Southwest Neighborhood Inc., a nonprofit that receives most of its funding through grants from the city of Portland, has been found to be a poor steward of taxpayer money, according to a new audit.

The 124-page report, delivered to the city Friday, digs into the financial records of Southwest Neighborhood Inc., commonly known as SWNI. The nonprofit is one of the city’s district coalitions tasked with fostering civic engagement and it oversees a cluster of neighborhood associations in Southwest Portland.

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After reviewing over 3,000 records including credit card statements, emails and checks, auditors with Marsh Minick, a financial crime consulting firm, said they found evidence that the group had mismanaged its money and exhibited what they termed a willful blindness to “noncompliance with governance documents, standards and ethics.”

Last year, a $307,000 grant from the city accounted for 85% of SWNI’s budget. But this spring, the city held off on funding the group amid financial concerns. Officials with the city’s Office of Community & Civic Life, which oversees Portland’s system of neighborhood associations, said SWNI wouldn’t turn over boxes of financial documents for review. SWNI’s leadership said the request was unreasonably large, with records dating back a decade. They planned to charge the city $31,885 in records fees.

With its funding cut, SWNI’s board members turned over reams of records to the city and a two-month long forensic audit was underway.

In a letter responding to the audit, the board’s officers said they had worked diligently to provide the records in hopes that the audit would be “fair and focus on the financial management system that SWNI has put in place following the fraud conviction of a former employee.” In 2011, police found a manager with the group had embezzled $130,000 and the manager was sentenced to three years in prison.

“Unfortunately, this does not appear to be the case,” the letter read. “It fails to recognize that there has been no financial wrongdoing since 2011 and does not acknowledge SWNI’s work to improve and strengthen its financial management system after the financial fraud.”

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The financial audit said the group’s top board members could have prevented the theft, pointing to a police report that showed five years elapsing between when Executive Director Sylvia Bogert discovered unauthorized charges on a business credit card in 2005 and when she brought the charges to the police. According to the report, Bogert opened up a personal credit card account to pay off the debt.

“The Executive Director’s delay in notifying police or the Board of $19,570 in unauthorized debt to a SWNI credit card exposed SWNI to continued embezzlement over a five-year period,” the report read. “The Executive Director continues to manage the organization.”

In an email to OPB, Bogert countered that she hadn’t known back in 2005 that the debt she had discovered was fraud. It was only years later they realized their their longtime office manager had been embezzling funds.

“It appeared SWNI had simply accumulated and failed to pay the principal on a high credit card balance,” Bogert wrote. “ I thought the expenses were legitimate and decided to take full responsibility for not being aware that the debt had not been paid off.”

The report also questioned the validity of a loan SWNI received through the Paycheck Protection Program. According to the report, the coalition received over $66,000 in funding from the program due to the pandemic, citing “COVID impact to budget & services.” The report states the funding from the city remained steady, and the group had enough money on hand to cover two to three months of paychecks.

“Forensic examination findings were that SWNI had marginal direct impact from COVID and that SWNI’s employee job security and paycheck funding was not in jeopardy due to COVID,” read the report.

In an interview, Suk Rhee, who heads the Office of Community & Civic Life and had pushed the coalition to turn over the records, pushed back against the perception of the audit as partial and said she believed laying bare the group’s finances was a step in the right direction.

“Although the findings were unfortunate, this is what the city needs to start doing in terms of safeguarding taxpayer dollars,” she said. “...It was a fair process and an independent one and it was one city council determined was necessary.”

Rhee said the council will be responsible for determining next steps.

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