MARION, Ind. (WTHR) — A promised financial audit at an Indiana homeless shelter cannot happen because too many of the charity's past financial records are missing or incomplete.
The Grant County Rescue Mission hired an accounting firm last fall, after a WTHR investigation exposed years of mismanagement and neglect at one of the state's largest homeless shelters. In an attempt to reassure the public about its fiscal responsibility – and to help answer questions about $7 million in donations the charity received over the past decade – the rescue mission's new leadership asked the independent accountants to conduct an audit of the charity's past finances.
"We want to be transparent and we want the public to know we are doing things the right way," GCRM's former interim director Ray Raines told WTHR last fall. "We don't know what the audit will show, but we want our donors and supporters to know we are looking for answers and making things better."
But any hopes that the charity's new administration would be able to answer lingering questions about the homeless shelter's previous finances were dashed when auditors began asking for documentation needed to perform a comprehensive review.
"When the auditors would come and ask me for something, I couldn't find it," explained the charity's new full-time accountant, Lori Geller. "The records just aren't here. On the third day that the auditors were here, they said 'There's no way. We just can't do it.'"
"You can't audit what isn't there and you can't re-create records that don't exist," said GCRM's new treasurer, Jerry Showalter. The retired certified public accountant, who joined the board late last year to help the charity recover from its scandal, told 13 Investigates that former staff and leaders at the rescue mission left behind few financial records to properly account for income and expenses. "Without the records, you can't have that proof showing where did the money come from and where did it go. So that's the biggest difficulty right now. There are no records. They don't exist – or at least the ones that do exist are incomplete. That's obviously a problem."
It leaves the charity and its new administrators in a tough position.
"This is something that I've never seen before," said new executive director Rick Berbereia, who was recently hired by the GCRM board to help repair the rescue mission's image. "With those records not being here, that's kind of shocking to me. It's unfortunate because we can't give people what they need to hear, what they want to hear, to help everyone move on."
Caught on camera
Moving on is something the charity desperately wants to do following an undercover investigation that shocked the community.
WTHR found former charity leaders had allowed tons of donated clothing, food and household items to pile up inside the rescue mission for years. The donations were contaminated with feces from rodents and cats that ran freely throughout the charity's downtown headquarters. Bedbugs infested sleeping areas of the homeless shelter, where inspectors also found widespread health and safety violations due to years of neglect. 13 Investigates tracked shipments of donated food to the rescue mission, and watched as some of the charity's longtime leaders took that food for themselves, their family and friends.
The investigation prompted local businesses and private donors to withdraw their financial support. It also triggered proposed boycotts and protests outside the charity, as well as an investigation by the state attorney general.
Facing intense scrutiny, the rescue mission's executive director and board president resigned in the aftermath of the investigation. Most of the charity's board members and staff stepped down, too, to make way for a fresh start.
Since then, a new director, new board members and new staff have been making widespread changes to improve conditions at the rescue mission and to fix improper accounting practices uncovered during the investigation. WTHR discovered a financial audit had never been conducted at the charity. The homeless shelter also had no conflict-of-interest policy to prevent the misuse of donations and no proper accounting procedures to prevent waste and abuse.
So what happened to all the money?
Geller, a certified public accountant, tells WTHR she is convinced that much of the money donated to the Grant County Rescue Mission over the past decade was, indeed, spent on legitimate expenses.
"We know things happened that were supposed to happen here," she explained. "Lights were on. Heat was on. The water was running. Staff was paid. Taxes were paid. Buildings were operating. People were being fed. So money was being spent properly. There had to be or the doors would have been closed."
But asked if former administrators had misappropriated any funds, Geller was far less confident.
"We have no idea. I just don't know. Can I tell you 100% of it was being spent properly, I cannot answer that," she said.
Tom Ballard, the charity's former director, refused to release financial records to WTHR and would not provide documentation to show how the charity had spent millions of dollars in donations from its supporters.
Former GCRM board president Tom Mansbarger told WTHR he did not spend time reviewing the charity’s finances and, therefore, could not answer any financial-related questions. “That’s just not my thing,” Mansbarger told WTHR last spring.
But internal documents, leaked to WTHR during the investigation, show Ballard and his family received perks not offered to any other employees at the charity.
Under Ballard, the homeless shelter's administrative staff received more than $266,000 annually in salary and benefits. The staff included Ballard, his wife, one of his daughters and an assistant. While their exact salaries are not itemized, GCRM records show Ballard's compensation included an $18,000 housing allowance, $7,800 for an annual car allowance, and more than $2,200 for a cell phone. Tom Ballard was also the only employee to receive health insurance (more than $13,000 annually) and a health savings account ($3,000).
His successor says those are highly questionable expenses considering living conditions inside the homeless shelter – where Ballard had a an office and oversaw operations every day – were deplorable.
"Whether it's a housing allowance or a car allowance, when you put that up against the neglect of the building and the people you're serving, there's a real problem there," Berbereia told WTHR. "And if you're going to offer health benefits, you're going to offer it to your whole staff or not at all. That's not right."
The new director says all those generous perks are now gone. Instead of spending money on benefits for him, Berbereia wants more perks for the homeless, like better sleeping quarters and comprehensive programs to help keep families off the street. He and staff at the rescue mission are now working on both. Grants and donations will help pay for new bed frames and better mattresses in the men's dorm. A year-long program to help homeless residents with addiction recovery, skills training and stress management will begin this summer.
Dozens of financial problems
While outside auditors could not perform an audit of the charity's previous expenses, they did review the rescue mission's accounting and financial procedures. They found serious deficiencies involving internal policies and controls, and outlined those problems in a 5-page report obtained by WTHR. Among the problems identified by the accountants:
- Inadequate involvement and oversight by the board of directors
- Inadequate systems for record storage and retrieval, including failure to return records to files or misfiling them
- No whistleblower policy to protect staff who report problems to management
- No operating manual outlining the charity's accounting policies and procedures
- No bank statement review procedures or invoice approval procedures to prevent fraudulent activity
- No record retention policy
- No policy for receiving, handling and distributing donated food
With permission from the Grant County Rescue Mission, Eyewitness News contacted the charity’s contracted accounting firm to discuss the attempted audit, the findings of its internal controls investigation and recommendations made to the homeless shelter’s new leadership. Patrick Burkey, an accountant from Muncie-based Estep Burkey Simmons LLC, did not return any of WTHR’s phone calls.
Charity insiders tell WTHR many of the problems identified by the accounting firm are symptomatic of a former director who shared little oversight and who created a system that offered few checks and balances.
For example, Ballard had sole discretion to sign all GCRM checks -- even for his own charity-issued credit cards bills – and charity leaders often inspected food shipments and re-directed some of the donated food before it was unloaded at the rescue mission.
Following Ballard's departure, rescue mission staff found old donations that had never been recorded and deposited into the homeless shelter's bank account. Some donors told WTHR they never received acknowledgement of their contributions.
After WTHR's investigation, the former director was allowed to remove several file cabinets from the charity. Ballard told board members those file cabinets contained only personal documents, but multiple sources inside the rescue mission told 13 Investigates the files also contained financial records relevant to the charity and its spending.
"He said it was just personal files. I don't know if that's true, but that's what he said," said Janet Pearson, who served as GCRM's treasurer while Ballard was the executive director. "I wasn't [in the building] when that happened. He did that on his own."
Some former board members acknowledged they "dropped the ball" by giving Ballard too much autonomy over the charity's finances and by not asking the former director for more details on spending.
"Former leadership was very charismatic and people trusted them," said Geller. "You want to believe the leadership is doing what they say they're doing and that they are looking out for the best interest of the charity, and I think that's why people didn't question them a lot. Now, no one's afraid to ask questions, and that's how it should be."
Many of the problems highlighted by the accounting firm have already been fixed by the new staff. Other areas will be addressed soon, according to Geller.
Later this year, the board will also consider new by-laws that could limit the term of its members. Term limits would impact three of the charity's nine current board members – including Pearson – who served the agency for more than a decade alongside its former director.
Pearson, the former GCRM treasurer who also works as the city of Marion's Deputy Director of Community Development, still remains on the charity's board in a diminished role. She declined to answer any of 13 Investigates' questions about the charity's finances during WTHR's year-long investigation. Contacted last week by phone, Pearson again declined to comment on the rescue mission's lack of proper accounting procedures while she served as treasurer.
"I can't explain that. I really don't have any response for that. I think it's time to leave the past behind," she said.
"Why would you do that?"
Leaving the past behind is not easy to do for a charity that is still trying to answer so many questions. Even the rescue mission's new leaders have questions of their own – questions they'd like to ask the charity's former director.
"Why? That's the question I'd ask: Why would you do that?" Geller said. "I just don't understand why you'd let it get to the place where it was. These are human beings that live here. These are people that have lost hope, and we're supposed to give them their hope back. We're supposed to help them."
"That's what I'd ask, too," said Berbereia. "The biggest heartbreaking moment was the people who needed this place were the ones suffering. My big question would be: Why the neglect? Because that's not what rescue mission is about. We're about rescue. We're about redemption. We're about rehabilitation."
As the homeless shelter continues to rehabilitate its image, it is publicly releasing current financial statements to reaffirm the charity's new commitment to transparency. The most current statement provided to WTHR shows GCRM operated at a small financial loss during the first quarter of 2017 – a more modest loss than records show for the same period last year. The homeless shelter will also conduct a thorough audit of its current expenses beginning in July, and those results will be published for the public, as well. Charity leaders say they aren't sure what more they can do to make amends for their predecessors' shortcomings.
"We talk a lot about redemption here and getting second chances and third chances for some of the people who come here. We need the community to give us that chance now," said Geller. "We're not those people who were here before. We'd really like forgiveness because we need to move forward."
"When people come in here off the street and have burnt every bridge they have and want to change their life, we don't sit with them and talk about the past and how bad they were for the decisions they made. We start walking a new life with them and start moving forward," echoed Berbereia. "That's what we're asking now. I think we are a huge story of redemption."
Some donors have heard that message and have responded.
Donations are up significantly from last summer, and the charity's food pantry is now full – thanks to recent donations collected during a U.S. Postal Service food drive that stocked the rescue mission's shelves with canned goods.
The Little Caesar's Pizza shop in Marion is again donating pizzas, now that it has been reassured the donations will all be provided to the needy. (Ballard admitted last year to WTHR that he regularly used some of the donated pizzas to feed his dogs and the large fish in his backyard pond.)
A Walmart Distribution Center in Grant County is also considering renewing the food donation program it suspended last summer after WTHR's investigation. That program provided GCRM with meat, fish, produce, beverages and other food items to help feed the homeless.
The rescue mission has taken steps to ensure very large food shipments will be put to good use. It created a partnership with the St. Martin Community Center food bank in Marion to help distribute surplus food donations to needy families throughout Grant County.
"We're moving in the right direction," Geller said. "Sometimes you have to get to the bottom of the hill to start to climb back up, and we're on our way back up to the top."