The state closed down operation (managed by a convicted felon) for failure to file required reports, and the former executive director collected unemployment while still writing herself paychecks.
There appear to have been multiple failures of management judgment and board oversight in the case of the Boys & Girls Club of Black Hawk County (EIN 42-6083723 Form 990). The Des Moines Register reports (Clark Kauffman) reports that the club has lost its license to operate a bingo hall that in 2004 had gross receipts of $1.3 million (2004 Form 990). The closure was due to a failure to file reports with the state, but the facility was actually losing money rather than supporting the charity. After the resignation of director Michelle Gholston and board chair Telisa Burt last spring, a new board headed by local businessman Chris Harshbarger found multiple issues.
- There were over $184,000 in past due bills, some from 2004.
- The manager of the bingo operation, Marcus Meeks, had a felony conviction for theft, forgery, and unauthorized use of credit cards.
- Financial records apparently were created long after transactions had occurred, in response to a state subpoena.
- The director applied for and received unemployment compensation at the time of her resignation, but continued to write herself paychecks.
It was certainly a mess, but the Form 990 points to some possible underlying causes. The director made a mere $45,320 in 2004 with no benefits (raised to $57,661 in pay and $3,817 in benefits in 2005). The club operation itself was very modest, about $350,000 a year, but the director was also expected to oversee the bingo operation, a physical plant with a value of $2 million, an investment portfolio of about $350,000 and a staff of 37. Apparently concerns were raised about Ms. Gholston's ability to manage the operation from the time she was hired in 2002.
The board had twenty members, which seems a bit unwieldy for a small scale organization.
What's involved here are the management and governance issues that will continue to arise as charity organizations are pressured to engage in profit-making enterprise in order to support their social programs. Charities will be hard pressed to find managers who can handle the dual responsibility that social entrepreneurship entails and yet are willing to work for charity organization wages. Boards that try to get without the necessary management risk this kind of outcome.