Sources negotiating settlement

CELINA - Finances remain clouded and issues unsettled a year after state auditors began investigating Sources Community Network Services.

And although the Celina-based organization has terminated the Home Weatherization Assistance Program for questionable practices, the staff at Sources continues to help residents by focusing on its four remaining programs.

The state audit report issued in May questioned the paperwork and approval processes for about $837,000 spent in the HWAP program. Sources has agreed to return $12,287 of unallowable questioned costs while negotiating a final settlement, interim director Kirk Moriarty said. A portion of the funds may be recovered through the agency's insurance company, although that option remains a long shot, he said.

The local agency is negotiating with the state, which is working with a federal inspector general to determine how much Sources will have to repay, Moriarty said.

Sources has been working face-to-face with state officials who will eventually have to deal with the federal inspector general, Moriarty said.

"They're (the state) going to bat for us," he said. "They understand the program and they understand our situation."

He's cautious about future action by the federal inspector general.

"We'll just have to wait and see what they say," he said. "It's just a long, darn process."

Moriarty was hired in February partly to guide the agency through the audit process. He and Sources' fiscal manager Erin Hess-Stein recently sat down with The Daily Standard to discuss the situation.

"When I came in to see the first board meeting, it was the worst of times," Moriarty said. "Things like this can really wear you down - wear down your staff. It's a matter of perseverance.

"This (audit) was (about) one of five programs," he continued. "Imagine how that affects your ability to raise funds for the other four programs."

The remaining four have cleared audits, he said.

Moriarty said the focus now is to pick up the pieces.

"Job one is to clean up the mess," he said.

A better system of checks and balances is being developed to ensure the agency's spending is properly accounted for, officials said. A new rule requires all purchase orders to receive three signatures - from the program director, the fiscal manager and the executive director. The change requires others, not just the program director, to be familiar with grant rules so problems can be caught before money is spent.

He said previously the staff wasn't adequately familiar with the fiscal process.

"It's a good lesson in T-crossing and I-dotting," he said.

The board also brought in a lawyer to help guide it through the financial process.

"When you're dealing with the public's money, you have to account for every dollar," he said.

"Some of us have become more of an annoyance" in questioning costs, Hess-Stein said. "It's a growing process to be able to say 'No, you can't do that.'"

Sources had regular audits in the past, but beginning in November 2012 the Ohio Development Services Agency sent in people familiar with the HWAP program, not just financial auditors. It was an unusual step, Hess-Stein said. What followed led Source's board members to terminate the program's coordinator and inspector. The rest of the HWAP staff resigned and the program eventually was turned over to Dayton Community Action Partnership.

"That program is gone. The former program director is gone," Moriarty said.

In May, the state issued the audit report questioning the $837,000 spent in HWAP spending. Sources replied to those questions in July and the two sides have been negotiating and preparing to deal with the federal government ever since, Moriarty said.

Moriarty said Sources' problems began when the HWAP program became part of the $831 billion American Recovery and Reinvestment Act. The local agency for six or seven years had operated the HWAP program with a mix of federal and state funds. When the program was tied to President Obama's stimulus plan in 2009, the rules changed, he said.

"Their goals for the grant changed," he said.

The HWAP program was expanded from just insulating homes to focusing on issues such as jobs, education, health and energy conservation. The expansion may have led to problems, but the problems should not have happened, he said.

"I can't forgive it," Moriarty said. "It was mismanaged, yes it was, from a programatic sense."

The problems arose when Sources failed to follow guidelines on permissible spending, he explained.

"There were no abnormalities in the accounting," he said. "A lot of these jobs were done and done well."

Hess-Stein agreed.

"The crews did good work," she said. "They did work they were supposed to do."

The problems were systemic, she added. When the stimulus program took effect, Sources had a very hard time getting answers on what spending was permitted, she said. Staff members went to meetings but did not receive guidance.

"You'd ask questions and they didn't have answers," she said.

Sources also was learning to deal with grants running concurrently - something it never dealt with before, she said. Through the years, Sources has received about $3.4 million in HWAP funds.

"You have a new program with unspecified or presumed unspecified guidelines," she said. "So where did the money go? It went to the vendors."

The board paid vendor Hemphill and Associates $12,000 a year for an annual audit that found no accounting problems, the pair said.

"They assert everything from an accounting perspective was done correctly," Moriarty said.

One of the items the state audit challenged was the purchase of smartphones for the HWAP, Hess-Stein said. She does not know why the program director approved the purchase but assumes it was thought the work crews would be able to link directly to the state website from worksites and document the work completed. However, she can find no documentation to back up that assumption so Sources cannot challenge that part of the audit, she said.

Moriarty said he is looking forward to getting the audit process completed so the agency can move on.

"It's a good gig," he said of the services offered by the agency. "We just have to keep in mind who we're helping here."

The ongoing issues have been difficult for the staff, he added.

"It's an emotional attachment" for Sources employees, he said. "They take their job very seriously."