Local Initiatives Support Corp. nixes West Duluth development grants after auditThe Duluth LISC has suspended two $50,000 grants awarded to the West Duluth Community Development Corp. because of concerns about improprieties and financial management of the neighborhood development organization.
The Duluth Local Initiatives Support Corp. has suspended two $50,000 grants awarded to the West Duluth Community Development Corp. because of concerns about improprieties and financial management of the neighborhood development organization.
LISC Executive Director Pam Kramer said her office was informed in January of “potential financial wrongdoing” at the West Duluth Community Development Corp. She said she contacted the attorney at LISC national headquarters and asked what steps she should take “as a good steward of funding.” She said LISC hired an accounting firm to do an audit of WDCDC.
“An audit showed there was no misappropriation of LISC funds, but we did find that there were some improprieties,” Kramer said. She wouldn’t specifically describe the improprieties or financial management issues, saying those questions should be addressed to the WDCDC Board of Directors.
“We detected that there was some misuse of other funding, not LISC resources,” Kramer said. “Our auditing firm had a series of recommendations about tightening the internal controls and procedures (at WDCDC). We made that recommendation to the (WDCDC) board. We then, in light of our concern about what we saw in the management of the funds, we decided it would be appropriate to suspend our two outstanding grants as of April 1. That was our decision.”
Kris Ridgewell, the WDCDC’s executive director, referred questions from the News Tribune asking about any improprieties and any steps taken to tighten internal controls and procedures to her board of directors.
“No matter what you write is going to look poorly on me, and I think you have to take that up with my board of directors,” she said Tuesday.
Ridgewell was asked if she was personally responsible for any improprieties. She said she was not. She said there were no improprieties.
Russ Salgy, a member of the West Duluth Community Development Corp. Board of Directors, requested that the News Tribune provide his board with a written list of questions. The newspaper submitted 30 questions and asked for the names of current and past board members. None of the questions were answered and no current or past board members’ names were provided, other than Salgy’s.
Salgy did e-mail a statement:
“There was an outside perception of our organization in regards to misappropriation of funds. A confidential audit by an independent party was performed and there were no findings of said misappropriation of funds. In addition to this audit our organization has a yearly audit on all our financial activity. As our organization moves forward we will continue to fulfill our mission of being committed to revitalizing West Duluth.”
One of the suspended $50,000 contracts went into effect in August 2011 and had a remaining balance of about $7,000 when suspended, Kramer said. The other $50,000 contract was scheduled to run through the end of the year and had $30,000 remaining to be awarded when suspended.
Though it rarely has happened, Kramer said LISC has ended contracts in the past if, for example, staffing changes left an organization unable to accomplish its goals. However, this is the first time Duluth LISC has halted funding to an organization because of financial management concerns, Kramer said.
“What I want to make sure of is that I’m very clear that we’re very responsible stewards of this funding and that none of the LISC funding was improperly used or improperly handled,” Kramer said. “We did have an outside firm that reviewed that. We also have annual monitoring. We have a very strong system of measuring and monitoring and ensuring results.”
Duluth LISC opened in 1997, and since then has developed or preserved 1,194 units of housing, created 186 child-care spaces, 1,273 jobs, and leveraged more than $74.7 million new investment in Duluth. Duluth LISC has three core programs: the Building Sustainable Communities Initiative; affordable housing development, preservation and advocacy; and building the capacity of local community development organizations.