A Baton Rouge nonprofit with a long history of mismanaging public funds is about to receive an $8 million annual windfall in taxpayer dollars
The East Baton Rouge Council on Aging spent more than $200,000 renovating the building at 6955 Florida Blvd. into a bingo hall. It opened in October 2014 and closed just nine months later, though the COA continues to pay $8,300 per month to rent the facility. Staff photo
Last November, voters in East Baton Rouge Parish narrowly approved a 2.25-mill dedicated property tax that will generate nearly $8 million a year over the next 10 years for the East Baton Rouge Council on Aging.
The millage was somewhat controversial before the vote. Opponents—among them, the Baton Rouge Area Chamber—pointed out that a 2015 audit of the organization found numerous instances of sloppy bookkeeping and a deficit of more than $200,000. They questioned how an agency that couldn’t manage a $3.2 million annual budget would be able to handle one more than twice that size. The COA did little to allay those concerns; it didn’t even present a plan for how it would spend the money if the tax passed.
Now that the tax has passed, the issue has become even more controversial. The Louisiana Legislative Auditor is conducting an audit into questionable activities that the COA allegedly engaged in during the campaign. Critics say the agency directed COA resources to campaign for the tax in violation of its tax-exempt status as a nonprofit organization.
The allegations are disturbing if true. What’s equally troubling, though, is the fact that the COA has a decades-long history of financial mismanagement that has gone seemingly unchecked by state or local government. Since the 1990s, audits have routinely questioned the agency’s accounting procedures and lack of oversight, yet the flow of public dollars to the dysfunctional organization has continued.
The current executive director, Tasha Clark-Amar, has blamed the agency’s recent financial troubles on her predecessor, and it’s true she inherited a mess when she took over in mid-2011. But Clark-Amar has been at the helm of the organization for more than five years, and as recently as 2015 things had not improved much. Perhaps they will now that the COA has a dedicated funding stream, but the agency’s track record isn’t very encouraging and it will soon have more money at its disposal than ever before.
The new tax will generate an estimated $7.9 million a year. The COA will also be eligible to continue receiving annual appropriations from the state through the Governor’s Office of Elderly Affairs, as well as a portion of the proceeds from a rental car tax passed in 2016.
“They’ve made some bad decisions. But they have given us a plan of how they are going to pare down their deficit. We watch them closely, but let me say this: Their heart is in serving the people. It truly is.” —Karen Ryder, director, Governor’s Office of Elderly Affairs
In fact, if state funding remains relatively unchanged over the next year, the COA could have revenues in 2018 that top $10 million, nearly all of which will come from public funds. That’s a lot of government money for a nongovernmental organization, or NGO, that doesn’t have to report to the city-parish and only has to answer to the state for the state money it receives.
Officials with the state defend the organization and the current administration. They say there’s more oversight than it appears and that the COA is working to right its financial ship.
“They’ve made some bad decisions,” acknowledges Karen Ryder, director of the Governor’s Office of Elderly Affairs, which directs state and federal funds to local COA offices. “But they have given us a plan of how they are going to pare down their deficit. We watch them closely, but let me say this: Their heart is in serving the people. It truly is.”
“There is very little oversight and there is very little professionalism. CATS is a model of efficiency compared to the Council on Aging.” —Ryan Heck, former Metro Councilman
Outside observers, however, say for an NGO to receive millions of dedicated public dollars is not only bad government, it’s just plain crazy.
“This relies on the goodwill of the board, and they’re probably good-hearted people,” says Michael Pagano, dean of the College of Urban Planning and Public Affairs at the University of Illinois in Chicago. “But that is not a constitutional protection.”
Neither Clark-Amar nor the COA’s board chairman, Brandon Dumas, would be interviewed for this article. In the wake of the allegations that surfaced after the election, the COA board hired an attorney, Murphy J. Foster III, and referred all questions about the agency to him. Foster declined requests for a face-to-face interview but responded to some questions in writing.
ON THE MONEY
The East Baton Rouge COA was created in 1973, one of dozens established after a 1964 state law authorized the charter of parish COAs to provide for the welfare of elderly people around the state. The COA supports the elderly through a variety of food and nutrition programs, the best known of which is Meals on Wheels. It also provides assistance with things like personal care, insurance counseling, Medicaid applications and health screenings through its main office at 5790 Florida Blvd. and at roughly a dozen senior centers and satellite facilities around the parish.
The COA’s revenues are derived from a variety of sources. Until the recent tax election, the majority of its funds came from the state and the federal government through the GOEA. In 2016, that amount approached nearly $2 million.
The COA has also received an appropriation from the city-parish general fund, which this year will total $877,000. Late last year, a divided Metro Council voted to keep the appropriation in the 2017 budget because the COA won’t actually receive the money from its dedicated millage until January 2018.
The city-parish is generous with the COA in other ways, too. Over the years, it has donated furniture and fixtures to the organization, and it’s allowing the COA to operate out of its Florida Boulevard headquarters rent free until 2035.
It also gave the COA a grant worth more than $33,000 in 2014 to cover four months rent on a facility the COA leased for a charitable bingo venture that lasted just eight months.
Additionally, the COA receives a share of the proceeds from a rental car tax passed by the Legislature last spring. Those funds average more than $3,000 per month. The rest of its money comes from private donations, grants and fundraisers.
Altogether, the agency’s total revenue stream in 2016 was more than $3.6 million, nearly 80% of which came from public sources. Metro Councilwoman Donna Collins-Lewis, who is vice chair of the COA board of directors and spoke to Business Report about the agency before the board retained counsel, says that may sound like a lot but it’s not. The COA’s revenues have never been adequate to meet its hefty expenses, she says, hence the board’s decision last year to pursue the dedicated millage.
“We get a lot of funding from a variety of sources, but it’s nothing consistent and it’s always up and down,” Collins-Lewis says. “We took a cut last year. We know the state is looking at more budget cuts for next year, and there are so many seniors in need and we’re not even able to serve all of them.”
While current revenues may be insufficient to serve the area’s growing aging population, the COA dedicates a whopping 50% of its revenue stream to overhead. In 2015, it spent roughly $1.86 million of its total $3.6 million on salaries, wages and fringe benefits, including more than $104,000 for executive director Amar-Clark. That represents 84% more than the $1 million it spent on operating services and supplies, and nearly three times the $649,000 it spent on kitchen operations feeding the elderly.
Best practices suggest that overhead in the nonprofit sector should average no more than 35%, according to the Better Business Bureau’s Wise Giving Alliance.
But Shauna Sanford, a spokeswoman for Gov. John Bel Edwards’ office, which oversees the GOEA, says the COA’s spending is not as out of whack as it might appear because the salaries and expenses of the agency’s workforce are an integral part of the services it provides.
“The East Baton Rouge Council on Aging employs senior center coordinators to run activities, cooks, drivers, information and assistance counselors, case managers, caregivers, homemakers, personal care attendants and individuals who make daily calls to homebound seniors,” she says. “The cost of these services is included in the total budget for salaries and benefits.”
Besides grappling with revenue shortfalls for years, the COA has had problems managing its money and keeping its books straight for decades. Audits of the agency, which are required by the GOEA, show examples of sloppy bookkeeping at best and misappropriation of funds at worst. Time and again audits have raised red flags that the COA promised to address, only to have those same problems crop up in subsequent years.
In 1996, an audit noted that the COA lacked an adequate system to monitor its accounts receivable. The audit also found that bookkeepers in the agency hadn’t reconciled the payroll account for two years and had entered employee time sheets into the payroll system without a supervisor’s signature. It was typical of the kind of findings audit reports would note in those years. The auditor recommended proper supervision and follow up. The COA’s longtime executive director at the time, Sharon Lafleur, promised to make changes.
Just a few years later, however, Lafleur found herself embroiled in a high-profile scandal over the misappropriation of a $1.1 million charitable trust that had been established years earlier by her brother-in-law to benefit the COA. According to a 2001 report from the Louisiana Inspector General’s Office, Lafleur squandered most of the money from the trust buying and partially renovating the Rosewood Plantation in Ascension Parish, which she told the board she was converting into a retirement home for the elderly. Instead she used it as a personal residence. The COA never received any money from the trust, and Lafleur was fired. The IG’s report ultimately blamed the COA’s board of directors for failing to adequately oversee its executive director.
But while the incident made headlines at the time, there was never any concerted effort at the state or parish level to reform the system, and the pattern of problems continued into more recent years. In 2010, the agency lost nearly $100,000 and reported a deficit of nearly $173,000. The executive director at the time, Johnny Dykes, resigned the following year, as did the agency’s finance director. The agency’s finance department was in such turmoil that auditors had to help the staff draft its financial statements and prepare its year-end reports, according to a 2011 audit.
Such was the situation when Clark-Amar took over in mid-2011, but two years later there was again a deficit. In 2013, the COA finished the year more than $139,000 in the red, even though revenues from the state and city were up 20% that year. Worse still, auditors noted an unrestricted net deficit of more than $400,000 and questioned the COA’s “ability to continue as a going concern,” an accounting term meaning the organization’s long-term viability looked iffy.
Through cost cutting measures and fundraising, the COA finished 2014 in the black. But by the end of 2015, it again had a six-figure deficit and—for the third year in a row—was in violation of its lease with the city-parish for failing to maintain adequate fire insurance on its Florida Boulevard headquarters.
“There is very little oversight and there is very little professionalism,” says former Metro Councilman Ryan Heck, who voted against putting the dedicated millage on the ballot last year. “CATS is a model of efficiency compared to the Council on Aging.”
An example of the COA’s chronic ineptitude is its unsuccessful bingo venture. In 2014, Clark-Amar and her board decided to try a new approach to creating a sustainable revenue source. The state allows nonprofit organizations to host bingo games as a way to raise money, and struggling agencies can generate thousands of dollars from hosting just a few games each month.
Under the rules of the state’s Office of Charitable Gaming, organizations can obtain a license to either operate their own bingo hall or they can rent a certain number of sessions per month from an existing hall, of which there are two in Baton Rouge. The latter approach doesn’t generate as much money as the former because an organization is limited in the number of sessions it can book. But it’s an easier, less risky way to get into the business and it doesn’t entail any overhead or experience.
The COA didn’t have any experience with bingo and certainly wasn’t in a position to lose money on the venture. Nevertheless, it decided to go big, opting to open and operate its own massive hall. That meant competing with the two established halls in the market for players and also for other nonprofit organizations to book sessions at the new hall.
“This is a public stream of money to a private entity, albeit a nonprofit. It’s worse than bad government. It’s not government at all.” —Michael Pagano, dean, College of Urban Planning and Public Affairs at the University of Illinois in Chicago
Records are not available to explain how the COA came to such an ambitious decision, and Foster, the board’s attorney, would not make board members or Clark-Amar available to discuss their thinking at the time. Because the COA is an NGO and not an arm of the government, Foster says the agency is not subject to the same public records law as are government entities.
What is known is that the COA went all out in its attempt to create the best bingo hall in Baton Rouge. It found a 33,000-square-foot space in a vacant shopping center at 6955 Florida Blvd., not far from the COA’s headquarters, and signed a five-year lease at $8,300 per month. It went on to spend some $203,000 painting the facility, renovating the kitchen, constructing a stage and redoing the floors.
“They remodeled the whole building,” says Michael Legendre, director of the state’s Office of Charitable Gaming. “From the looks of it they did a first class job.”
But running a bingo operation isn’t as simple as it looks, and the games don’t necessarily generate big revenues. The key to making money is to sell a profitable amount of pull tabs, which are essentially like lottery scratch-off games and generate the real profit.
“Bingo is a loss leader,” Legendre says. “You need to sell the pull tabs to make money.”
“I’m very concerned because this is an NGO and we have no control over them or their budget. I hope the legislative auditor is on their game and monitors the COA’s spending because there’s nothing we can do.” —Metro Councilman Buddy Amoroso
You also need to take in more cash at the door than you promise to pay out. Under state law, the maximum allowable purse per bingo session is $4,500. In order to entice players away from the other halls in the market, the COA’s bingo hall promised the maximum amount. But the facility didn’t attract enough players or sell enough pull-tabs to cover the cost of its generous purse, Legendre says.
“If you’re not selling those pull tabs and you’re only collecting $3,000 at the door but you’re promising to pay out $4,500, it doesn’t work,” Legendre says. “They were paying out more than they were bringing in.”
The hall opened in October 2014. By the following June it had shut down, and the state had revoked its license because it had failed to file the requisite quarterly reports with the Office of Charitable Gaming. Legendre also received a formal complaint from Cajun Bingo Supplies, a New Iberia company that claims it’s still owed several thousand dollars for the bingo supplies it leased to the COA.
Today, the facility sits behind a chain link fence. It has been rebranded by the COA as the Capital City Events Center, and the organization continues to lease the space and use it for occasional events and fundraisers, like a music festival it held last spring. Property owner Khahn Van Bui says the COA owes him money, though he declines to say how much. Foster denies this claim and says the COA is current with the landlord “with the exception of invoices for taxes and insurance which have not yet been received.”
WHERE’S THE OVERSIGHT?
Given the COA’s troubled history, you might wonder why there appears to have been such little accountability over the years. True, the COA is audited annually and is ultimately responsible to the GOEA for the state funding it receives. But when questions have been raised in those audits, as long as the COA says it’s working to correct the problems—which it invariably does—the GOEA doesn’t seek to curtail or cut off its funding.
State officials are defensive of the organization and their efforts to monitor it. Ryder says there has actually been more oversight by the GOEA than it might appear, and that the state monitors the agency to make sure it spends its state funds as required by law.
“The legislative auditor is the reporter of facts, not the judge and the jury. The best I can do is bring entities like this to Audit Advisory and have Audit Advisory read them the riot act.” —Daryl Purpera, Louisiana legislative auditor
“We’re confident because we go out and look at the programs and they have to send in reports to us,” Ryder says. “We know our funds are being used for the services they say they are. They have to report them to us.”
The GOEA says it compares audit data from year to year, and that since the COA’s troubling 2015 audit it has been monitoring the agency on a quarterly basis to make sure it reduces its deficit. Ryder also says if the agency were on the verge of bankruptcy, her office would step in and take it over, as it has done in other parishes.
But who will be watching how the COA spends the nearly $8 million it will receive annually from taxpayers in East Baton Rouge Parish? Even though the state will continue to audit the agency, it doesn’t have any legal authority to cut off parish funding that comes from a dedicated millage.
Some Metro Council members and state lawmakers are troubled by the situation, especially now that the COA has so much money at its disposal. They’re frustrated because they feel like their hands are tied and the state isn’t doing enough.
“I’m very concerned because this is an NGO and we have no control over them or their budget,” says Metro Councilman Buddy Amoroso, who voted against putting the millage on the ballot last year. “I hope the legislative auditor is on their game and monitors the COA’s spending because there’s nothing we can do.”
Legislative Auditor Daryl Purpera, whose office receives the annual audits on the agency, concedes it’s a problem but says as a practical matter there is little he can do.
“The legislative auditor is the reporter of facts, not the judge and the jury,” he says. “The best I can do is bring entities like this to Audit Advisory and have Audit Advisory read them the riot act.”
The Audit Advisory Committee is a 10-member committee of legislators that, among other things, resolves audit findings. It can hold hearings and subpoena witnesses when necessary, and if it finds an agency out of compliance it can cut off its state funding.
“But that is seldom done,” Purpera says. “Besides, it takes a long time to get to that point.”
THE NEED FOR TRANSPARENCY
The East Baton Rouge COA isn’t the only one in the state to receive a dedicated millage. On the contrary, 28 other COA offices in Louisiana receive some sort of dedicated sales or property tax from their local governments.
No other COA receives anywhere near as much money as the $7.9 million the local COA will, however. Only six COAs receive more than $1 million from their dedicated millages. Some receive as little as $113,000.
What’s more, in many parishes the local governing authority exercises some degree of oversight of its COA, according to Ryder. In Jefferson Parish, for instance, the Jefferson Parish Council collects the 2-mill property tax voters approved to help the parish COA then allocates that money, dividing it among several local agencies in the parish based on need.
That’s the way it should be done, according to Pagano at the University of Illinois in Chicago. He says the situation in East Baton Rouge Parish is unusual not only in Louisiana, but compared to the rest of the country. In most places, local COAs or offices on aging receive an appropriation from the local government out of the general fund, but rarely a dedicated millage—and never one that doesn’t have to first pass through the local or municipal government.
“I’ve never heard of this kind of privatization, where there is a public stream of money that goes directly to a private entity,” he says. “I’ve heard of small state universities that receive property tax revenues, but in all cases there was an elected board that oversaw that and could step in and demand accountability to the public. Where is the accountability here?”
Foster, the COA’s attorney, says he is encouraging his client to be accountable to the public by being thoroughly transparent. He says the agency is planning to hold town hall meetings to get input from those they serve on what is needed and how the money can best be used. The COA has also formed a committee to study the issue and put together a plan for its newfound revenue.
“I think these meetings will be to gather input they will use to develop a budget, and to develop a more structured program for the utilization of those funds,” he says. “The agency is also retaining a consultant to help it construct a profile that best fits their new budget.”
While added transparency and public input may help the image of the COA, Pagano questions the entire system. If the COA can ask voters for a dedicated tax, why can’t some other nonprofit organization? If public funds are the main source of revenue for the organization, there needs to be more public accountability.
“This is a public stream of money to a private entity, albeit a nonprofit,” he says. “It’s worse than bad government. It’s not government at all.”