Under the gun, South Norwalk’s NEON votes to allow return to old audit firm

By Nancy Guenther Chapman

NORWALK, Conn. – Board members of a South Norwalk anti-poverty agency struggling to regain its credibility opened the door Thursday evening to call in its old auditing firm to help bail it out of a jam.

The firm is the same company that audited Norwalk Economic Opportunity Now for more than a decade, including the period of time in which an Office of the Inspector General audit indicated the agency “misspent” more than $400,000.

That February 2012 OIG report led to the resignation of Executive Director and President Joe Mann and the subsequent appointment of Pat Wilson Pheanious as interim executive director and president.

NEON’s board voted 6 to1 to permit its audit committee to relieve the audit firm hired earlier this year of its obligation to complete an audit of the agency’s 2011 finances – a process that has been slowed by NEON’s lack of familiarity with the new firm’s procedures – although doing so will cost the agency more money

The move is being considered because the audit needs to get done so fundraising activities can continue. “We need to get it done as quickly as possible,” Attorney Mike Widlan said.

Board member Doug Hempstead voted against the potential move. “We wanted a fresh look (at the finances,)” he said. “Here we are, eight months later, saying, ‘Well, we gotta go back to the other guys. For me it’s a fear factor, going back to the old ways instead of learning new ways.”

The problem is cultural, both Widlan and Pheanious said. The old firm, Hope & Hernandez PC, would “park” at the agency, asking questions of staff members. The new firm, CohnReznick LLP, is one of the largest firms in the country. It sends emails and expects a reply.

“When Hope and Hernandez wanted something they showed up at the front door and said you’re going to do it,” Widland said. “Now it’s emails. Frankly, that’s the way of the future, if you want it done at a cost that is affordable. The big firms are not sending over 20 people.”

Pheanious said, “It’s not so much how we kept our books it’s how the staff is used to working with auditors.”

CohnReznick, as a new firm, is going over everything and questioning things that have been happening for a long time, Widland said. “Cohn is very conservative and is going over everything with a microscope,” he said.

As an example, he mentioned $387,000 that has been owed to the Department of Corrections since the mid 1990s. “No one expects it to be repaid but you can’t get a letter (to that effect) from the Department of Corrections,” he said.

CohnReznick would like to know how it will be paid, he said. Pheanious said the answer is not easy, as grant monies are authorized for specific programs.

Board members voted unanimously to authorize a change of language regarding the use of its Orchard Street fund, money gained from the sale of property. The $403,117 has been slated for capital projects. Now it can be used for capital projects or to repay state or federal debts if there is 2/3 approval of the board.

Making the audit more complicated is the fact that NEON has 62 programs, each of which has separate accounting,

While Hempstead was afraid that NEON is not learning new ways, Pheanious said, “We have already recovered information that I have found very useful in terms of how we can improve the system.”

“NEON needs to adapt to new ways,” Hempstead said.

“Well, easier said than done,” Pheanious replied.

Widlan said the 2012 audit would need to be “upped a notch,” in part because it will include the merger with CTE Inc., the Community Action Agency for the Greater Stamford Area.

Board Member Brian Baxendale, who abstained from the vote, agreed. “Let’s do the 2011 audit, get it out of the way,” he said. “We need to do the 2012 audit very carefully.”

CohnReznick also has been hired to do a forensic audit.That will not change.

The return to the old firm is not a done deal. Board members voted to allow the committee to decide by Jan. 7 whether to keep CohnReznick on the job or to hire Hope & Hernandez. Pheanious hoped to be able to negotiate with CohnReznick to avoid paying the entire fee that had been agreed on. Hempstead was skeptical.

“I’ve been on both sides of this,” he said. “I know how this goes.”