National accounting firm's study critical of NAACP's financial procedures

August 11, 1994|By James Bock | James Bock,Sun Staff Writer

At the time NAACP Executive Director Benjamin F. Chavis Jr. agreed last fall to pay a fired aide up to $332,400 -- a deal that neither the NAACP board nor its general counsel knew about -- an accounting firm was finding fault with the civil rights group's -- financial procedures.

Not long after the secret deal was signed in November 1993, an NAACP executive told the board that Arthur Andersen & Co., a national accounting firm, had made a critical study of the NAACP and that significant improvements in financial management were under way.

"The need for more effective accounting procedures [was] obvious from the first days of our management efforts," Lewis Myers Jr., Dr. Chavis' deputy executive director, reported to the board in February.

The Chavis administration had already beefed up its financial management. Dr. Chavis added an interim chief financial officer and a comptroller to the staff in the first few months after becoming executive director in April 1993.

But neither the consultants' study nor the new high-level personnel resulted in the NAACP's 64-member board's learning about Dr. Chavis' out-of-court settlement with Mary E. Stansel, his former assistant, and its potential financial impact on the cash-strapped NAACP.

Now the settlement has created a furor within the NAACP that could cost the executive director his job when the board holds an emergency meeting on the deal Aug. 20 in Baltimore.

Among the questions -- so far unanswered -- that board members and others are asking about the Stansel agreement are:

* Who at the National Association for the Advancement of Colored People besides Dr. Chavis knew about the deal?

* Who signed the checks with which Ms. Stansel was presumably paid, and to whom were they payable?

* How was the expenditure of $64,000 in NAACP funds -- plus $18,400 from unnamed "friends" of the group -- accounted for in NAACP financial records?

* Why wasn't the $250,000 that Dr. Chavis agreed to pay Ms. Stansel, in the event he failed to help get her an offer of an $80,000-a-year job, listed as a contingent liability in the NAACP's 1993 financial statements? (That sum amounts to nearly 1 1/2 percent of the organization's total $18 million annual budget.)

Terhea A. Washington, a spokeswoman for Dr. Chavis, says only that the executive director will answer such questions in his coming meeting with the board. As the NAACP's chief executive, she said, Dr. Chavis clearly had the authority to make the Stansel deal.

"He doesn't have to notify the board about how he handles administrative and personnel matters," she said. "As it stands now, he didn't violate policy."

Board members, including Chairman William F. Gibson, say they knew nothing of the payments to Ms. Stansel until she filed a lawsuit June 30 in the District of Columbia, charging Dr. Chavis and the NAACP of reneging on the agreement.

Robert Titus, a principal in Mitchell, Titus & Co., the accounting firm that audited the NAACP's 1993 financial statements, would not say whether auditors knew of the Stansel deal.

But he hinted that they did not. "We're in fact-gathering mode right now. We're trying to get the facts here," he said.

"The financial statements are really the statements of management. As CPA we simply issue an opinion on the fairness the financial statements," Mr. Titus said.

"To the extent that it is determined that financial statements are materially misleading, accountants do amend them," he said.

"It's too early" to say whether the NAACP report must be amended, he added.

Ironically, Mr. Myers told the board in February that a streamlined procedure for expenditures was instituted Sept. 10, 1993 -- before the Stansel deal was made. He reported that a seven-stage procedure had been simplified to a two-step process.

"This accomplishment alone allows us to make major strides in the area of financial and fiscal integrity," he told the board. Mr. Myers said the "major study" by Arthur Andersen had found a need for improvement in several areas, including accounting procedures, cash management and communications.

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