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Nonprofit loses funding from Florida Department of Children and Families

High salaries, 'ghost employee' questioned

ORLANDO, Fla. – A nonprofit organization that provides alcohol, drug and mental health treatment to Central Floridians will soon lose much of its state funding due to questions about how it managed taxpayer money, including concerns about high executive salaries, large real estate transactions and a "ghost employee" who was on the payroll.

Human Services Associates Inc. is a private subcontractor that received most of its $13 million in funding last year from Florida's Department of Children and Families.  HSA runs the juvenile assessment centers in Orange and Polk counties, as well as numerous other social service programs throughout the state.

HSA's contract with the state will not be renewed when it expires next year, following a unanimous vote Friday by the board of Central Florida Cares Health System.  CFCHS is contracted by DCF to oversee state funding for mental health and substance-abuse treatment.  Prior to the vote, some CFCHS board members expressed concern about HSA's financial stability and its former and current executive teams.

In 2012, HSA's founder and former president, Frank Francisco, was paid $406,000, which included a $150,000 bonus, according to a forensic analysis commissioned by CFCHS.  HSA did not provide auditors with any records indicating that bonus was approved by HSA's board.  Such compensation is considered high for a nonprofit organization of HSA's size, according to an accountant who examined HSA's records.

Although Francisco retired from HSA earlier this year, the audit indicates he may still be in possession of two 2003 Chevrolet trucks once owned by HSA.

Francisco recently moved away from Central Florida and could not be reached for comment.

HSA's co-founder, Vickie Tanaka, has been referred to as a "ghost employee" by some CFCHS board members.  HSA's current chief operating officer told auditors that "Tanaka has not worked at HSA for about 10 years" and yet was still getting paid.  Deborah Dain said she was unaware of Tanaka's $26,000 salary until Dain became COO last year, according to records.  Tanaka was removed from the payroll in June 2013.

Tanaka did not respond to questions that Local 6 sent to her Facebook page, which indicates she now lives in Guatemala. 

Last year, Tanaka flew from Guatemala to Daytona Beach to attend HSA's 20th anniversary celebration.  Records show HSA reimbursed Tanaka for her $879 airline ticket. 

"I talked to Frank (Francisco) yesterday about covering this expense and he said yes," Tanaka wrote in an email to HSA's former Vice President of Finance David Rooks.

HSA's current chief executive officer, Lori Tomlin, tells Local 6 that most of the nonprofit's top executives and its entire board of directors have been replaced within the past year.  But Tomlin acknowledges they left behind an organization hemorrhaging money.

In 2013, records show HSA found itself with a $1.2 million deficit. Tomlin partially blames that huge loss on economic challenges facing many other nonprofit organizations.  But she also said HSA's personnel costs  and the expense of maintaining and paying mortgages on several pieces of real estate took a toll on HSA's financial situation.

To improve its cash flow, in early 2014 HSA sold six of those properties to a single investor for  $3.4 million.   Those properties, which were owned by a separate entity called HSA Property Corporation, included the Polk County Juvenile Assessment Center, a 67-acre former boys ranch in Lake County, a former charter school in Flagler County, a commercial unit in Seminole County, HSA's office building on W. Colonial Drive in Orlando and a condo in Tallahassee.

The investor who purchased the real estate, Ray Berry, works in the health care industry and has volunteered on several boards with other past and present HSA executives, including Francisco, Tomlin and Dain.

Tomlin said she did not see a problem selling the properties to someone familiar with HSA personnel.  Had Berry's company, MRCE Holdings LLC, not purchased the real estate in a "package deal" when it did, Tomlin said HSA would not have not have been able to afford to stay in business.

Accountants who examined HSA's real estate transactions question whether HSA sold the properties for much less than they were worth.  They recommended that CFCHS hire a real estate appraiser to determine the fair market value of the property sold by HSA.

On January 15, HSA sold its 1289-square-foot condo in Tallahassee to Berry's company for $200,000.  Two days later, Berry resold the condo to another buyer for $265,000.  The condo had been assessed at $185,000 by the Leon County Property Appraiser.

In March, MRCE Holdings purchased a former charter school in Flagler County from HSA for $500,000.  Four months later, the city of Bunnell bought it from MRCE Holdings for $600,000.  The property was assessed at $1,266,728, according to the Flagler County Property Appraiser.

"They are a great long-term investment," Berry said of the six properties his company purchased from HSA.  However, he said many of the buildings were in severe disrepair and required extensive renovations.  The investor said he also had to pay realtor fees, which cut into his profit.  Berry told Local 6 he broke even on the Flagler County property. 

Before the properties were sold, Berry and Tomlin said they checked to make sure the federal government and the state of Florida were not entitled to some of the proceeds.  The real estate was not originally purchased with taxpayer money, according to Tomlin.  However, the accountants who examined the real estate transactions were unable to rule out the possibility that the government may still have a financial interest in the property sales.

Tomlin and Dain told accountants that HSA purchased the Tallahassee condo in 2006 so Francisco could spend time "lobbying, networking, and attending trade functions".   Although a nonprofit organization may engage in some lobbying, one that engages in "too much lobbying risks loss of tax-exempt status," according to the U.S. Internal Revenue Service.

Tomlin insists HSA is now in a strong financial position and that concerns about the organization's past management and governance have been addressed.  She points out that CFCHS board members have not questioned the quality of services HSA has provided to the community. 

However, due in part to lingering concerns about HSA's financial situation, CFCHS's board refused to renew its nearly $9 million annual contract with the nonprofit.

"From my perspective, it's an issue of public trust," said board member Don Lusk.  "I have no trust in HSA at this point in time."

"After conducting an extensive review of Human Services Associates, the board of directors has decided to let the contract between CFCHS and HSA expire," said CFCHS Chief Executive Officer Maria Bledsoe.  "This will occur at the end of the year, which will allow time to procure new contracts while ensuring there is no disruption of services for clients." 

CFCHS is encouraging agencies that submit proposals to replace HSA to consider hiring some of HSA's 250 current employees, according to Bledsoe.

The CFCHS board has asked the DCF Inspector General's Office to investigate HSA.