For years now, the Human Development Corp. has taken in millions of tax dollars to provide Head Start services for 2,500 of the city's low-income children. It has never come close. And the problems just begin there.

Another 45 files showed that the parents of disabled children weren't getting a host of crucial information from the teachers -- about reinforcing learning at home, about the Americans with Disabilities Act and about Supplemental Security Income that their children might qualify for.

And then Ben McMillan gave the review team an earful about HDC. McMillan -- whose company, Bentech, sold computers to HDC -- told them he was owed $75,000 and that he and other vendors hadn't been paid on time. He said HDC employees were apparently making questionable purchases with Head Start funds, such as a refrigerator for the agency's purchasing department. He said that he had seen HDC employees scrambling to make purchases at the end of the fiscal year because so much money had gone unspent in the budget, and that he had observed "several staff sitting at tables with catalogues going through what they would like for their offices, i.e., furniture, etc." HDC bought equipment with old bids, McMillan said, such as the October 1995 bid used to purchase computers from his firm in 1998, even though the cost of computers had fallen during that time. (A few months after his discussions with the team, HDC sued McMillan, claiming he sold the agency outdated computers at inflated prices; the case is pending.)

More questions surfaced about HDC's financial practices, because bank reconciliations -- the corporate equivalent of balancing a checkbook -- hadn't been done in months and the disposition of old checks hadn't been noted on checks as far back as 1996.

Larry Hinton-Johnson, HDC board chairman: "They say, 'Enrollment, attendance, fiscal mismanagement.' Whoopee-doopee-do. They've had questions about us paying our bills late — excuse me, but who the hell doesn't pay their bills late?"
Larry Hinton-Johnson, HDC board chairman: "They say, 'Enrollment, attendance, fiscal mismanagement.' Whoopee-doopee-do. They've had questions about us paying our bills late — excuse me, but who the hell doesn't pay their bills late?"

Records showed a bank overdraft of $500,000 in 1997, and the preceding three financial audits had shown the agency to be operating at a deficit. Tax returns for the fiscal year that ended in November 1997 showed that the agency finished more than $320,000 in debt; by November 1998, it was $430,000 in debt. HDC wasn't paying its bills within a three-month period, including utility bills for its Head Start centers. Checks were written to vendors but not mailed. Purchases were made without proper bids or with no invoices attached. One HDC employee ordered a fully loaded Chevrolet Suburban with leather seats for use on the job, a purchase "which would not be visibly "reasonable' for a Head Start purchase without additional financial documentation."

Its warehouse contained furniture, microwaves, computers and other valuable items but no inventory list to track them. A warehouse supervisor said the only mechanism to keep the equipment from "walking off" was his presence every day, because he "knew what was there." Even the agency's executive director admitted to the team that financial and property records were "unreliable" and that her finance director was "incompetent."

HDC's efforts at keeping parents involved in running the program were also found lacking. On the Head Start Policy Council, a 36-member board made up mainly of parents, the team found there were "major improprieties in the tallying of the score" in hiring a new director for the program. The agency would call ad hoc meetings of the council but summon only certain members, leaving others out. The council said it believed underenrollment was at least partly caused by a lack of full-day classrooms, and yet the agency hadn't taken appropriate steps "in several years to move to that option." Minutes from one council meeting said a trip to Cancun was offered to "any parent responsible for enrolling five families."

Five months after that visit, in November 1998, HHS notified the agency that it was losing its Head Start program altogether. The letter officially terminated the $11.6 million contract on three grounds: failure to comply with fiscal requirements; failure to recruit and enroll children consistent with its funded level; and failure to have proper plans and activities for children with disabilities.

HDC appealed and was allowed to keep operating the program in the meantime. After a hearing last summer, a departmental appeals board ruled in HDC's favor, finding that under Head Start's rules and regulations the agency did not have adequate notice of the deficiencies or enough time to correct any alleged deficiencies.

HHS spokesman Kharfen says the agency prevailed "on technical grounds. They were not absolved of those deficiencies and problems. There was a technical step in the process that was not taken, not that the program was providing the kinds of services that merit them continuing to have the grant."

And although HDC won its appeal, the scrutiny was far from over. In a Nov. 8 letter, the government repeated its earlier lists of deficiencies in the St. Louis program and put the agency on notice that it had 90 days to fix them.

A review team is planning a visit in February.

Ruth A. Smith bristles when the subject of the federal review comes up. As she escorts a visitor to her office, a large room in the basement of what appears to be an old school building at 929 N. Spring Ave., she points to the plaques and commendations on the wall from various elected officials, recognizing HDC, praising its work.

A widow whose husband died in 1998 -- a death, she says, accelerated by his worries about disgruntled HDC workers' making false accusations against her -- Smith wears her hair pulled tightly behind her head. She's worked at HDC for decades, starting as a junior accountant in the late 1960s. She left for two years in the early 1970s and returned in 1974 as assistant comptroller and payroll branch manager. She has stayed ever since, rising to comptroller under HDC's former general manager, Harold Antoine. Since Antoine's retirement in 1994, Smith has held the top post at HDC. As executive director, she earned more than $100,000 in salary and compensation in 1998, according to the most recent tax returns on file with the IRS. She drives a 1994 Mercury Marquis paid for by HDC. She's working on a degree in management at Maryville University; Smith says she's a senior this year.

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