RESOLUTION
Hubbard Farms Neighborhood Association
Disposition of Grant and Related Items
The Question
A question was raised with regard to the disposition of residual funds from an inactive 2022 grant in the amount of $2,745.
Foundation
In 2022, a member of the Hubbard Farms Green Spaces Committee who no longer lives in the District applied for and was awarded the Bridging Communities Community Improvement Mini-Grant for itemized expenditures in the community garden. The total award was $3,500. The grant term was for one season, expiring at the end of the calendar year, 12/31/22. The grant did not require an organization to be a 501(c)(3) to receive funds, but following HFNA practice at that time, the committee deposited the funds with Clark Park Coalition (CPC) as HFNA’s direct fiscal sponsor for a pre-approved grant. To that end, CPC was paid a fee of approximately 6.8%.
During 2023 and the planning phase of 2024, the HFNA board (past and present) was unaware of these funds. They had not been reported by the Treasurer in monthly reports; the last report in July 2023 did not include the grant. HFNA kept no ledgers and CPC provided no monthly or quarterly reports, as is standard: HFNA appears to have relied exclusively on on-demand verbal reporting from CPC, some of which could not be later substantiated. Direct questions about available funds among the board (past and present), including an active garden committee member, did not discover/disclose the grant residual: in a February 2024 meeting, the director/committee chair stated explicitly that past grants to the garden had been spent (starting around 54:00). The current 2023-2024 HFNA board only became aware of the balance in April 2024, after receiving requested disclosure from CPC. In a May 2024 monthly meeting, the designated new liaison for the garden group stated explicitly that she had been unaware of any residual funds until after the HFNA board requested disbursement (starting around 52:00).
Analysis of the grant showed five expenditures were made on the grant; one draw was made. Two line items were paid by a third party. The last associated receipt for any purchases made on the grant was July 16, 2022. The ledger used by the grantee manager is not reconciled with the ledger maintained by CPC.
The HFNA board has seen no grant agreement with Bridging Communities nor a MOU between the committee and HFNA, the committee and CPC, or HFNA and CPC. In response to HFNA’s initial request for the founding documents, CPC stated that it had provided the sum of its records. Later, at the end of May 2024, a digital copy of the grant application was provided by CPC to a board member.
The HFNA board contacted the funder to determine the status and availability of the funds. The grantor released the funds entirely to HFNA with no restrictions.
The budget submitted with the grant is titled, “Hubbard Farms Green Spaces Committee.” The application makes repeated references to the group as a HFNA committee. The letter from the grantor states, “Hubbard Farms Neighborhood Association (HFNA) was among the grantees, and funds were given to Clark Park as the group’s fiduciary… We are hereby authorizing HFNA to utilize remaining grant funds as they see fit.” CPC’s document name for the grant ledger was “Hubbard Farms Grant,” and it was provided by CPC to the board explicitly as a HFNA asset held by the fiscal sponsor.
Process
HFNA has not been operating in accordance with its bylaws in terms of reporting and fiscal oversight perhaps since inception. This is the first board year known when compliance was operationally incorporated. The board has also adopted a policy of member/vote inclusiveness that, while not binding or determinative under the current bylaws, is accepted in practice as informative and directive.
Therefore, the board first solicited from the membership project interests and goals it would like implemented. A rough scope and budget were requested in support. This invitation was made repeatedly through electronic notice. Six responses were received. The garden committee did not submit any information.
Additionally, for the first time known to current directors, the board created an operational budget based on direct expense needs. A one-time expense for this budget cycle included the 501(c)(3) application fee, which would enable the organization to apply for any grant without fiscal sponsorship. All board members, including the green spaces committee sponsor, were specifically and explicitly requested to submit line items expenses for inclusion. This was discussed in monthly neighborhood meetings, as well as through electronic board communication through the email list, Nextdoor, Facebook and HFNA.info.
The executive committee met to determine the use of the residual funds and to establish financial controls for its new role in self-management. All executive committee members were present and the decision unanimous; the executive committee was also a supermajority of the board.
Based on prior votes and policies adopted, the board also initiated closure with CPC as a fiscal sponsor and established its own financial accounts to self-manage its assets. Consistent with the standard practice between HFNA and CPC for disbursement, and in the absence of a written agreement, the board requested a transfer of the funds from CPC to HFNA. This transfer was only for the purpose of management, ie, HFNA would now manage disbursement. To whom and for what purpose was still an ongoing process of decision.
The proposed budget and projects were delivered to membership for vote. The ballot was made available by all electronic channels through May 2024: the RiseUp email list, the Facebook group, Nextdoor and the HFNA website. Notices about the ballot were given iteratively throughout the month.
Initially, CPC requested two documents in support from HFNA and one from Bridging Communities in support of the request. This varied from past practice, but both complied. In May, CPC informed the board that it was withholding the funds, pending further review. Subsequently, CPC withdrew the longstanding use of its address as HFNA’s official mailing address and required that HFNA change its previous forms to reflect a new address. It additionally then required new documents to support release of HFNA funds. HFNA provided these, with the exception of a full bank statement. In lieu, HFNA provided a proof of account, without sensitive information disclosed. To date, CPC has refused to disburse the funds, asserting a role far beyond a fiscal sponsor, but as some unspecified agent with authority to supervise or counter HFNA board decisions and financial management.
Discussion and Controversy
The rationale of the board in voting on the disposition of the residual funds was that while the residual wasn’t large, there was plenty of money available for multiple stakeholders to benefit from a bright new cycle. By funding the operational budget, nominal as it is, HFNA could establish itself to pursue larger funding for district projects into the foreseeable future: to the board’s knowledge, to the degree that “HFNA” has received funding thus far, it has primarily been as a cosigner and pass-through to provide additional funding for Clark Park assets and programs. The board envisioned productive and collaborative revenue sharing that took into consideration a holistic vision of a long-term good which considered the interests of more than just one group. And, potentially by funding other projects with demonstrated interest and sponsors, there was an opportunity to engage a larger segment of the membership by creating more supported nodes of activity.
Through a process of communication outside the board, initiated by a board sponsor who did not attend the executive committee vote and multiple related meetings, the garden group has taken several positions since April. Currently, in summary, the coalition which is now active makes a claim that they are entitled to inherit the entire balance of the grant, since its original purpose was for the garden. Questions of the grant terms should be, they argue, set aside to accommodate their extended, exclusive use. A budget was submitted in June, after multiple requests, which presumed use of the full residual for spend down. The budget included duplications of capital purchases from 2022. In May’s meeting, board members specifically offered labor and materials in order to meet the garden’s needs without requiring expenditures, but this offset was not reflected.
In the June 2024 meeting, the garden group collaborated with CPC to block both the transfer of funds to HFNA’s management, a separate operational issue, and HFNA’s board-approved allocation of those funds based on the results of the resident budget and project vote. Its evolving position was that the garden group acted as an independent concern within the district, not a committee of HFNA. (Editor’s note: this is at odds with the documentation) The receipt of the funding and use of CPC as a fiscal sponsor, it was asserted, was part of a standalone relationship between the garden group and CPC. It was alleged by some attendees that it had been both unethical for HFNA to propose using the funds for broader community benefit and that HFNA had no standing to make claim to the funds. Standing board members were accused of attempting to “steal” the money and of being untrustworthy for their decision to use the money to fund a published budget approved by voting members for the exclusive benefit of HFNA, including the garden. It was stated that CPC “owned” the grant funds. (Meeting audio)
The agenda item had not been requested, and therefore other matters planned for discussion relevant to the topic were not addressed. Additionally, the board had no notice for preparation of materials which may have been useful, nor were other residents given notice that this would be discussed so that they could participate. It had been understood by the board that the May meeting was the community forum for the topic. After going past the scheduled meeting time, the session was adjourned without further action.
One board member resigned at the end of the meeting, explicitly citing it as a consequence of the tone and tactics used in opposition to the board’s decision. A second board member has changed position from his original vote and supports the garden’s ownership of the funds. Three remaining board members stand by the rationale of the original intent and decision.
Based on interactions thus far, the only apparent way HFNA can overcome CPC’s obstruction is through legal action. While a viable case, each board member has differing reasons to feel it is not a constructive path. However, failing to pursue it is arguably a liability under the bylaws, which must be addressed.
The Requirements
Several bylaws adopted by HFNA in 2018 are germane.
Section 4.12 Discharge of Duties. A Director or Officer shall discharge the duties of that position in good faith with the care an ordinarily prudent person in a like position would exercise under similar circumstances and in a manner she or he reasonably believes is in the best interests of the Corporation. In discharging her or his duties, a Director or Officer is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by any of the following:
(a) one or more Directors, Officers, or employees of the Corporation, or of a domestic or foreign corporation or business organization under joint control or common control, whom the Director or Officer reasonably believes to be reliable and competent in the matters presented;
(b) legal counsel, public accountants, engineers, or other persons as to matters the Director or Officer reasonably believes are within the person’s professional or expert competence;
(c) a committee of the Board of which she or he is not a member if the Director or Officer reasonably believes that the committee merits confidence.
A Director or Officer is not entitled to rely on information described in subsections (a), (b), or (c) above if she or he has knowledge concerning the matter in question that makes reliance otherwise unwarranted.
If a Director or Officer is subject to the Uniform Prudent Management of Institutional Funds Act, MCLA 451.921 to 451.931 (the “UPMIFA”), the Director, in discharging her or his duties under such act shall conform to the standards of the UPMIFA .
Section 4.16 Report to Directors. The Corporation, at least once each calendar year, shall prepare or have prepared a report of the Corporation for the preceding fiscal year and present the report at the annual meeting of the Board of Directors and such other times as the Board may direct. The report shall include all of the following for the Corporation’s preceding fiscal year:
(a) its income statement.
(b) its year-end balance sheet, including trust funds and funds restricted by donors or the Board.
(c) its statement of source and application of funds, if the Corporation prepared that statement.
(d) any other information required by the Act.
The report may be distributed by electronic transmission or by making the report available for electronic transmission. If the report is distributed electronically, the Corporation shall provide the report in written form to a Director on request.
Section 4.17 Examination of Books and Records. A Director may examine any of the Corporation’s books and records for a purpose reasonably related to her or his position as a Director. A Director wishing to examine any books and records shall submit a notice to the Secretary of the Corporation that she or he wishes to examine books and records and attempt to reasonably describe the books and records to be inspected. The Corporation shall use its best efforts to gather the requested books and records for examination. The examination shall take place at the office of the Corporation, unless the Board or Chair selects another location that is reasonably near to the Corporation’s office. The Corporation shall allow the examination to be conducted within a reasonable period of time following receipt of the notice from the Director asking to examine the books and records. The Board may adopt additional procedures for the examination of books and records by a Director.
Section 6.01 Non-voting Members…. No resident member of the Corporation shall have any right to a binding vote on any matter involving the Corporation, nor shall any resident member have any of the rights granted by the Act to members in a membership corporation. The Board of Directors may, from time to time, consult with the resident members on District-wide issues and hold non-binding votes of the resident members as it sees fit. A resident member shall not have any interest in any of the Corporation’s assets or have the right to file a claim against the Corporation seeking to compel the Corporation or the Board of Directors to take certain action, or refrain from taking certain action. A resident member shall also not have any right to file any suit in any court seeking to have the Corporation dissolved or requesting any other relief or remedies from the Corporation or any of its Officers or Directors.
The Board of Directors may allow resident members to cast non-binding votes regarding any matter at any meeting.
Section 7.01 General. The Board of Directors may designate standing committees with such duties and powers as it may provide in order to carry out the programs and purposes of the Corporation. Special committees may be appointed by the Chair, with the consent of the Board of Directors. The Chair, with the consent of the Board of Directors, shall designate the persons to serve on each committee, fill vacancies on committees, and serve as Chairperson of the committee. Membership on committees, except executive committees, is open to all persons, Directors and non-Directors. Each committee shall make such reports of its activities to the Board of Directors as the Board may request. Each member of a committee serves at the pleasure of the Board and may be removed at any time by vote of the Board.
Section 11.04 Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies, or other depositories as the Board of Directors may select. For the purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts, and other orders for the payment of money which are payable to the order of the Corporation shall be endorsed, assigned, and delivered by such person or persons and in such manner as may from time to time be designated by the Board of Directors.
Board Response
The executive committee met on June 25, 2024 to vote on the final disposition of the contested grant residual and related matters. A quorum was present. Two members at large participated.
It was intended that this be a straight vote to conclude the business from the monthly meeting. Some board members present engaged the time to relitigate prior discussion; consequently, not all votes were concluded. The ones which passed by majority agreement by and through executive committee were:
- To synchronize the business and calendar of the HFNA to a fiscal year running July 1 – June 30. In the transition year of 2024, the election will take place in October, but in 2025, the election will take place in June so that new directors are seated with the new operating year.
- Independent of the budget, expenses for web hosting and domain renewal will be reimbursed or paid, as needed.
- The proposed budget approved by membership was adopted with the modification to strike both the budget line item for the community garden committee and the inclusion of the BCI grant. HOWEVER, this decision is contingent on the results of issues not yet voted.
Motions which were pended:
- HFNA will release its claim on the residual funds when CPC, the garden group and the grantor submit a MOU which states that those funds were made directly to the garden group, not HFNA, and that CPC holds the funds as a fiscal sponsor directly for the garden group, not HFNA.
- A previous vote is amended: while the board accepts any funding to support a project initiated by a member, no one may use HFNA affiliation or membership as authority or standing for the grant unless there is a MOU between the parties with regard to the funding and project.
- HFNA accepts the garden group’s assertion of its independence from HFNA and no longer includes it as a committee.
BY: /s/ Marlena Hanlon
Marlena Hanlon, Secretary
AS OF: June 25, 2024