Seven years of deficits lead to center’s problems with IRS

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By Becky Barnes


For at least the past seven years, the Harrison County Commission on Aging’s Senior Citizen Center has operated at a deficit which lead to a city and county bailout of delinquent payroll taxes owed the Internal Revenue Service.

According to records released following an open records request by The Cynthiana Democrat, it appears troubles began in 2007 with a over $4,000 more expenses than there was revenue.

However, Tracy Whitaker, director of Senior Citizens, said the problems could have been going on even before that, but the records she has begin with 2007. Those, she also said, may be incomplete because a new accounting system was initiated during the 2007 fiscal year.

Subsequent years the deficit rose to as much as $38,752 but never lower than nearly $16,000.

Whitaker took over as director in July 2012 after serving as co-director since 2011 and payroll clerk since 2007.

Whitaker and Dr. Beth Laytart, who serves as chairman of the commission on Aging, said Tuesday that as far as they could tell financial difficulties began in 2007-08 when the director at the time was charged with embezzlement.

Pamela Huff was prosecuted and has since been paying back the $8,800 that she was charged with taking from the  Senior Citizens Center.

Whitaker said that when she was hired as payroll clerk, that wasn’t really what she did. She said she was never allowed to handle payroll and took care of Medicaid billing and data entry.

In April 2008, Whitaker said she noticed some discrepancies in some of the books and took those concerns to county judge-executive Alex Barnett. The end result was charges filed against the terminated director.

“At that time there was close to $60,000 in CDs,” Whitaker said referring to the center’s cash reserve.

Laytart, who was appointed to the board in 2008, said a $25,000 CD was cashed right before she joined the board. That was followed by a $20,000 cash in and another for $10,000 to pay bills and meet payroll.

“We have no cash reserve now,” Laytart expressed.

Whitaker contends that the center’s financing was set up to fail from the start.

The building was constructed in 1996-97 with city and county ownership.

The Senior Citizens and Community Action are paying rent.

Whitaker said the Senior Citizens’ rent is $1,517 monthly. Additionally, any maintenance and repairs needed are at the expense of the Senior Citizens, not the city and county.

Laytart and Whitaker explained that when the building was new and there were no repairs to be made, it wasn’t such a bad arrangement.

However, since February 2012, there have been $23,836 repairs and a new roof is still needed.

Whitaker said ideally the city and county will refinance the balance owed on the building, which is about $350,000,  and the lease can be renegotiated.

“Most centers, which are non-profit, are not paying rent,” Whitaker said.

The city and county each contribute to the center’s budget. The county gives $19,500 annually and the city gives $12,000.

Most revenue for the center comes from the state through the Blue Grass Area Development District, which was budgeted at about $158,000 during the 2011-2012 fiscal year. Another $150,000 comes from Medicaid.

The biggest expense is salaries, which amounted to $256,383 in 2011-12.

Whitaker’s salary is $31,200 annually. The highest paid employee is a full-time nurse who earns $33,280. She said employees have not had a raise in five years.

She said that this year is the first opportunity the center has had to get out of contracts that were started five years ago and were a drain on the center’s finances.

She explained that they were paying $200 a month for elevator inspections and $10,000 over a 5-year period for a copier that even at the end of the five years, they still did not own the equipment.

“I just feel like we’ve been cleaning up problem after problem after problem,” said Laytart.

According to senior citizens’ records, revenue has fallen every year since 2009. Expenses have also been cut, but not enough to stop the financial bleeding.

During this fiscal year, there is already a $29,590 deficit with three months remaining.

What brought the financial issue into the open was the recent request by the board of directors for the city and county to help pay for nearly $60,000 in unpaid payroll taxes.

“We were just going deeper and deeper,” Whitaker said of the taxes.

She said she contacted the Internal Revenue Service when she took over asking how best to resolve the problem.

She said she was advised to pay on the oldest bills, going back to 2010, according to IRS documents acquired with the open records request.

Payroll taxes went either unpaid or partially paid during the final three quarters of 2012 and the first quarter of 2013.

“Our goal was to keep services going,” said Whitaker. “We were robbing Peter to pay Paul.”

Unpaid payroll taxes now total $43,452.57. With fines and interest, total amount due to the IRS was $58,697. However, with IRS abatement, the debt was lowered to $45,995.42 of which the county and city will split.

Now, Whitaker said it appears the center will have to cut services or find another agency to take over.

“We’re trying very hard to find a solution,” Laytart said. “We cannot continue to operate at this rate.”

Responding to Cynthiana City Commissioners’ question of will the Center be in the same shape next year and need city and county to bail them out, Laytart said no.

“We won’t be in this shape next year, one way or another,” she said.

Laytart said they are looking at Blue Grass Community Action Partnership (CAP) to take over the Cynthiana programs as well as looking at offering fewer programs.

“We want what is best for our seniors,” Whitaker said.

Laytart added that the building issue may be a deal breaker for CAP in that they operate rent-free in other counties.

“I’ve tried to do my best by the seniors,” said Whitaker. “We have a wonderful staff. I’d hate to see the center go out.” 

Whitaker said if she could go back she didn’t know if she could have done anything differently.

 “My heart was in the right place,” Whitaker said.