Question about financial audit causes city to withhold funding from homeless shelter

Lawrence Community Shelter, 3655 E. 25th St.

The city of Lawrence is withholding $46,000 in 2017 funding from the Lawrence Community Shelter after the city asked for but did not receive the 2016 financial audit from the shelter.

City officials on Tuesday confirmed they were withholding the funds after the Journal-World began asking about the shelter’s finances. The shelter on Friday fired its executive director, Trey Meyer. Shelter officials, though, said on Tuesday that Meyer’s dismissal was unrelated to the funding issue.

The withholding of funds came after the shelter failed to submit an audit for the 2016 calendar year by Sept. 18, said Casey Toomay, assistant Lawrence city manager. Meyer, then the shelter’s executive director, had told the city the audit would be available on that date. After missing that deadline, he reportedly told the city the audit was not yet complete. Shelter officials on Tuesday confirmed that the audit is still not complete.

The city began withholding shelter funding on Oct. 6. The city suspended a quarter of the shelter’s 2017 city allocation of $184,000, Toomay said. The shelter receives two equal disbursements of its annual funding from the city, she said. The withheld $46,000 was half of the second 2017 disbursement.

The city took the action at the direction of Lawrence City Manager Tom Markus. He said he wanted to see the audit after the shelter made a request in April that the city forgive about $280,000 in debt that it owes to the city from a 2013 loan. The city ultimately rejected that request.

“My concern was they were asking for a change to a financial obligation they had with the city, and I wanted to see what their finances were,” he said. “They asked for the second (2017) disbursement, and we said we’d split it because we wanted to see the audit.”

Markus said he also wanted to review the audit to see if the shelter was raising revenue through means that Lawrence City Commissioner Stuart Boley, who was a nonvoting member of the shelter board in 2015, had recommended. Those suggestions included payments from employed shelter clients and charging the home counties of noncounty residents staying at the shelter, Markus said.

Jackie Counts, president of the Lawrence Community Shelter’s board of directors, sought to explain Tuesday the timing of the audit. She said the board schedules annual audits later in the year during accounting firms’ nonpeak periods to save money. She said Sept. 18 should not have been given as a date for the city to expect the audit, but rather was a “wishful thinking” type of projection.

Delays in the shelter submitting information that the auditing firm needed contributed to the delay in completing the audit, Counts said. The delay was not a factor in the shelter board’s Oct. 27 decision to dismiss Meyer as the shelter’s executive director, she said. No one on the board has disclosed why Meyer was fired.

John Magnuson, treasurer of the shelter’s board, said the audit would be finished soon and would have to be completed by Nov. 15, when the shelter is required to make a filing with the IRS. The delay in the city’s funding will not cause hardship at the shelter, he said.

It is rare for the city to suspend payments to social service agencies, Toomay said. The step in this case reflects the city’s increased scrutiny of partnering agencies.

“I think it’s fair to say all agencies are getting more review of their financial documents, starting with the 2018 budget cycle,” she said.

The city now requires all its partnering agencies to submit their latest audits when making requests for funding, Toomay said. The city’s Social Service Funding Advisory Board reviews those audits as part of the city’s budget review process, she said.

Douglas County does not require audits of its partnering social service agencies, although those with very large requests like Bert Nash Community Mental Health Center and the Lawrence-Douglas County Health Department submit them with annual funding requests, Douglas County Administrator Craig Weinaug said. For many of the smaller agencies, like the shelter, an audit would be a significant expense, he said.

Weinaug said he represented the county as a nonvoting member of the shelter’s board in 2015 when the shelter was experiencing a financial crisis. Boley served as the city representative at the same time.

The county does review the smaller agencies’ revenue and expense statements to ensure their financial soundness, Weinaug said. He added that the shelter has recently taken steps to get on sounder financial footing by managing its client population differently.