"No one wants to be in the position to repay money or to go back to the drawing board," said Brian Sullivan, a spokesman for HUD.
In the wake of the controversy, City Council members and city commissioners say they need to use extra discretion in future federal funding allocations.
"This whole chapter with New Horizons is something that we look at as a lesson, I suppose, and makes us more cautious, I think, as to how we allocate funds," said Councilman John Drayman.
'Big warning signs' While the degree of New Horizons' money troubles did not surface publicly until this year, financial records show they had been brewing long before Rochart abandoned plans for the new child-care facility.
As of July 31, New Horizons owed about $153,000 in back payroll taxes, according to financial records submitted to the city.
The nonprofit also had $338,000 in outstanding loans. Records show Rochart's family members held the majority of the outstanding loans — nearly $300,000.
Records also show multiple lines of credit, overdrawn bank accounts, several years of running at a deficit, no significant savings or an updated financial audit — all signs that finance experts said point to major cash-flow issues.
Sandra Miniutti, vice president for marketing and chief financial officer of Charity Navigator, an organization that evaluates nonprofits, said operating so thinly leaves organizations with little safety net.
"If they are always scrambling to make payroll, how ambitious can they be?" she said. "Those are big warning signs."
When evaluating a nonprofit's financial sustainability, Miniutti said she and other officials look for a "rainy-day fund" that could support at least six months of operations.
New Horizons had no cash savings, with center facilities and the vacant Maryland lots making up the majority of the organization's assets.
Miniutti said overly ambitious expansion plans likely added to the financial problems.
"I think that's where a lot of charities go astray," she said. "They don't really accurately consider what costs are involved and plan for that."
Rochart said she and her board of directors had been kept in the dark on the growing financial problems for several years.
"My mistake was leaving this in the wrong hands," she said. "I don't know anything about finances … I got the grants, the fundraising. I brought the money. Someone else was handling the books."
While she would not name her accounting administrator, the unpaid payroll taxes appear on financial records at around the same time as the departure of former New Horizons Controller Aristedes Ferral. He could not be reached for comment.
Now, Rochart said she is looking to rebuild as the nonprofit consolidates operations to its youth center on Glendale Avenue.
"We are having financial difficulties. It's been coming. It's not like it happened overnight," she said. "But I thank God we're still here."
