Group revokes HERO's status

AIDS organization faulted on accounting, safeguards

Agency loses endorsement

July 10, 2004|By Dennis O'Brien | Dennis O'Brien,SUN STAFF

An agency that monitors area nonprofit groups has revoked its endorsement of a well-known Baltimore AIDS organization -- the agency's first revocation in five years -- citing several questionable practices.

The Maryland Association of Nonprofit Organizations notified the Health Education Resource Organization yesterday that it had revoked its "seal of excellence" for at least a year because its review had uncovered questionable accounting practices and insufficient safeguards to prevent conflicts of interest in the way money is spent.

"We don't wish this to be perceived as disparaging the quality of the work the organization is engaged in," said Peter V. Berns, executive director of the association. "We just hope and assume the organization will take these concerns seriously and take the steps necessary to correct the problems."

FOR THE RECORD - An article Saturday about Health Education Resource Organization, a Baltimore AIDS support group, incorrectly reported the number of board members who have resigned or whose terms have expired. The correct number is eight.
The Sun regrets the error.

Berns would not say whether government agencies or individuals should stop contributing to HERO. "The important thing," he said, "is how this organization responds and what changes they make to address these issues."

Berns said the revocation is the first since the association began monitoring nonprofit groups and issuing such seals five years ago. About 48 nonprofit agencies in Maryland have the seal of excellence, a designation that means the organization meets "a very rigorous set of standards" for how it operates, Berns said.

HERO's troubles began in mid-March when the organization fired its deputy director three days after she accused the executive director, Leonardo Ortega, of misusing agency money.

Ortega has denied the claim.

But four board members have resigned since March, and six employees, including the agency's fund-raising coordinator and its housing services director, were laid off last month.

The agency -- which provides medical and legal help, counseling and other services for 3,400 clients with HIV and AIDS in Baltimore -- gets the bulk of its budget of more than $4 million from government sources.

HERO officials declined to comment on the revocation yesterday. Neither Ortega nor his chief assistant returned repeated telephone calls yesterday.

Bernard S. Denick, HERO's lawyer, said that he hadn't seen a copy of the association's final report, but that two previous audits by the state and Baltimore had found no accounting improprieties. HERO continues to receive individual and government donations, he said.

"The organization is continuing to receive funding, their doors remain open, and the needs of the public are being served," Denick said. "I'm not aware that any funding has been reduced, suspended or denied."

The state said an audit revealed that $50,000 in Maryland AIDS Administration grant money was properly spent. And the city, through which $1.4 million in federal funds flows to HERO, has decided to continue providing funds after a review.

The association's review, which covered the accounting and conflict of interest policies at HERO for the past 18 months, found that the agency violated five standards set by the association's oversight committee. They were:

Insufficient oversight of how Ortega was compensated. Only HERO board President Carlton R. Smith was making decisions regarding Ortega's salary, now $122,000, while there should have been an executive committee or board review of his compensation.

Failure to prevent conflicts of interest that allowed Ortega to approve a $3,000 loan to Centro de la Comunidad, an East Baltimore Latino organization for which he serves as board chairman. Berns said that the loan wasn't improper, but that it should have been approved by a disinterested board member.

Ortega bought tickets to political fund-raisers for two candidates and was reimbursed by HERO. Berns declined to identify the politicians, but said such reimbursement violates federal rules that prohibit nonprofit groups from engaging in political activity.

Travel advances of "several thousand dollars" were disbursed for about 10 trips over 18 months for which there was insufficient record-keeping -- no employee receipts -- to show whether the advances were spent on the trips. There also were several hundred dollars worth of airline tickets bought with a corporate credit card for personal trips.

HERO's accountants failed to report the compensation paid to Ortega's personal trainer as income in kind in annual reports to the Internal Revenue Service. Such benefits have to be reported as income to employees. The amounts HERO submitted to the IRS for the trainer also failed to disclose the full amounts that the trainer had been paid, Berns said.

Berns said HERO was notified of the audit's findings several weeks ago and given time to respond. He said a letter was delivered to HERO's offices yesterday notifying the agency of the association's decision.

HERO can reapply to be placed in good standing by next July, if it shows that it has addressed the deficiencies, he said.

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