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MLK nonprofit and state agency look bad in audit

Post by Cheryl Tucker on Nov. 25, 2010 at 6:35 pm |
November 24, 2010 4:36 pm

This editorial will appear in Friday’s print edition.

A state audit of the Martin Luther King Housing Development Association paints a disturbing picture of mismanagement bordering on wrongdoing – if not actually crossing the line into deliberate misappropriation of public funds.

The audit released Monday supports findings from a year ago by an accountant hired by the state Commerce Department. The accountant had found that the housing nonprofit misspent $1.8 million of the more than $4 million in state and federal funding it had received to build a mixed-use business and housing center on Tacoma’s Hilltop. That project has gone nowhere.

Like most developers in the last few years, the MLKHDA was hit hard by the recession and collapsing real estate values. And it suffered from poor management and lax board oversight. But some actions the audit confirmed look even more serious.

For instance, MLK didn’t pay several of its vendors, even though it had submitted invoices to the state for those expenses and had received reimbursements. And the nonprofit wrongly used grant funds to pay off other loans and cover operational costs. This seems to go beyond mere bookkeeping errors.

The state agency administering the nonprofits funding also fares poorly in the audit. The Commerce Department failed to monitor MLK’s spending, and there is no record that it conducted the kind of onsite inspections or financial reviews it’s supposed to do.

If the recession had never happened and had MLKHDA been a well-run operation, the lack of state agency oversight might not have been a problem. But in this case, it likely enabled questionable – and possibly illegal – practices to continue far longer than they would have had Commerce been doing its job.

Department officials say that future projects will require better documentation. And state lawmakers – who in hindsight were too forthcoming in appropriating money for a venture that at least two local legislators expressed reservations about – say they won’t award these kinds of “pre-construction” grants again.

The MLK fiasco has provided a very expensive lesson: Just because a project looks worthwhile on paper, never assume that everyone is doing their job – or that the national economy will be accommodating.

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