Thursday, June 17, 2004

A D.C.-based AIDS charity spent thousands of dollars of federal grant money on cigarettes, movie tickets and bingo games, an audit by the U.S. Department of Housing and Urban Development disclosed.

The charity, Safe Haven Outreach Ministry Inc., also could not account for how it spent more than $1.1 million in federal grant money since 1997, according to a report released by HUD’s Office of Inspector General last week.

“Entertainment costs are unallowable,” Daniel G. Temme, HUD’s regional inspector general for audit, wrote in a June 3 memo to the agency’s Office of Community Planning and Development.

Safe Haven, based at North Capitol Street NW, has received more than $1.9 million from HUD through three housing grants, including a $1.2 million grant awarded in 2000 to provide housing for people with AIDS.

Under that grant, Safe Haven officials charged more than $3,800 for movie tickets, cigarettes, Christmas decorations and weekly bingo games, HUD investigators found.

“We were asked to provide recreational things; it’s not like the staff went to the movies,” Marsha A. Richerson, executive director of Safe Haven, said yesterday in defending the use of federal money to pay for clients’ movie tickets and Christmas wrapping paper.

“As for the Christmas presents, they were just underwear and socks and deodorant that we wrapped up in Christmas paper. These are homeless people and you want to give them something nice for Christmas,” Miss Richerson said.

She said a mix-up caused cigarettes to be charged under the federal grant and the organization plans to reimburse the federal government for those costs.

HUD officials are seeking reimbursement of $3,977 in improper expenses. The federal officials also said that if Safe Haven can’t document its expenditures for other grants, HUD could require the group to repay more than $1.1 million.

In addition, HUD’s Office of Inspector General is recommending administrative actions “against current and/or former members of the board of directors, executive committee and other responsible officials.”

HUD also criticized the group’s accounting practices, saying Safe Haven officials failed to maintain documentation supporting hundreds of thousands of dollars drawn on its three HUD grants.

“Safe Haven did not have an effective or organized accounting or filing system,” Mr. Temme wrote. “As a result, responsible officials could not substantiate how they spent … federal funds intended to improve the quality of life for homeless persons in the District of Columbia, particularly those coping with the emotional and physical hurdles due to mental illness, HIV/AIDS and a history of substance abuse.”

Mr. Temme said Safe Haven officials also failed to record spending accurately in their general ledger. He said the group did not properly maintain personnel activity reports to support salaries and wages charged to HUD grant programs.

In a letter responding to a draft copy of the audit, Miss Richerson blamed problems on a previous accounting staff. She said three employees at Safe Haven’s financial department had been terminated or asked to resign as of October 2001 because of “numerous errors” in record keeping.

“I have directed staff to spend every spare moment reorganizing old financial files,” she wrote, adding that the organization will emerge “as a well-administered, financially accountable provider of services to the underserved populations we are dedicated to serve.”

Miss Richerson said yesterday the organization is compiling its financial records in response to HUD’s request.

“We assure HUD that these are procedural and not based on actual misspending of HUD dollars,” Miss Richerson’s letter stated about the accounting mistakes.

She said the charity no longer receives funds through HUD-administered grants, but operates through a mix of other grants and private donations from fund-raising efforts.

The organization took in $1.9 million and spent $1.5 million in 2002, tax records show.

“This is going to make us a better organization,” Miss Richerson said of the federal audit.

In her May 26 letter to HUD, Miss Richerson said Safe Haven can prove the organization did not misspend federal funds.

“This isn’t about HUD saying we spent the money badly,” Miss Richerson said. “They’re saying we have to account for it, and I believe that can be done.”

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