Employees Not Paid, Taxes Not Paid, City Owed $200 in Rent and Utilities
Former NCC Executive Director Jim Bostic
Use of $3.8 Million in Annual Grants Questioned Under Former Executive Director Jim Bostic
“Being in default with the City of Yonkers, having their not-for-profit status revoked and the numerous additional issues facing the NCC, the City of Yonkers has no choice but to cut ties with the NCC as the Obama Foundation did,”
Yonkers Inspector General Liam McLaughlin
By Dan Murphy
Yonkers Inspector General Liam McLauglin issued a report on March 22 on the misuse of funds at the Nepperhan Community Center, NCC, under its former Executive Director Jim Bostic. The IG’s report concerns grant monies that NCC received from the Barack Obama Foundation in connection with the My Brother’s Keeper Alliance, but also grant funds from the City of Yonkers and Westchester County.
IG McLaughlin writes, “In September 2022, the City of Yonkers received a copy of a letter from the Barak Obama Foundation (the “Foundation”) to the Nepperhan Community Center (the “NCC”), (See letter attached hereto as Exhibit A). The letter was forwarded to the Department of the Inspector General (“Inspector General”). The subject of the letter was the administration of grant funding pursuant to the 2018 Grant Agreement between the Foundation and the NCC in connection with the My Brother’s Keeper Alliance Community Challenge (“MBKA”). According to the letter, the Foundation conducted an investigation to determine whether the NCC honored its obligations under the Grant Agreement. Specifically, the Foundation was concerned that NCC did not pay a number of employees employed pursuant to the Grant Agreement, including the Community Coordinator.
According to the September 2022 letter, the Foundation concluded that the NCC had violated the terms of the Grant Agreement, in that the Community Coordinator had not received all funds owed to him pursuant to the Grant Agreement. Additionally, other employees were unable to deposit paychecks due to insufficient funds. As a result, The Foundation cut ties with the NCC and rendered them ineligible for any future funding. A request from a majority of the Yonkers City Council, prompted the Inspector General to conduct an investigation of the MBKA grant administration and the findings of the Foundation.
Additionally, there was a concern that NCC was the recipient of matching grant funds from the City of Yonkers and the NCC currently rents City owned property.
At the time of the grant award, the NCC was a domestic not-for-profit corporation. However, our investigation revealed that in January 2024 the U.S. Internal Revenue Service revoked NCC’s tax exempt status for failure to file their 990 Tax Returns for Organizations Exempt form Income Tax for the last three years, 2020, 2021, and 2022. NCC is currently in the process of applying for tax exempt status for a new entity, the Nepperhan Cultural Center.
From the beginning of our investigation, this office was met with a startling lack of cooperation, from the Obama Foundation and the NCC. This office repeatedly tried to contact the Foundation by regular mail, telephone, email, and certified US Mail. The Foundation never responded to any of our requests for information. In October 2022, this office contacted the NCC board of directors seeking, among other things, information on the administration of all grants pertaining to MBKA. Our letter was forwarded to the NCC’s Executive Director who provided minimal cooperation and categorically refused to assist with most aspects of our investigation. This office then contacted former Executive Director Dr. Jim Bostic who cooperated fully.
Our review revealed pervasive mismanagement by the NCC. Among the multitude of issues, the NCC failed to maintain accounting and other records, failed to segregate grant funds to properly account for said funds and failed to maintain proper payroll balances to pay employees. NCC management does not maintain policies and procedures consistent with an organization that has received upwards of $3.8 Million Dollars annually of grant funds and other revenues. The NCC has failed to pay rent to the City of Yonkers for use of its City owned facility and currently owes the City in excess of Two Hundred Four Thousand Dollars ($204,000) in back rent and utilities. Lastly, as previously mentioned, the NCC has had its §501(c)(3) tax exempt status revoked for failure to file tax returns.
The NCC needs top to bottom reorganization with a professional Board of Directors, staff and management in order to continue its good work in the community. NCC needs to adopt an effective system of internal controls to ensure the reliability and integrity of financial reporting and regulatory compliance. All of that will take time. Creating a new entity does not solve NCC’s problems, but rather compounds them, as the new entity will be in default and have no rights under the lease with the City of Yonkers. Being in default with the City of Yonkers, having their not-for-profit status revoked and the numerous additional issues facing the NCC, the City of Yonkers has no choice but to cut ties with the NCC as the Obama Foundation did.
INVESTIGATION
In 2018, the Barack Obama Foundation entered into a Grant Agreement with the NCC in connection with the My Brother’s Keeper Alliance Community Challenge. According to Dr. Bostic, the Grant Agreement was executed during his tenure as Executive Director. Dr. Bostic stated that the program was to last for two years. The Foundation was to award NCC $250,000 per year. The program was contingent upon the NCC receiving a matching grant from the City of Yonkers for $200,000 per year, and a matching grant from Westchester County for $50,000 per year. Subsequently, the grant from the Foundation was increased by $100,000 to pay for a community coordinator. Additionally, the NCC received a payment of $50,000 from the Foundation as a COV1D award. The final sum of awards was to be $1.15 million.
By letter dated September 13, 2022, the Obama Foundation notified Dr. Bostic, then Executive Director of the NCC, that it had engaged counsel to investigate whether NCC had honored its obligations under the 2018 Grant Agreement. According to the letter, the Foundation’s counsel determined that the NCC had not met its obligations within the terms of the grant, which included the agreement to pay its Community Coordinator a specified salary and other NCC employees with funds drawn from the Foundation grant and the COY and Westchester County matching grants. As a result, the Foundation terminated its affiliation with the NCC and determined as follows:
• NCC will not be eligible for future funding in any form from the Foundation or MBKA;
• The Foundation and MBKA will not promote NCC on social media or any website;
• NCC shall remove all mention of its prior relationship with the Foundation or MBKA from its social media and website within thirty (30) days of receipt of this letter;
• NCC shall not be eligible to serve as a My Brother’s Keeper Backbone entity for MBK Yonkers.
• Officers and employees of NCC may continue to participate in the My Brother’s Keeper Network’s programmatic offerings (virtual, in-person events, MBKU trainings, etc.)
A copy of the September 13th letter was also provided to the Yonkers Law Department and forwarded to the Yonkers Inspector General (“IG”). This office began a preliminary review and was shortly thereafter contacted by a Majority of the City Council who requested an investigation.
In response to the September 13th letter, this office took the initial step of trying to contact the Foundation by telephone, regular mail, email and certified US Mail to discuss its investigation and findings. The Foundation did not respond to any of our inquiries.
Thereafter, this office contacted the NCC board of directors seeking information on the NCC’s administration of the 2018 Foundation grant. Our request for information was forwarded to the current Executive Director of the NCC, however, the current Executive Director provided minimal feedback and was almost entirely uncooperative with our investigation. Our request for information was directed to Dr. Jim Bostic, the former Executive Director, who was cooperative and responsive. The IG sought, among other things,
• A copy of the Grant Agreement between the Foundation and NCC;
• Payroll records for those who were paid from the foundation grant and/or the City and County matching grant funds;
• All bank statements for any and all accounts wherein the Foundation and/or the City matching grant funds were deposited .
• A list of all independent contractors who were paid by NCC from 2018 to present;
• any payments of expenses which were paid directly by or reimbursed using the Foundation and /or City matching grant funds;
The NCC provided little if any of the information sought. Among other things, they did not provide this office with any financial statements, or statements of internal controls. They did not provide a copy of the Grant Agreement between them and the Foundation. They did however, allow Dr. Bostic into the building to locate bank and other payroll documents for our review.
Over the course of the following months, Dr. Bostic and Sterling National Bank provided this office with bank records and other documents. From these bank records, this office was able to identify $900,569 in deposits from the Foundation, the City of Yonkers and Westchester County. It is believed that the deposits listed below pertain to the MBKA. However, Westchester County could not confirm that the February 2020 amounts listed were in relation to the MBKA program.
Checks deposited into NCC:
12/17/2018 $250,000 from The Obama Foundation
7/18/2019 $50,000 from The Obama Foundation
2/4/2020 $23,341 from Westchester County
2/6/2020 $23,000 from Westchester County
3/23/2020 $4,228 from Westchester County
2/20/2020 $250,000 from The Obama Foundation
6/8/2020 $200,000 from the City of Yonkers
6/26/2020 $50,000 from The Obama Foundation
12/4/2020 $50,000 from The Obama Foundation
The MBKA grant funds were comingled in an account with other funds without the use of internal recordkeeping to identify the source and use of the funds. Although it is believed that each of the above referenced grants is a part of the MBKA total grant funds, we do not know this with absolute certainty. Similarly, because fund accounting was not adhered to there is no way of truly knowing how the funds were used. We know that MBKA funds were designated for a specific purpose, (e.g. payment of the community coordinator), however, without the Grant Agreement and the use of fund accounting, it is impossible for this office to know the full extent of NCC’s lack of compliance with the program.
After multiple meetings, Dr. Bostic did confirm that the Community Coordinator associated with the MBKA program had not received his complete salary pursuant to the terms of his employment. Moreover, other NCC employees were unable to deposit checks due to insufficient funds in NCC’s operating accounts. Dr. Bostic identified six NCC employees who claimed that they did not receive full pay. This office spoke to four of the six employees, of which three stated they did not receive their complete salaries. However, this office was unable to confirm their assertions due to a lack of payroll documentation.
RENT ARREARS
The NCC is responsible to pay rent, TEN DOLLARS ($10.00) a month, to the City of Yonkers for use of its headquarters at 342 Warburton Avenue. In addition to the rent, NCC is responsible to pay utilities. The New York Power Authority and Con Edison invoice the City of Yonkers for NCC’s utilities. The Yonkers Department of Finance and Management Services (“Yonkers Finance”) then invoices the NCC for reimbursement. However, Yonkers Finance records indicate that from January 1, 2020 to February 15, 2024, the NCC is in arrears to the City of Yonkers for a total of$204,558.83.
CONCLUSION
The NCC has served a vital role for the people of Southwest Yonkers since it was founded in 1942. However, the ongoing mismanagement of the organization is not something that can be overlooked. This investigation has determined that NCC has no system of internal controls, comingles grant funds, has failed to file tax returns for the last 3 years, had its not-for profit status with the federal government revoked, owes the City of Yonkers over $200,000 in back rent, is attempting to create a new corporate entity in an apparent effort to avoid tax filing requirements in prior years, has defaulted in its lease agreement with the City of Yonkers, has failed to pay employees and has had the Obama Foundation cut all ties with NCC. Any one of these issues would threaten the viability of the NCC, however cumulatively these issues appear to be insurmountable with the current Board and management composition of NCC.
Transparency and reliability of financial information is paramount for any entity seeking government funds for its survival. Taxpayer dollars cannot and should not be given to organizations that do not have well defined internal controls in order to ensure the reliability of their accounting systems, compliance systems and the source and use of funds. The U.S. Department of Housing and Urban Development (“HUD”), the Federal Agency in charge of awarding and distributing Community Development Block Grants (“CDBG”), strictly prohibits the comingling of funds by grantees and subrecipients such as NCC.3 As such, for this reason, the loss of its not-for-profit status and a multitude of other reasons, NCC is no longer eligible to receive CDBG Grant funding.
Unfortunately, the City of Yonkers administration must follow the lead of the Obama Foundation and cut ties with NCC until they can prove that they have remedied all of the above and have a professional staff and Board of Directors who are well versed in not-for-profit business operations. Well intentioned volunteers are the backbone of many not-for-profit organizations, however, when you are responsible for running an organization funded by millions of dollars of taxpayer funds the rules must be followed,” End of Report.
Many questions remain. Look for more in the weeks ahead.
