Community Action groups serve needs amid new scrutiny on spending

Minnesota's Legislative Auditor will launch an investigation into the oversight of the state's community action organizations.

Jim Nobles, the auditor, said Monday that his office has a long-standing concern over the lack of oversight of nonprofits that receive state grants.

His office will examine how well the Department of Human Services and the Department of Commerce oversaw and required accountability for the money they granted to community action agencies.

"We strongly encourage state agencies that make grants to be more active in their oversight of their grant recipients," Nobles said.

The upheaval at Community Action of Minneapolis is bringing new attention to the little-known organizations that often have a big impact in their communities.

There are 26 community action agencies that have taken root in communities around the state as their annual budgets swelled to nearly $300 million, mostly through state and federal tax dollars. They have served tens of thousands of residents, from children who need to learn skills before starting school to people seeking heating assistance.

"We are the quiet company," said Arnie Anderson, head of Minnesota Community Action Partnership, the umbrella group for all 26 agencies. "Nobody has heard about Community Action, but everyone has heard about Head Start and energy assistance."

"People understand that this is a big public relations black eye," Anderson said. "It's our culture to be frugal and be common-sense."

Community Action leaders are now bracing for significant new restrictions on executive compensation and board makeup once state legislators convene early next year. State leaders are already probing the salaries of community action directors, travel budgets and makeup of the organizations' boards of directors.

Senate Minority Leader David Hann, R-Eden Prairie, said there are so many of these taxpayer-funded nonprofit organizations that "to effectively scrutinize them is very difficult."

The harsh light on Community Action comes in a crucial fundraising moment for most Minnesota nonprofits as they try to cash in on the holiday season and the end of the tax year, when consumers are more likely to give.

Leaders with Minnesota Community Action Partnership insist that what happened in Minneapolis is not typical.

The budgets for community action agencies range from $4.5 million to $27 million a year. Executive pay ranged from $56,392 to $273,000 in 2011.

The audit of Community Action of Minneapolis found that recent reductions in federal funding resulted in many community action agencies spending more state money on administrative costs, such as travel, training and salaries.

The Minneapolis branch expected administrative costs to eat up 68 percent of its proposed 2014-15 budget, by far the highest percentage of any of the community action groups.

The Arrowhead Economic Opportunity Agency allocated 29 percent of community grants for administrative costs, while Minneapolis allocated 54 percent. The Community Action Partnership of Suburban Hennepin only spent 5 percent on salaries and other overhead.

"It's so low, particularly in that year, because we are plowing those dollars into programs that address the needs of our service territory," said Scott Zemke, the executive director of Community Action of Suburban Hennepin.

Arrowhead Economy Opportunity Agency, which has the largest community action budget in the state, at over $26 million, offers a "Lives in Transition" program for displaced homemakers. These are individuals who stayed at home for at least two years, but have lost their primary source of income due to a separation, divorce or death.

The Tri-County Action Program is the only other organization that offers that kind of assistance for homemakers.

The salaries and travel expenses are raising some of the biggest questions.

Community Access of Minneapolis' chief executive Bill Davis' salary and benefits came under intense scrutiny after the Department of Human Services audit was released. Davis was the highest-paid executive director out of all the community action agencies, making $273,000 in 2011, according to a Star Tribune analysis of director pay.

The average pay in 2011 for community action directors was $119,433.

Arrowhead Economic Opportunity Agency cited $896,355 in travel, conferences and conventions. Community Action Partnership of Ramsey and Washington Counties claimed $756,272.

Anderson said those with high travel costs often operate a Head Start program where they have to bus children to and from the facilities, expenses that are counted as travel costs.

The Southwestern Minnesota Council claimed $122,000 in travel costs in their 2013 tax filings. The majority is "directly related to program delivery to clients, or required trainings," while 5 percent is room, mileage and registrations costs for conference. The total travel dollars account for 3 percent of their total budget.

Community Action organizations are not completely free of other financial questions.

The Anoka County Community Action board unanimously voted to reimburse executive director Patrick McFarland $1,000 for a painting he bid on at a MinnCAP auction.

McFarland said he thinks tough state audits worked in catching the misspending in Minneapolis.

"I think this is a good wake-up call for all the agencies," he said.

Alejandra Matos • 612-673-4028