City Asks for More Nonprofit Oversight

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February 2, 2011; Source: Glendale News-Press | Glendale, Calif. had a problem. The New Horizons Family Center received $300,000 in federal funding through the city toward predevelopment costs for expanding the organization's child-care programs, and then announced that it was terminating the effort. Soon afterwards, the expansion wasn't the only thing not happening. The New Horizons Family Center itself shut down, with the revelation that it owed hundreds of thousands in payroll taxes – and in personal loans.

This article from Glendale News-Press intimates that the city seems to have been caught by surprise by all of this. As a result, the City Council is asking for new requirements for nonprofits competing for the $550,000 in social services money and the $300,000 in capital improvements money that the city makes available to nonprofits annually through CDBG.

The requirements will include two years of financial statements and audit reports and a signed statement that there are no liens against the organization's assets. In addition, for nonprofits engaged in capital improvement projects, they will have to verify that the construction funding is in place and submit quarterly construction progress reports.

Although there were concerns about overburdening the nonprofits, these don't look excessively problematic, except for two things: First, by requiring two years of financials, newer nonprofits are excluded. The city should be open to the idea that a new nonprofit might have something very useful to offer. And second, the city's concern for monitoring construction projects shouldn't mean that it eliminates predevelopment funding. Predevelopment funding is the toughest money for nonprofits to find.

The problems of New Horizons shouldn't be interpreted as a reason to stop providing predevelopment dollars, but as a reason for better oversight and perhaps more support and hands-on engagement by city agency staff. Glendale might want to avoid too many future emulations of the New Horizons child care program, but it shouldn't throw the baby out with the bathwater.—Rick Cohen