An organization tasked with training unemployed workers and at-risk youths might have mismanaged millions of federal tax dollars, and local governments could be on the hook to repay the money, according to a recent audit obtained by the Review-Journal.

The Southern Nevada Workforce Investment Board sends a portion of the federal dollars it receives each year to a small group of nonprofit organizations to train unemployed people and at-risk youths. However, according to the audit commissioned by the city of Las Vegas and Clark County, some of the groups have refused to account for how the money was spent, as required by law.

"Other than a complete disregard for government accounting standards and financial principles, ignorance or disdain for the taxpayer, the consultants know of no legitimate reason for ... allowing for these deplorable practices," the auditors said.

Auditors also noted that some of the nonprofits receiving contracts have close ties to the board.

Among the ties cited by auditors:

• Nevada Business Services Inc. received $16.8 million after Richard Blue left the nonprofit in 2000 to become executive director of the Workforce Investment Board, according to the audit. Nevada Business Services recently dissolved, leaving nearly $370,000 in debts that local governments might have to repay.

• Nevada Partners Inc. received $10.4 million from the board. The nonprofit's president is state Sen. Steven Horsford, D-Las Vegas, who was on the Workforce Investment Board before resigning over the potential conflict of interest in 2004.

• A son of a Workforce Investment Board senior staff member and a daughter of a board member received contracts worth $200,000 and $34,000, respectively.

• The nonprofit Arbor Education and Training lost out on a bid, then hosted a reception at Wynn Las Vegas for the Workforce Investment Board. The group later received $800,000 worth of contracts.

Leadership with the Workforce Investment Board and Nevada Partners denied that contracts were awarded based on personal relationships.

In response to the audit, Gov. Kenny Guinn has ordered the board to prepare a reform plan, which is expected in the next two weeks.

The Southern Nevada Workforce Investment Board is made up of 32 members appointed by elected officials from Las Vegas, Boulder City and North Las Vegas and Clark, Nye and Lincoln counties.

Tasked with doling out federal grants to train hard-to-employ workers and youths, the organization, which has a staff of 21, has a current budget of less than $7 million. In past years, its budget has been as large as $14 million.

Nearly all of its money has come from the U.S. Department of Labor.

It is unclear how much of the money meant to help the poor get job training might have been misappropriated since the board was formed in 1999. But under the Workforce Investment Act, local governments are responsible to repay federal money that can't be accounted for, according to Terry Johnson, director of the state Department of Employment, Training and Rehabilitation.

But Blue, the Workforce Investment Board's executive director, downplayed the audit's criticisms.

"All of our contractors have accounted for their money. Their accounting practices could have been handled better," he said. "We can do better. We'll look at (the audit) and see some recommendations that can be addressed."

Workforce Investment Board Chairman Robert Brewer, who is also an executive with Southwest Gas Corp., said he didn't know of any misappropriated funds.

"There are broad assumptions (in the city and county's audit), and if there are specific misappropriation of funds, the consultant needs to say what they are," Brewer said. "There are no problems that are not fixable."

Johnson, the state Department of Employment, Training and Rehabilitation director, said one of the biggest obstacles to reforming the organization is that those associated with the board don't grasp the seriousness of the allegations against it.

"They have been less than responsive to making changes," Johnson said.

The audit by the city and county's consultant, Bill Kirchoff, recommended that the board of directors be removed and the staff temporarily placed with other agencies for mentoring.

Where the board "misses the mark the most is with its haphazard, unprofessional and frivolous management of public monies," according to the audit. "There are too many instances where inadequate paper trails or documentation does not exist for where money is going, who received it and who authorized it."

Guinn, however, has decided the board should stay. "I am willing to provide the board with one final opportunity to improve the management and operation of the organization," he wrote in a letter to Brewer.

The state is conducting its own in-depth investigation after a May 31 state audit found 21 irregularities with the board and its service providers. After the new state audit is complete, more should be known about how much money isn't accounted for or has been used for unauthorized costs, Johnson said.

When reached by the Review-Journal this week, Workforce Investment Board leaders and some representatives of the nonprofits denied that close ties have played a role in the distribution of federal dollars, as the audit suggests.

Pamela Egan, chief financial officer for Nevada Partners, denied the accusations against her group in the state's audit.

"The issues raised there are erroneous," she said. The contracts awarded to her group were through a competitive bid process, she said.

Horsford, a state senator and former member of the Workforce Investment Board, did not return calls for comment.

The resident agent for Nevada Business Services, Phung Jefferson, did not return a call for comment.

Blue said that despite problems with Nevada Business Services, including its failure to provide a required audit for the past two years, its success at training workers outweighed the risks of giving it money. Nevada Business Services folded just weeks after receiving more than $1 million from the Workforce Investment Board. The board later rescinded the grant.

The audit questioned at least two contracts the board awarded to children of board members or staff.

Thornton Boulware, the son of Rosalie Boulware, the senior staff member responsible for contract compliance and procurement, received a $200,000 contract for work from Feb. 1, 2005, to Jan. 31.

Blue said Rosalie Boulware recused herself from being involved with her son's contract.

Simone Pitts, daughter of board member Rose Kelly, was given a $34,000 contract by the board.

Kelly said she had no knowledge of the contract awarded her daughter. "She's a grown woman. She has her own place," Kelly said Friday.

Neither the county nor the city of Las Vegas would estimate how much money they could be forced to repay to the federal government.

The state audit by accounting firm Solari and Sturmer also didn't reach any conclusions on the potential costs to local government.

But among the state's findings were $6,875 in inappropriately spent federal funds. The expenditures included a $75 corkage fee at The Mirage, $3,600 in "entertainment expenses" for a nonprofit event and $1,250 for the NAACP Freedom Fund Event.

Blue said the agency planned to dispute the contention that those costs were not allowed. The expenditures were for networking events that helped the Workforce Investment Board make connections with potential employers, he said.

Blue recalled an event Sept. 12 at The Mirage, the date of the $75 corkage fee, but said board members did not consume any wine or alcohol. A corkage fee is typically charged to patrons who bring their own bottles of wine to a dining establishment.

"That must be for soda or water," he said of the corkage fee. "We're going to dispute that with The Mirage."