By Sarah Owens and Michael Livingston
In addition to MWVCAA's failure to submit annual audit reports two years in a row, ODE CNP said a May 14 plan to ensure compliance going forward depended heavily on CEO Jon Reeves who had subsequently resigned, the failure to operate the program in accordance with performance standards, particularly those having to do with "financial management, administrative capability, and program accountability", the fact that the most recent audit "identified two material weakness findings and three significant deficiency findings", and the fact that "MWVCAA has failed to provide adequate administrative oversight."
The complete notice is pasted at the end of this blog, along with a timeline of relevant agency events based on publicly available information, the BOD meeting materials posted to the agency website, and the response to public records requests to ODE CNP, and reasonable inferences therefrom.
It should be noted that ODE CNP's conclusion that MWVCAA failed to operate the CACFP program in accordance with performance standards is based on findings that apply agency-wide, and could, therefore, support similar conclusions with respect to MWVCAA's other programs.
On the one hand, it's reassuring that at least one state agency takes its oversight responsibilities seriously, unlike OHCS, which covered up MWVCAA's failure to comply with its rules and regulations in the purchase of the new ARCHES building on Commercial Street (and perhaps others we don't know about). On the other, it's extremely concerning, because the deficiencies are in MWVCAA's core functions. An enterprise that fails to ensure sound financial management, administrative capability and program accountability is just, well, failing as an enterprise.
How did things get to this point? In answer to ODE CNP's request for a detailed explanation for MWVCAA's failure to file its FY 2016 audit on time, MWVCAA cited staff turnover that left three relative newbies in the finance department when it came time to prepare for the FY 2016 audit, with the new CFO having no access to the previous CFO, or to key information in the previous CFO's email. MWVCAA also cited problems with its new payroll management company.
At the time, however, back in March 2017 when Reeves and the Board of Directors knew that the FY 2016 audit was going to be late, they were willing to accept some responsibility. Going forward, anyway, they would need to provide "effective oversight", and "ensur[e] that the Executive Director has the resources needed to improve systems and ensure compliance and timely reporting."
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| Notes of a March 23, 2017 Board of Directors Training |
But, that is not what happened. In its April 26 letter, MWVCAA told ODE CNP the delay of the FY 2017 audit was, like the delay of the FY 2016 audit, due to the "inexperience of the team" (meaning the finance department), and also to the implementation of new accounting software. As for oversight responsibility, MWVCAA told ODE, "[d]uring multiple meetings throughout the year, Agency leadership was reassured of the progress being made and that the team was in a much better state of preparation for the audit." Presumably, "Agency leadership" here refers to management and the Board of Directors (BOD).
Agency meeting records do not support the suggestion that management and the BOD were somehow misled, versus they neglected their oversight and other responsibilities with respect to the FY 2017 audit. To the contrary, the records indicate that management was preoccupied until June 2017 with getting the FY 2016 audit completed, at which time they were also negotiating the purchase of the new ARCHES building and a new financial accounting system. To the extent management and the BOD were given audit-related reassurances during that period, the reassurances concerned the FY 2016 audit, not the FY 2017 audit.
Meeting records also show that, once the FY 2016 audit was submitted (June 2017), management's focus turned to the new accounting system, not the FY 2017 audit. None of the reports or minutes for the period July 2017 through January 2018 refer to the FY 2017 audit or to financial statements (which would demonstrate progress or lack thereof in the reconciliation process, obviating the need for "reassurances"), yet, it was at the January BOD meeting that Reeves announced the CFO's resignation. If what MWVCAA told ODE CNP were true -- that the CFO resigned because she was "unprepared for an audit of an organization with this many grants" -- then there should have been at least some mention of the audit at the January BOD meeting; something said that would put the BOD on notice that the audit was in trouble. But, according to the minutes, the audit was not mentioned. Rather, it was March 2018 before that the BOD was given an "audit update." (See timeline, below.)
Not surprisingly, ODE CNP was not satisfied with MWVCAA's explanations. What was CEO Jon Reeves doing during this time? they wanted to know.
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| April 30, 2018 Letter from ODE CNP |
Reeves, it seems, had sought and accepted a position at ODE (different division), and would be gone in 30 days. The Controller and Deputy Director quickly followed suit, leaving Community Resources Director Jimmy Jones to fill the void and carry out the "corrective action response." At that point, ODE CNP basically had no choice. The Notice of Serious Deficiency arrived on June 29, 2018.
Reeves did not respond to a request for comment about the Notice. Jones asked that we share the following statement:
We are taking the ODE letter and the issues it raised very seriously. We are preparing a corrective action plan to address the deficiencies outlined in the letter. My role as interim is to recruit the next executive director, re-build our finance team with one that is reflective of the needs of an agency that has grown this large, and to make certain that our single audit, which is scheduled for November 2018, is completed on time and without any findings. Toward that end I, and the executive team and the board, have restructured our finance department, brought in an outside consultant, added a procurement position for finance, completed the transition from a much older finance software system to Abila MIP, and made Nancy Cain’s position permanent. The story here is that the agency has grown so large—now with more than 100 grants totaling more than $30M—that we never hit pause to make sure that we had a finance department that was reflective of the needs of a $30M agency. In 2003 this was a $13M agency. In 2008 it was $17M, and we have nearly doubled in the number and value of grants in the last decade. These are growing pains. Across all of our programs we are assisting thousands of clients with greater resources than we have ever had. We just need to make sure that our systems and structures catch up to the size and value of these grants.(Highlight added.) It's not self-evident, however, that growth from $13M to $30M over a 15-year period would in any way be unmanageable, or cause "growing pains" in an agency with minimally competent management/oversight. Nor is the "growing pains" explanation consistent with either the facts, or the written explanation given ODE CNP. Furthermore, anyone who would consider the failure to ensure sound financial management, administrative capability and program accountability "growing pains" has failed to appreciate the depth and pervasiveness of the institutional problems such failure suggests, and is unlikely to be able to take the Notice of Serious Deficiency "seriously".
The August 23 Corrective Action Plan (CAP) can be summed up as proposing that MWVCAA give its financial department "the resources needed to improve systems and ensure compliance and timely reporting", and the CEO and BOD fulfill their respective duties. Presumably, ODE CNP will either approve, or has approved, the CAP or require minor modifications in order to gain approval. The BOD hopes to have a new CEO on board by the first of October and s/he will be responsible for implementation, with BOD oversight.
MWVCAA's Serious Deficiency Timeline
(Entries based on publicly available information, BOD meeting materials posted to agency website, and the response public records requests to ODE CNP. Corrections and comments welcome.)May 1999 Teresa Cox to CEO
Sep 2014 CEO Teresa Cox resignation, CFO Nancy Cain to Interim/CFO
2015 new payroll mgmt company hired
Jul 2015 Jon Reeves to CEO, requiring Amber Reeves, CRP Director to resign w/in year
Jan 2016 CFO Nancy Cain resignation
Mar 2016 Controller hired (new position)
May 2016 Kathy Chase to CFO; Carmen Hilke to CRP Director
Jun 2016 Grants Accountant hired (new position); end FY 2016
Aug 2016 Jimmy Jones hired as Coordinated Entry Specialist (new position)
Sep 2016 CFO Kathy Chase resignation and Carol Matteson to CFO
Dec 2016 unreconciled accounts delayed audit prep
12 Jan 2017 Executive (Wood, Boes, Wheeler) and Finance (Wood, Honey, Lanning) Committees told consultants had been hired for the finance department, and that the audit had been postponed
26 Jan 2017 BOD Chair Jeff Woods and Carmen Hilke resignation, Jennifer Wheeler to BOD Chair
23 Feb 2017 BOD told the audit still in process
3 Mar 2017 Jimmy Jones to CRP Director
10 Mar 2017 CFO told Exec C'tee audit "should be complete next week"
23 Mar 2017 BOD told audit deadline might be missed, about plans to buy a building for ARCHES, and received training on financial oversight responsibilities
31 Mar 2017 FY 2016 audit deadline missed
27 Apr 2017 BOD given 1Q 2017 balance sheets/statements and status of reconciliations and told agency "pursuing a new accounting software system" (Abila)
11 May 2017 Exec/Fin C'tee given Apr balance sheets/statements and status of various reconciliation efforts and told audit near completion and will have findings,
16 May 2017 BOD meeting by email to approve agency making $2.1M offer on Commercial St property.
25 May 2017 CEO reported agency expected to be running Abilia by Oct, except for HR/payroll components.
8 Jun 2017 Exec/Fin C'tee told audit complete with 3 findings that had been addressed
22 Jun 2017 BOD given audit presentation and fin statements thru May, CEO reported agency was committed to converting to Abila, save money by taking payroll management in-house
27 Jun 2017 615 Commercial Street property purchased for $2.1M
Jul 2017 FY 2016 audit submitted late
Sep 2017 agency began migration to Abila accounting software (though the agency's response to ODE CNP states the migration began in Nov)
12 Oct 2017 Exec/Fin C'tee told of the terms of the Commercial Street purchase and that agency audit would begin in January
Jan 2018 CFO Carol Matteson resignation, former CFO Nancy Cain to Interim CFO
8 Feb 2018 Exec/Fin C'tee (Wheeler, Weiner, Honey, Karvandi, Rutledge) told that the Abila system should be fully functional in March
22 Mar 2018 BOD given "update on progress toward a finalized audit" and BOD asked Interim CFO to attend and report at next 3 BOD meetings
31 Mar 2018 FY 2017 audit deadline missed
12 Apr 2018 ODE CNP corrective action ltr setting April 27 deadline to submit audit; Exec/Fin C'tee given financial statements thru Jan
13-15 Apr 2018 Kathy Chase brought in as contractor to assist with audit
26 Apr 2018 response to ODE CNP requesting deadline extension to May 25; BOD mtg (no reference to audit or financial update in minutes, but CEO report states Chase was brought in to assist)
30 Apr 2018 ODE CNP corrective action ltr allowing extension to 5/25, demanding additional information
14 May 2018 response to 2d ODE CNP (no minutes of a May Exec/Fin C'tee mtg posted)
22 May 2018 CEO Jon Reeves resignation (30-day notice, took a position with ODE, Early Learning Division); Controller resignation (date approximate)
24 May 2018 BOD told audit would be complete May 25, contractors hired to assist with restructuring in response to findings
25 May 2018 audit submitted to ODE CNP; CEO's transmittal didn't mention his resignation
30 May 2018 ODE CNP learned CEO had resigned
15 Jun 2018 Exec/Fin C'tee given financial statements thru Apr; Interim/Deputy Dir Leinassar's resignation (date approximate)
19 Jun 2018 BOD given audit presentation and "finance department plan"
22 Jun 2018 CEO's last day
29 Jun 2018 ODE CNP Notice of Serious Deficiency
11 July 2018 ODC CNP letter re Admin Revew of CACFP Agreement
12 July 2018 Exec/Fin C'tee informed agency had contracted with NOW CFO's Kaolee Hoyle for financial advice and that Interim/Deputy Dir to meet with ODE CNP along with BOD members Weiner and Honey
26 July 2018 BOD told updated on meeting with ODE CNP and "finance plan", which included BOD members attending Finance Dept's weekly meetings and desk manuals, regular training and cross training for Finance Department staff, and told May financial statements would be emailed
3 Aug 2018 Interim/Deputy Dir Leinassar's last day, Jimmy Jones to Interim Dir, Nancy Cain to CFO (permanent), ODE CNP letter re Procurement Review
9 Aug 2019 Exec/Fin C'tee told agency would be hiring a Manager of Audit & Compliance (new position) and Procurement Manager (new position), and that June financial statements would be finalized and sent to BOD next day
23 Aug 2018 Corrective Action Response submitted to ODE CNP
__ Oct 2018 Jimmy Jones to Director (permanent)
31 Dec 2018 ODE CNP letter re Response is inadequate
15 Jan 2019 Additional Corrective Action Response submitted to ODE CNP
Serious Deficiency Notice
Copies of the documents enclosed with the Notice, and the August 23 CAR are available on request.
Inadequate Corrective Action Response Notice
(excerpt)
Copies of the entire December 31, 2019 letter from ODE, and MWVCAA's January 15, 2019 response, are available on request.
Good luck everyone...
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