State Auditor Les Merritt last week called into question expenditures and accounting practices of the Greensboro-based Sit In Movement, Inc., which plans to turn the city’s former downtown F. W. Woolworth’s store into a civil rights museum.
In a letter to Melinda Coleman, grants administrator for the state Department of Cultural Resources, Merritt said the nonprofit organization co-mingled grant funds with other monies, maintained an inadequate chart of accounts to track the spending of grant funds, failed to obtain approval by organization leadership for some invoices, and used insufficient planning that led to unnecessary expenditures.
The Sit In Movement received grants of $1.5 million in 2005 for construction of the International Civil Rights Center & Museum, and $500,000 in 2006 for final renovations for the museum.
“We could not be sure what payments were made with grant funds and what payments were made with other funds,” Merritt wrote.
But in a response to the auditor’s review, both the Sit In Movement’s treasurer and its accountant disputed some of the allegations. Daniel P. Duncan, a partner with the nonprofit’s accounting firm, Williams Overman Price, LLP, “[took] exception to the use of the term ‘co-mingling'” because the state allegedly did not require that the Sit In Movement keep grant funds in a separate bank account. Also, Duncan said the Sit In Movement has had only one program for which its funds are used: the civil rights museum.
“The grant received from the state was expressly used for this purpose,” Duncan wrote.
He added later in his letter, “all construction expenditures and exhibit fabrication costs are charged to easily identifiable accounts, and there were more eligible expenditures than were needed to support the funding from the state….”
According to Merritt, auditors reviewed a sample of 58 expenditures, and found in 11 cases that either a board member or the executive director failed to approve invoices. Five payments were made for items or services that had no supporting documentation, and seven expenditures “did not appear reasonable….”
Investigators found 20 instances in which invoices had not been marked as “paid” to prevent the possibility of duplicate payments. No double payments were found, according to the auditor’s office.
Three expenditures were payments totaling $2,330 to Executive Director Amelia Parker, which Merritt said had no supporting documentation.
Also, Merritt said, a lack of planning by the Sit In Movement’s board and management led to unnecessary expenditures, including additional costs for construction and renovation. The nonprofit has had to pay for storage of exhibits and equipment that have already been purchased, because of moisture problems in the downtown Greensboro building that is supposed to house the museum. Five large-screen televisions were purchased to test presentations and films, the timing of which Merritt questioned, “due to rapidly changing technology….”
Merritt said many invoices were only partially paid because “lack of available funds,” which he said could harm the museum’s viability because contractors and vendors might be reluctant to continue working for the Sit In Movement.
“The Movement may want to consider hiring a professional planner to create a formal strategic plan to address the current issues plaguing this most deserving project,” Merritt wrote.
In a separate response from Duncan’s, Obrie Smith, treasurer for the Sit In Movement, explained that the purchases of large items such as the televisions were made in anticipation of a February 2005 opening date for the museum. Sit In Movement had contracted with an architect to determine the condition of the building for the museum. But structural problems found in the former Woolworth building caused the delays and the need for storage services — and a change to a new architect with “a major museum and historic preservation portfolio.”
“We are concerned about the value judgment on a construction matter when the organization made every effort to exercise due diligence,” Smith wrote to Merritt.
Smith also explained that the televisions were plasma screens for exhibit use, and their purchase was timed for the debut in February 2005.
As for invoices that had not been approved, Smith said “every check issued” is approved in writing by two board members and by the executive director. However, common accounting practice requires that invoices, not checks, be approved before payment is authorized.
Rules governing state grants to outside agencies require grantees “to maintain reports, records and other information to properly account for the expenditure of all state grant funds….”
Chris Mears, a spokesman for the Auditor’s Office, said Merritt “is very concerned” that funds granted by the state to nonprofits be used for their intended purposes.
Paul Chesser ([email protected]) is an associate editor of Carolina Journal.