State says investigation into nonprofit executive pay is ‘not a witch hunt’

Florida’s top auditor told a House committee that the state probe into the compensation of executive salaries at social welfare organizations was not “any kind of witch hunt” but instead was an attempt at “bringing transparency to the process” of state and federal funds used by privately run entities.

“We are on a fact-finding mission, doing research so that the policymakers such as yourselves can decide what to do with the facts that we reveal,’’ Melinda Miguel, the chief inspector general for Gov. Ron DeSantis, told the House Governmental Operations Subcommittee on Wednesday.

A preliminary report released in January found that nine nonprofit organizations, all contracted by the Florida Department of Children and Families, appeared to be spending millions compensating executives above the limits allowed by state law.

Although the information provided to DCF all came from the private organizations themselves and was based on a questionnaire developed by the Office of Inspector General, several of the organizations challenged the conclusions of the report and mounted a public-relations campaign to counter it.

Some suggested that the preliminary findings threatened their nonprofit status with the IRS. Others suggested it was harming their fundraising ability as donors raised doubts about the management of the money.

Miguel attempted to assure lawmakers that the findings were just the first part of a more lengthy look into “excessive” compensation for executives who run private social welfare organizations contracted by the state to manage millions of dollars in state and federal funds.

A week before, she had sent a letter to executives of the organizations reminding them that the findings were preliminary.

“Just to be clear, the intent for the CIG’s [chief inspector general] preliminary report is to show where we may receive a request for further review or verification. However, nothing within the document is final,’’ she wrote. Her office and the agency inspectors general, were “continuing their review of the entities that were either in non-compliance or appeared to have excessive compensation or are requested by the agency for further review.”

Miguel and DeSantis have found themselves on the defensive after the governor ordered state agencies in February 2020 to do a thorough review of the annual compensation of all not-for-profit organizations that receive at least half of their budgets from state and federal funds or have single-source contracts with the state.

Outrage over Tiffany Carr spawned inquiry

The investigation was launched after Miami Herald reports and a House of Representatives investigation found that the Florida Coalition Against Domestic Violence paid its chief executive officer, Tiffany Carr, more than $7.5 million over three years.

Miguel told legislators that while it is her job to establish the facts, it will be up to legislators to decide what is considered “excessive” compensation for organizations that “do the Lord’s work” once her report is complete.

Since 2012, when then-Gov. Rick Scott, a former CEO of a for-profit hospital chain, started raising questions about executive compensation at FCADV, Florida legislators continued to allocate money to the privately run and often politically powerful social services organizations without asking questions about their compensation practices.

In 2015, a Department of Children and Families audit found questionable practices relating to salary compensation at community-based care lead organizations, including bonuses and severance pay or leave balances that were not supported by state law. Legislators that year also ignored the findings.

Only in 2017, when Scott proposed a sweeping update to child welfare statutes did lawmakers adopt a cap on the amount of money executives could make: no more than 150% of what the secretary of DCF makes, which would translate to $213,819.

But legislators continued to overlook the issue. In July 2018, the Miami Herald first reported that six years after Scott started raising questions, Carr, the CEO of the domestic violence coalition, was receiving an annual salary of more than $761,000, which included questionable bonuses and compensation packages.

Only after DeSantis came to office and then DCF-Secretary Chad Poppell started demanding that FCADV turn over documents to agency auditors, did details emerge about the extent of the excessive compensation going to that organization.

After months of obfuscation, FCADV turned over documents, revealing for the first time that it paid Carr more than $7.5 million from state and federal funds — including nearly $5 million in cash compensation for “paid time off.”

The extensive review, conducted over 10 months by Miguel’s team, offered a window into the lucrative nature of the state’s 20-year push to privatize state services. It found that $3.9 billion in state dollars and $3.4 billion in federal dollars flowed into 839 organizations that have sole-source, public-private agreements with a state agency.

Of those organizations, 165 were named in a state statute, which gave them added budgetary protection, and 675 receive 50% or more of their budget from the state or from a combination of state and federal funds.

The inspector general’s report also found another two organizations that contract with the Department of Education’s Office of Early Learning but, before the preliminary report was made public, those organizations returned the excessive compensation. They included the Early Learning Coalition of Miami-Dade/Monroe County which returned $29,811 in funds, and the Children’s Forum which returned $14,391.

The report also found that state oversight by DCF and other state agencies as well as legislators had been woefully inadequate.

Auditing deficiencies

Although state law required 194 of the organizations to submit annual audits to the state, 154 of them did not. Only 39 had been audited and one had an audit pending. The agency with the most outstanding audits was the Department of Education with 26 audits missing.

Rep. Rick Roth, a West Palm Beach Republican, asked Miguel to detail the preliminary findings of her review into the other nonprofits, but she was interrupted by Rep. Cyndi Stevenson, the vice chair of the House committee, who is an auditor.

“I’ve had complaints to my office that some of these things aren’t accurate, and I’d like to give her a chance to get the good numbers so that we can be sure that we’re not load, fire, aim,’’ Stevenson said.

The governor’s executive order asked the organizations to report back “salary, bonuses, cashed-in leave, cash equivalents, severance pay, retirement benefits, deferred compensation, real-property gifts, and any other payout” to the executives.

As a result, some organizations said they produced information that appeared to show higher compensation than was actual.

For example, Community Based Care of Brevard in Melbourne paid its CEO $266,471, which is $52,651 over the allowed amount. The organization’s current CEO, Phil Scarpelli, told Florida Today that his predecessor, Patricia Nellius, was paid $93,991 as part of a separation package, and that amount appeared on the IRS 990 form the state received. He said the voluntary separation package was approved by the community board governing the organization and did not come from state or federal funds.

In Miami, Citrus Health Network President and CEO Mario Jardon and Citrus Health Network Board of Directors Chair Patricia Croysdale also disputed the preliminary report, which said that Jardon was paid $360,840 in excess compensation. They noted that the Citrus Health contract began in July 2019, but the state report appears to have used compensation data from tax documents ending in June 2019 and that Jardon’s salary, and that of Chief Operating Officer Maria Alonso, “do not come from state funds allocated to Citrus as the lead agency, and are provided at no cost to the state.”

Miguel told the House committee that the documents used by her office were those provided to DCF by the private organizations.

In Sarasota, the Safe Children Coalition said that the preliminary finding that showed it paid its CEO $39,019 more than allowed was inaccurate. In 2019, the organization discontinued fitness branches and changed its name. The current CEO, Brena Slater, has a salary that is “well below what is allowable by law.”

In Tallahassee, Big Bend Community Based Care CEO Michael Watkins was reported to have made $577,573, which the state says is $363,753 more than is allowed by law. But Reginald Johns, chair of NW Partnership for Better Communities, a private nonprofit administrative support organization working with the entity said that the state erred when it incorrectly identified Watkins as an employee of Big Bend Community Based Care.

“He is not,’’ Johns said in a statement. “He is the CEO of a private corporation overseeing a $130,000,000+ budget with revenues from multiple sources and with multiple enterprises across 18 counties.”

In Clearwater, the preliminary OIG report found that the CEO of Eckerd Youth Alternatives in Clearwater made $654,445 in excessive compensation. But V. Raymond Ferrara, chair of the board that oversees the affiliated Eckerd Connects, said in a statement: “We believe Eckerd Connects is complying with state requirements, and we look forward to cooperating fully with Office of Inspector General in their review.”

In Yulee, Robert Miller, CEO of Family Support Services of North Florida, said in a statement that the $40,746 the OIG said he received in excessive compensation was an “incentive payment” for one year in which he did some outside consulting but was not charged to the DCF contract.

“The difference comes from other services our foundation performs and not from any contributed or grant funding,’’ he said.

And in Pensacola, Lakeview Center President and CEO Allison Hill said in a statement that the state appears to be applying the statutory cap “broadly” to the organization instead of solely to the organization’s contract with the state.

Miguel says there’s a ‘gray area’

Miguel acknowledged that the preliminary findings raised questions and underscored the complicated way in which nonprofits operate.

“I think that there’s going to be a lot that shake out in a gray area,’’ she said. “Because if you get multiple grants from multiple agencies, there’s a different set of criteria.”

She promised that the organizations will have ample time to respond to the state’s findings.

“We will make sure that we treat everyone with dignity and respect,’’ she said. “We look forward to their cooperation in bringing transparency to the process. We are not on any kind of witch hunt, we are on a fact-finding mission, doing research so that the policymakers such as yourselves decide what to do with the facts that we reveal.”

The next step, Miguel said, is that state will meet with executives of the organizations to discuss what kind of information they are seeking and next will conduct a survey, asking them to provide detailed records that will allow auditors to examine their data. State auditors will then conduct interviews as needed and prepare a preliminary report to which they will have at least 20 days to respond.

“I vow to you we will give them that opportunity for that response,’’ Miguel said.

This story has been updated to include the amount of money returned by the Early Learning Coalitions and to remove the Hillsborough County Early Learning Coalition, which state officials said was initially included in the preliminary report because of an error.

Mary Ellen Klas can be reached at meklas@miamiherald.com and @MaryEllenKlas