CITY HALL — The City Council this week approved increased financial oversight of local nonprofits that receive federal grant funding through City Hall.
The tighter controls come in response to recent revelations that local nonprofit New Horizons Family Center was facing mounting financial problems at the same time city officials doled out hundreds of thousands in grant funding to the center.
“The New Horizons project did raise questions and issues with policies and procedures,” said Jess Duran, acting director of the Community Services & Parks Department.
Founded in 1994 to provide childcare for low-income families, New Horizons became the subject of scrutiny after founder Maria Prieto announced she had scrapped plans for a long-awaited expansion project after spending $300,000 in federal funding on pre-development costs.
Earlier this month, Prieto announced the center would be closing its doors for good. In its final years, financial records show the center owed hundreds of thousands in outstanding payroll taxes and personal loans.
In the wake of the revelations, council members advocated for increased monitoring of nonprofit applications for federal Community Development Block Grant funding. City officials review most grant proposals before they reach commissioners and the City Council for recommendations and approval.
“I think that right now, with this limited funding, we can’t take the chance of funding groups who can’t deliver the services they are promising,” said Councilwoman Laura Friedman.
On average, local nonprofits each year compete for a cut of roughly $550,000 in social service grant funding and $300,000 for capital improvement projects.
Under the new rules, nonprofits will not be allowed to apply for grant funding for pre-development costs, as was the case with New Horizons.
“We can’t be in the position where we are spending speculative money,” Friedman said.
They will also be required to submit additional documents verifying the fiscal health of their organization. Two years of financial statements and audit reports and a signed statement that there are no tax liens of any kind against organization assets will be among the new requirements.
For capital project funding, nonprofits will be required to verify that construction funding is in place, and submit quarterly performance reports before and after construction.
While one local nonprofit official said he was concerned that the new requirements could present an undue burden, council members said they had to be careful with tax dollars.
“We have to make sure every dollar that we spend toward a nonprofit is being used in the very best capacity,” said Mayor Ara Najarian.