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New controls for nonprofits are worth it

February 04, 2011|By Jason Wells, jason.wells@latimes.com

Added oversight controls approved this week for nonprofits applying for federal grants may seem like another regulatory burden, but as the now-closed New Horizons Family Center clearly showed, better safe than sorry.

In that debacle, what was thought to be a solid nonprofit player in Glendale got hundreds of thousands of dollars in federal Community Development Block Grants funneled its way for an ambitious expansion plan that ultimately led to its demise. Despite promises of financial backing and pressing ahead, New Horizons was on the brink of financial insolvency, even as city officials channeled block grants toward the project.

New Horizons has since closed its doors and promised to pay the money back, but the lesson was clear: No matter how popular a nonprofit may be, due diligence must be upheld.

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As Councilwoman Laura Friedman pointed out, given the still-depressed economy and competitive nature of the federal grant program, “we can’t be in the position where we are spending speculative money.”

Surely, the vast majority of local nonprofits do cross their Ts and dot their I’s and have the book-keeping to back it all up, and so the additional requirements — quarterly performance reports for grant-funded construction, two-year financial audits and slashing “predevelopment” costs from the eligibility list — shouldn’t be such a heavy burden on already tightly run ships.

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