The audit, released Monday by the Corporation for National and Community Service's Office of Inspector General, focused primarily on allegedly questionable practices within the United States Veterans Initiative - a nonprofit organization that receives CNCS funding to run its AmeriCorps program.
The initiative also has acted as the nonprofit arm of the Villages at Cabrillo, a 26-acre site that provides a cadre of homeless services on the city's Westside.
But the network's obvious successes are accompanied by some obvious flaws, the audit found. In addition to "major financial and operational problems involving the AmeriCorps program," the audit also revealed "a number of less-than-arms-length transactions involving (the initiative) and Cantwell-Anderson Inc., its for- profit joint venture partner," according to a press release accompanying the 51-page audit.
Questioned costs included expenses for the "home phone, home fax, home Internet and home cable television services" of the Initiative's former executive director, Stephani Hardy.
Hardy, who could not be reached for comment Tuesday, announced her resignation in July - within a week of receiving a draft report of the CNCS audit. At the time, she said she was resigning for personal reasons entirely unconnected to the inquiry.
Her successor, Dwight Radcliff, also could not be reached Tuesday. But, in a published response that accompanied the audit, initiative executives disagreed with many of the findings and vowed to refute them during the "resolution" portion of the case.
Depending on the results of the resolution process, the CNCS could decide to withhold future funding from the group.
Still, CNCS Inspector General Gerald Walpin said he was confident the audit had unveiled legitimate and significant misappropriations within the group.
"There can be no better use of federal funds than for helping our veterans in need," Walpin said in a statement. "But that good purpose is no excuse for misusing such funds and thus depriving veterans of money allocated to benefit them."
For 10 years, the Villages has been applauded for pulling thousands of poverty-stricken families and individuals - many of them veterans - off the streets, putting them in programs designed to meet their special needs, and then transitioning them back into society.
AmeriCorps is one such program.
Often described as the "domestic peace corps," AmeriCorps is a volunteer program that "employs" people by paying them a $16,000 stipend plus $5,000 toward each person's education at the end of his or her term of service. Through the Initiative's sponsorship and management, AmeriCorps most recently employed some 30 people throughout the Villages.
Monday's audit questioned a relatively small amount of money and fell short of labeling the initiative's actions as illegal.
Out of a $6.8 million grant received by the initiative between 2003 and 2006, for instance, negative attention was focused on about $750,000 of it. Most of that was questioned because it appeared to have been miscategorized, poorly tracked, mischarged, or improperly accounted for in the group's ledgers.
But the audit goes to great lengths to point out deficiencies in the program, including allegedly poor oversight, careless mistakes and a flexible interpretation of AmeriCorps' rigorous guidelines.
In one example, auditors found that some AmeriCorps members "provided no service to veterans" or only "performed administrative duties" for the Initiative.
In another example, auditors questioned whether certain "in-kind donations" received by the initiative constituted legitimate "matches" for government money. At one point, the audit pointed out, the organization logged the receipt of $7,000 in Krispy Kreme donuts without sufficient paperwork to justify it as a match.
Other findings
In explaining their view that the initiative was inappropriately "related" to Cantwell-Anderson, auditors pointed out that Hardy and Cantwell-Anderson's founder, Tim Cantwell, had been romantically linked for years and were now "engaged to be married."
Investigators also found that:
Cantwell recently represented the initiative in sworn testimony before Congress, and has taken part in meetings of the organization's board of directors.
The initiative and Cantwell- Anderson "share the same Internet Web site" and are headquartered at the same Inglewood address.
In 1998, Cantwell-Anderson entered into a Business Services Agreement with the initiative to provide accounting and consulting services, all without the required public announcement of the bid and competition.
The initiative's 2005 financial statements show a note-payable balance owed to Cantwell-Anderson of $516,000 and another outstanding balance owed of $385,000, but the origins and purpose of the loans were unclear, as were the terms and conditions for repayment.
Some of the veterans receiving grant money to work for the initiative's AmeriCorps program were providing services directly to Cantwell-Anderson.
Cantwell, the Initiative's founding executive director, has told the Press-Telegram that - while the organization's goals are still near to his heart - he is no longer involved in the group's day-to- day operations.
He and Hardy have steadfastly denied any wrongdoing and have blamed most misunderstandings on the unorthodox nature of this particular public-private venture.
Indeed, part of the CNCS probe was simply trying to figure out how the Villages runs and who is in charge. The business model is a confusing network of nonprofit organizations and for-profit corporations - many of which have changed names and roles over the years.
U.S. VETS, the group most often credited with running the Villages, is the name of the collaboration between the United States Veterans Initiative and Cloudbreak Development LLC - the for-profit side of the equation and a subsidiary of Cantwell-Anderson. Century Housing, which owns the property, has financed the project and acts as the landlord for a slew of other nonprofits that operate on the site.
Century Housing was not targeted in the audit.
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