CLEARLAKE, Calif. – A local nonprofit organization's mounting financial problems have led to the stoppage of important services that support some of the county's most vulnerable citizens, a situation which local officials and other nonprofits are trying to address as quickly as possible.
Lake County Community Action Agency, faced with unpaid bills and back payroll taxes, furloughed its employees and closed facilities including its Transitional Living Center (TLC) House in Lower Lake last week, according to Tom Jordan, president of the LCCAA Board of Directors.
The TLC House, under the New Beginnings program, offers a clean and sober living environment for women and their children who are under age 12.
TLC and New Beginnings are part of a significant portfolio of critical services overseen by the agency.
LCCAA's services include food pantries in both ends of the county, a transitional homeless shelter, the federal Commodity Supplemental Food Program, domestic violence education, Alcoholics Anonymous meetings, youth drop-in centers, food stamp outreach and nutrition education classes, the Farm to Family fresh produce program and even a Christmas program that includes a toy drive and food boxes for needy families, according to information on the county of Lake Web page and the organization's mission statement submitted to the Internal Revenue Service.
LCCAA was set to go before the Board of Supervisors on Tuesday to answer questions about its fiscal situation, but on Monday afternoon the group requested that the matter be postponed, according to County Administrative Officer Kelly Cox.
Cox had sent the agency's executive director, Georgina Lehne, a letter earlier this month asking the group to come to the Tuesday meeting as the board had concerns that needed to be addressed.
The letter was dated Feb. 2, a day after the board had declined to approve the second agreement between the county and LCCAA's New Beginnings Highland High School and Carlé Continuation High School for alcohol and drug counseling for the current fiscal year.
The contract has been for $100,000, and Cox said that LCCAA was asking for it to be increased to $200,000.
But with LCCAA facing an estimated $100,000 in unpaid federal payroll taxes, unpaid rent for the TLC House, the possibility of eviction from its offices and unpaid vendors – issues that Cox's letter to Lehne pointed out – the board refused to accept the agreement's amendment.
“I'm definitely not going to recommend approval of that,” Cox said of the amendment, noting that he would only consider it if the agency was paid up on taxes and vendor bills.
“We can’t contract with any organization that doesn't pay its payroll taxes,” he said.
Jordan said the agency's board is now launching a “fact-finding process” to try to understand how the agency has been operating and what has gone wrong.
He said the board had a regular meeting last Thursday, Feb. 10.
At that meeting “we began to fully realize that we've got some very weak internal governance systems,” Jordan said.
On Friday, Feb. 11, the board went into an emergency meeting, “at which time it was understood that we needed to furlough our employees immediately, that day,” he said.
Jordan estimated the agency employs between 15 and 20 people.
It was that day that New Beginnings was closed, Jordan said.
“We're temporarily having to stop services,” he said, noting that reopening New Beginnings “is our absolute goal and objective.”
A food delivery that is part of one of the federal food programs the group administers will take place on Tuesday, and Jordan said that food program will be one the main services still operating under the agency at this time.
In order to accomplish the goal of getting the agency back on its feet, the fact-finding process has to go forward, and Jordan said there isn't a clear time line about how long that might take.
That process will be discussed at an agency board meeting set to start at 9 a.m. Wednesday, Feb. 16, at which time Jordan said the board should have a better idea of how to proceed.
Jordan said the board was just made aware of the $100,000 the agency was arrears in federal payroll taxes. He said “one of the facts that we're trying to gather” is how long those taxes have gone unpaid.
Up until the Feb. 10 meeting, “We were getting information from staff indicating that things were fine financially,” Jordan said.
Jordan, who has been on the agency's board of directors for five years, said he doesn't know who was telling staff to give the board false reports.
Jordan also is the executive director of First Five Lake County, which provides LCCAA with $50,000 a year for a parenting program through New Beginnings.
He said that full amount hasn't been paid this year, adding of First Five, “We have not taken action to stop it.”
The IRS requires nonprofits like LCCAA to annually file a Form 990, which details its finances, programs and mission. The most recent reports available online for LCCAA were for 2008, with 2009 so far unavailable.
The documents showed that LCCAA, formed in 1995, had revenue of approximately $1,056,472 in 2008, compared to expenses of $1,115,334, for a shortfall of just over $58,000.
In 2007, it reported revenue of $1,023,951 and expenses of $1,057,645, for another shortfall, this time of just over $33,000. For 2006, a shortfall of more than $25,000 was reported between the agency's $746,212 in revenue and $771,740 in expenses.
Jordan said he couldn't speak to the increase of close to $300,000 in both revenue and expenses between 2006 and 2007, but he said the agency has increased its services in recent years.
The agency reported paying payroll taxes totaling $33,008 in 2006, $46,509 in 2007 and $51,303 in 2008. It's unclear if those amounts actually were paid or simply tallied.
Those IRS documents also showed that Jordan had loaned LCCAA $25,000 which as of the 2008 report had not been repaid.
LCCAA also is behind on its rent for the TLC House building.
Lars Crail – who manages the Lower Lake building for his mother, who owns it – said rent payments have been “inconsistent.” While he wouldn't give a specific amount, he said that the rent is “several months overdue.”
Crail said LCCAA has leased the building since July 1, 2006. Prior to that the Drug Abuse Alternative Center (DAAC) Santa Rosa leased the facility. New Beginnings took over the services DAAC had previously offered, according to the county's Web site.
Issues come to light
LCCAA's problems appear to have come to a head last month, during what might otherwise have been a routine changeover of board members.
Two county supervisors usually have sat on the board, said Jordan. Most recently they were Supervisor Jeff Smith and Supervisor Jim Comstock.
Smith didn't return a call from Lake County News seeking comment on Monday.
Comstock told Lake County News that he had asked to rotate off the board because during the past year the board meetings were not regularly scheduled, often were canceled or moved with little notice, agendas arrived late and he had a resulting conflict with another meeting.
“It was a huge challenge for me to get there,” he said.
Because he wasn't at the meetings, Comstock said he hadn't been fully apprised of the group's situation.
So last month Supervisor Denise Rushing attended a board meeting in Comstock's place. She said it was about halfway through the meeting – as they were attempting to elect her board president – that she realized they considered her officially a board member.
At that meeting, which occurred Jan. 13, Rushing said she was alarmed to discover the issue with the unpaid payroll tax. Lehne told the board at that time that the IRS was auditing LCCAA.
“I asked questions, I got enough information to realize that the agency was facing some significant challenges and before the county could fund programs we needed to know more,” Rushing said Monday.
Rushing said she sent Jordan and Lehne a list of questions, which included asking them if the Jan. 13 meeting was the first time the IRS issues had been discussed. She said Jordan replied to her, telling her that the LCCAA Executive Finance Committee had been aware of the problems last September and the full board was made aware of them in October.
Rushing then wrote to Jordan and Lehne and declined her appointment to serve on the LCCAA Board of Directors.
In the message she indicated no financial reports were presented at the Jan. 13 meeting, and that she had not reviewed past statements.
“It is clear, however, based upon our correspondence thus far, that the state of this agency will require investigation and action on the part of the LCCAA board. The problems will require a great deal of time to sort out all the issues, to correct them and to set the agency on a good management path. I must emphasize that this needs to happen right away and the CURRENT board need to undertake these actions,” Rushing wrote.
She continued, “I would recommend your board undertake a forensic audit from an independent agency and can give you a name or two if you would like. With no reserves in place, your board needs to act swiftly: you will likely need to trim back payroll right away to make sure you can meet all legal obligations.”
Rushing's letter also questioned if new or current board members are covered by board insurance “given the nature of these problems and the length of time the current LCCAA board has known about them.”
She added, “Most of these insurance policies require faster action than this board has demonstrated … so be sure and check the policy to make sure you are operating within its guidelines.”
Rushing told them that she was recommending that the Board of Supervisors ask the LCCAA board and Lehne to present a report regarding the financial state of this agency before any additional contracts are approved.
“I support your mission and will do what I can to help,” Rushing concluded.
Comstock said he was dismayed that LCCAA wouldn't be appearing before the supervisors on Tuesday, because the board needs its questions answered, which is why the New Beginnings contract wasn't approved two weeks ago.
He said nonprofits are really struggling right now, not just in Lake County but across California.
“I'm very sorry to see these things happen,” Comstock said.
There may have been other indicators that something was happening with LCCAA prior to the information that has arisen in recent weeks.
Gloria Flaherty, executive director of Lake Family Resource Center (LFRC), said her agency provided supportive services such as domestic violence support groups at New Beginnings for a long time.
“We know that many of our clients benefited from New Beginnings,” said Flaherty, whose organization also runs Freedom House, the county's domestic violence shelter.
She said LFRC and LCCAA worked collaboratively for many years, communicating with each other and forming memorandums of understanding to prevent service duplication.
However, Flaherty said, “The community action agency has not been a collaborative partner for awhile,” estimating about two years ago the communication from the group just stopped, with no explanation.
“They haven't been as active in working with all of the other agencies,” Flaherty said.
The challenge now is for local groups and the county government to try to make sure the critical services offered by LCCAA can continue.
Flaherty noted that all of LFRC's services are open to LCCAA's clients.
Lori Carter Runyon of Hilltop Recovery said Monday she attended a meeting with county officials that was facilitated by Laura Solis, administrator of Lake County's Alcohol and Other Drug Services (AODS) program.
Runyon credited Solis – who could not be reached for comment Monday afternoon – for stepping up to help fill the gap.
Solis got a group together to come up with solutions. Runyon, part of that group, said that included finding beds for displaced TLC House clients.
Runyon said community members and New Beginnings alumni helped find housing for those who are being displaced.
She said she had one bed left. “I took the one girl who was left, who had no place to go.”
Runyon added, “The community really embraced everybody and got things going.”
What's uncertain is the impact that LCCAA's troubles will have on the community and on confidence in nonprofit groups, which already have complicated reporting responsibilities that place on them a significant administrative burden.
Flaherty said it's “very sad to see this happen.”
She added, “Nonprofits do have a responsibility to respect the public trust. If they haven't, then they’ve betrayed it.”
E-mail Elizabeth Larson at
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