Public’s trust on line after audit of Nevada Partnership for Homeless Youth

When it was created in 2008, the Homeless Youth Foundation set out to start an endowment that would help Southern Nevada's homeless children for decades to come.

Kathleen Vermillion, a longtime champion of the cause who had been a homeless teenager herself, fronted the fledgling fundraising arm of the Nevada Partnership for Homeless Youth, a charity she had founded and ran for most of the past decade.

The partnership gave more than $473,000 to fund the foundation's efforts since 2009, but after three years the foundation has little to show other than red balance sheets and a trail of bad press.

Vermillion's critics blame the failures on her wasteful spending. One of them, partnership Executive Director Arash Ghafoori, asked the state attorney general's office to investigate.

Vermillion blames the failure on a personal vendetta that torpedoed the foundation before it could become self-sustaining, which she said would have happened by the end of this year thanks to at least $2 million in pledged donations.

Now those potential donations are in limbo, Vermillion's reputation is in tatters, the foundation is being dissolved and the Nevada Partnership for Homeless Youth is trying to rebuild and regain the trust of donors who have shied away since the charity's dirty laundry went public three months ago.

"This is clearly a gut-wrenching thing for everybody involved at this point," said Jessica Word, a University of Nevada, Las Vegas professor and an expert on nonprofits. "That's the thing that gets lost in all of this. ... The sad part is people are going to lose trust in this organization, and they really were probably doing a lot of good for the clients. There are not a whole lot of other places in town that serve this client."

INTERTWINED FINANCES

When the foundation was incorporated, its first board included several familiar faces from the Nevada Partnership for Homeless Youth, including Assemblyman Marcus Conklin, D-Las Vegas, former Nevada first lady Sandy Miller and businessman Tim Herbst.

It was unclear whether the foundation received any partnership money before December 2009, when it was given a $150,000 transfer that was approved by the partnership's board. The same board also approved making Vermillion the foundation's chief operating officer, a job that would pay her $125,000 a year. That was her official, paying position although she was still heavily involved in the partnership.

In March 2010, the boards of both charities held their first joint meeting.

Over the next two years, the partnership transferred hundreds of thousands of dollars to the foundation. Much of that cash covered Vermillion's salary and expenses. It also included more than $60,000 that the foundation used to furnish and decorate the partnership's drop-in center near UNLV, where homeless youths can get services.

In Ghafoori's complaint to the attorney general's office, he questioned the transfers, saying the foundation's role was to generate cash for the partnership, not the other way around.

"The NPHY has no business transferring hundreds of thousands of dollars to HYF to pay Kathleen Vermillion a six-figure salary," he wrote.

The Homeless Youth Foundation's annual tax documents show it lost $25,272 in 2009 and $152,805 in 2010, the latest year available.

Jasen Cassady , a trustee for the foundation since 2008, said the boards expected the partnership to financially support the foundation through its first few years until it could generate a donation stream to support both itself and the partnership. The boards also approved her salary, he said.

"This was a startup, so it's not like we had a big (fundraising) network in place," Cassady said. "It was something she had to build up from scratch."

He said during his years on the foundation's board, he never heard any rumors or rumblings about any misspending or financial problems.

"As far as I knew, the foundation and the partnership were doing the things they were supposed to do," Cassady said, adding that the yearly audits never raised any questions.

The first Cassady heard of any potential issues was when Ghafoori went public with his allegations in January, he said.

SPENDING QUESTIONED

In his written complaint filed in January, Ghafoori accused Vermillion, formerly known as Kathleen Boutin, of using her unauthorized control over partnership finances to misspend the charity's money, including a $200,000 donation that was supposed to expand the drop-in center. He also wrote that at least one partnership board member resigned because of the financial concerns.

The partnership's mission would be "jeopardized if Ms. Vermillion is permitted to remain in de facto control of the NPHY," he wrote.

The partnership board fired Vermillion later that month after she tested positive for the drug methadone.

In an audit of Homeless Youth Foundation finances released recently, accountant Dennis Meservy identified several "personal like" expenses by Vermillion that "could constitute a violation of criminal and/or civil law."

Those expenses included airline tickets, spa days and clothing. Financial documents included with the audit also showed the purchase of a car for a homeless client with a "scholarship" fund and a trip to a California yoga institute.

Vermillion said if she made any personal expenses with foundation money, she reimbursed the cost. Those reimbursements were sent to the partnership, however, so they don't appear on the foundation's financial records, she said.

Those expenses included $507 in airline tickets for Vermillion's teenage daughter and a friend to visit Colorado last summer. Vermillion said that the tickets were an "error" and that she had reimbursed the charity.

Another transaction of note came during an April 2010 visit to the Palms spa, where $2,100 in facials and other services were racked up. Most of the cost was covered by gift cards, though the foundation paid the remaining $640.

Vermillion said that was the weekend of the partnership's bachelorette auction fundraiser and that her then-boyfriend, County Commission Steve Sisolak, donated the gift cards and reimbursed the charity for the remaining balance.

Sisolak said that one time he gave Palms gift cards to the charity's clients so they could get haircuts. When it came to donating to the foundation, Sisolak said that he gave money for a foundation scholarship fund but that most of his donations went to the charity.

Sisolak said he didn't know anything about a leopard purse Vermillion said she bought for a female client with foundation funds. Vermillion said Sisolak was with her when she bought the $225 purse at Brighton Collectibles in June 2010 for the client's birthday.

Other expenses over the two-year period flagged by the auditor included more than $8,000 in meals and more than $6,100 in gas.

ACCOUNTING RESPONSIBILITY

Vermillion said that those were all expenses that were approved by the board and that almost all of the money she spent through the foundation went to help homeless youths , including buying meals and clothes. She noted that there were only a few questionable transactions among thousands of documents in the audit.

The auditor also highlighted $1,900 in cash withdrawals as a concern.

Based on notes handwritten on the withdrawal receipts, the transactions appear to be for homeless clients to pay for rent, travel and other expenses.

Word, the UNLV professor, also questioned the cash withdrawals .

"That doesn't give you a good accounting record," she said. "It's hard to know where that cash went."

Nonprofits usually use cash accounts to pay for office supplies or make change at fundraisers, she added.

While the foundation audit raises questions about Vermillion's money transfers and spending, it also shines a spotlight on the financial oversight board members had when they approved the transactions, Word said.

"The board has the responsibility to manage and do oversight of the organization," Word said. "That includes legal responsibilities in overseeing those expenses and how the money is used. More often than a staff person being in trouble is the board being fined for not doing oversight appropriately."

According to the state attorney general's office "Guide to Nonprofits" publication, a nonprofit board is obligated to study charity finances, conduct investigations when necessary and ensure that funding is used to achieve the organization's mission.

"If an organization raises funds for a charitable purpose but consistently uses virtually all its income for administrative and promotional expenses with little or no distribution to the charitable purpose, the board has failed to exercise due care," the guide reads.

But in releasing the audit publicly, the foundation is "taking ownership of the situation by airing its dirty laundry," Word said.

LEADERSHIP TURMOIL

Most of the partnership's board members resigned amid the turmoil, leaving a few holdovers and some new faces to rebuild.

Meanwhile, the Homeless Youth Foundation is being dissolved.

For more than a year and a half, the two boards held regular joint meetings where the distinctions between the two were murky at best. Business from both charities was discussed and absent foundation trustees often gave their votes by proxy to members of the partnership board or even Vermillion herself, according to meeting minutes.

In his attorney general complaint, Ghafoori said the majority of board members were "under the control of Vermillion" and unwilling to take action to stop her spending.

She tightly controlled financial information and acted as a buffer between the board and charity staff members, according to his complaint.

Board meeting minutes dating to 2009 show Vermillion dominating discussions about money transfers and transactions between the charity's operating side and the foundation fundraising arm.

John Simmons, who joined the partnership board in December 2010 and is now the chairman, said Vermillion's roles in the charity and foundation were unclear. Vermillion was chief operating officer of the foundation but appeared to have de facto power over the charity she founded.

Six months into his new gig, Simmons asked Vermillion to define her role, which still wasn't clearly explained, he said.

Simmons said he and other volunteer board members had an expectation of trust in Vermillion to provide accurate financial information.

Foundation board members Herbst and lobbyist Mark Fiorentino did not return calls seeking comment. Conklin could not be reached for comment.

Cassady said he wouldn't speculate on the allegations. One thing was clear, however -- it's not good for the partnership and foundation to be in the middle of the negative publicity.

"People are going to have disagreements and all that, but you have to remember this is about the kids," he said.

Contact reporter Brian Haynes at bhaynes@reviewjournal.com or 702-383-0281. Contact reporter Kristi Jourdan at kjourdan@reviewjournal.com or 702-455-4519.