Nonprofit's board failed the taxpayers

An audit by the state Department of Human Services makes it painfully clear that some board members of the embattled nonprofit Community Action of Minneapolis failed to take their governing roles seriously.

Largely funded by state and federal grants and city contracts, the well-established neighborhood agency is supposed to serve the poor. Its mission is to help people meet their basic needs and help lift them out of poverty.

Instead, the audit found that hundreds of thousands of dollars in public funds were spent on trips and other lavish expenses from 2011 to 2013. The violations were so egregious that a revamping of top leadership — including the board — is in order.

Community Action Chief Executive Bill Davis, who has held the job for more than two decades, is at the center of the controversy and largely responsible for making the questionable spending decisions. DHS auditors also rightly blamed members of the agency's board, which includes several well-known politicians and community activists, for failing to provide proper oversight.

The audit said that nearly $35,000 was spent on activities that "do not appear to serve a business purpose, and are considered waste and abuse as defined in state policy."

Among those activities were two weekend trips, between 2011 and 2013, to a resort in Alexandria, Minn., where board members and senior management spent $9,000 for lodging, $3,200 for food and $900 for spas. During an interview with a Star Tribune reporter, Davis justified bringing his fiancée along at agency expense because his board had approved it to "promote family.''

That's the same kind of irresponsible management of taxpayer dollars that has contributed to black eyes for other state and community agencies. We would hope nonprofits established to help the poor and disadvantaged would be especially careful not to use precious resources on junkets or luxuries.

Community Action had an $11 million budget in fiscal year 2011, with about half coming from government grants. Included in the budget is $2.8 million in state aid to provide weatherization, heating assistance and other kinds of help to low-income Minneapolis residents.

Based on the DHS audit, Community Action could lose that aid and might have to pay back more than $800,000 that the audit found was improperly spent. Those are funds that should have been used for the organization's core mission — assisting the poor.

Questionable fund uses included a $36,000 loan the agency made to Davis to buy a car. According to the nonprofit's most recent tax record, Davis earned $273,060 in salary, bonuses and deferred compensation in 2011 and was awarded a $17,624 bonus in 2012. With that kind of income, he certainly should have qualified to get a vehicle loan in a more traditional way.

In addition to the budget issues, the state review questioned the effectiveness of the agency. The audit found that there had been an 85 percent to 96 percent drop in the number of participants who landed a job through a DHS-funded employment program.

Regular and advisory board members during the time of the audit included U.S. Rep. Keith Ellison, D-Minneapolis; Minneapolis City Council President Barbara Johnson; former council member Robert Lilligren, and State Sen. Jeff Hayden, DFL-Minneapolis. Ellison, who resigned from the board Monday, said he had not attended any meetings and had appointed an alternate to serve on his behalf. He said the audit results were "serious and require corrective action.''

Johnson and Hayden said they had also appointed alternates. Johnson said she was "dismayed that this wasn't identified." Hayden issued a statement claiming that neither he nor his appointee (his wife, Terri) benefited improperly. He resigned from the board Tuesday and called for Davis to step down.

For his part, Davis told a reporter that Community Action had submitted 112 pages of information disputing the audit but that the response had been "totally ignored."

DHS, the state Department of Commerce and the city of Minneapolis are reviewing their contracts with the agency to determine next steps. At a minimum, Community Action should follow the recommendations of the DHS audit, which include complying with state and federal rules on use of funds, submitting proper documentation and working with groups like the Minnesota Council of Nonprofits to improve its operations.

And, as the state review recommends, the state's Office of Economic Opportunity should consider terminating funding if Community Action fails to get its financial house in order in a timely manner.