NEW: State Auditor's Report Unveils Significant Financial Problems for John Hope Settlement

NEW: State Auditor's Report Unveils Significant Financial Problems for John Hope Settlement

Rhode Island State Auditor General Dennis Hoyle released his review of the troubled non-profit John Hope Settlement House late on Friday afternoon and his report flags numerous significant issues. GoLocal reported two weeks ago the Chair Anastasia Williams told her board the the organization would be forced to close. Since then another member of the Board has called for her resignation.

Among Hoyle's findings:

- John Hope Settlement House’s (JHSH) financial condition has steadily deteriorated. Operating reserves have been depleted and current operations are almost entirely dependent on one income stream of federal/state revenue for child care. Program operation and related revenue are now threatened by the revocation of JHSH’s child care license by the Department of Children Youth and Families. The license revocation has been temporarily stayed by the Superior Court. Should the license be permanently revoked, it is doubtful JHSH could sustain operations and would likely need to seek receivership. 

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- If JHSH is allowed to continue to operate its child care center, we believe an aggressive and strategic plan would need to be implemented immediately to address the ongoing operating challenges that would continue to exist. This strategic plan would be designed to potentially restore financial confidence and accountability necessary for JHSH to sustain operations and provide quality services. Even with effective implementation of such strategic efforts, JHSH will continue to be challenged by the mismatch of its current operations to its existing facility and the related capital and operating challenges of that facility. Seeking a strategic operating partner with financial, administrative and operating strengths that compensate in part for JHSH’s weaknesses may be a necessary reality. 

- JHSH exhibits multiple indicators of financial stress and lacks effective controls over its accounting and financial reporting functions. JHSH has lost other key operating grants totaling more than $500,000 annually due to its lack of financial controls and financial status. With these constrained resources, JHSH struggles to make the financial and operating improvements necessary to demonstrate that it may again qualify for restoration of other grants. 

- JHSH’s most recent audited financial statements available are for the fiscal year ended June 30, 2015. These financial statements are outdated and consequently do not provide an accurate view of its current financial position. Fiscal 2016 and projected 2017 financial information is needed to accurately assess JHSH’s current financial condition; but that information could not be provided by JHSH. No auditor has been engaged to audit JHSH’s fiscal 2016 financial statements. 

- Due to control weaknesses and “lack of sufficient management oversight of the financial function”, JHSH’s auditor’s issued a modified independent auditor’s report on its fiscal 2015 financial statements. The report included multiple matters of emphasis and the auditor’s management letter outlined numerous issues – many of which existed in the prior fiscal year. The modified opinion issued by the auditors and the quantity and nature of management comments reported highlight the precarious financial status of JHSH.

As GoLocal reported in late February:

Representative Anastasia Williams has informed John Hope Settlement House (JHSH) board members of plans to shutter the Providence community organization that has been around nearly 90 years, but has been plagued with recent financial problems.

On Thursday February 16, Board Chair Williams -- in an email obtained by GoLocalProv.com -- instructed a JHSH administrator to “put on J.H. letterhead” the following letter for distribution to parents and staff ). 

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