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Health department faulted in foundation audit

Friday, June 1, 2018 by Jo Clifton

Members of the city auditor’s staff have found that Austin Public Health’s monitoring process for contracts with the African-American Youth Harvest Foundation has been ineffective and that the department cannot verify that the foundation has fulfilled the intended purpose of one of its contracts with the city.

The city currently has two contracts with the foundation. One contract assists the foundation in running programs at its youth resource center and the second funds African-American youth conferences for middle and high school students in the Austin Independent School District.

The two city contracts together amount to more than $1 million. So far, the city has spent about $644,000 on the youth resource center contract and nearly $275,000 on the contract to provide youth conferences, for a total of about $920,000.

Auditors reported to the City Council Audit and Finance Committee last week that when auditors attempted to get complete supporting materials for the foundation’s payment requests, auditors were unable to get those materials. “As a result, we were unable to verify the accuracy of payments made to the foundation by Austin Public Health. We were also unable to determine whether the Youth Harvest Foundation’s performance report was accurate,” according to Matt Clifton, the auditor in charge of the audit.

According to a draft audit presented to the committee, auditors said that after reviewing expense documentation for a three-month period, it appeared that the city had overpaid the foundation by more than $18,600 for employee salaries. Auditors indicated they had great difficulty in locating supporting documentation for various expenses, and that is why they could only review such a short time period.

Foundation CEO Michael Lofton strongly disputed the audit’s conclusions about his organization, sending the auditors an eight-page rebuttal of their findings.

During the time that auditors were trying to gather information, the person managing the organization’s finances went through a number of personal problems, and he ended up going back to his home country to arrange for medical treatment for a family member, making the situation even more difficult, according to City Auditor Corrie Stokes.

At the end of the committee’s discussion about the audit, Mayor Steve Adler said he wanted to postpone acceptance of the audit until officials with the health department had time to make another site visit.

Adler also criticized auditors for not conducting an exit interview with the foundation, even though it was the health department that was the subject of the audit. He told the Austin Monitor that since there was no time pressure to accept the audit, giving the foundation more time “seemed like the right thing to do.”

In response to a question from Mayor Pro Tem Kathie Tovo, Austin Public Health Director Stephanie Hayden said her employees would not be able to schedule another site visit for about a month. Since Council takes July off, it will need to schedule a special meeting in August if it is to review the findings before making decisions about funding the foundation and other nonprofits during its budget deliberations.

Adler told the Monitor Council would be meeting pretty much all of August and he could see no problem with scheduling another audit meeting that month. Adler expressed the view that auditors might be asking too much of small foundations.

The audit also reports that Austin Public Health employees reviewed less than 1 percent of client files at their annual site visit as they attempted to verify performance, according to the auditors.

In addition, auditors criticized the health department because its employees had learned that another source of foundation funding, AISD, had audited the Youth Harvest Foundation and found $49,000 in alleged overcharges. “However, Austin Public Health staff did not follow up on this,” Clifton told the committee.

Lofton told the Monitor that AISD terminated its contract with the foundation one day after providing a copy of the district’s audit to him. Lofton also told the Monitor that AISD owes his organization for work done and not paid for. Although the foundation sued AISD, Judge Eric Shepperd of Travis County Court at Law No. 2 dismissed the lawsuit on Thursday based on the district’s plea to the jurisdiction.

Lofton told the Monitor that one member of the AISD Board of Trustees had instigated the audit because Lofton did not support that member’s candidacy when he ran for the board seat. He said that all of his previous audits had shown no problems.

In his response to the auditors, Lofton wrote, “We believe that both haste and assumptions, skewed by perceptions created through Austin ISD’s report, may have led the City to draw certain conclusions about AAYHF’s overcharging the City in the draft audit report, and no questions were therefore asked regarding these discrepancies. This is why City managers should use caution when utilizing unsubstantiated reports from other agencies to influence its assumptions and conclusions, particularly when those reports are under legal dispute.”

Lofton told the committee that his organization had provided whatever the city had asked for over the last 10 years.

Auditors noted that after receiving a draft copy of the audit report, the foundation “provided another report showing a salary amount that matched the amount on the profit-and-loss statements. However, supporting documentation such as employee pay stubs were not provided and auditors cannot verify the validity of this information.”

Clifton said, “The message of our audit has not changed as a result of viewing (Lofton’s written) response.” He said auditors requested records in line with the terms of the contract, but after reviewing those records, “we were unable to obtain supporting documentation to justify the payment that Austin Public Health made to the Youth Harvest Foundation.”

Stokes told the Monitor her team had been working on the audit since last fall, and Clifton told the committee that the audit started after auditors received an anonymous complaint about the Youth Harvest Foundation. He said auditors followed their normal procedure for investigating such complaints, but auditors eventually decided that it would be more fruitful to do an audit of processes the department uses in a number of its contracts.

Auditors said that Austin Public Health was not reviewing enough client files at the foundation’s youth resource center to verify its reported performance. In response to the audit, Hayden said that Austin Public Health is “planning a comprehensive assessment of its current contract management and monitoring functions.”

Photo by John Flynn.

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