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.”