12/07/06 — Shelter board releases audit report

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Shelter board releases audit report

By Matthew Whittle
Published in News on December 7, 2006 1:46 PM

The Lighthouse of Wayne County Inc. released its 2004 and 2005 audit reports Tuesday, adding that well-intentioned oversights, not malfeasance, contributed to the organization's financial woes, including $70,000 in unpaid payroll taxes, penalties and interest.

The audit, which was done by accounting group Pittard Perry & Crone Inc., shows The Lighthouse ending its 2005 fiscal year with its expenses exceeding its revenues by more than $6,000. During that year, the organization incurred a decrease in net assets of almost $53,000.

"We were expecting this. It appears the well-intentioned (2004 and 2005) volunteer board of directors and staff did not have the experience, training and organization to realize the expenses were overtaking the funding," said Cindy Sanford, current Lighthouse Board of Directors member.

In an accompanying letter released by the board, the directors emphasized that there was no "detectable evidence of fraud," and that much of the organization's problems stemmed from the absence of a dedicated accountant and grant writer during those years.

Because of that lack of oversight, The Lighthouse also found itself almost $70,000 in debt to the U.S. Internal Revenue Service, due to unpaid payroll taxes.

The unpaid taxes were from the fiscal year that ended on June 30, 2005, and from the two subsequent quarters that ended on Dec. 31, 2005.

Once the board received notice of the unpaid taxes in April, The Lighthouse began making payments. In September, the organization received a $40,000 loan from its executive director Cheryl Seronick and borrowed an additional $5,000 from one of its lines of credit.

Now, they have that tax debt down to almost $900.

But to get to that point, the board had to take several extreme steps.

In October, the board of directors began work on a re-organization plan and closed the administrative offices and thrift store for two weeks. During that time, Ms. Seronick resigned her post as executive director.

Then, on Nov. 28, with work on that re-organization plan still under way, The Lighthouse shut down all of its operations, including its safehouse.

It remains closed today, but the re-organization plan is complete.

Included in it are new guidelines for the oversight of accounting records, plans to eliminate long-term debt and reduce expenditures, plans to improve communication with funding agencies and plans to recruit, educate and train members of the board of directors and new volunteers.

The board's goal, Mrs. Sanford said, is to re-open the safehouse at some point in the near future.

"Our plan is to take the organization back to the basics of its existence and cut those programs that require financial support that cannot be realistically met without guaranteed funding. We will be cutting operating expenses to the bare necessities," the board's letter said.

"Our focus is the safehouse," Mrs. Sanford added.

To help pay off The Lighthouse's debts -- which currently do not include the results of an upcoming 2006 audit -- the board is discontinuing the use of its credit lines, working on a payment plan with the IRS and planning the sale of its administrative building, property and adjacent lot, as well as the lot adjacent to its safehouse.

Officials are hoping to avoid declaring bankruptcy.

"Bankruptcy should not be considered until we determine our actual financial status and the availability of immediate and long-term funding," Mrs. Sanford said. "We're kind of in a catch-22. Our funders want to know when we're going to open everything back up, but some of them have frozen our funding while they wait for some reports.

"We're working diligently, though. Our community has been very supportive. We've had some companies forgive some bills, and we've got a lot of volunteers and good-hearted people out there."

The hope, she continued, is that after the 2006 audit is completed in mid-January, the board will have a clearer picture of The Lighthouse's status.

"We expect to get the same kind of report," Mrs. Sanford said.