Portland City Council considers financial dissolution of Southwest Neighborhoods Inc.

Civic Affairs

Dec. 9 vote proposes shuffling staff from Southwest Neighborhoods Inc. after critical forensic audit

The Multnomah Arts Center in Portland, which includes SWNI offices, sits vacant and closed to the public. (Photo: Pamplin Media Group)

PORTLAND, Ore. (PORTLAND TRIBUNE) — The Portland City Council will meet Wednesday, Dec. 9, to consider, among other matters, whether to transfer funds and resources away from Southwest Neighborhoods Inc.

The proposal comes on the heels of a forensic audit of Southwest Neighborhoods Inc., commonly referred to as SWNI, a nonprofit public benefit organization that oversees 17 Southwest Portland neighborhood associations and provides community outreach, events and support services via funding contracts with the city.

Wednesday’s agenda includes a funding amendment that would increase the city’s contract with Southeast Uplift by $145,000, transferring staff and some responsibilities from SWNI to the Southeast district coalition.

“Continuity of services to Southwest neighborhood associations can be supported through the hire of one program and one administrative staff from SWNI’s existing employees, if desired and mutually agreed upon by all parties, and by redirecting or expanding Southeast Uplift’s existing staff,” a draft ordinance states.

Earlier this week, SWNI’s board voted to reduce its staffing levels to 60% during the month of December, down from 75% the month prior, amid ongoing budget shortfalls. The employee furloughs were the byproduct of the City Council voting in July not to renew the coalition’s contract funds and instead ask for a financial audit. SWNI has since managed to stay afloat with the help of donations.

The independent forensic audit, conducted by Marsh Minick, P.C., concluded SWNI has lacked real financial oversight since a hefty $130,000 embezzlement by an employee a decade ago. Auditors found that through faulty recordkeeping and budget practices, SWNI mismanaged and misspent a significant portion of funds received from Portland’s bureau of Community & Civic Life over the past 10 years. They called out a lack of meaningful board oversight, continued financial risk exposure and the receipt of a federal Paycheck Protection Program loan that created a budget surplus within SWNI’s coffers earlier this year.

Most of SWNI’s board has denounced the audit as biased and factually flawed, while noting improved financial oversight measures put in place after the embezzlement case a decade ago.

“When people say the board wasn’t aware of things, that’s a mischaracterization,” Leslie Hammond, SWNI’s board president, said Dec. 3. “We thought we were going to be treated fairly. We don’t feel like we were.”

Hammond said the audit conclusions don’t reveal the whole picture of SWNI, which has served its 17 neighborhoods for decades as a nonprofit group offering outreach and civic events, fundraising and the distribution of a monthly newspaper to Southwest Portland neighborhoods.

She also noted that auditors were given information about past financial transactions and practices from current staff and board members that went ignored in their audit report.

Audit discussion kept private

While SWNI’s board met shortly after the release of the audit on Nov. 18, board members were allotted two minutes each to comment or ask questions. Most declined, saying they had yet to finish reading the 124-page report.

When the board had a follow-up discussion during a special meeting on Nov. 30, it was done in private, during an executive session, in conflict with Oregon’s public meetings laws and rules set forth by the city. The board also used the executive session to discuss routine budget documents like its cash flow, as well as staffing levels.

When asked by The Connection why routine matters like a publicly available audit and cash flow documents were discussed in a private meeting, Hammond defended the board’s decision, noting privacy and confidentiality concerns. “Technically we don’t have to follow any of those rules because it’s not the city’s money (we’re operating with) right now.”

While SWNI’s board had hoped the City Council would renew its funding contract before the end of the year, the council instead appears poised to effectively dissolve the district coalition’s ability to continue in its current iteration.

“There were some things in the audit that need attention,” Portland City Commissioner Amanda Fritz told members of the Hillsdale Neighborhood Association Dec. 2. Fritz has voiced support for SWNI as the coalition remained under the city’s eye in recent months. At one point, she said she planned to introduce a motion to reinstate the coalition’s city contract, but that was prior to the audit results.

Fritz confirmed last week she has no plans to bring an agenda item to the council regarding SWNI.

“I am focused on bringing several major policy projects to Council before the end of my term,” Fritz said via email.

As of Friday, the council had received several letters in support of SWNI and pleas to maintain the coalition’s role in Portland.

The Homestead Neighborhood Association’s board of directors, in a letter to the city, suggests the audit was politically motivated, hinting at past criticism of neighborhood groups and coalitions by city employees and Commissioner Chloe Eudaly, who oversees the Civic Life bureau.

“The audit report appears to pick out details that might suggest possible errors while ignoring evidence that could suggest other less negative conclusions,” the letter, signed by Homestead Neighborhood Association President Ed Fischer and the association’s vice president, Jackie Phillips, states. “SWNI’s support is essential for Neighborhood Associations to carry out their missions to provide residents a means to be involved and informed about civic and neighborhood matters; deliver informed input to City Council; conduct community projects; put on regional events; and much more.”

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