More Oversight Ensures Accountability

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November 18, 2010; Source: Charlotte Observer | There ought to be a special place for people who steal from nonprofits serving the disabled. In Charlotte, N.C., a grand jury indicted the former CEO of the nonprofit mental health contractor, Mecklenberg Open Door, with embezzling $145,000 from the organization. FBI investigations leading to the indictments found misspent public funds and devastating HUD audits.

The former CEO, Ed Payton, apparently also owes $160,000 in back state and federal taxes. He pocketed the money to pay for alimony, child support, tax liens, veterinary services, dental bills, groceries, and more. The impact on the organization’s survival may be fatal. Because of the CEO’s alleged financial profligacy, Open Door frequently ran out of operating funds, so to stay alive, it took funds belonging to the organization’s mentally ill clients to pay for operations.

Following a HUD audit of Open Door’s recordkeeping for the housing it provided to its more than 500 mentally ill clients, the county has replaced Open Door as a provider, with the Albemarle-based Monarch nonprofit. So is this just another alleged criminal fleecing a nonprofit and its clients? Actually, the culpability in this story falls to more than the CEO. HUD criticized the county for its inadequate oversight of Open Door, which allowed the nonprofit to misspend rent payments and other resources.

There is also the question of the organization’s internal oversight, particularly the stewardship that might have been shown by the board of directors. There seem to have been plenty of indications that Open Door wasn’t being run right, notwithstanding the CEO’s alleged money-pocketing. The Open Door story is a good example of the need for both internal oversight from the board of directors and external review from the public agencies charged with ensuring the accountability of charitable and public funds.—Rick Cohen