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Infusion of $1.5 million needed to stabilize CAP

By Barbara Tetreault
Tri-County Community Action Program's financial reports and books were in such disarray that auditors had to adjust and correct entries representing more than a quarter of the agency's annual budget to produce an accurate fiscal 2012 audit.
In his latest status report to the Coos County Probate Division, special trustee Todd Fahey states an infusion of about $1.5 million is needed to permanently stabilize the organization.
Fahey wrote that "adjusting entries of approximately $5.5 million were needed – and made – to correct accounting errors and to ensure TCCAP's books and financial records were accurate" as of June 30, 2012. He said the adjusting entries were many and varied and represented more than 25 percent of CAP's annual $20 million operating budget.
"The size and extent of the entries show how disorganized and adrift the organization's finances were which, in turn, contributed to TCCAP's near collapse in mid-December of 2012," Fahey said.
The recently completed audit, by the auditing firm Mason and Rich of Manchester, show Tri-County CAP sustained an operating loss of approximately $1 million from July 1, 2011 to June 30,2012. Fahey said that was not unexpected given that about $1 million was used to fund operational shortfalls. At the end of June 2012, CAP had assets of $8,064,387 and liabilities of $7,423,637
Fahey, who was appointed by the court in December to oversee CAP, said since then hundreds of thousands of dollars in expenses have been cut and several programs that perennially lost money were discontinued or replaced with others that break even or generate a small surplus. Still, he said lasting stability for the organization will require an infusion of about $1.5 million.
Fahey reported insurance claims have been filed "under a theory of internal (versus external) misappropriation" to recover $224,000 taken from client funds in the Guardianship Services Program and used to pay CAP's general operating expenses. He said there has been no response from the insurer. In the meantime, CAP is repaying the fund at the rate of $20,000 a month.
CAP has a $750,000 line of credit with TD Bank that contained a Feb. 1 deadline to pay down $350,000 of the amount. The deadline was extended to May 31, and Fahey said he has advised the bank it is unlikely CAP will meet that deadline.
The special trustee said CAP also does not have the liquid assets to repay the agency's use of a $533,000 advance for the Low-Income Home Energy Assistance Program (LIHEAP).
Fahey said he believes the state must step up with some funding and said there are ongoing discussions with key lawmakers on options for funding to help with the agency's debt.
The Coos County legislative delegation has discussed a $1 million loan to CAP from the state Office of Energy and Planning using Electric Assistance Program funds. The loan would be repaid over 20 years. Fahey said it will become clear during the next few weeks if legislative assistance will be successful. Reaction to the proposal has been mixed.
While the state faces fiscal challenges, Fahey said he is confident state leaders recognize the importance of CAP to the vulnerable people it serves in the North Country.
Fahey said an offer has been made to fill the vacant chief financial officer position. The position has been vacant since the termination of Dori Ducharme on Dec. 3. He also reported the agency is advertising for a new chief executive officer. That position has been vacant since Joseph Costello was suspended in December. The closing date for applications is April 30.
The cost of the team of experts overseeing the reorganization of CAP totaled over $200,000 as of the end of March. While acknowledging the charges may seem high, Fahey points out the agency has been without a CEO and CFO since December.
Fahey's firm, Orr and Reno, has billed over $116,000 for his services at $275 an hour. John Gilbert, president of the management consulting firm Synchrony Advisors LLC of Exeter, has invoiced over $62,000 for services, and CPA John Killion has billed over $35,000 for services.
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