Doing Well By Doing Good, Part 3

Alleged financial mismanagement at a local nonprofit, Community Action of Minneapolis, has received a great deal of media attention since the release of a scathing state government audit of the group.  The state’s Department of Human Services is now considering cutting off funds to the agency as a result of its investigation.

The story has taken on a political angle, since the group’s board included two politicians—Congressman Keith Ellison and state Sen. Jeff Hayden—who have resigned from the group in recent days.

What is a Community Action Agency?
The Community Action Agency is a creature of LBJ’s War on Poverty, created 50 years ago to assist in delivering Great Society programs to the nation’s poor.  Community Action of Minneapolis is part of a network of agencies that covers the entire state.  The service offerings differ from agency to agency, but often include low income household energy assistance (utility bill subsidies), low-income home weatherization (insulation) and operation of the local Head Start program.

The Minneapolis agency was formed by the City in 1994 to administer certain Federal block grant programs.  It does not operate the local Head Start program.

Many readers of the Minneapolis Star Tribune’s coverage of this story may have been surprised to discover so many Democrat elected officials serving on the agency’s board.

It is actually required by law.  Not that they all must be Democrats, but that one-third of the board for each agency must consist of public officials, with the remainder split between community members and private sector leaders.  For this purpose, unions count as the private sector.

As it happens, Republican public officials are thin on the ground in Minneapolis, if Community Action were inclined to appoint one.  In areas dominated politically by Republicans, you will find public official board members at local agencies who are Republicans.

I have no idea what the original rationale was for having one-third of each agency’s board consist of public officials.  However, in today’s context, it provides a built-in lobbying team ready to advocate for continued (or expanded) taxpayer funding of the agency’s activities.

What is the Issue?
In Fiscal Year 2012, Community Action received 99.92 percent of its total revenue from government sources, according to the group’s IRS Form 990 income tax return.  Most of its funds come from Federal energy-related programs overseen by the state’s Department of Commerce.

An earlier audit (2012) performed by the Legislative Auditor found that the state’s,

Department of Commerce did not adequately monitor a local service provider [Community Action of Minneapolis] that inappropriately provided $1.35 million to households who did not meet the eligibility requirements for the crisis emergency benefits they received from the Low-Income Home Energy Assistance Program.

In the audit (2014) performed by the state’s Department of Human Services (DHS), the first finding involves inadequate oversight by Community Action’s board over the activities of senior management.  One recommendation made by DHS was to have Community Action fill the many vacant slots on the board.  The resignations of Ellison and Hayden, in that regard, are not helping the cause.

In the audit itself, the DHS audit cites specific transactions related to programs overseen by Commerce.

Further, many of the questionable items cited by DHS apply to the agency’s overall management.  The bulk of the dollars questioned by DHS involve dodgy allocations of overhead costs to a DHS grant that should have been allocated to Commerce-related grants, or never incurred in the first place (travel, bonuses, etc.).

With all of its revenue coming from taxpayer sources, Community Action must meet strict guidelines on cost allocation and administrative spending.

If DHS has lost faith in the ability of Community Action to execute its grants, then one wonders how Commerce cannot reach the same conclusion.  Should the discussion be expanded to include cutting off all government funding of this local agency?

And if government funding is withdrawn from Community Action, who would step in to continue to supply the services that its clients depend on?

To extend the discussion even further, if an agency has been around for 20 years (or 50) and has not yet accomplished its mission, then perhaps it’s time to rethink the delivery of these services or consider whether this particular mix of services will ever accomplish the stated goals.

In Part 1, I looked into some of the politics behind the latest controversy.  In Part 2, I looked into the connections with the 2009 Federal stimulus money.