Auditor finds serious problems at nonprofit chaired by Rep. Williams

PROVIDENCE, R.I. (WPRI) – A report ordered by House Speaker Nicholas Mattiello has laid bare serious financial problems at a nonprofit chaired by Rep. Anastasia Williams that has received hundreds of thousands of dollars from taxpayers over the years.

Auditor General Dennis Hoyle said the financial condition of the nonprofit, the John Hope Settlement House, “has steadily deteriorated” and it will likely need to file for receivership if the R.I. Department of Children, Youth & Families succeeds in revoking the license for the group’s day care center.

John Hope is under “financial stress” and “lacks effective controls over its accounting and financial reporting functions,” according to Hoyle. “Operating reserves have been depleted and current operations are almost entirely dependent on one income stream of federal/state revenue for child care,” he wrote.

Hoyle also said John Hope owns a significant amount of empty space that strains its limited resources, and said its leaders were unable to provide “reliable operating results” for 2015-16. He emphasized that his office did not audit John Hope’s financial statements or test the accuracy of the data the organization provided.

The 13-page report – released at 4:30 p.m. Friday with no advance notice – was requested by Mattiello last June after he made a last-minute decision to remove a $300,000 taxpayer grant to John Hope from the proposed state budget. The grant was cut the same day Providence pulled taxpayer funding for the group due to financial concerns.

Peter Petrarca, John Hope’s attorney in its dispute with DCYF, noted he successfully convinced a judge to delay revoking its day care license and said he expects the organization will be able to keep it long term. Petrarca said he had no further comment on Hoyle’s report and Williams was not available.

The R.I. Department of Human Services reported paying John Hope’s day care center $629,000 in 2015 and $455,000 in 2014, which was mostly federal funds.

John Hope received $850,000 in taxpayer-funded grants from the General Assembly over the three years before Mattiello pulled funding. Such grants were under heavy scrutiny by that point, after the abrupt resignation of House Finance Committee Chairman Ray Gallison put a spotlight on his taxpayer-funded nonprofit; prosecutors now say Gallison was embezzling money from the group.

A spokesman for Mattiello said he was still reviewing the report Friday and had no comment yet on its findings.

John Hope, a fixture in Providence since 1929, has been battered by negative headlines for a number of years. But Williams, D-Providence, has insisted she is working to fix the problems there and dismissed critics who have cast blame on her. She has also said her position is unpaid.

The auditor general’s report laid out a long list of additional concerns related to John Hope, including its “unstable management” with “frequent turnover” among staff and board members. It said John Hope has defaulted on a $50,000 interest-free loan from the city of Providence and cited problems with receipts, a credit card and pension contributions.

The report made 11 recommendations for how John Hope can try to turn things around, including to resolve the DCYF dispute, adopt a strategic plan to stabilize its operations, find a “strategic operating partner” to help with management, hire a full-time financial officer, and have its finances properly audited.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter, Facebook and Instagram