City Staff Suspended over Funds Diverted to Furniture

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May 19, 2011; Source: Detroit News | The NPQ Newswire commented on the original disclosure of this hair-brained expenditure a few days ago, conveying a wholly understandable sense of outrage. Detroit Mayor Dave Bing took a week to consider the facts of the case and chose to suspend the director of the city’s Department of Human Services and several DHS staff who diverted $200,000 in federal block grant funds from their intended purpose of helping the poor (for a food pantry, etc.) to a distinctly different purpose – the purchase of new office furniture for the department. The money was part of $1.1 million funneled through the “nonprofit” Clark & Associates, which this latest Detroit News article reveals also used $236,000 of the grant to pay its staff overtime.

Not long afterwards, city officials talked about lagging or misspent CDBG funds that the city might have to pay back to HUD, with the implication that a big chunk of the funding was problematic due to nonprofits – and nonprofits would have to take the brunt of funding cuts as a result. If the role of Clark & Associates is one of the examples of nonprofit screw-ups with block grants, let’s set the record straight.

Clark & Associates is identified on its Form 990s as Clark Associates, as a 501(c)(4) tax-exempt organization with a mission to serve as “a fiduciary for administering federal grants for various health and other societal programs.” The 990 lists no website for the organization. Clark may be no more than a pass-through with little function other than taking and spending government money at the city’s direction, counting between $25 million and $34 million in mostly government grants and contracts between 2005 and 2008. In 2009, its revenues dropped to only $4.2 million. Can anyone say who or what Clark is, or why the city needs to offload these functions to or through Clark?

This deal shows all the signs of a city department accustomed to running expenditures to and through a third party, making effective City Council oversight and approval – such as approval for new furniture – a bit more difficult. Don’t blame 501(c)(3) nonprofits that deploy block grants for neighborhood development and human services for this use of a (c)(4) whose primary purpose seems to be the shifting of city government administrative functions to a less than fully transparent third party. In fact, blame DHS for a practice that probably long predates the Bing administration.—Rick Cohen