MN Community Action Agency Audit Reveals Financial Improprieties

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September 25, 2014; Minnesota Public Radio (blog)

The Republican candidate for attorney general in Minnesota has an usual attitude toward nonprofits. In 2011, State Senator Scott Newman introduced legislation in 2011 that would have banned nonprofits from receiving state grants for the provision of service if those services were also available directly from state government agencies or from private businesses. Newman doesn’t seem like he would be an AG particularly open to the concerns of Minnesota’s nonprofits.

Unfortunately for the nonprofit sector, a crisis involving charges of misspending by Community Action of Minneapolis has given Newman a nonprofit-connected campaign issue. The Republican state senator has called on the current AG, Lori Swanson, who is running for reelection as a DFL candidate, to initiate an investigation of the community action agency. A recent audit of the agency indicated that it had spent nearly $900,000 of state dollars in a number of improper ways, including trips and personal expenses.

“Taxpayer money that should have been used to help the needy in Minneapolis has been used to provide luxurious vacations, spa treatments, and cars to leaders and board members of this organization,” Newman said in a news release. “It is the statutory duty of the attorney general to oversee and investigate suspicious activities of nonprofit organizations in our state. It is further the duty of the attorney general to prosecute when appropriate.”

Among the charges against the community action agency are six-figure spending for a trip to Bahamas by the agency’s CEO, Bill Davis, plus expenditures for a “celebrity cruise,” spa services, and a personal loan of $36,000 to the CEO to buy a car.

Board members are leaving the agency as a result of the audit, including the most high profile board member, Rep. Keith Ellison (DFL-MN), but other DFL leaders have criticized Ellison and other party-affiliated board members for their lack of oversight. DFL state senator Barb Goodwin, who said she has been raising questions about Community Action of Minneapolis expenditures since 1997, called for Davis’s criminal prosecution. Another politician member of the board has been singled out for significant criticism. State Senator Jeff Hayden was a member of the board, but had apparently designated his wife to attend meetings in his place. He (or his wife) resigned from the agency board along with Ellison in the wake of the audit findings. Ellison admitted that he had never attended board meetings, but had sent a designate in his place.

The Community Action scandal has a number of very troubling aspects beyond Newman’s use of this one agency’s audit as an anti-nonprofit campaign strategy. For one, it raises questions about nonprofits that use high profile political board members who, in this instance, showed less than industrious oversight over the agency which they had signed on to govern. Nonprofits should sign on board members who are prepared to carry out their fiduciary duties fully. Board members who function like nameplates aren’t of much use, even if the names are famous.

The scandal also creates problems for community action agencies across the state. There are 26 community action agencies in Minnesota, but Republican critics have issued statements as though Community Action of Minneapolis were the state’s only community action agency in an effort to impugn the state’s entire community action network. If the state’s audit findings are correct, the other community action agencies do not need the troubles brought upon them by their Minneapolis cousin.

There hasn’t been a lot in the press to suggest that the state’s audit findings aren’t supportable. To the contrary, even among DFL party members, accusations and blame about the lack of oversight of Community Action of Minneapolis are flying. Without prejudging the culpability of individuals, a thorough housecleaning at the agency seems warranted. For the sake of both the community action movement and for nonprofits in general, the sector should figure out how to put Community Action of Minneapolis back on track in its important services to poor people in the Twin Cities area and to convince issue-hungry Republicans as well as the public that the problems of one nonprofit organization do not mean that the entire sector functions with anything like the lack of financial judgment attributable to the executives and board members of Community Action of Minneapolis.—Rick Cohen

  • SophieB

    It’s is bad enough that there are people within nonprofits who take advantage of their positions in the way that this CEO is alleged to have done. They unfortunately exist in every industry, but for some reason one person’s actions taint the entire sector when it comes to nonprofits. If the candidate for AG wants to go after the incumbent for not dealing with this specific situation appropriately, fine, but it is grossly unfair to make it a sector-wide issue.

    But there is another underlying issue here which may contribute to the broad application of individual misdeeds–it is the lack of appropriate response from Board Members who further abdicate their responsibility by resigning instead of firing the CEO.

  • Linda K

    I certainly hope Bill Davis, CEO, of Minneapolis Community Action, and all the individuals that helped him waste close to a million dollars of our hard earned tax dollars go to prison for a very long time or this state better start releasing individuals presently serving 5-10 years for robbery… many other tax funded agencies are doing the same thing? This sickens me as I work hard for my money and always seem to struggle and am appalled at the taxes taken out of my checks each week. They all deserve to go to prison.