Chattanooga auditor: Multicultural Chamber in financial straits

Chattanooga auditor: Multicultural Chamber in financial straits

July 13th, 2011 by Cliff Hightower in News

John Taylor and former City Council Chairman Yusuf Hakeem speak regarding the defunding of the Multicultural Chamber of Commerce by the Chattanooga City Council during a meeting Tuesday evening in Chattanooga, Tenn. The council ultimately decided to cut funding of the agency.

Photo by Jenna Walker/Times Free Press.

REVIEW FINDINGS

A review by the city's internal audit department raises 18 questions about the management and financial oversight of the Tennessee Multicultural Chamber of Commerce. Some of the issues detailed in the report include:

* The Tennessee Multicultural Chamber of Commerce received more than $500,000 in federal funds never used;

* The organization's travel expenses totaled in excess of $13,000 per employee, more than other similar non-profit organizations;

* The salary and compensation of Executive Director Sherrie Gilchrest exceeds other similar non-profits;

* The chamber appears to be in significant debt;

* The chamber purchased two properties for almost $580,000, yet the value of the properties is about $211,000.

Source: City of Chattanooga

The Tennessee Multicultural Chamber of Commerce has been operating in the red for years and has made questionable financial decisions, including receiving federal money without completing the project the funding was slated for, a city review states.

City Auditor Stan Sewell wrote the Chamber's "management and board have made extravagant expenditures and obligated the organization to excessive liabilities at a time when liquid assets were virtually nonexistent and operating losses were consistently incurred.

"Even with continued funding from the County and City, the organization's ability to continue as a going concern should be questioned."

But a Chamber board member and former city councilman questioned the 21-page review to Mayor Ron Littlefield on Tuesday night, saying Sewell never talked to the executive director of the organization, Sherrie Gilchrest, or to board members.

"It was a document taken without her opinion," said John Taylor. "She can answer every question."

City and county officials cut budget allocations to the Tennessee Multicultural Chamber of Commerce this year after questions emerged in a Chattanooga Times Free Press investigation about financial data the organization provided to both governmental bodies, as well as on federal tax forms.

The review of records found contradictory data reported on different forms over a period of years.

Board members appeared before the City Council on Tuesday night to ask for the $75,000 annual allocation to be reinstated.

Council members said they would review the city auditor's report and asked that Chamber officials come back next Tuesday with answers to 18 questions detailed in the review and a copy of the latest Chamber audit.

Board members on Tuesday pleaded with the council to restore funding, saying the organization helps minority business owners in the community get a leg up to compete against larger, more established businesses.

"This Chamber, sad to say, is recognized more outside of the city of Chattanooga than it is here," said Gerald Mason, a former member of the organization's charter committee.

Auditor findings

Document: Internal audit of the Tennessee Multicultural Chamber of Commerce

Internal audit of the Tennessee Multicultural Chamber of Commerce.

The auditor's review, released just before the council's regularly scheduled business meeting, includes a laundry list of questionable financial and business dealings and concerns over use of federal money.

Gilchrest received a salary from $134,000 to $146,000 annually over a three-year period, the review states. Sewell compared the salaries to two other nonprofit organizations - Big Brothers, Big Sisters and the Partnership for Families, Children and Adults Inc. - and found her salary is more than double the directors of both organizations.

His review also found that the Chamber's travel expenses totaled almost $27,000 per year, or about $13,000 per employee. Big Brothers, Big Sisters, which has about the same budget as the Chamber, has a $8,100 travel budget or about $630 per employee.

The review also found that the Chamber had gone into debt considerably and appeared it funded its operations by increasing its credit line over a period of four years.

"It appears these consecutive and persistent losses from operations were funded by increases in debt," Sewell wrote.

The review also found the Chamber purchased two pieces of land for almost $580,000, but the value of both parcels totaled about $211,000. In one instance, the Chamber bought a parcel valued at $46,600 for $250,000, property assessor records show.

The organization also received $545,000 in grant money from the U.S. Department of Housing and Urban Development for a Business Solutions Center in the 2005-06 fiscal year. The review states $306,400 was spent on the $4.4 million project. About $200,000 was spent on land acquisition, while another $106,400 was spent on planning, administration and project management.

The Chamber received another $238,000 but it is unclear what the money has been spent on.

"A physical inspection of the land shows no signs of project activity," Sewell wrote. "There were no expenditures on the project during the fiscal years ending June 30, 2008 or 2009."

Reaction

WHAT ELSE HAPPENED

The City Council voted 7-2 Tuesday night to approve a budget with appropriations of $19.3 million to agencies once funded jointly through the now-defunct sales-tax agreement with Hamilton County. Councilman Russell Gilbert and Councilwoman Deborah Scott voted "no." The amendment to the current year's budget went through first reading; a second reading is scheduled for next Tuesday.

Gilchrest did not attend the council meeting.

Taylor said afterward the Chamber's board of directors also will go to the Hamilton County Commission on Thursday to ask for restoration of funding.

He said the Chamber would not comment on the auditor's review until it meets with the council and commission to give them answers to the questions raised by Sewell.

Councilman Jack Benson said he would not support funding the agency until he gets some answers.

"Until the questions produced in this document are answered, we would not be good stewards of the taxpayers' money," Benson said. "You've got some real problems."

Taylor said the Chamber would respond fully.

"I will assure you every question will be answered," he said.