SalemNews.com, Salem, MA

August 11, 2011

Accounting flaws found at NSCAP

By Jesse Roman
Staff writer

PEABODY — Shoddy accounting practices at North Shore Community Action Programs Inc. may have cost taxpayers thousands of dollars, according to a state audit released this week.

The audit, which covers July 1, 2007 through the end of 2009, found that the publicly funded social services agency could not account for $627,000 in costs such as salaries and property expenses, because those expenses were not documented correctly.

According to the audit, NSCAP allocated a certain percentage of its expenses to each of its various state-funded programs, but there doesn't appear to be a clear written plan for how or why it allocated certain amounts. Further, NSCAP never got state permission to use that particular accounting method and bucked state guidelines by allocating budgeted, not actual, expenses to its programs.

"As a result, there is inadequate assurance that ... the financial statements that (NSCAP) submitted to the Commonwealth during these two fiscal years are accurate," the audit said.

In addition, the audit revealed other problems including:

NSCAP had no evidence that $86,765 in expenses, supposedly used for a state-funded emergency shelter program, were actually expended in support of that program.

NSCAP did not have a formal bidding process for procuring services and awarded tens of thousands of dollars in contracts without putting them out to bid as required by state law.

NSCAP paid $5,200 in unauthorized benefits to an employee, and that money was not reported to state and federal tax agencies as taxable earnings.

NSCAP improperly used thousands of dollars in state funds to provide management services for River House, a Beverly nonprofit, which NSCAP partnered with to provide emergency shelter for homeless men.

On the last point, River House paid NSCAP a management fee to provide administrative support, but the payment didn't fully cover the cost of services NSCAP provided, the audit said. Instead, NSCAP violated state law by subsidizing River House's administrative costs with funds from other state contracts.

"In the case of River House, NSCAP says it was trying to meet a legitimate community need, but they did so without authorization and failed to properly account for state funds," State Auditor Suzanne Bump said in a statement.

North Shore Community Action Inc. has 139 full-time and part-time employees, has a budget of about $10 million and serves 26 cities and towns on the North Shore. Its main mission is to help low-income people move toward self-sufficiency by offering a variety of programs including housing and homelessness, fuel assistance, income maintenance, education and training and much more.

North Shore Community Action Programs Executive Director Beth Hogan could not be reached last night for comment.

NSCAP Board President Stephen Mott said yesterday that he has "a deep appreciation" and confidence for the entire program and staff and said the problems are administrative, not ethical.

"As an ethicist, I take these things very seriously, and I am not concerned with the ethics this raises," said Mott, a former pastor and professor of Christian Social Action at Gordon College. "There are no accusations of fraud, just some areas that need to be better. ... It's not like anybody is siphoning money for their own use, or that we're loading up on administration where we shouldn't."

NSCAP had an independent audit in February, which failed to uncover a lot of the items in the state audit, Mott said. Some of the issues the state raised have already been addressed prior to the publication of the state audit on Aug. 5, he said.

The state audit gives a clear message that NSCAP needs to do a better job keeping its written records, and Mott looks at the report as a positive moving forward.

"Aside from the worry of the unwanted publicity and the chance of people misinterpreting the information, we really think this information will be helpful for us," he said.