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An Orange County [California] nonprofit created with the best of intentions – to expand housing for people with developmental disabilities – has done little to further its core mission, instead directing three-fourths of its spending to its own management.
Community Housing Resources Inc. (CHRI), a Santa Ana-based housing nonprofit, was created in 1997 by the Regional Center of Orange County with a simple mandate: to expand housing opportunities for people who can live independently as they cope with autism or other developmental challenges. There are an estimated 7,400 adults with developmental disabilities in Orange County
But after more than a decade in existence and $1.6 million in taxpayer funding, the housing nonprofit has little to show for itself.
The Register found that the agency has operated in relative obscurity, shielded from open records laws and without oversight from a state agency that funneled money to its parent, the Regional Center.
During five of the last eight years, Community Housing Resources spent nothing on programs to help the developmentally disabled, according to an Orange County Register analysis of Internal Revenue Service documents filed by the agency from 1999 to 2007. It owns no properties outright and has about $700,000 unused in its accounts.
The non-profit repeatedly filed federal IRS forms and state registration statements late, generating penalties and interest totaling in excess of $27,000, by the agency's own accounting.
During the same period it spent $660,000 – 74 percent of its spending – on management salaries and costs. On average, only 24.6 percent of its spending went to programs to help the developmentally disabled.
That ratio falls far below what most nonprofits spend on programs and services, according to Charity Navigator, an organization that evaluates the financial health of more than 5,300 charities nationwide.
"I would say that any group spending such a small percentage of its budget on programs isn't living up to donors' expectations or its mission," said Sandra Miniutti, director of external relations for the watchdog group.
Rhys Burchill, former executive director of Orange County's Area Board XI, part of a state agency that advocates for people with developmental disabilities, said in an e-mail that she's frustrated with the agency's failure to produce measurable results.
"Ten years later…I remain appalled that any nonprofit funded with public tax dollars is not accountable to the public for all of the money that they have received, and that there is no accountability from the entities that gave them the money in the first place," wrote Burchill.
Joseph Singh, who took over as executive director of the non-profit in January, defended his organization in a lengthy letter to The Register, saying CHRI has confronted problems, proposed new housing projects and "continued to explore opportunities to leverage what, in real estate terms, is a relatively small amount of money to the maximum benefit of people with developmental disabilities."
As for the paperwork problems, Singh said, "When the Board of Directors became aware of these matters they responded to remedy the situation."
Bill Bowman, former chief executive of the Regional Center, resigned last month and could not be reached for comment. The nonprofit's board president did not respond to four phone calls, and other board members either did not return phone calls or declined to comment.
RECORDS IN 'CHAOS'
The number of developmentally disabled adults in Orange County is expected to grow in coming years, as the population ages and as autistic adults, among others, become more common.
For many of those people, state-subsidized dwellings will be the only alternative to living in group homes--which often restrict a resident's independence--or homelessness. Both alternatives are considered more costly for taxpayers than long-term housing.While the Regional Center can help clients find rental housing, it can't, by law, own real estate. So in the last two decades, with the encouragement of the state, more than a dozen regional centers across the state created and funded housing nonprofits like this to develop and own a permanent supply of low-cost housing for people with special needs.
Housing nonprofits in other expensive real estate markets have helped build or purchase low-cost housing that is helping hundreds of special needs adults.
But in Orange County, Community Housing Resources has been a partner in the creation of exactly one project: a 10-unit Stanton apartment complex built by United Cerebral Palsy of Los Angeles, Ventura & Santa Barbara Counties.
Meanwhile, the problem that the non-profit is supposed to help solve is becoming more acute. Last year, a report by the California Affordable Housing Institute described the lack of housing for developmentally disabled adults statewide as being at "a crisis level."
Last year, Jennifer Lee-Anderson worked briefly as executive director of Community Housing Resources. After being recruited by the Regional Center, she took the job at Community Housing Resources in July, 2007, hopeful that she could help developmentally disabled adults find permanent homes.
But when Lee-Anderson started to explore the nonprofit's finances and other records, she says she found chaos. She learned that while Community Housing Resources was sitting on $700,000 in unused funds, 800 to 2,000 Regional Center clients were living in federally subsidized housing or were on local housing authority waiting lists.
"It took me a couple days to realize…that there really had been serious mismanagement," said Lee-Anderson, who resigned in October of 2007.
Meanwhile, similar housing nonprofits in other expensive real estate markets have thrived.
One example is the Housing Choices Coalition in San Jose, which launched in 1997 with funding from the San Andreas Regional Center and an annual budget of $75,000. Today, the agency's budget is $674,000, and Housing Choices has been able to set aside 230 affordable apartments for its clients and place about 100 people in housing annually, according to executives at that agency.
In stark contrast to its Santa Ana counterpart, the San Jose nonprofit spent on average 83.9 percent of its funding on affordable housing programs.
IRS records show that Community Housing Resources received sizable contributions in the fiscal years 2001-02 and 2002-03 totaling more than $1.2 million. But the nonprofit did not create or help develop housing units until 2004, when it gave the $200,000 grant to United Cerebral Palsy to build the Stanton complex.
Attorney and housing consultant Randy Gibeaut served as the nonprofit's first and longest serving executive director, from 1999 to 2006.
"The game plan was to spend that money wisely over a five-year time horizon, and we were unable to do that," said Gibeaut, who resigned from the nonprofit in November, 2006. "We were unable to find investment opportunities that made sense to us."
IRS records show that the last 990 form signed by Gibeaut was for the 2001-02 fiscal year. For the next five years, 990s were not filed at all, generating penalties and interest totaling at least $27,000 according to IRS records and an accounting by the agency.
"My recollection is that it was all cleared up and the (990) filings were done," Gibeaut said.
Lee-Anderson said, and IRS records reflect, that she filed the 2002-2006 990s when she took over in 2007 and discovered they had not been filed.
Lawrence C. Eisele, Jr., a director and board president since the nonprofit's inception, did not respond to four requests for comment about the 990 filings and other issues surrounding the agency.
Singh, in his letter, said the board moved to correct the problems as soon as they were discovered.
Singh pointed to Community Housing Resource's success in helping clients obtain and keep federally-subsidized Section 8 housing vouchers, and noted that 742 clients are enrolled in this program, "most of whom are participating due to CHRI's efforts."
Today, Singh writes, the nonprofit is headed in the right direction.
He noted that the nonprofit has hired an auditor, adopted a new policy requiring an annual audit of the organization, and is attempting to recoup some of the IRS penalties. He said the nonprofit has already convinced the IRS to return more than $21,000 in penalties.
LITTLE STATE OVERSIGHT
While the state Department of Developmental Services has audited the Regional Center in the past, the agency said that it has never audited Community Housing Resources.
The state said due to limited staff resources it randomly audits regional center vendors, including the housing nonprofits, only when they receive payments of more than $100,000 from regional centers, or if there is evidence or cause for concern.
In the case of Community Housing Resources, the state agency said it was not aware of the housing nonprofit's financial mismanagement issues, and that since it received less than $100,000 in 2005-06 and 2006-07, it was the Regional Center of Orange County's responsibility to audit the nonprofit.
The agency said that a 2003 audit of the Regional Center of Orange County showed no irregularities with regard to funding to the housing nonprofit, which is classified as a vendor.
When asked if the agency had any concerns regarding CHRI's financial management issues, a DDS spokesperson responded, in an email, "The Department believes the review process established safeguards the investment of public funding."
State Senator Lou Correa, D-Santa Ana, whose district includes the Santa Ana headquarters of the Regional Center and CHRI, said the housing nonprofit is an example of "quasi public/private agencies" that lack oversight and operate outside the realm of state scrutiny.
"You're sitting on $700,000 of unused funds, yet you haven't filled out your tax returns for a couple of years, and you've got this tremendous need for housing for special needs members of our community - our family members, our neighbors," said Correa. "
"My question is do we believe that as tax payers we got our money's worth? It appears from the evidence that very little has been advanced over (the past) 10 years."
Correa said he hopes to introduce legislation that calls for transparency and accountability from public/private organizations such as Community Housing Resources and establishes a mechanism to provide oversight.
In the past year, Community Housing Resources took steps to launch what would be the nonprofit's biggest development spree to date – three new projects that would include 40 low-cost apartments and two single-family houses.
But, earlier this month, two of the three projects fell through. The Regional Center notified the Department of Developmental Services that it was withdrawing from two of the three projects because they aren't financially viable.
The third project, to create two single family housing units, remains on the table, according to the state agency.