A recent audit of the Appalachian Regional Coalition on Homelessness has found eight significant deficiencies in ARCH’s financial statements and internal control of major federal award programs. The coalition annually funnels more than $1 million in HUD grant funding to homeless housing and service programs in Northeast Tennessee.
The audit, which determines ARCH to be a “high-risk auditee,” also includes a separate significant deficiency of “obstruction of audit.”
Dave Hansard, president of the board of directors of the nonprofit ARCH coalition, attributed the deficiencies to the “apparent misappropriations” of funds by the coalition’s former executive director, Dreama Shreve and to the coalition’s lack of financial “checks and balances” that would have caught the misappropriations.
Hansard said needed financial controls have been put in place since Shreve was fired from ARCH in January and despite the negative audit findings, “the coalition is strong and ARCH itself is in good shape.”
Shreve, who recently launched her own nonprofit homeless service agency network, on Monday publicly denied allegations she misappropriated ARCH funds and contended the coalition’s board of directors fired her because she was attempting to force them to comply with statutory regulations governing “Continuum of Care” organizations like ARCH through which HUD funds are funneled to homeless programs.
Ed Ellis, HUD’s field office director for East Tennessee, and Joseph Phillips, a public affairs officer with HUD’s Southeast regional office in Atlanta, said Wednesday ARCH continues to be “a viable Continuum of Care organization” through which both the coalition and its member service agencies qualify for COC grant funding.
Phillips said HUD’s Knoxville field office “will review the audit and ARCH will be required to address any noted findings.”
In the meantime, Phillips said, the field office has hired two contracting groups, the Corporation for Supportive Housing and The Cloudburst Group, to provide technical assistance to the ARCH board and the coalition member agencies, including training in internal and external relations and basic homeless programming.
“ARCH is operating in an acceptable manner with its grants. It has a new executive director and changes have occurred with its board of directors,” Phillips said.
The audit is available to the public at the Tennessee Comptrollers office website www.comptroller.tn.gov. Conducted by the office of CPA David M. Ellis of Greeneville, its significant deficiency findings include:
- Inadequate segregation of financial duties conducted by one employee with sole control over financial transactions.
- Insufficient and incomplete accounting for revenues from two federal housing grant programs.
- Unauthorized grant expenditures.
- Duplication of payments to service providers and staff.
- Lack of reconciliations of bank account balances with general ledger entries
- Failure to approve and retain receipts for credit card purchases
- Insufficient documentation of changes in employee salaries.
- Insufficient record keeping of board of director meetings.
In responses to the findings submitted by ARCH and included in the audit’s summary report, ARCH concurred with all of the deficiency findings and stated “controls” have been or will be implemented to correct eight of the nine deficiencies.
In its response to the inadequate segregation of financial duties finding, ARCH stated, “Available employees and board members are limited and optimum segregation may not be possible. This will likely be an ongoing problem.”
The deficiency findings related to accounting for federal housing grants specifically cite requests for funding that exceeded a grant contract for the federal Housing Opportunities for Persons with AIDS program by $35,537; and a $2,731 understatement of funds retained for administration of the VA Homeless Veterans Providers Grant and Per Diem program.
Four of the nine deficiency findings include references to the coalition’s executive director. Those deficiencies include: failure to maintain receipts for three credit card charges totalling $1,163 “that were personal in nature and should have been reimbursed” and three duplications of mileage payments totalling $1,778 in excess payments.
The credit card charges expenditures include $810 in iTune charges, $124 in charges at Christmas Place and $229 in charges at Toys R Us. Shreve said the iTunes account was set up in her name and accessible to the entire ARCH staff. She said the Toys R Us purchases were for a homeless family ARCH adopted for Christmas and the Christmas Place purchases were for decorations for the family and for the ARCH office.
The insufficient documentation of staff salary changes finding cites $3,625 in excess payment to the coalitions’s executive director and $6,246 in excess payment to the financial director. Hansard said both payments were made from Tennessee Housing and Development Administration funds approved by THDA for work preformed by the two staff members.
The audit’s final finding of the obstruction of audit states the ARCH staff rescheduled the audit proceedings on four occasions, prohibiting the audit from being completed within the contract term. “Based on inquiry of staff, this was caused by the executive director’s instructions to staff to withhold from the auditor supportive documentation related to the examination.”
Shreve said the audit was not conducted until after she was dismissed by ARCH. A representative of the auditor’s office said their first request for documents from ARCH was made on Oct. 30 and their first day present at the ARCH office was Nov. 26. The audit was completed on March 27 and presented to the ARCH board in April.