A government-funded nonprofit agency that assists Anne Arundel County's poor has named an interim director as it searches for ways to erase an $850,000 debt to the Internal Revenue Service for unpaid taxes.
The Anne Arundel County Economic Opportunity Committee Inc. hired Yevola Peters to take over for Edith M. Knight, who retires today. A search is planned for a permanent replacement.
The agency's board said Knight and her staff did not tell it about program overspending that led to cash shortages and, ultimately, a failure to send the IRS money withheld from employee paychecks to cover their income tax obligations. But Knight says subordinates told her "things were OK" financially and blames high staff turnover and computer glitches.
The agency plans to ask the county for help in repaying the IRS - a prospect that has County Executive Janet S. Owens leery. The county already contributes $300,000 a year to the group's $3.5 million annual budget, most of which goes for the federal Head Start program.
"I need some clear plan of action," Owens said yesterday. "If they're going to request money, I need to know precisely how we're going to repay it and that what happened will never happen again."
Representatives of the agency met yesterday with the IRS in Baltimore as the first step in attempting to have at least part of the $850,000 forgiven.
"Just what they [IRS officials] are going to ultimately accept in the way of payment, we'll have to see," said Sylvia Jennings, who chairs the agency's board of directors. "All the vibes I've been getting in the way of feedback from them are quite positive in terms of them doing everything to assist us through this."
An IRS spokesman said federal law prohibits the agency from commenting on such cases.
Jennings said there is no sign of theft.
Rather, Knight's staff took $600,000 withheld from employees' paychecks for income tax and diverted it to cover overspending in Head Start and other programs the agency administers in Anne Arundel. Taxes were not paid for five quarters, she said. (The IRS also levied a $250,000 penalty.)
"When they ran short, it was the taxes they elected not to pay and [it] started a downhill spiral they couldn't get out of," Jennings said. "We are getting our financial house in order."
New controls have been instituted since the agency's external auditor uncovered the problem last fall, and all taxes for 2000 were paid, Jennings said. None of its programs have been affected.
In hiring Peters, the 35-year-old anti-poverty agency with about 120 employees is getting an experienced - and familiar - leader. She served as director for 25 years, retiring six years ago, according to Jennings. Knight spent more than 27 years with the agency and became director in 1994.
Jennings suggested that Knight deserves the blame for the failure to pay taxes: "The accountability we were looking for certainly has to be Edith."
Knight, however, denied that she misled the 13-member board, which includes members appointed by Owens, Johnson and state delegates.
"The information my fiscal director gave me is that things were OK, and that's the information I forwarded to the board," she said.
Knight also blamed external factors for the confusion.
"I had five directors of the fiscal department in the short period of time I've been executive director," she said, noting low pay.
"In addition to that, we purchased an accounting system that was not functioning; then we had to purchase another one and redo two years' worth of work. It was difficult to determine what was going on."
Knight said the decision to step down was hers.
"I had planned to retire anyway; since this happened, I decided to just go on and do it."