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Citing fiscal mismanagement, Commissioner Jo Ann Hardesty strips Southwest Neighborhoods Inc. of its current duties.

PMG FILE PHOTO - The Multnomah Arts Center in Southwest Portland houses the offices of Southwest Neighborhoods Inc. The district coalition no longer will be responsible for serving the 17 Southwest Portland neighborhood associations it previously oversaw. After months in financial limbo, Southwest Neighborhoods Inc. will no longer be responsible for providing services to the 17 neighborhood associations it previously served.

Citing the results of an alarming forensic audit and "ongoing financial management concerns," Commissioner Jo Ann Hardesty announced Wednesday, Feb. 24, that groups previously receiving sponsorship and services from Southwest Neighborhoods Inc. (SWNI) should now report directly to the city.

"As a result of audit analysis and staff briefings, I am recommending that the Office of Community and Civic Life provide services to the community members and neighborhood associations currently served by SWINI, effective immediately," Hardesty said. "The results of the audit, and staff briefings have proven that there has been substantial mismanagement of public money. As an elected official, part of my job is to ensure taxpayer money is being utilized responsibly."

PMG PHOTO: JONATHAN HOUSE - Portland Commissioner Jo Ann Hardesty speaks during a press conference in 2020. Hardesty announced Feb. 24 that the duties of Southwest Neighborhoods Inc. would officially be taken over by the city's Office of Community and Civic Life. City records show that from 2009 to 2019, SWNI received $3.17 million in non-competitive city grant funds. This marks the third time the city has stepped in to take over management of a district coalition. Portland has seven district coalitions. Until Wednesday, two of them were run by city staff.

The decision effectively means those associations will now report to the city's Office of Community and Civic Life, but exactly what services and support the city will provide remains unclear. Hardesty met with the SWNI board to deliver the news directly, but offered few answers and little advice for the groups on how to proceed.

The commissioner advised neighborhood groups to check with a staff member at the Office of Community and Civic Life, which oversees grant contracts with district coalitions like SWNI. Hardesty was given oversight of the Office of Community and Civic Life bureau earlier this year.

Soon after she was assigned the bureau, Hardesty made no promises to SWNI's board about the future, instead saying she was evaluating the Civic Life bureau and the district coalition model.

The following month, she returned to inform the board that the City Council would be convening March 3 to consider a plan to hire two additional staff members to help service the Southwest neighborhood groups, essentially relieving SWNI of that role.

"What I want you to know tonight is that the service of district coalitions are very valued by myself and my colleagues," Hardesty said, noting the decision only applies to the Southwest Portland coalition and she is not currently considering any similar actions for other coalitions in the city.

SWNI currently provides administrative services to the neighborhood groups, including insurance and banking services. Most of the associations keep their money under SWNI's management because they don't have nonprofit status.

When asked who would take over the management of the associations' finances, tax filings and insurance, Hardesty said that was beyond her purview and encouraged each association to look for "other partnerships."

"That's your relationship with SWNI. I'm only talking about the city's relationship with SWNI," Hardesty said.

Some pressed Hardesty for a better explanation.

"What exactly is Civic Life going to do for neighborhoods?" Mike Linman asked. "Because it seems the main thing SWNI did, Civic Life is not going to be doing for us."

Others shared concerns and disappointment, noting the district coalition provided essential services to all-volunteer neighborhood groups that often struggle to find enough volunteers to carry out business.

"I am really disappointed by this decision," Mike Charles of the Marshall Park neighborhood said. "SWNI has done so much for my neighborhood association, since I've been involved with it for the last 16 years. …The fact that you've decided to tear it all down rather than work with SWNI to address the issues and problems … I just find that really disappointing."

"This was not a rash decision," Hardesty said. "I didn't come in with my mind made up. What I did was my due diligence. What I did was review years of documentation, years of audits, years of non-accountability, with how the dollars were utilized, the banking systems, the oversight."

Richard Freimark of the Bridlemile neighborhood suggested Hardesty was punishing Southwest Portland for being an affluent quadrant of the city.

"I think you sit here in front of us and tell us that you've done your homework, and you should be able to answer our questions instead of just redirect us to somebody in Civic Life, that you are not taking your responsibility as a commissioner," Freimark told Hardesty. "You're simply slipping it off to somebody else who's going to say, 'I can't help you. It's up to the commissioner.' I think you're a slap in the face of everybody who lives on the west side. I think because we pay more taxes than anybody else, you're jealous. I think that we're not being represented by you, in this organization, and I think you're lying to us."

Freimark was quickly interrupted and chastised by other board members for the comment.

Hardesty's decision was delivered seven months after the City Council voted in July not to renew SWNI's funding contract and instead order an independent audit of the organization.

In the absence of a city grant contract, which previously accounted for nearly all of the nonprofit coalition's funding, SWNI took in just over $39,000 in private donations from July to January 2021, financial reports show. The organization has repeatedly declined to disclose the source of the donations, citing donor privacy.

In January, citing dwindling finances, SWNI's board voted to lay off its employees, keeping only a part-time bookkeeper on staff. A few weeks later, in an attempt to make good with the city and try to get contract funding restored, the organization's board outlined a 10-point plan for improving its relationship with the city, as well as some of its routine processes. The memo primarily suggested greater oversight, periodic audits and feedback from the city about SWNI's processes. Hardesty followed up her announcement Wednesday with a memo to city commissioners, highlighting problems beyond the audit.

"Most recently, SWNI's President has communicated an action item to work with the Department of Justice to determine ways in which to exclude some neighborhood associations from the district coalition, a clear indication that SWNI is ill prepared to foster an inclusive environment for all neighbors," Hardesty stated in the memo. "I have also reviewed SWNI's proposed '10 Point Plan.' Upon review, the plan points out SWNI's inability to self-manage their organization in a functional way. The plan requests a burdensome level of oversight and additional funding from the City, that is entirely inappropriate for an independent outside entity."

Hardesty isn't the only one with concerns about the coalition's management of taxpayer dollars. Three different board members questioned a pattern of errors in the organization's monthly financial reports, saying they had no confidence in the financial reporting of SWNI. They were met with heavy criticism.

Following Hardesty's bombshell announcement Wednesday, the board was split on how or whether to proceed with its business.

"We are still a nonprofit and we still have our same responsibilities for the moment," SWNI vice president Steve Mullinax said. "We're going to see how we manage this transition and how we move forward from here."

Board President Leslie Hammond was absent from the meeting.

This story has been updated with additional documents and reporting.

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