interim president and CEO and the NEON Board of the Directors is selling.

DSS issued its final audit report Friday — Audit of Norwalk Economic Opportunity Now, Inc., Financial Position as of June 30, 2013 — after considering NEON’s response to the scathing draft audit report released in October. In the final version, DSS dismisses claims by former interim President and CEO Chiquita Stephenson and Board of Directors Chairman Michael Berkoff that NEON was in its deep financial mess because of decisions and directions made by DSS and Connecticut Association for Community Action (CAFCA).

The report states, “Without some major organizational changes to how funds are expended and without obtaining unrestricted funds to be used to pay the debt, NEON’s financial future is in significant doubt.”

As of June 30, NEON’s reported assets totaled $684,936, while liabilities were $3,631,752, the report said.

The NEON response to the draft audit had pointed its finger at DSS and CAFCA for allegedly pushing the Norwalk-based anti-poverty agency to merge with Stamford’s own troubled CTE, a merger that further stressed NEON’s already stretched budget. The response also laid blame at the feet of DSS-appointed interim CEO Pat Wilson Pheanious for questionable decisions and the city of Norwalk for cancelling its $1.3 million annual funding in the wake of a federal audit that showed widespread misuse of funds and a lack of financial accountability.

After commenting on the NEON response to the draft audit point by point, the DSS report concludes: “As a result of NEON not providing additional documentation that supports its response, the Audit Division maintains its conclusions reached during the review as reported.

Read the entire document here: NEON final audit with response

The report offered comments from the Audit Division on five recommendations made in the audit report draft, including:

  • Selling assets and property that are incurring costs in which there are no funding would result in decreasing expenses, prevent liabilities from continuing to increase, and have funds available to lower it current liabilities.
  •  … Someone with past experience turning around organizations that are not financially stable would be able to use the past experience to help make the difficult decisions.
  • The auditing recommendation was to point out that expenses should not occur if funds are needed to cover other expenses so that administered programs are properly funded, Our audit disclosed expenses (example – travel), although insignificant, in March 2013 that should have been avoided.
  • NEON must submit its comprehensive plan to the Department within two weeks after the report is dated as final. NEON’s plan must address the current liability amount (this includes checks cut that have not been mailed) that is owed as of the final date of this report. Included with the plan, NEON must submit its general ledger for the period July 1, 2013 to the final date of this report, the balance sheet as of the date of this report generated from its accounting system, the bank reconciliations for all bank accounts for the month of October 2013, and a list of liabilities by vendor and invoice date.

The Department will only accept a plan that assures that NEON uses current funds granted by the Department to pay for these expenses incurred for services provided in the current contract period and not be used to pay liabilities/expenses that occurred prior to Sept. 30, 2013. In addition, the plan should ensure that the funds granted by the Department will not be used to pay for expenses incurred by NEON on behalf of administering programs that are not contracted by the Department.

In the past week, Berkoff has hired a the new interim President and CEO, the Rev. Tommie Jackson, who has had experience helping to turn around troubled agencies. Jackson has announced layoffs of about 100 employees, suspended programs, and has indicated to the South Norwalk Community Center a new spirit of cooperation. However, Jackson has also continued to publicly state he hopes to collect money “owed” to NEON by funders, including the city of Norwalk, and has indicated receipt of those funds are key to turning things around.

Mayor-elect Harry Rilling told NancyOnNorwalk this week that, “Until we can get some responsible leadership in place it would be irresponsible to appropriate any city funds to an agency that doesn’t have any proper financial controls,” he said. “We need to make sure that we get responsible leadership and we get proper reporting, and proper documentation of expenditures is going to take place and that we know the money is going to be used in the proper way it’s supposed to be allocated.”

Berkoff did not respond to an email request for comment on the audit report Friday night.

Thursday, NEON announced it had not yet come to an agreement with Community Development Institute (CDI), the agency that has been appointed to run Norwalk’s Head Start program on an interim basis. NEON’s contract to run the program was suspended for at least 30 days for a number of reasons on Oct. 24. The program has remained closed, with no start date available. Jackson said Thursday in a press release that NEON was willing to continue discussions, but the Colorado-based agency was coordinating with the Administration for Children and Families in Washington, D.C., and Boston, adding to the holdup.

ACF spokesman Kenneth Wolfe responded to an inquiry Friday from NancyOnNorwalk about NEON’s future.

“As you may know, NEON was running several programs from several pots of funding – federal and state,” Wolfe wrote in an email. “We are currently working with the state and mayor’s office on a plan and hope to have an update for you next week.”

NEON-HighRiskStatus

NEON draft audit 10-7-2013

Comments

16 responses to “DSS final audit report takes hard line with struggling NEON”

  1. The Norwalker

    The former top management at NEON should be the only ones facing penalties, not the various programs run by Neon in Norwalk and Stamford that on paper were running a surplus and who’s funds disappeared into that black hole called NEON Senior Management.

    Once NEON goes down for good Norwalk citizens will suffer the most. Stamford has a DSS Sub-office, Norwalk clients are served by the Bridgeport DSS Office which is quite a ways inland in Bridgeport.

    Citizens from Greenwich to Westport will lose services from various programs that had funding on paper and who’s only problem was that they were administrated by NEON Senior Management.

  2. Don’t Panic

    Which Mayor? Why do they continue to telegragh the idea that money is coming from the City?

  3. Casey Smith

    “The NEON response to the draft audit had pointed its finger at DSS and CAFCA….and the city of Norwalk for cancelling its $1.3 million annual funding in the wake of a federal audit that showed widespread misuse of funds and a lack of financial accountability…Jackson has also continued to publicly state he hopes to collect money “owed” to NEON by funders, including the city of Norwalk, and has indicated receipt of those funds are key to turning things around.”
    .
    Oh, come on! Actions have consequences! It wasn’t who gave the money, or even how much money, it was how it was spent that was the problem. And that is solely in NEON’s court. There was a period when the City and other agencies were still funding NEON and the money was being misused. That was the beginning of the problem. When turned up in the original federal audit, that simply was the point where the problem was revealed.
    .
    Until NEON is willing and able to say, “We were responsible for this mess” the City shouldn’t give them one thin dime. Rev. Jackson can help the organization pinpoint the problem areas and correct them, but blame placing shouldn’t be part of it. NEON has hurt and is hurting many, many people throughout Fairfield County with the programs being shut down and lay offs. They need to deal with that, too.
    .
    Does this solution sound one of the 12 step program plans? Probably because it is…

  4. Casey Smith

    By the way, for those who are concerned about the NEON clients and staff, the Norwalk Early Childhood Council posted a statement following the story about SNCC providing some of NEON’s former services. The statement says that financial donations can be given to those affected through Person-to-Person and provides a contact number.
    .
    Way to go, NECC and P2P!

  5. Oldtimer

    When the first audit showed $400,000 or so “misused” and carefully avoided saying missing, was the time for action. I have already suggested the Moccia administration could, and should, have done more, but the management at NEON could, and should, have taken steps to fix the problem. Instead, they denied and said the auditors were lying. Then the Moccia administration stopped the city grant and nobody at NEON believed it was really stopped and kept spending as if the City money was coming soon. The state sent a new interim manager and things only got worse. Can’t anybody in charge at NEON count ? We know the book keeping must be a nightmare with numerous funding sources, each restricted to certain programs. But even keeping a separate checkbook for each program and it’s funding source, and never writing checks that were not covered would have avoided this mess. We manage household budgets that way, why didn’t they manage their various households the same way ? Can’t help wondering who was getting fat on NEON money. It will be interesting to see who eventually gets blamed, maybe even arrested.

  6. WHAT?

    If anyone reads the entire DSS final audit and does not realize that everything NEON’s board and staff have been saying for the last few months is total garbage, then such a person is either part of the coverup or they dont know how to read.

  7. Bamboozled

    @ what I agree totally!! People just seems to turn a blind eye and if there are no serious repercussions then this agency will always be venerable to theft…the alleged culprits: CEO, CPO, CFO, Diector of Grants/Planning, Dieector of Administration, and lets nor forget the person who prints and cuts checks at the CFO requests and also the hand picked board members!! The ones who are no longer there are those that questioned irregularities and inconsistencies. Certain staff who questioned the same were ousted as well Legislators and law makers pay attention to this scandal and corruption!!!!

  8. The Norwalker

    Does anyone know what Accounting Firm NEON uses? Most Fund Accounting Firms would have done a Audit that would have ended all this in the 1st year.

  9. Tim T

    Bets on how long before Rilling reinstates the city portion of funding. I say within a month. Let us not forget it is the group and the unions that got Rilling elected aka the tax takers instead of the taxpayers.

  10. M Allen

    “As of June 30, NEON’s reported assets totaled $684,936, while liabilities were $3,631,752, the report said.”
    .
    I’m saying even Rilling won’t reinstate city funding prior to what has to be an inevitable bankruptcy filing, reorganization and the publishing of a hardcore plan for emerging. It would be sheer lunacy to do otherwise. By the time NEON has righted itself, that will be well down the road. Not a month from now. Probably not a year. And frankly, by that time, other organizations will have stepped into the breach to provide the services once offered through NEON. If that is the case there will be no need for city funding on the scale of the old $1.3 million per year.
    .
    But Tim, I’ll be absolutely happy to eat these words if funding does suddenly appear.

  11. Oldtimer

    Norwalker
    In all the stories about NEON and their finances, I don’t think any accountant or accounting company was ever mentioned. Somebody down there apparently decided they didn’t need any help with the books.

  12. The Norwalker

    Hi Old Timer

    All of the Agencies like NEON that I have worked for the year end audit was a big event, documents gathered, all bases covered, the team of Auditors (3-4 or more) moved into the agency for a week or two and then worked from their office for a while asking us for misc. items to tie out the Audit.

    If our Auditors were not happy they would go to the Board for results.

  13. Tim T

    M Allen
    Would you like salt and pepper on those words?

  14. PJ

    That was a read. Made it through all 19 pages of the audit report and the ExecuAtive response. Is (execuAtive) Latin for executive? No that would be; exSecutiva. Maybe it is German, no thats exeKutive. Maybe it was Korean, no thats 행정부. Maybe old english? Nope thats like the boss or king/queen. Maybe its just an executive typo. Sure that happens to everyone, right?

    Besides the typo heading of the response much of what is in the audit itself has been known, to those following, for sometime. No real surprises in the audit report itself. The ExcecuAtive Response however, does provide some insight to some issues not adreesed. Lets look at some of the ExcecuAtive response quotes, shall we?

    The Audit states that funding sources to cover past liabilities is not realistic or something to that effect. In response, The execuAtive asks the question, “How would DSS know, did they speak to Moccia.”

    Well, unless you been under a rock the last couple of years, its common knowledge Moccia did more than cut ribbons, he cut NEON knees off altogether to help balance his own books. But thats another post that can wait.

    We all thank the Mr. Moccia for his service and wish him well and rest assured Richard you gave some local comics material for years to come. You wont be forgotten anytime soon sir, thats for sure.

    Now as to the claim in the audit report that no funding donations/resources are on the horizon, that will satisfy past liabilities, the excecuAtive states “NEON never stated that NEON was expecting donations”. Really? There are quotes everywhere of the execuAtive doing just that, stating that she was pursuing pivate donations and that those donations would be fourth coming in the immediate future. Think NON even has the execuAtive on video somwhere, recorded saying such.

    The execAtive goes on to say in the response that NEON does not disclose funding sources until the funds are secured, ie. the checks clear. Well that makes sense anyway. Can’t disclose that Jeffery Immelt or Steve Cohen are going to divy up and help out if you cant get past the guards, to ask them.

    Oh wait, Steve Cohen has his own problems. Wonder if SAC will raise the 2 Billion in sfine from his extravigant Art auction? That check will clear, no matter what he has to liquidate, Cohen doesn’t want to go to the big house.

    Anyway, back to the execuAtive response quotes. The execuAtive repeatedly states that NEON “does not point fingers”, yet continues on throughout the entire response doing just that. Faulting Mann, McKain, Bremby, Pheanious, DSS, CAFAC, even DMHAS, HUD, OIG and the city of Stamford. Did anyone get left out? Please, excuse being ommited but the list is lengthy.

    Apparently every one has some blame, everyone but the execuAtive, of course. There is merit to questions regarding the sustainability of the merger and who should have been doing what and who didnt do what at the time of the merger and immdiately thereafter, however, the execuAtive was well aware of all this before the position was accepted. So, if it was known how poorly managed the organization was and what was inevitabaly over the immediate horizon, (failure and ultimately bankruptcy), kinda moots the “they did it” excuse when you knew they did it and when and what the repercussions were that were coming. One person involved, after being hired to work the books, took one look at the books and quit right off the bat.

    Even though (they) and they is all inclusive to the long list, even though they might have did it, it was known when the position was accepted,knowingly, at double the salary.

    Far as the nepotisim allegation made in the audit report, prety much the execuAtive shurggs it off retorting, hey “they applied and dont they answer to me directly”. The definition of nepotisim just doesnt appear to register with the execuAtive, at all.
    Its all good, everybody does it,
    its a small town right? But hey, hire from within and save on advertising as an equal opporunity employer, right?

    Another item that popped up in the response was the dates. The merger supposedly, according to the execuAtive response, was completed 6 months late of the anticapted six moths to a year completetion date, on or about Sept 2012. Yet in the same response the execuAtive states that the accounting merger is on going and will be for some time and blames the audit, for pulling its staff off task, for the delays.

    Whatever valid points there are in the execuAtive response to the DSS audit report they are obscured by what comes off as a child caught by mom, on a chair, next to the couter, shattered cookie jar on the floor, with cookie crumbs on the lips saying, I didnt do it, they did it, pointing at the cats watching all the commotion on the windowsill, (outside)…

    All that doesnt fix/replace the cookie jar or refill the stash, does it? It does leave impressions of either or both of two posiibilities. One; the author of the response is immature and/or, Two; there is a serious mental health issue that needs to be addressed. The first step to healthy mental health is admitting that denial does not resolve anything…

    Yes the state bureaucracy is error prone, slow and has serious quality assurance issues but that doesn’t give a pass to anyone, including the state and those in authority. It doesnt give the execuAtive a pass either, the issues were/are well known. Time to lay blame has come and gone as are most of those people involved. What was and is needed is leadership, which the response does not just come up short of demonstrating but isn’t even in the same theatre as the audience.

    Another missed opportunity for leadership to shine.
    Can we not do better, collectively? If not, why not?

    What is needed is leadership, reorganization and total rebranding including name change. 1.2.3. How many excuAtives will it take to accomplish these 3 necessary and attainable goals?

    Will the current crop of Head Start students make it to high school first? Or will an asteroid hit us and we forget all about the whole debacle because it will be every man woman and child for themselves. Wait, thats the way it is now and no asteroid has hit.

  15. @Norwalker
    “I have already suggested the Moccia administration could, and should, have done more,”
    Yeah, we all read your “suggestion” but you are not getting it – this is NOT a city program –
    HELL, BOB DUFF ISN’T DOING A DAMN THING ABOUT IT AND HE WAS ON THE BOARD A FEW YEARS AGO AND ISN’T HE THE “CHAMPION” OF ALL THINGS UNDERDOG?????”
    (but, oh yeah — that is only for PHOTO OPS)
    *
    SHEEEZ, IT IS EVEN TAKING THE STATE A GAZZILION YEARS TO TAKE ANY ACTION ON IT AND IT’S THEIR PROGRAM.
    So, puhleeze, for the sake of sounding like a broken record – MOCCIA IS NOT TO BLAME.
    *
    MOCCIA, TAKE A BOW FOR TAKING A STAND AND NOT GIVING ANYMORE TAXPAYERS MONEY – and Rilling – heed those words.

  16. Norwalk Lifer

    PJ. I thoroughly enjoyed your posting, nothing more to say than Thank you

    Regards
    Norwalk Lifer

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