Ten years after a foundation formed and chaired by U.S. Rep. Frank Ballance began to receive appropriations from the state of North Carolina, the congressman is scrambling to explain where all the money went. "I have accountants and lawyers trying to put all this stuff together," Ballance says.
The questions surrounding the John Hyman Foundation have been multiplying since first raised in March by Hal Sharpe, the conservative editor of the Littleton Observer. Funded primarily by the state Department of Corrections to provide substance abuse treatment and prevention services to at-risk residents in Warren, Halifax and surrounding counties, the foundation failed to file required documents with the state and Internal Revenue Service. While apologizing for the decade-long lapse, Ballance says the organization's good works should not be overshadowed by "a few paperwork errors."
Those "few errors" have already proved costly: Foundation executive director Eddie Lawrence recently lost his job as director of the state Human Relations Commission because he neglected to note his outside income from the Hyman job in three separate commission filings. Lawrence, who is also pastor of Greenwood Baptist Church in Warrenton, did not return phone calls to the foundation office, which is located in the church's basement.
As for the good works, judgment will have to await the full accounting of the foundation's activities promised in the near future by Ballance. Documents indicate that its substance abuse program did directly provide some services, including DWI classes at Greenwood and family counseling at its Halifax County office. Records also show that Hyman redistributed several hundred thousand dollars over the years in "mini-grants" to churches and community groups for anti-drug and other initiatives. Last December, for example, the Norlina Public Library got $5,000 for its GED program and reading classes. But the details are scarce, and the records spotty. Applicants for the mini-grants had to fill out no formal applications or submit reports explaining how the funds were used. No details of any programs were provided in writing to DOC.
Sloppy and non-existent record-keeping aside, it wouldn't take much for an outsider to be skeptical of the foundation. The substance abuse program Web site alternately lists its hours as Monday-Friday, 2-7:30, and Monday-Friday, 9-5; no one seems to answer the phone at any hour.
In early January, DOC controller Paul Gross cut off the group's funding and demanded financial statements for the two previous fiscal years, noting that his office had been trying to contact the foundation for several weeks with no reply. The statements, Gross wrote in a letter to Lawrence, should be submitted by the end of the month and should include breakdowns of salaries and the mini-grants.
Almost four months later the financial statements arrived in Gross's office, minus the breakdowns. "There was a delay," says Ballance, "and that was unfortunate."
Moreover, the one-page statements raised more questions than they answered. One lists "administrative fees" of $25,000; the other has no similar line item. The foundation paid Greenwood a lump-sum rent of $35,000 in FY 2000-'01 for the previous four years, then paid no rent the following year. And both financial statements are inconsistent, sometimes dramatically, with budgets previously submitted to DOC.
Staff salaries, which consume about half the foundation's annual budget, have since been itemized: According to figures supplied by Ballance and published in the Roanoke Rapids Daily Herald, Lawrence took in $30,000 per year for his foundation work; the two highest-paid employees on the payroll after Lawrence are Melinda Solomon-Harris ($24,200), and Joyce Bullock ($14,400). Together, their wages represented more than 30 percent of the organization's total budget for fiscal year 2001-'02.
Three hard-working employees can easily dominate the expense lines of a small non-profit. But all three have ties to Ballance beyond the foundation that raise serious questions of appearance. Ballance is a member of Greenwood Baptist and heads its Deacon Board. Solomon-Harris chairs the Democratic Party's First Congressional District and helped oversee the 2002 primary election in which Ballance defeated two challengers. And Bullock serves as treasurer of his campaign committee. The connections help fuel the impression that the foundation essentially served as a political patronage fund.
That these public servants can claim ignorance of basic paperwork imperatives makes no sense, since their various activities demand routine filing on an almost daily basis. They should know that accurate and complete documents are often the only way to ensure that public funds are being properly managed. And they should also know that such intertwined public and private relationships have trouble passing the smell test.
Ballance paints a picture of a part-time crew working evenings and weekends, focused on making the programs work and with little time to handle the minutiae. But he also realizes that the explanation is insufficient. "In hindsight, maybe we should have done it differently," he admits, one of a series of mea culpas offered during an interview.
The recipients of the foundation's pass-through grants raise additional concerns of impropriety that have been raised by the Carolina Journal and in other news accounts. The grants, distributed in amounts averaging several thousand dollars, were given primarily to churches in Ballance's district whose pastors and their families supported his congressional campaign with contributions.
Ballance insists that there's no connection between the grants and the campaign contributions--indeed, there's nothing inherently damning about appreciative constituents supporting someone like Ballance, who was running to replace Eva Clayton and had admirably served his community in the state House and Senate for almost 20 years. It would have been absurd had Ballance not solicited donations from the churches, long the political backbone of the region, and he points out that the amount received from mini-grant recipients represents but a small fraction of the faith community's overall support. But the contributions violate at least the spirit of the foundation's own conflict-of-interest statement filed with the state, which says that "The officers, employees or agents of the Agency should neither solicit nor accept É anything of monetary value from contractors/vendors."
This particular problem could have been easily avoided, Ballance acknowledges. "I should have resigned from the board a long time ago," he says. But you know what they say about hindsight.
It's easy to point the finger at foundation officials, but scrutiny of the loose handling of taxpayer funds should not stop with them. The Department of Correction finally blocked the cash flow in January, but how had the legislature and the agency approved almost $2 million over a 10-year period without asking for more than a few shreds of information about the program it was funding? The odds that the John Hyman Foundation was the only organization given free reign with taxpayer funds are next to zero--if Hyman is an example of how the state monitors its funds, and it probably is, it's no wonder the budget is nearing total collapse.
The larger backdrop to the Hyman muddle is President Bush's push to give religious organizations countless millions in public money for so-called faith-based initiatives. Ballance communications director Joanna Kuebler calls the foundation "a faith-based initiative." It's not difficult to imagine that oversight of these many programs by the feds would be far more lax than even the state's apparent hands-off policy. Ironically, the John Hyman Foundation and its liberal chairman may perfectly illustrate why the idea is fundamentally a bad one.
Ultimately, the inner workings of the foundation will be open for scrutiny after Ballance's team of accountants and lawyers sorts through the information. And after the state auditor's office completes a review of its own. Perhaps then the public will learn such details as how much cash the foundation actually received from the state--the total appropriations approached $2 million, but Ballance says the actual disbursements were closer to $1.2 million.
No matter the particulars, they'll probably be enough to satisfy state and federal officials, though perhaps not satisfying enough to restore funding. And the majority of First District voters will also likely not hold it against Ballance, though his political opponents will no doubt try and keep the issue burning. "This will not end between now and next November," he says.
But the damage has already been done. At a time when budget cutters are wielding their meat cleavers, the revelations about the John Hyman Foundation could have a damaging ripple effect on other nonprofits. "That's one of the things that's so regrettable," says Ballance ruefully. "This is coming at a time when social programs are the first things that are going to be cut."