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11/5/2011
PAL center funds up for vote;Cash-strapped facilities come under fire after critical audit - News Journal

PAL center funds up for vote
Cash-strapped facilities come under fire after critical audit

New Castle County Council will vote on a proposal to give two Police Athletic League centers, including the one in Hockessin, more than $200,000. 
Councilman Bob Weiner thinks NCCo should take over until a new board is installed.  
 
The New Castle County Council will vote Tuesday on a proposal by County Executive Paul Clark's administration to give two strapped Police Athletic League centers more than $200,000 during a two-year period beginning in July.

The vote was complicated this week when county auditor Bob Wasserbach released an audit critical of the centers, in Hockessin and in Garfield Park near New Castle.

The audit contends that the PAL centers' financial condition has gotten progressively worse in the last four years, that fundraising efforts have been poor, ethics and audit board subcommittees have done little work and that PAL employees get 100 percent of their health care plans paid for despite the agency's poor financial shape.

Wasserbach said he was concerned because PAL officials did not give him all the financial documents he requested.

"When an auditor asks for information and does not receive it, this is typically a red flag that the entity being audited may be trying to hide something," Wasserbach said.

Vince D'Anna, the head of the PAL board, said the audit is unfair and contains inaccuracies.

Wasserbach said he was asked by a member of Clark's administration to not release the audit until the negotiations between the county and PAL were complete, but wouldn't identify the official. Gregg Wilson, the county attorney and acting chief administrative officer, said he isn't aware of any such request made to Wasserbach.

Wasserbach said he released the audit this week when he learned that the negotiations were over and that the council would vote on the agreements Tuesday.

Councilman Bob Weiner, one of two council members who voted against a bailout of the agency in February to pay a delinquent $101,000 Delmarva utility bill, reiterated Friday what he said eight months ago: He thinks the county should take control of the PAL centers until a new board of directors is installed.

"I have no problems tweaking the finances between the county and PAL, but not with that incompetent board of political cronies in control," he said. The group's 2009 tax filing with the IRS shows that the board included former County Executive Tom Gordon; Joseph Freeberry, brother of Gordon's former top aide, Sherry Freeberry; and former state lawmakers Roger Roy and Terry Spence.

Councilman Jea Street said the audit underwhelmed him and plans to vote to give PAL the money.

"There's nothing scathing in there, such as accusations that money is being mismanaged or stolen," Street said. "The audit isn't a reason to not amend our agreement with PAL and pay them more. We can't provide our programs anywhere else for a comparable cost."

The proposed funds

The proposal before the council would take effect on July 1, when the county's next fiscal year begins, Wilson said.

From 2003-07, the county paid the Hockessin PAL $12,500 a month and Garfield Park PAL $10,666 a month, mostly to lease space for county programs. PAL runs afternoon recreational, athletic and educational programs for children at the centers during the day, and the county runs a variety of programs for adults in the evening.

In 2008, those payments were cut by 4 percent because of the county's budget woes.

As part of the new agreement, the county would increase those payments by $4,460 a month for both facilities. Those additional payments total $107,000 during the two-year period of the proposed lease amendment.

The county would also give the centers two one-time payments that would total $97,000. One is for $44,480, which represents a giveback of the 4 percent reductions in monthly payments from 2008 to now. The other is for $52,520, which is an eight-year, 2 percent retroactive increase in payments.

"The second one-time payment is proposed because PAL's costs for things such as electricity have gone up significantly over the past eight years when the payments from the county haven't gone up at all," Wilson said.

The new financial arrangement would also include having PAL send the county its Delmarva bills. The county will pay the bills, then send the balance of its payments to PAL.

D'Anna said he isn't troubled by that arrangement.

"We probably should have paid the electric bills first, but we didn't want to shut down programs for kids," D'Anna said. "We thought we'd be OK because the county told us it would give us more money for years. They kept saying the check was in the mail, but it never came."

Wilson said that while some of the findings in Wasserbach's audit have merit, it's more important to keep the PAL center's afloat for now.

"That's the reason this is short term," Wilson said. "It will allow the county to evaluate the county's decades-old partnership with PAL. We want them to increase their cash flow and their fundraising activities. If they are unable to do that, the county will end up operating those buildings."

Wilson said the one-time cash payments and the increased monthly payments will give the existing board time to fix its problems. Weiner said Wasserbach's audit is concerning enough to warrant no more money be given to PAL.

Concerns about PAL

The audit shows that PAL had $37,183 in assets and $373,550 in liabilities as of June 30, 2010. To be in good fiscal health, an agency such as PAL should have twice as many assets as liabilities, he said.

PAL's revenue decreased from $937,927 in 2008 to $688,993 in 2010, the audit states. The percentage of that money spent on programs went from 40 percent in 2008 to 21 percent in 2010.

D'Anna, the board chairman, said things have improved since then but couldn't provide specifics because he wasn't given a copy of the audit by county officials, so he wasn't prepared to respond Friday.

The audit said the fact that Hockessin PAL employee Jo Ann Freeberry is married to board member and former county employee Joseph Freeberry "could be conflicts of interest or appearances of impropriety." It also noted that PAL's third-party fundraiser, Scott Phillips, was a board member when his contract was signed. Phillips works in the county sheriff's department.

D'Anna said Joseph Freeberry recuses himself whenever anything is voted on pertaining to his wife. The contract with Phillips was signed before D'Anna joined the board.

"I don't see any ethical problem there," D'Anna said.

Wasserbach noted the fundraiser gets 62 cents for every dollar he raises but said that's not out of line compared with other nonprofits. D'Anna said the amount is actually 55 percent.

The audit also questioned the past practice of having current county employees on the board. Wilson said that ended years ago, when the County Ethics Commission said that practice should stop.

Wasserbach was critical of the fact PAL pays for 100 percent of its employees' health plans. D'Anna said their salaries are low and that the perk is a reasonable one. He said the workers' benefits costs have gone down in recent years because the board shopped for a less-expensive policy and co-pays increased.

Ownership question

The audit also examined the issue of who owns the PAL centers. Wasserbach contends it's the county and wonders why, as the landlord, it is paying any rent to PAL, the tenant, in the first place.

"The county should research whether it makes more sense to lease building space and program times to PAL, rather than vice versa," the audit says.

Wilson said that analysis is "simplistic."

The county owns the land, which it leases to PAL for $1 a year. PAL built the buildings at both locations, although the county built an addition at Garfield Park. The money the county pays PAL is for use of the buildings for its programs. The agreements between PAL and the county, which remain in effect until 2043 at Garfield Park and until 2040 at Hockessin, state the buildings become the county's property if PAL fails to operate functioning centers.

Council Attorney Carol Dulin has said her review of the agreement shows that the county owns the building.

D'Anna said he was flabbergasted by Wasserbach's analysis and Dulin's conclusion.

"It's our building," D'Anna said. "I can't even conjure up the logic that would get you to any other conclusion."

Charges of political motivations were made by people on both sides.

"Perhaps it's political connections between board members and administration officials that is making the county take actions that are not in the best interest of county taxpayers," Weiner said.

Wilson said the agreements were not politically motivated.

D'Anna said the PAL board has a better relationship with Clark's administration than it did with that of former County Executive Chris Coons. He said he thinks Weiner's sour relationship with Gordon is why the councilman thinks the audit warrants rejecting the proposed financial agreements. He can only assume Wasserbach's motives are similar.

"This financial review was a fishing expedition," D'Anna said. "Wasserbach is trying to play 'gotcha' here. The intent here was manifestly destructive and had absolutely no constructive use at all."

D'Anna said the additional county money would serve an important role.

"We had a young man come back to a dinner saying if it wasn't for the PAL center, he'd be in jail, not in college," D'Anna said. "That's what all of this should really be about."

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