Following the resignation of its entire board and previous director, HeadQuarters Kansas has announced a new interim director, and an audit has found that the nonprofit must repay more than $340,000 in grant funding spent between 2021 and 2023.
Troubles within the suicide prevention nonprofit reached a boiling point in April when staff members shared a letter signed by about 80% of HQ’s employees at the time that called for the board and interim executive director to step down. The interim executive director — the second to hold the position since the resignation of the previous CEO — and entire board of directors ultimately did resign in July.
HeadQuarters’ attorney, Brad Finkeldei of Stevens & Brand LLP, filed a case with Douglas County District Court asking for a legal custodian to be appointed for the organization in July. Attorney Dan Watkins of Watkins Law Office was appointed and has been working over the last few months to get the organization back in order.
Walter Way began as HQ’s interim executive director — the third the nonprofit has had this year — on Aug. 5. Way previously served as director of the Johnson County 911 Communications Center and co-chair of the Kansas 911 Coordinating Council, according to a news release Friday from HeadQuarters.
“I am motivated by the mission of HeadQuarters Kansas Inc. to serve Kansans who are experiencing crisis in their lives,” Way said in the release. “I understand the challenges organizations like this face, and I’m excited to focus on positively handling 988 crisis calls, providing education and outreach, and building strong partnerships with mental health providers, law enforcement and other stakeholders involved throughout Kansas.”
Watkins said in the release that Way’s experience managing emergency call centers in public safety make him “extremely well-suited to provide steady leadership at HeadQuarters.”
Watkins has detailed his and Way’s efforts in a series of four progress reports to the court thus far.
Audit findings, progress updates
Staff members back in April were concerned, in part, that the organization’s funding from the Kansas Department for Aging and Disability Services would be in jeopardy.
The board of directors in April made a statement about potential improper use of funds. Employee surveys in December 2023 led the board to conduct a “thorough inquiry into the handling of finances and promptly notified our funding partners, the state of Kansas and Douglas County of potential mishandling of funds,” according to their statement. “As a result of the board’s inquiry it has been identified that from June 2021 through June 2023, a minimum of $206,000 in funds may not have been used in compliance with grant guidelines.”
(Read a detailed article about all of that at this link.)
Audits were ongoing at that time. Watkins’ progress reports indicated that the KDADS audit was completed Aug. 9.
The KDADS audit raised concerns about a lack of internal controls to ensure grant funds were spent in accordance with agreements, and some audits were not submitted by their due dates, which meant some material issues were not identified and improved.
It also determined that $343,447 in expenditures “made by HQ top management” were not allowable to be reimbursed under the 988 grant “and must be recovered from HQ,” Watkins wrote.
“Over 75% of the nonallowable reimbursement amounts were related to employee bonuses paid in 2021, 2022 and 2023 which were not properly documented and did not receive pre-approval from the HQ Board and KDADS,” according to Watkins’ September progress report. “18% of the nonallowable costs were related to accounts payable for which there was a lack of supporting documentation. The remaining 5% of non-allowable costs were related to expenditures for a country club membership, supplies for a therapy dog and an amount recorded (but not paid) for gym memberships.”
“In recent months, HQ has worked diligently to ensure adequate internal controls are in place so expenditure of KDADS-awarded funds fully comply with governmental policies and grant agreements,” the report continues.
Work on the organization’s financial statements for 2023, through accounting firm Forvis Mazars, is near completion, and SSC Associates should complete audits for 2022 and 2023 before the end of the year, according to an update filed last week.
“In six months, KDADS will evaluate the effectiveness of the controls being implemented to ensure that the issues identified have been resolved,” according to the September report.
And KDADS has extended HQ’s $3 million 988 operational grant agreement for fiscal year 2025, as well as a $42,000 Suicide Prevention Resource Center grant.
Since January, the organization had lost 17 employees, 13 of whom held master-level education, staff members wrote in a July letter. And between July and August, nine full-time employees and 11 part-time employees also left the nonprofit, according to reports to the court.
But HQ has hired a new human resources director, crisis training coordinator and clinical director, according to updates.
“HQ currently has 21 full-time salaried employees with benefits, 22 part-time hourly employees with partial benefits and a small number of unpaid volunteers and part-time employees with few regular hours,” Watkins wrote in the September report.
Next steps
HQ is working on significant restructuring in financial management and its organizational operations to address concerns raised in the KDADS audit and focusing on two core service areas, according to the updates:
“One is to enhance the reception and quality of 988 call/chat/text management and the second is to broaden HQ outreach and educational efforts across rural Kansas,” Watkins wrote. “HQ submitted a revised 988 budget to KDADS that reflects the restructuring and received approval.”
Along with that restructuring, Way is working on financial and personnel policies and procedures that clarify responsibilities and tighten controls over expenditures, according to last week’s progress report. Way is also modifying position classifications, salary ranges and benefit amounts to more closely align with other nonprofit agencies, which “will allow significant payroll and benefit savings over time,” according to the report.
Watkins wrote that “Until HQ’s financial audits for 2022 and 2023 are completed and HQ corrective measures to address KDADS audit recommendations are more fully implemented, it is difficult to ask individuals to take on Executive Director and Board responsibilities.”
When Watkins is able to provide interested prospective director and board member candidates with audited financials and assurance of stability, he can propose a slate of board members for the court to review and approve, he wrote.
“The Custodian will work with HQ stakeholders and others to identify qualified individuals interested in serving on the Board and as Executive Director,” Watkins wrote in a September update.
Read Watkins’ reports at this link.
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Mackenzie Clark (she/her), reporter/founder of The Lawrence Times, can be reached at mclark@lawrencekstimes.com. Read more of her work for the Times here. Check out her staff bio here.
More coverage: HeadQuarters Kansas
HeadQuarters Kansas announces interim director; reports share KDADS audit findings
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