CUDAHY — The city has decided to withhold funding from a nonprofit organization that distributes food and clothing to the needy because the agency has apparently failed to show how it spends its money.
The Cudahy Social Service Agency, which receives a large part of its financial support from federal money distributed by the city, will have to undergo a private audit before receiving more money, City Manager Gerald M. Caton said. The city authorized $50,000 in federal Community Development Block Grant money for the agency in the current fiscal year.
The agency received a $5,000 check from the city late Thursday, but was told the money could be used only to pay salaries, liability insurance and specific office supplies, such as stationery, said James Graham, executive director.
Caton said he suspended future monthly payments of the block-grant money after auditors hired by the city said the agency did not have an "adequate financial control system." The cursory audit by Diehl Evans & Co. of Santa Ana stated that the agency did not have "underlying documentation to support the cash receipts" and that there seemed to be no "control or review process" for monitoring spending. The report was submitted to the city Aug. 31.
"The block-grant funds are strictly regulated," Caton said. "The city is responsible for them. Any money not used properly puts the city in a bind. The (city) audit isn't saying money was skimmed off, but it is saying (that) because there is no financial system, you can't trace what happened." He said he told the agency about his decision in a letter Tuesday.
The agency probably will have to close if it doesn't receive money, Graham warned.
He said he is not a "certified public accountant" but insisted that he keeps accurate financial records.
"An audit would cost $2,000--we don't have it," Graham said.
The agency operates a food and clothing distribution program, and provides rent-free space for other social service agencies. Graham said the agency provides free food to about 950 families and clothes to about 350 families monthly, as well as drug counseling and job-placement information.
He said he would start a fund-raising effort to try to keep the agency open.
Agency records, supplied by Graham, showed income of $104,574.70 in the 1987-88 fiscal year. In addition to the $50,000 in block grants, the agency received $14,170 in other federal funds, $15,000 from the city's general fund, and $25,404.70 in private donations.
Graham said expenses exceeded $105,000, including $50,000 in salaries for him, a secretary and a receptionist. He is paid $35,000.
The remaining money was spent on food and other services for the poor, he said.
The agency, amid high hopes of serving the needy in Cudahy and neighboring cities, opened in December in a vacant industrial building at Elizabeth Street and Otis Avenue. The building is owned by the city Redevelopment Agency; the city provided $27,000 for renovation; rent was free through June 30, and the Redevelopment Agency paid the utility bills.
Now the social services agency owes the Redevelopment Agency about $6,000 in back rent and owes $2,300 to Southern California Edison Corp. SCE has notified the agency that electricity will be shut off Tuesday if the bill is not paid.
Counting on Bingo Proceeds
Graham said he had been counting on revenues from a bingo game that was to have been set up in the unused part of the agency's building.
In June, city officials started negotiating with John Mgrdichian, a Compton businessman, to bring bingo to the city. Mgrdichian, who owns the Murcole rubbish firm, and a casino and inn near Victorville, said he hoped to draw 500 to 600 players a day. Most of the money was earmarked for the social agency and other charities.
Graham, anticipating income from the bingo game, signed a three-year lease agreeing to pay rent and utility bills. He said he had hoped that revenue from the bingo games would free the block-grant money for other services.
But the bingo proposal appears to have died. "It looks like bingo has fallen by the wayside," said Councilman Tom Thurman, a member of the two-man subcommittee formed to negotiate with bingo representatives. He said some council members became concerned that a large bingo operation would create traffic problems.
In an interview last week, Mgrdichian said he believes the bingo proposal is finished. "I haven't heard from them," he said of city officials. "I sort of got the feeling they just didn't want what I had to offer."
Mayor Remains Supporter
Meanwhile, Mayor Bill Colon, a staunch supporter of the Cudahy Social Service Agency, said he will do whatever he can to try to keep the agency open.
Last week, he tried to convene a special meeting of the Redevelopment Agency, which is made up of the five-member City Council, to provide money to pay the rent and utility bill.
But Colon was unable to muster a quorum. Only he and Thurman showed up. Even with a quorum, the council would have faced a legal hurdle. Both Colon and Councilman John O. Robertson, who are on the board of directors of the Social Service Agency, have been told by the city's attorney that they can not vote on agency matters because of a possible conflict of interest.