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'Disturbing' audit questions why Queens nonprofit spent $100K on events, other issues
By
David Brand
Published Apr 12, 2024
Modified Apr 12, 2024
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Photo by Chris Hondros/Getty Image
By
David Brand
Published Apr 12, 2024
Modified Apr 12, 2024
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City officials are questioning a southeast Queens business group after an auditor’s report found the city-funded nonprofit spent $100,000 on events with no apparent benefit to the neighborhood, paid tens of thousands of dollars for a website and exercised “weak to nonexistent” controls over its finances.
The internal audit and a related summary shared with Gothamist detail the spending practices of GatewayJFK, a business improvement district that receives city grants and collects a fee from local businesses for enhanced garbage pickup, public safety and promotion along 51 blocks of Springfield Gardens near Kennedy Airport.
A summary of an annual audit for fiscal year 2023 said the organization withdrew $450,000 from its reserves and earmarked it for “large items of expenditures, which were not clear in terms of how they would positively impact the business district.” The report by an auditor hired by GatewayJFK as required by the city also noted that the organization paid the former interim executive director’s consulting company in addition to her salary, made payments to consultants that “seem to be very extravagant” and failed to adequately document how it spends public funds. The former interim head is disputing the findings.
GatewayJFK was formed in 2016 to drive economic development and improve conditions along the commercial corridors and residential blocks around JFK, which have suffered from disinvestment and environmental impacts from truck traffic and flooding. The routine audit comes as similar organizations in the five boroughs face heightened scrutiny over their use of tens of millions of dollars in city funds.
The audit and summary do not accuse former GatewayJFK administrators or board members of any misdeeds. But a representative for Councilmember Selvena Brooks-Powers said she would be referring the matter to the city’s Department of Investigation for additional review.
Fred Leopold-Hooke, the director for nonprofit governance and compliance at the city’s Department of Small Business Services, called the findings “most disturbing” during a contentious April 5 public meeting attended by GatewayJFK board members, local business owners, civic group leaders and representatives for at least three elected officials.
“The audit came back essentially stating that the executive director, who was operating on an interim basis, had performed rather poorly and instead had operated so egregiously that they endangered the finances of the organization,” Leopold-Hooke said in the meeting, according to a recording. “Unfortunately, the board proved to be absent in terms of performing its duties.”
GatewayJFK’s mission is to boost municipal services and promote dozens of businesses operating on the blocks along Rockaway Boulevard near the airport. The BID imposes a “special assessment” tax on local property owners and receives grants from Small Business Services to fund additional maintenance, sanitation, public safety and other services.
The organization operated a shuttle service to Downtown Jamaica for local residents and workers before suspending it for financial reasons at the start of 2023.
A spokesperson for Brooks-Powers, who represents the area, said she notified the City Council’s lawyer and asked them to make the referral to the investigative agency. A spokesperson for the Department of Investigation said the agency received the complaint and is reviewing it.
Current GatewayJFK Executive Director James Johnson, who took over in August of last year, said the organization would implement recommendations from the audit.
"Although we are a business improvement district, our aim is to not only improve the district but our business practices as well,” Johnson said in an email. “We are conducting a thorough review of our financial management processes and implementing robust controls to prevent any recurrence of such issues.”
Former Interim Executive Director Barbara Cohen, who led the organization during the period reviewed in the audit and participated in the group’s initial formation, sharply disputed the findings and characterizations.
Cohen said she temporarily took over the organization after serving as a consultant when a previous director left in 2022. She said she had not spoken about the audit with Leopold-Hooke or seen the summary to the board.
“At no time did he reach out to me to obtain the facts nor get a full understanding of the BID’s administrative, governance, and administrative activities,” she said in an email. “He has no basis for these statements.”
Cohen also disputed specific expenses cited in a letter to the board from the auditor, saying “Events at $100,000 is just wrong” and that website spending totaled around $57,000, not the $84,000 the auditor described. She said the organization maintained a surplus of funds in the bank and the auditor report mischaracterized the way the organization operated.
“It is not the auditor’s place to comment as to whether a programming expense ‘benefits the district,’ she added in an email. “The Board, working with the [executive director’s] expertise, and to some degree [Small Business Services], determines the needs [of] the District and what activities are required and how they are implemented.”
She said the board was “fully involved” with every proposal and expense and that the reason the organization paid her consulting company is because she was working as a consultant before assuming the role of interim director.
“Not a single penny is unaccounted for nor unapproved,” she added.
GatewayJFK Board Chair Frank Liggio and Vice Chair Kim Lawton did not respond to emails with questions about the audit.
GatewayJFK is one of 75 BIDs controlling a combined $187 million across the five boroughs, according to the city’s Small Business Services agency.
Small Business Services spokesperson Joseph Jourdan said the GatewayJFK audit was a routine annual review not prompted by “any alleged wrongdoing, missing funds or expenditures,” but the agency has issued directives for the board and new executive director to better document its spending.
Jourdan said his agency requires BID boards “to be much more attentive in their oversight of BID executive directors, especially regarding outcomes and internal controls.”
He said city rules forced GatewayJFK to withdraw $450,000 from its reserves last fiscal year because BIDs are required to spend money in the district instead of stashing more than six months of reserves in bank accounts. The organization still had nearly $400,000 in reserves at the beginning of the current fiscal year in July, according to the city agency.
The auditor behind the report declined to discuss the review she conducted and said she had forwarded an email from Gothamist to Small Business Services, the Department of Investigation and the city’s Department of Finance.
Other BID groups' spending practices are also facing scrutiny elsewhere in the city. A 2019 audit of the 47th Street BID, located in Manhattan’s Diamond District, by the city comptroller’s office found the organization misspent more than $200,000 on security services, failed to provide additional services outlined in its budget and made unauthorized payments to the executive director.
A follow-up audit issued by Comptroller Brad Lander earlier this month found the 47th Street BID failed to implement most of the city’s recommendations for better financial management.
A 2023 report from Lander’s office found about 16% of the city’s BIDs had “more than one potential area of concern,” including exorbitant salaries for administrators and little spending on actual services.
During the tense public meeting last week, Leopold-Hooke and some members of the GatewayJFK board of directors discussed approving a “forensic audit” to find out more about the spending questions raised in the annual review.
“A forensic auditor will be able to follow the threads to see where funds went,” Leopold-Hooke said.
The board did not hold a vote on the forensic auditor proposal.
Navin Jaimangal, who owns a seafood import business and retail store near the corner of Rockaway and Baisley boulevards, was present at the meeting. Jaimangal said conditions have worsened in the area, despite businesses paying the special assessment for improved services.
“We were supposed to get better services, sanitation, policing. I’m frustrated,” he told Gothamist. “I’m forced to pay into this BID and nothing comes out of it.”
This story was updated to include additional information from the Department of Investigation.
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David Brand
David is a reporter covering housing for Gothamist and WNYC. Got a tip? Email [email protected] or Signal 908-310-3960.
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