Letter from MYCAP attorney to Ohio Department of Development
February 5, 2010
VIA EMAIL:
Candace M. Jones, Esq.
Chief Legal Counsel
Ohio Department of Development
P.O. Box 1001
Columbus, Ohio 43216-1001
Re: Financial and Program Review of Community Service, Block Grant, Minority Contractor, Business Assistance Program and Home Weatherization Assistance Program
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Dear Ms. Jones:
A. INTRODUCTION
In accordance with instructions received from the Ohio Department of Development under cover of correspondence dated December 22, 2009, this is the Mahoning Youngstown Community Action Partnership's (MYCAP) board of director's (hereinafter "the Board") Response to the referenced financial review.
The MYCAP board is acutely aware of and sensitive to its fiduciary obligation to assure compliance with corporate formalities, applicable state and federal laws, and grant guidelines, in connection with MYCAP activities. The Board recognizes that it is the policy making arm of MYCAP and a fiduciary, with responsibility to assure compliance by MYCAP officers and staff with the highest standards of fidelity, care and loyalty to MYCAP. Accordingly, the Board desires for it to be clear to ODOD that the board has fully cooperated in this review and devoted substantial staff and Board time to the thorough investigation of all allegations within the Review. Based on this process the Board has either already formulated or is formulating corrective action where appropriate.
Notwithstanding the Board's efforts to assure that no ethical or legal breaches of duties owed to MYCAP have occurred, the Review conducted by ODOD was precipitated by a sequence of events that is disturbing by reason of its implications in relation to the Ohio Whistleblowers' Statute R.C. 4113.52. The board of directors has fully investigated all issues raised by the Review. The board has taken, or will take corrective and disciplinary action, where appropriate, however there have been no findings by the Board that would justify the continued suspension of funds to any MYCAP program. The board respectfully requests that ODOD immediately restore all MYCAP funding. The suspension of funding has adversely and unfairly injured MYCAP's ability to perform its mission and the reputation of both the Agency and its senior staff. A discussion concerning the events that led up to the suspension and Review is set forth below.
The MYCAP board formed a Special Committee, consisting of its Executive Committee and five additional directors to thoroughly investigate all issues within the Review. While it has been determined that certain lapses in judgment, shortcomings and deficiencies exist in MYCAP's corporate governance and oversight, and its senior management, the Audit allegations concerning rampant self dealing, conflicts of interest, fraud and nepotism are totally unfounded. Nonetheless, the board has determined that the Audit has provided it with an opportunity to correct deficiencies in its governance of MYCAP. For this reason the MYCAP board is appreciative of the opportunity this Audit has provided for MYCAP to engage in a comprehensive self critique and to improve where necessary.
The board has reviewed with particular concern allegations concerning MYCAP Executive Director, Richard A. Roller. Specific findings and conclusions concerning Mr. Roller are discussed separately below.
B. BACKGROUND
The Mahoning Youngstown Community Action Partnership (MYCAP) formerly known as Youngstown Area Community Action Agency was incorporated by the State of Ohio in 1965. MYCAP is governed by a volunteer board of directors (the "Board"). MYCAP employs over two hundred fifty full and part-time employees. The MYCAP Board has fifteen members, drawn from the public, private and low income sectors. The Agency is headed by an executive director, Richard A. Roller, who has occupied the position of executive director since 2001. For over forty years, MYCAP or its predecessors, have operated in concert with local and federal authorities to effectively perform its mission to strive to alleviate and prevent the causes for poverty. For the last nine years, the current senior management team has effectively operated the Agency. It is against this record of performance and the legacy of MYCAP that concerns arise in relation to the bases upon which this Review was instituted and its implications under R.C. 4113.52.
Following a report from a MYCAP employee under MYCAP's Whistleblower Policy, See, Exhibit A, to MYCAP's Executive Director of activity by the Director of the MYCAP Business Development Center, Mr. Herman Hill, that may have violated MYCAP's Code of Ethics, Exhibit B, Conflicts of Interest Policy, Exhibit C, or state-federal law, MYCAP's Executive Director, Richard Roller, advised the State of Ohio Department of Development and the City of Youngstown, Ohio of the interim restructuring of activities within MYCAP's Business Center, by reason of potential violation of law. A copy of Mr. Roller's correspondence is at Exhibit D. Within days of Mr. Roller's reporting to the Ohio Department of Development (ODOD) of the possible violation of state or federal law, on October 5, 2009, correspondence was sent to MYCAP. ODOD immediately suspended funding to the MYCAP Business Development Center (See, Exhibit E). In addition, program and financial audits of Minority Contracts Business Assistance Program (MCBAP) and Community Service Block Grant (CSBG) were initiated. All funding from MCBAP and CSBG was suspended, which resulted in the necessity to layoff the Business Center's staff, including the original employee whistleblower.
ODOD then dispatched auditors to conduct a program and financial review of MYCAP. In the course of this process ODOD entertained allegations from the Business Center director, Mr. Hill, against Mr. Richard Roller.
ODOD has advised that it also received anonymous allegations concerning Mr. Roller. By reason of these allegations and ODOD's preliminary audit findings, in advance of any opportunity for MYCAP or Mr. Roller to respond, ODOD terminated the MYCAP involvement in the MCBAP Program. On November 30, 2009, ODOD met with representatives of the MYCAP Board of Directors and distributed a draft report of audit findings, that it was prepared to release to the public again in advance of any opportunity for the Board or Mr. Roller to respond. Upon the urging of the MYCAP Board Chairman, Mr. Atkinson, ODOD relented to the extent that a period of eight days was agreed to give MYCAP an opportunity to respond to the allegations and audit findings.
On December 22, 2009, the Audit/Review was released.
C. PROCEEDINGS
In connection with the comprehensive review discussed above MYCAP committed substantial amounts of time and resources to the formulation of this Response. As stated a Special Committee of the board was formed to investigate the issues raised in the Audit. The Special Committee over a period of five separate multi hour sessions has exhaustively examined all allegations. In addition the Special Committee interviewed the following witnesses:
1. Vesna Vukasinovich – Director MYCAP Weatherization Program;
2. Jeffery Patterson – MYCAP Fiscal Director;
3. John Janecko – MYCAP Weatherization and Quality Control Manager;
4. Henry Wiley – Chief Weatherization Installation Crew;
5. Jason Roller – MYCAP Food Services Director (Brother of MYCAP Executive Director);
6. Wilma Torres – MYCAP Director of Planning and Development;
7. Francis Pettis – MYCAP Director of Human Resources;
8. Richard Roller – MYCAP Executive Director;
9. Herman Hill#SYMBOL 42 \f "Symbol" \s 14 # - Mr. Hill declined to be interviewed;
In addition the Board has reviewed the corporate minute book, relevant, selected fiscal and personnel records as well as relevant MYCAP policies.
D. FINDINGS
1. WEATHERIZATION
A. – The following audit findings have been received concerning Mr. Roller: RICHARD ROLLER
(i). DOD Audit Allegation – Development received an allegation that weatherization services had been performed at the residence of Richard Roller. Mr. Roller wrote to Development on October 20, 2009. He indicated that a weatherization assessment had been performed at his residence as a training exercise on December 2, 2006 and that weatherization measures had been installed at his residence in November 23, 2007. Mr. Roller indicated that MYCAP's board was aware of and approved the use of Mr. Roller's residence for a training assessment. Mr. Roller did not indicate that the Board was aware of or approved the use of agency resources to weatherize his home. Mr. Roller paid members of the crew that performed weatherization services at his home and reimbursed the agency for the cost of materials used from the agency's inventory (though not until six months after the work was completed). Mr. Roller's payments did not reimburse the agency for the costs of vehicles and equipment used to weatherize his home, nor do they account for the fact that agency resources – personnel, equipment and materials – were deployed to weatherize a residence not eligible for HWAP services.
Questioned costs are detailed in the report of the special financial review. Questioned and disallowed costs must be addressed by MYCAP.
(ii). DOD Audit Finding – 1) Two separate weatherization activities occurred at the residence of the Executive Director, an assessment in December 2006 and implementation of weatherization measures in November 2007. MYCAP has indicated that the assessment activity was undertaken as a training exercise and notes that use of employee residences for training was not expressly prohibited by Development in any weatherization guidelines or program rules.
Development recommends that training be undertaken only at residences of individuals eligible to receive weatherization services. Homes of employees and board members should not be used for weatherization training except in the limited circumstances that the employee or board member has been determined to be eligible to receive weatherization benefits, is given the same priority in the agency, and does not participate in the review or approval of the training exercise. Procedures should be instituted to avoid any future delivery of services for the residence of any employee board member or contractor of the agency who is not eligible to receive such services.
2) The implementation of weatherization measures at the Executive Director's residence was not undertaken as a training exercise, the work was performed by an experienced crew on a holiday weekend. Alan D. Wenger, counsel for Mr. Roller, stated in his letter to Development dated December 9, 2009, that Mr. Roller "contacted program personnel who were engaging in work time, to be paid for directly by Mr. Roller." (Emphasis added.). Legitimate training activities are considered work time for agency crews.
Implementation of weatherization measures at the Executive Director's residence resulted in a direct personal benefit to the Executive Director. Use of agency resources for personal benefit violates the MYCAP Code of Ethics, the Conflict of Interest Policy and federal guidelines for the HWAP program. Section 9 of the Code of Ethics requires agency staff to "[s]erve in such a way that we do not realize undue personal gain from the performance of our professional duties." Section 10 of the Code of Ethics requires agency staff to "[a]void any interest or activity which is in conflict with the conduct of official duties." Mr. Roller was clearly not eligible to receive HWAP benefits. Nevertheless, he obtained weatherization services using materials and equipment belonging to MYCAP and acquired with grant funding. Such misuse of agency resources violates established agency policy and program standards. Use of agency personnel and resources for personal benefit also suggests a lack of integrity and poor judgment on the part of the individual tasked with overall administration of the agency.
Also, reimbursement for insulation materials does not fully compensate MYCAP for the services performed at the Executive Director's residence. A more reasonable valuation of those services would be an amount equal to what Mr. Roller would have paid a private contractor to have the same weatherization measures implemented. In addition to payment by Mr. Roller to the agency for the full value of services rendered by the agency at his residence, we recommend the Board consider appropriate discipline for any violation of agency policy and grant terms and conditions.
(iii). MYCAP Board Finding – The weatherization allegation has two aspects, a December 2, 2006 assessment conducted at the home of Richard Roller and installation services at Mr. Roller's home on November 23, 2007.
The weatherization allegations against Richard Roller in large measure are the product of the lack of definitive guidance from the State concerning weatherization training sites and the lack of a MYCAP weatherization training policy. A copy of the State's weatherization training policy is at Exhibit F. Federal guidelines are at Exhibit G.
The Board interviewed Ms. Vukasinovich, MYCAP Weatherization Director, Mr. Janecko and Mr. Wiley concerning the activities at the home of Mr. Richard Roller. The board also reviewed minutes of the board proceedings. Based upon this review, the board learned that there is no definitive guidance from either the state or federal government concerning where weatherization training may take place. Mr. Janecko advised the board that in his twenty year experience, weatherization training conducted by the State frequently occurred in locations in Central Ohio, that did not meet HWAP income guidelines. Ms. Vukasinovich stated that in many instances, in order to find training sites, MYCAP has approached developers with vacant homes as training sites. The State requires MYCAP to conduct training at local sites however, the State has provided no guidance whatsoever as to where training may lawfully occur.
In the case of Richard Roller, the MYCAP Board was aware of and approved the use of Mr. Roller's home as a training site. The board Chairperson at the time, Ms. Williams, actually attended the training. There was nothing sinister or hidden about the fact training was being held at Mr. Roller's home, but the board agrees that the appearance of impropriety exists. In retrospect the use of Mr. Roller's home was unwise, however no statute or policy was violated.
The allegation concerning installation of weatherization materials at the home of Richard Roller stands on a different footing than the assessment allegation. Unlike the assessment, the board was not aware that weatherization materials were being installed at Mr. Roller's home. The Special Committee learned that Mr. Roller requested that a team, while on personal time or during a weekend, install weatherization materials in his house. Mr. Roller proposed to pay for this service.
A team headed by Mr. Wiley, using MYCAP tools and vehicles, worked on personal time on a Saturday at Mr. Roller's home. Mr. Roller paid $750.00, an amount above the regular wage of the workers, for the installation crew. He paid $435.00 for materials. Copies of relevant documents for the installation are at Exhibit H. Mr. Roller did not pay the costs associated with the use of MYCAP tools or vehicles. The costs of these items is $49.06.
The MYCAP board has determined that even in the absence of a weatherization training policy, it was an error in judgment for Mr. Roller to not disclose to the board the fact that installation activity was occurring at his home, despite it being on the weekend. The board also determined that MYCAP should develop a policy governing the use of MYCAP assets, equipment, vehicles, etc. for private outside activities or business.
(iv). MYCAP Corrective Action – a) The Board of MYCAP is working with Ms. Vukasinovich and her staff to develop an appropriate policy governing where weatherization training may occur.
b) The board will develop a policy governing the private use of MYCAP resources and equipment.
c) The board will reprimand Mr. Roller in connection with the installation decision and recover $49.06.
B. JASON ROLLER
(i). DOD Audit Allegation – Jason Roller is the brother of Richard Roller. Jason roller is employed by MYCAP as its Food Service Manager. Jason Roller's home was used as a training site for weatherization services in March 2009. Measures were installed as part of the training. It does not appear that Jason Roller is eligible to receive weatherization services. Jason Roller did not pay or reimburse the agency for weatherization services performed at his residence.
(ii). DOD Audit Findings – 1) The Findings and Recommendation in Section II above concerning use of employee homes for training exercises applies to the weatherization activities undertaken at Jason Roller's residence.
2) Even if weatherization measures were implemented at Jason Roller's home as a training exercise, Jason Roller obtained a personal benefit for which he did not compensate the agency. Use of agency resources for personal benefit violates the MYCAP code of Ethics, the Conflict of Interest Policy and federal guidelines for the HWAP program. Section 9 of the Code of Ethics requires agency staff to "[s]erve in such a way that we do not realize undue personal gain from the performance of our professional duties." Section 10 of the code of Ethics requires agency staff to "[a]void any interest or activity which is in conflict with the conduct of official duties." Mr. Roller does not appear to have been eligible to receive weatherization benefits. Mr. Roller should be required to pay the agency for the full value of services rendered by the agency at his residence.
(iii). MYCAP Board Findings – Jason Roller's home was used for training at the behest of Ms. Vukasinovich. The training conducted at Jason Roller's home was actually performed by State of Ohio trainers, not MYCAP trainers. The trainers inserted holes into Mr. Roller's previously defect free duct system and then repaired the holes as a training exercise. Mr. Jason Roller received no benefit.
(iv). MYCAP Corrective Action – No action required. But for Jason Roller being the Executive Director's brother, this finding would likely not have been made. Jason Roller received no benefit. Given the absence of any State guidance concerning training locations and the benefits conferred on MYCAP by Jason Roller's selfless act of permitting weatherization staff members to disrupt his domestic routine by training in his home, it is disturbing that Jason Roller was unjustly singled out as a subject of wrongdoing. Notwithstanding this sentiment, the board will strengthen MYCAP's weatherization training policy to avoid any recurrence of the appearance of impropriety.
2. EMPLOYMENT OF FAMILY MEMBERS
(i). DOD Allegation – Employment of Family Members – Jason Roller is employed as the Food Service Manager for MYCAP. Jason Roller is the brother of Richard Roller, the agency's Executive Director. When Development conducted a financial audit of MYCAP on December 31, 2008, it found that during 2007 and 2008, MYCAP did business with Chef's House, a business operated by Jason Roller. Development identified the business with Chef's House as a conflict of interest in its audit report dated March 13, 2009. During the course of its interview, Development also received anonymous allegations that MYCAP employs, directly or through a temporary agency, two daughters and two cousins of Richard Roller.
Percy Squire, counsel for MYCAP, and Mr. Wenger, counsel for Mr. Roller, confirmed in their respective letters to Development dated December 9 that in addition to Jason Roller, MYCAP currently employs two cousins of Richard Roller, Tonja Cowart and Richard Lampley, and a daughter of Richard Roller, Sydney Roller. Richard Lampley, Reanna Rolle,a nd Sydney Roller are or were employed indirectly through Callos personnel Services. Mr. Wenger also indicates that MYCAP has from time to time employed relatives of other agency employees.
With respect to employment of family members, MYCAP's Personnel handbook, Section 10, provides in relevant part as follows:
"Immediate family" is defined in the Personnel Handbook to include "father, mother, brother, sister, husband, wife, son and daughter, father and mother-in-law, brother and sister-in-law, son and daughter-in-law."
(ii). DOD Findings – Notwithstanding the agency's general policy concerning employment of immediate family, MYCAP personnel, particularly management personnel, must be cognizant of, and comply with the agency's Conflict of Interest Policy. The Conflict of Interest policy counsels MYCAP directors and staff "to be aware that both real and apparent conflicts of interest or dualities of interest sometimes occur…and that the appearance of conflict can be troublesome even if there is in fact no conflict whatsoever." The use of one's authority or influence to obtain jobs or contracts for family members is inconsistent with MYCAP's Conflict of Interest Policy and the principles it reflects.
As the Executive Director, Richard Roller exercises the ultimate authority over all personnel actions and business relationships of the agency. Even if Mr. Roller's family members do not report to him directly, their supervisors do. Therefore, while it is possible that the agency could employ or do business with family members in situations where no actual conflict would result, employment of family members, or conducting business with family members, of the Executive Director and other senior management staff poses an inherent conflict that cannot be avoided. Furthermore, even if the Board were to determine no actual conflict of interest is created by employment or doing business with family members of senior management staff, an appearance of conflict remains.
Appropriate action should be taken by the Board to eliminate conflicts of interest posed by the employment of, or conduct of business with, family members of the Executive Director and other MYCAP employees. In addition, MYCAP and its Board should examine the agency's policy with respect to the employment of family members, generally, to take account of supervisory and management responsibilities affecting family members who might otherwise be employed by the agency consistent with the policy.
(iii). MYCAP Board Findings – The following individual relatives of Mr. Richard Roller either are currently or have been employed by MYCAP:
JASON ROLLER (Brother)
Original hire letter signed December 20, 1990 by Marcia Rose-Walker, Exec. Dir.
Supervisor: Wilma Torres
Title: Food Service Manager
Start Date: January 10, 2000
Resigned: August 6, 2004 (employment extended until September 17, 2004)
Contractual Service: Intermittent: September 20, 2004 – August 3, 2008
Supervisor: Head Start Assistant Director and Head Start Director Title: Food Service Manage
Rehired: August 4, 2008
Supervisor: Head Start Director
Title: Food Service Manager/Youth Enrichment Coordinator (Individual was interviewed by Policy Council, Head Start and Personnel. Hire must be approved by Head Start Policy Council prior to requesting Executive Director's approval.)
TONJA COWART (Cousin)
Hire Date: January 8, 2001
Supervisor: Jamira Ellis
Title: MIS Specialist (still employed)
SYDNEY ROLLER (Daughter)
Temporary Staffing Employed Through Callos Personnel Services
Start Date: July 9, 2007
Supervisor: Wilma Torres
Title: Summer Aide
Terminated: August 24, 2008
REANNA ROLLER (Daughter)
Temporary Staffing Employed Through Callos Personnel Services
Start Date: January 28, 2008
Supervisor: Wilma Torres
Title: Data Entry Clerk (still employed)
RICHARD LAMPLEY (Cousin)
Temporary Staffing Employed Through Callos Personnel Services
Start Date: April 28, 2009
Supervisor: Vesna Vukasinovich
Title: Insulation Technician
Hired MYCAP: December 2, 2009
Supervisor: Vesna Vukasinovich
Title: Technician II/EPP Auditor
MYCAP's personnel policies handbook dated December 31, 2007 provides, in pertinent part:
Employment Criteria: Every applicant for employment with MYCAP will be bound by the employment criteria:
1. No person who serves as a voting member of MYCAP, delegate agencies, or other policy/advisory bodies of the Grantee MYCAP, not any member of the person's immediate family, may be employed by MYCAP or any of its delegate agencies. "Immediate Family" shall be defined as father, mother, brother, sister, husband, wife, son and daughter, father and mother-in-law, brother and sister-in law, son and daughter-in-law.
2. No more than one person per immediate family, living in the same household, shall be employed by MYCAP as a full-time employee. Should this occur, the employee with the least amount of seniority will be terminated.
Mr. Roller's daughters are Callos employees. They do not work for MYCAP. No employee of either MYCAP or Callos lives in Mr. Roller's household. There is no prohibition under MYCAP policies against the hiring of cousins. Based on these policies there is no basis for a finding of wrongdoing against Mr. Roller for the hiring of relatives.
The ODOD Audit finding mentions MYCAP having been party to a previous contract with Chef's House. This issue was addressed in response to the March 13, 2009 audit. The contract in question is no longer in place. This contract is discussed in the vendor section below.
(iv). MYCAP Board Corrective Action – The MYCAP board will expand its Code of Ethics and Conflict of Interest policies to include language specifically addressing the hiring of extended family members. The board will also improve and expand its nepotism policy to address Callos employees. The proposed revisions in the nepotism policy will include a prohibition against any supervisory relationships involving family members.
3. GOVERNOR'S OFFICE OF FAITH BASED INITIATIVE AND PRIVATE
CONSULTING AGENCIES
(i). DOD Allegation – While not directly related to the special review of CSBG, HWAP, or MCBAP, the following matters came to the attention of Development staff during the special financial review. These matter reflect negatively on the governance and management of the agency and, therefore, warrant attention by the Board.
Herman Hill indicated to Terry Edwards that Richard Roller was paid to provide training for non-profit organizations in continuation of a training program originally funded with a grant from the Governor's Office of Faith-Based Initiatives. Mr. Squire provided additional information concerning this matter in his December 9th letter to Development. Mr. Squire indicated that "Mr. Hill, Mr. Roller and several MYCAP directors entered into private consulting agreements with non-profit entities in connection with a training program originally funded with a grant from the Governor's Office of Faith-Based Initiatives. These consulting agreements were disclosed in the grant request and authorized."
Mr. Wenger also provided additional information concerning this matter in his December 9th letter to Development. According to Mr. Wenger:
The grant and its implementation were specifically approved by the MYCAP board. Those engaged in implementing the training included Roller and other MYCAP management employees, but also other individuals not associated with MYCAP. Rather than paying program compensation to the trainers some as employees of MYCAP and to others as individuals not associated with MYCAP, all trainers were paid through grant proceeds as consultants, reflected by IRS Form 1099's.
Development does not purport to comment on behalf of the Ohio Department of Job and Family Services ("JFS") or the Governor's Office of Faith-Based Initiatives about the propriety of charging time of agency employees against the grant as subcontracted costs. We do, not, however, that JFS grant is subject to the same financial cost principles, OMB Circular A-122, as apply to Development's grants of federal funds, and professional services provided by employees and board members are not allowable costs of federal grants under those cost principles.
Furthermore, it would seem unreasonable to charge to any Development-administered grant personnel costs for employees who were being compensated separately as contracts. MYCAP's board should provide additional information regarding the compensation of employees and board members as contracts and indicate for each whether any personnel costs for those individuals were charged to Development-administered grants and the amounts of any such charges. The Board should also provide a copy of the minutes of the meeting at which this arrangement was approved (as suggested by Mr. Wenger) and indicate whether or not any board members that may have provided services under the grant participated in the action to approve this consulting arrangement.
(ii). MYCAP Board Finding – The Special Committee learned that consulting agreements were entered into in connection with the GOFBI grant. The consultants worked on personal time. The Special Committee reviewed the consulting agreements, which are at Exhibit I, and checked time records to assure recipients were not consulting on MYCAP time. The consulting agreements were a disclosed aspect of the GOFBI grant which was authorized by the board.
(ii). MYCAP Board Corrective Action – The board will develop a policy governing private consulting agreements by MYCAP employees. Additional corrective action in relation to the issue of private consulting agreements is discussed below in the section concerning Smart Cap.
4. VENDOR RELATIONS
(i). DOD Allegation – Certain conduct described in Section I of this report and discussed further in this Section V suggests a pattern of conduct within the agency of staff maintaining on-going outside business relationships with vendors to the agency. such relationships are a source of conflicts of interest and potential self-dealing. Outside business dealings of agency staff should be examined comprehensively to evaluate potential conflicts of interest and self-dealing. Appropriate actions should be taken in each case to eliminate improper conduct. If existing policies were violated, appropriate discipline should be administered by the Board and/or by agency management. IN addition, agency policies concerning outside business relationships should be clarified and training instituted to avoid any violation of the principles underlying those policies.
(ii). MYCAP Board Findings – a) MYCAP entered in a vendor agreement with Chef's house, a business operated by Mr. Richard Roller's brother. This was an arms length transaction of which the board was aware and in MYCAP's best interest. As stated above the Chef's House contract is no longer in force and was the subject of a previous state audit.
b) The only other vendor relationship found to exist was the relationship between Herman Hill and Cynthia Rogers. The board was not aware of this relationship. See, Exhibit J for details. By reason of the conflict of interest that exists due to Mr. Hill's business relationship with Ms. Rogers, it is the view of the board of directors that any agreements between Ms. Rogers and MYCAP are voidable. There are presently no agreements between MYCAP and Ms. Rogers. The board is aware that payments totaling $975.00 were made to Ms. Rogers in 2009 for services provided to the MYCAP Business Center. The board has opted not to take action to recover those amounts for the reason the board believes that services were provided to MYCAP and the transactional cost of litigation outweighs the potential recovery.
(iii). MYCAP Corrective Action – The board will adopt an annual requirement for the filing of financial disclosure statements by all MYCAP employees, in order to determine if any conflicts of interest exist. The board will adopt an annual financial disclosure statement requirement to compel all employees to disclose the existence of any outside business relationships. The policy will require seasonable supplementation in the event of the establishment of a reportable relationship between reporting periods.
5. AUTOMOBILE USE
(i). DOD Allegation – Development received a number of anonymous reports subsequent to the special review on October 26 and 27, 2009, including an allegation that Richard Roller has an agency-funded vehicle that he uses for his personal benefit. Development was told this vehicle was paid for with proceeds of a federal grant. The vehicle situation is of particular interest to Development because Development is ware that in 2007, MYCAP approved a substantial salary increase for Mr. Roller in lieu of a questioned vehicle allowance.
Since Development provided a draft of its report to Board members on November 30, counsel for MYCAP, Percy Squire, and counsel for Mr. Roller, Alan Wenger, have separately provided additional information to Development. Mr. Squire indicated in his December 9th letter that "[a]n agency funded vehicle has been available for Mr. Roller's use since the summer of 2009." Mr. Wenger indicated in this letter that "[t]he ‘Anonymous Allegation' that Roller has an ‘agency-funded' vehicle is simply false." In light of this discrepancy, Development requests that the Board provide supporting documentation for its response. The Board should also provide copies of vehicle logs for all agency-funded vehicles for 2009 and any other documentation evidencing the use and maintenance of agency-funded vehicles.
If Mr. Squire is correct that the MYCAP provided a vehicle in 2009 for Mr. Roller's use, the Board should consider whether adjustments to Mr. Roller's compensation for that period are warranted in light of the prior arrangement to increase Mr. Roller's salary in lieu of a vehicle allowance.
(ii). MYCAP Findings – Mr. Roller has utilized since July 2009 an agency provided vehicle. In 2007 Mr. Roller's compensation was increased $939 per month in lieu of a vehicle allowance. Under these circumstances using an agency vehicle since July 2009 requires an adjustment to be made in Mr. Roller's compensation. Mr. Roller does not have an employment contract. Details concerning Mr. Roller's vehicle allowance are at Exhibit K. List of GOFBI vehicles purchased is at Exhibit L.
(iii). MYCAP Corrective Action – 1) MYCAP will update current driver policy, Exhibit M, to expand details of log book requirement.
2) MYCAP will account for July 2009-January 2010 vehicle usage in accordance with IRS Pub. 63, Exhibit N.
3) Mr. Roller will reimburse allowance for six months or have value added to salary, (July-December, 2009). Contrary to the allegation, review of the Board's May 16, 2007 Executive Committee minutes, Exhibit K, indicates the $939 increase in Mr. Roller's pay was not a car allowance, it was given in lieu of a car allowance. Accordingly, the issue is being resolved by the board in accordance with IRS Pub. 63. Mr. Roller will either reimburse the $939 vehicle allowance for the six month period that he utilized a MYCAP vehicle or his salary will be adjusted to reflect the value of an agency provided vehicle for the period July 2009 until January 2010;
4) Mr. Roller will no longer use an agency vehicle; and
5) Mr. Roller will, following satisfactory evaluation, receive an employment contract clarifying his benefits, etc. Mr. Roller will, provided that he receives a satisfactory performance evaluation from the board, receive an employment contract that delineates his work terms, i.e. salary, car allowance, outside employment, etc. The lack of such an agreement is currently violative of MYCAP's By-laws adopted in 2008 and the source of uncertainty concerning the propriety of some of Mr. Roller's actions.
6. REALTY BUILDING LEASE
(i). DOD Allegation – MYCAP has paid the security deposit to lease an apartment at Realty tower at a cost of $1750 per month. after Development staff met with MYCAP Board members and counsel on November 30, Development received by mail without attribution a copy of a lease for unit 201 in Realty Tower, fully-executed with the Lessee identified as MYCAP. Mr. Squire provided with his December 9th letter a copy of the Realty Tower lease revised by hand to substitute a different commencement date (change initialed by one party) and different Lessee, Smart Cap (change not initialed). It is not clear why the Lease would have been changed to identify Smart Cap as the Lessee when both Mr. Squire and Mr. Wenger have indicated that Smart cap does not exist as a legal entity. Smart Cap is discussed further in paragraph 5 below.
According to Mr. Squire, it is the position of the MYCAP Board that MYCAP is not obligated under the Realty Tower lease. Mr. Squire also indicated that the MYCAP Board has instructed Mr. Roller to recover the security deposit from the Lessor, and that no further action should be taken on the rental of an apartment until a study has been completed regarding the cost-effectiveness of maintaining an apartment for use as accommodations for visiting consultants in lieu of paying for hotel accommodations
According to Mr. Wenger's letter of .December 9th, the MYCAP board approved the Realty Tower lease not once, but twice. Mr. Wenger states:
The lease was approved by the MYCAP board, and then, with Roller's concern that there might be a misunderstanding as to the lease, it was presented a second time to the board, and approved again. The lease was considered as a means to provide convenience and cost savings to MYCAP by housing next door consultants from out-of-town that work at MYCAP on a routine basis.
After the second MYCAP board approval, and in consideration of the possibility that smart Cap might be developing, and might also utilize the lease premises for similar needs, "MYCAP/Smart Cap' was handwritten in as the named lessee. MYCAP submitted the approved deposit.
Regardless of the source of funds used to pay the security deposit or intended to pay rent for the Realty Tower apartment, the conflicting descriptions of the lease transaction by the Board and the Executive Director indicate either failure of communication between the Board and the Executive Director, disregard for Board roles and actions and/or lack of Board oversight of significant agency transactions. In a similar vein, Development notes that Mr. Atkinson's signature was affixed to a check dated November 4, 2009, issued by MYCAP to pay the Realty Tower security deposit. When Mr. Atkinson and other board members met with Development staff on November 30, Mr. Atkinson indicated that it was his understanding that no security deposit had been paid.
The circumstances surrounding the Realty tower lease cause Development to be concerned about the governance and management of the agency. MYCAP should provide to Development an explanation of conflicting information provided by Messrs. Squire and Wenger, including copies of all minutes for meeting of the Board or its committees at which the lease of an apartment by the agency was discussed or approved. (Development staff reviewed minutes of MYCAP board meetings obtained during a recent CSBG program review and found no reference to approval of an apartment lease.) If the Board determines that the lease was not approved, the Board should investigate further to determine why management proceeds without Board approval, why the Executive Director's counsel indicated to Development that Board approval has been obtained, and whether internal controls were circumvented in any respect in connection with the payment of the security deposit.
(ii). MYCAP Findings – A lease was signed in advance of board approval. There is no evidence that board approval was obtained, and the board minutes do not indicate. The Smart Cap issue appears to be in Executive Director's August 2009 report, but no explicit resolution authorizing the lease exists. See, Exhibit O, board resolution and check voucher.
A lease was signed in advance of board approval. Although there was debate concerning this issue among board members, there is no evidence board approval was obtained.
The board has determined that the controversy concerning the Realty Lease and Smart Cap, which is discussed in the next section, is, in large measure, a function of insufficient adherence to appropriate corporate formalities. In point of fact, inspection of the August 27, 2009 minutes of the board indicates that board approval was given to entering a lease with "MYCAP Consulting." It appears the terms of "MYCAP Consulting' and "Smart Cap" are being used interchangeably. The MYCAP consulting concept has been approved by the board as evidenced by the consulting activity that occurred in connection with the GOFBI grant, where MYCAP consultants, with State and ODOD, approval provided consulting services. In light of the perceived demand for MYCAP Consulting type services and the expertise within MYCAP's senior staff, the "MYCAP Consulting" concept evolved into a more innovative concept dubbed "Smart Cap." Neither "MYCAP Consulting" nor "Smart Cap" have been formally established as Ohio business entities. MYCAP Consulting has received, as evidenced by the August 27. 2009 minutes, board recognition if not approval. Smart Cap, although being treated by the staff as synonymous with "MYCAP Consulting" has not been approved by the board. Organizational and development expenses for MYCAP/Smart Cap expenses have been allocated by MYCAP fiscal department to "Smart Cap.") Hence, although Smart Cap is still in the developmental stage as the board considers the legality, and appropriateness of the Smart Cap idea, the expenses listed at Exhibit Q have been incurred.
Another factor in this uncertainty concerning what has or has not been approved by the board, is the practice of MYCAP senior staff of presenting reports that mention several initiatives to the board, the board voting to approve the report and the report approval being treated by the MYCAP staff as authorization to proceed with every discrete item mentioned in the Report. This is especially true in relation to the executive director's report.
In order to eliminate any uncertainty concerning what MYCAP/Smart Cap Consulting measures have been approved by the board, the board has taken the following steps:
1) Terminated the Realty Lease;
2) Received back the $1750.00 security deposit; and
3) Voted to terminate the consulting agreement with MR Walker & Associates.
The board will consider whether to proceed with each of the above matters in due course in accordance with appropriate board committee involvement, legal review and ODOD concurrence.
(iii). MYCAP Corrective Action – See, Exhibit P, lease terminated, security deposit recovered. Board will activate dormant committee structure and require improved compliance with corporate formalities. MYCAP staff will not act on basis of reports to board but require formal resolutions.
7. SMART CAP
(i). DOD Allegation – An organization called Smart Cap Consultants, LLC appears to operate from the MYCAP offices, see, smartcap.org. The Smart Cap website indicates that Richard Roller serves as President of that organization. Smart Cap has a working phone number, which is allegedly also charged to MYCAP.
Notwithstanding that Smart Cap appears to exist and be offering services, Mr. Squires, on behalf of MYCAP, and Mr. Wenger, on behalf of Mr. Roller, each indicate in their respective letters that Smart Cap is a "concept." Mr. Wenger states: "It is a concept – an idea that has been tentatively floated, but absolutely not implemented."
According to Mr. Squire:
Smart Cap is a concept only. A Smart Cap business entity does not exist. It appears that in anticipation of board approval certain actions, such as establishing a website and paying a security deposit for Smart cap have been taken by the Executive Director. These actions were premature. The board is still reviewing whether it will approve the Smart Cap initiative.
The "premature" steps the board attributes to Mr. Roller raise the same concerns about effective governance and agency management as discussed in paragraph 4 above. In addition, Mr. Roller's position with the prospective Smart Cap enterprise (and his efforts to establish Smart Cap) raise questions relative to the grant funding administered by Development. Mr. Roller is paid through various government funding sources to serve as the full-time Executive Director of MYCAP. The demands of a position as an executive officer of a consulting business would appear to be inconsistent with the duties of Mr. Roller as Executive Director of MYCAP. In this regard, Development has previously noted in the ordinary course of its business with MYCAP that Mr. Roller has been unavailable to carry out certain routine tasks expected to be performed by the executive director of the community action agency, including signing reports submitted to Development. Outside obligations that detract from Mr. Roller's execution of his duties as the full-time Executive Director of MYCAP must be closely examined by the Board, both to ensure effective agency leadership and management and to avoid overcharges to government grants for personnel costs not actually dedicated to agency functions.
(ii). MYCAP Findings – See, Realty building response above.
(iii). MYCAP Corrective Action – See, Realty building response above.
8. RETALIATION
(i). DOD Allegation – Anonymous Allegations - Development has received a number of anonymous communications since it conducted its special review at MYCAP on October 26 and 27, 2009. At least one person who communicated anonymously with Development indicated he/she was a MYCAP employee and was fearful of retaliation. We bring this to the Board's attention so that the Board members are aware as they continue their investigation of these matters of concern among at least some employees about the possibility of reprisal.
(ii). MYCAP Findings – MYCAP's present retaliation policy does not deal with issues affecting the executive director.
(iii). MYCAP Corrective Action – Retaliation policy must be expanded to address senior staff and directors.
9. BUSINESS DEVELOPMENT CENTER PROGRAM REVIEW
(i). DOD Allegation – In addition to the special financial report, Development conducted a review of the Minority Contractor and business Assistance Program (MCBAP). The program review found serious deficiencies. The Minority Business Enterprise Division has recommended immediate termination of the MCBAP grant to MYCAP. A separate report and findings of the Minority business Enterprise Division accompanies this report
(ii). MYCAP Findings – According to correspondence received from the Ohio Department of Development Enclosure 4, Page 8, Item VII Business Development Center Program Review. It is stated that "The program review found serious deficiencies". In review of the documentation provided by ODOD, dated November 23, 2009 Youngstown MCBAP Program Performance Review it indicates that the Youngstown MCBAP office administered by MYCAP was not meeting a minimum of 75% of its projected goals.
1. MYCAP applied for the MCBAP grant in 2007 and was awarded the grant for FY 08, 09 and 10. Year 2007 was the first time MYCAP had completed an application to this funding source and according to Attachment 3, Key Performance Measures which are pages 31-33 of the grant application, these numbers projections. According to Merriam Webster dictionary, " a projection is an estimate of future possibilities based upon a current trend". As a new ODOD MCBAP grantee, MYCAP did not have access to baseline information or current trend prior to its initial grant application. Therefore, the projections in the grant application were optimistic and self imposed projections and not based on any given state recommendations or performance requirement.
2. Projections are rooted on previous trends which were not available to MYCAP but are also rooted on factors beyond the control of the organization, the number of minority businesses that request counseling, amount of loans, contracts and bonds available to be awarded are subject to the economic conditions within each MCBAP territory.
3. There are several factors that could have contributed to the failure for not achieving 75% on the key measures in FY 08 and 09.
a. Over projection in the first year of the grant, based upon ignorance of performance trends.
b. Failure to document all work that was completed in the MbdAssist database.
c. Failure of ODOD to provide
i. Technical Assistance to a new grantee
ii. A Performance Compliance Review and Visit in the first year for a new grantee. The only correspondence regarding an On-Site Review was received via email to Mr. Hill on October 12, 2009 from Evelyn Cleveland. Prior to this we could not locate any correspondence in our Executive office, Youngstown MCBAP Office, or Fiscal Office indicating that a programmatic or financial review had ever been scheduled or conducted. It was not until MYCAP notified ODOD of the allegations and suspension of the program that the first on-site review was scheduled.
iii. Failure of ODOD to correspond with MYCAP grantee administration and board regarding non-compliance in meeting key measures and allowing MYCAP to develop a Corrective Plan of Action.
4. The information provided for FY'10 is inconclusive and not a program deficiency. The program began in July 2009 and upon receiving allegations made against Mr. Hill, was suspended by MYCAP at the beginning of September followed by correspondence to the various funding sources. Therefore the numbers reflect work for the months of July, August and potentially part of September.
5. In conclusion, it is key to note the following discussion:
On October 26 and 27, 2009, an agent of the ODOD Minority Contractors Assistance Program (Evelyn Cleveland) conducted a programmatic audit of the MYTOWN Business Development files as it pertains to the program. In addition, Evelyn Cleveland interviewed Wilma Torres, Director of Planning & Development regarding the program, the work that is being done. Ms. Torres explained that in June 2009, there had been discussion with Mr. Hill regarding potential changes to Business Development Services including Youngstown MCBAP, Entrepreneurship Academy and MYTOWN Business Development Services.
a. New Direction for MYTOWN Business Development Center and the Youngstown MCBAP office.
b. Review of staffing and changes, credentials and requirements and training.
c. Move some business services under more appropriate departments in MYCAP:
i. Prevailing Wages for City Contract work would be moved under MYCAP Human Resource Department.
ii. Loan applications would be reviewed by MYCAP Finance Director who is also a CPA prior to sending to MEDVEC as the 3rd party administrator, reviewing loan appli, cations.
iii. Training for MYCAP staff who are trainers and facilitators and who hold MBA's to acquire training in FastTrac and as Business Counselors.
d. Expansion of FastTrac to include Youth Entrepreneurship sessions and Sessions for Low Income Individuals ---its about creating wealth
e. Business Industry driven Networking Sessions at MYTOWN Business Development Center. E.g. Networking Sessions for Retailers, Networking Sessions for Barbers and Beauticians, etc.
f. Business Industry driven Entrepreneurship Classes, e.g. All participants are in the same industry such as construction, retail, services, restaurant, day care, etc.
g. Increase in number of contracts, bonds, counseling sessions, edge-MBE/FBE certifications.
h. Visits to other MCBAP Programs in the State to discuss best practices.
i. Connection with PTAC and SBA, as well as YSU.
Ms. Torres outlined for Ms. Cleveland what the preliminary plans were and asked for suggestions and what her recommendation would be regarding the Youngstown MCBAP Program. Ms. Cleveland stated that it appeared MYCAP was on the right track and while this office had difficulty in meeting its deliverable that her recommendation would be continue the program under MYCAP but that it would be likely that the administration would place the Youngstown MCBAP on probation for several months. In addition, Mrs. Cleveland stated that she was going to recommend that all centers be returned to their original funding levels. Ms. Torres thanked Mrs. Cleveland, and informed her that this was the first time she had heard that the deliverable were not being met and that this communication had not reached the administrative offices at MYCAP which is the grantee agency.
(iii). MYCAP Corrective Action
MYCAP will work will ODOD to restore funding in this action.
10. COMMUNITY SERVICE BLOCK GRANT 0809-37
Minority Contractors Business Assistance Program (MCBAP)
8) MYCAP has since obtained additional documentation and, thereby, the following information. The documents were the building and demolition drawing and plans needed for submittal of an NFL Grassroots Program Grant for $100,000. The expense was unrelated to MCBAP and the $100 will be reclassified to unrestricted funds.
9) Same response as #7.
Home Weatherization Assistance Program D06-123 (HWAP)
10) ODOD & HWAP rules and regulations lack clarity and do not specifically prohibit the type or status of a residence for weatherization training sessions. Expenditures incurred for staff training is reasonable and allowable for the performance of the award. MYCAP respectfully requests ODOD reconsider this questioned cost and allow it.
11) Same response as #10.
12) Addressed above by legal counsel representing the Board of Directors.
Home Weatherization Assistance Program D07-123 (HWAP)
13) Same response as in #10.
14) It is MYCAP's position that these individuals were not acting as MYCAP employees. The individuals in question volunteered and performed the service on Saturday, a non-scheduled work day. The individuals, as self-employed persons, contracted directly with the Executive Director. Therefore, MYCAP did not avoid any payroll taxes.
15) Addressed above by legal counsel representing the Board of Directors.
Home Weatherization Assistance Program D08-123 (HWAP):
Non-Grant Findings and Recommendations:
E. SUMMARY OF CORRECTIVE MEASURES
1. The board will develop all policies mentioned above within a period of 90 days or less. Specific follow-up in each policy area will be reported by the board's designee;
2. The board will establish a full-time position of compliance officer to act as a resource to board members to assure corporate adherence to formalities and compliance;
3. The board will act aggressively to reinvigorate its committee structure;
4. The board will consider all provisions of R.C. 122.70, including whether MYCAP will be better served by compensating directors, See, R.C. 122.70 (H)(2), as well as improve corporate governance through CAPLAW training;
5. Executive Director: 1) The board will officially reprimand the Executive Director for authorizing the installation of weatherization materials at his home, violating the spirit of his $939.00 salary increase, and require repayment of the cost of weatherization tools and vehicles, $49.20, as well as make an adjustment for six months of automobile usage; 2) This reprimand will be placed in the file of the Executive Director pending completion of his next evaluation; 3) The board will conduct required performance evaluations in the executive director; and 4) The board will, depending on the outcome of the evaluation, negotiate an employment agreement with the Executive Director.
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Sincerely,
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Percy Squire
PS/cp
Enclosures
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EXHIBIT LIST
EXHIBIT A.
EXHIBIT B.
EXHIBIT C.
EXHIBIT D.
EXHIBIT E.
EXHIBIT F.
EXHIBIT G.
EXHIBIT H.
EXHIBIT I.
EXHIBIT J.
EXHIBIT K.
EXHIBIT L.
EXHIBIT M.
EXHIBIT N.
EXHIBIT O.
EXHIBIT P.
EXHIBIT Q.
EXHIBIT R.
Mr. Walker & Associates, Contract Termination MYCAP Consulting ExpensesTermination of Realty Lease Resolution for Realty Lease IRS Pub. 63 "Vehicle Allowance" MYCAP Vehicle PolicyVehicles purchased for GOFBI GrantAutomobile Allowance RecordsRecords Concerning Accelerate Strategies GroupConsulting Agreements and Related DocumentsDocuments Relating to Richard Roller Weatherization PaymentsFederal Weatherization GuidelinesODOD Weatherization Training PolicyODOD Suspension LetterMYCAP Executive Director Letter re. Herman HillMYCAP Conflict of Interest PolicyMYCAP Code of EthicsMYCAP Whistleblower Policy20) Same response as #12 above.
21) Same response as #12 above.
22) Same response as #12 above.
23) All research, documents, and information obtained or performed by Attorney Squire were made available to Attorney Stefanski. This action allowed Attorney Stefanski to minimize his efforts and work. Therefore, it is our position that all expenditures associated with the above legal counsel are reasonable and allowable.
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16) Same response as #10 above.
17) Same response as #10 above.
18) Same response as #10 above.
19) Same response as #12 above.
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:::1) MYCAP has invoices for the services rendered which have been properly approved and paid. There are two concerns with this finding, the first being that the services in question do not clearly fall under the scope of professional service. The second concern deals with the cost versus benefit of negotiating, documenting, and executing contracts for professional services. In the situation in question, all payments are less than $500, and based on policy, do not even require the issuance of a purchase order ($1,000 or more). Going forward, MYCAP will develop a generic boiler plate professional services contract. MYCAP will forward this document to ODOD for your review and input. Afterwards, the document will be presented to the Board for their review and approval, and then implemented.
In summary, MYCAP believes appropriate and good accounting practices were utilized and respectfully request expenditures to Cynthia Rogers be allowable.
2) MYCAP agrees with the position of ODOD. Grant is still on-going and MYCAP will make the proper adjustment to remove $54.00 from CSBG Grant and pay with unrestricted funds.
3) At the time of the ODOD audit, MYCAP could not locate requested supporting documentation primarily because of the turmoil in the Business Development division of MYCAP. We have since located specific documentation evidencing the clients completion of the program [see enclosed]. We respectfully request the expenditure be considered allowable.
4) The CSBG program is on-going and no final report has been sent. Therefore, MYCAP will make the necessary financial adjustment to classify the expenditure, as an administrative cost.
5) Same as # 4 above.
6) The CSBG program is on-going and no final report has been sent. Therefore, MYCAP will make the necessary financial adjustment to reclassify the expenditure to the agency's balance sheet.
7) It is MYCAP's position that the paid administrative leave under the circumstances was necessary and appropriate. This action allowed MYCAP to continue operation of the grant in order to provide services to eligible participants. Because the staff was on paid administrative leave, they were available to the remaining staff to answer questions by phone and e-mail. Also, staff on paid administrative leave were available when requested to come to the office to assist in any manner necessary and appropriate. We respectfully request the expenditures be considered allowable.
No more than one person per immediate family, living in the same household, shall be employed by MYCAP as a full-time or part-time employee. Should this occur, the employee with the least amount of seniority will be terminated.
10. Cynthia Rogers* – Ms. Rogers declined to be interviewed;
11. Attorney Kim Stefanski – MYCAP Special Council.
