L.A. nonprofit promoted heavily by Garcetti faces uncertain future, audit says

A Los Angeles nonprofit charged with tackling poverty in some of the city’s neediest neighborhoods has suffered from weak oversight, inaccurate financial reporting and a budget problem so dire that its survival is now in question, according to a report submitted last week to City Hall.

Youth Policy Institute, which provides job training, after-school programs and other services, spent $1.3 million more than it took in during the 2017-18 fiscal year, according to the 50-page report from the accounting firm Armanino, a copy of which was obtained by The Times.

The group’s financial challenges, along with its failure to comply with state and federal funding rules, “create a substantial doubt about YPI’s ability to continue as a going concern,” the report said.

The findings come at a difficult time for the group. Earlier this month, the nonprofit laid off 26 full-time employees, bringing the total this year to 47. City agencies have withheld funding because the group’s financial reports are past due.

Youth Policy Institute has long-standing ties to Mayor Eric Garcetti, a major promoter of the group’s programs and a fixture at the group’s yearly fundraising gala. Dixon Slingerland, who ran the nonprofit before being fired last month, was named as a co-host of at least six Garcetti fundraisers during the 2013 mayoral campaign, according to city records.

During his first year as mayor, Garcetti worked with the nonprofit to have Hollywood and nearby neighborhoods designated as a federal Promise Zone. In 2017, Garcetti celebrated the group’s work in securing a $30-million commitment for tutoring and other services. Last fall, he announced the nonprofit’s involvement in a new city job training program.

Dan Grunfeld, the group’s interim chief executive, said the board of directors is “incredibly troubled” by the audit’s findings and is working to install more rigorous financial controls. The board also has begun looking at shifting some of its programs to other nonprofit groups to ensure their survival, he said.

“What’s important is to make sure that the programs continue and that the children and communities we serve continue to get the benefit of those programs,” said Grunfeld, who was brought on to address the group’s financial woes in July.

Garcetti spokesman Alex Comisar said city officials are concerned with the audit’s findings and are working to make sure services will not be interrupted. Economic development officials went to the nonprofit’s offices on Thursday to review its finances, he said.

In their report, auditors concluded that Youth Policy Institute made unauthorized payments to Slingerland, who ran the nonprofit for 23 years and had an annual salary of about $400,000. Slingerland’s credit card incurred numerous charges that “lacked a clear business purpose” and his expense reports lacked documentation, auditors wrote.

Grunfeld would not say how much money is at issue. The group intends to pursue “appropriate remedies” to retrieve any unauthorized funds, he said.

Slingerland did not address questions about his expense reports, saying he had not been provided a copy of the audit. But he has repeatedly attributed the nonprofit’s financial woes to the Trump administration, which has scaled back funding in recent years.

“It is heartbreaking to me that these Trump administration actions are forcing YPI to make difficult financial decisions that may lead to the potential dismantling of programs that are successfully fighting poverty’s effects on educational and economic opportunities,” he said in an email.

Slingerland said federal officials cut $3.3 million in grant funding and are withholding an additional $5 million, “using compliance and oversight to make everyone’s life miserable.”

A spokeswoman for the federal Department of Education called such remarks “politically motivated.” Officials said their agency had declined to provide nearly $6 million for one of the nonprofit’s programs, in part, because the group “consistently submitted inaccurate invoicing.”

“The department has serious concerns about YPI’s fiscal mismanagement and lack of internal controls,” agency spokeswoman Angela Morabito said. “We are working with YPI’s new senior leadership to address these concerns and properly account for how taxpayer dollars were spent. “

Youth Policy Institute has seven contracts with L.A.’s economic development agency and an eighth with the city’s housing department, according to city officials. It also works with Garcetti’s office on the Promise Zone initiative and reentry programs for formerly incarcerated residents.

The group also has contracts to provide after-school programs at 11 campuses in the Los Angeles Unified School District, according to district officials. If the nonprofit were to shut down, L.A. Unified would work to provide those services, Deputy Supt. Megan Reilly said.

Youth Policy Institute has sent its audit to an array of fundraising sources, including the Weingart Foundation, which distributes grants to Southern California nonprofit groups. Fred Ali, the foundation’s president and CEO, called the nonprofit’s financial predicament “extraordinary and troubling.”

Ali, who has reviewed the audit, said the group’s financial liabilities significantly exceed its assets. And its lack of internal controls leaves it at risk of having its government grants canceled.

While Grunfeld and other executives have been working to preserve the nonprofit’s programs, some of the group’s vendors say they are still trying to collect on unpaid bills.

Liliana Monge, founder and CEO of software training company Sabio, said her business is owed $16,000 for training provided to Youth Policy Institute over the last year. Monge said she has been emailing the nonprofit weekly to demand payment, without success.

“It’s insane to me what they’re doing,” she said. “They should be defunct.”

Times staff writer Howard Blume contributed to this report.