MEMORANDUM

To:

Mayor Andy Berke

City Council Members
Wade Hinton, Chief Ethics Officer

From: Stan Sewell, City Auditor

Date:

December 7, 2016

Re:

YFD Opportunity Fund Conflict of Interest

Digitally signed by Stan Sewell

DN: cn=Stan Sewell, o=City of Chattanooga, ou=Office of
Internal Audit, email=sewell_stan@chattanooga.gov, c=US
Date: 2016.12.07 13:35:02 -05'00'

Youth and Family Development (YFD) Administrator Lurone Jennings executed an agreement
between the Community Foundation of Greater Chattanooga, Inc. (CF) and the City of
Chattanooga on May 21, 2014 to create the YFD Opportunity Fund. The agreement establishes
an Advisory Committee to direct disbursements of funds, subject to final approval of CF. The
Advisory Committee members are YFD Administrator Lurone Jennings, YFD Program Director
Gary Rudolph, and YFD Deputy of Education, Jason McKinney.
On June 10, 2014, Council Resolution #27911 authorized the YFD Administrator to apply for and
accept grants and donations through CF for this fund. The Council Resolution specifies funds
are designated for temps for teens for work scholarships and additional educational services
when needed for high school graduation. We have attached a copy of our review of
disbursements from the YFD Opportunity Fund including relevant comments by Administrator
Jennings. This attachment is an integral part of our memorandum. It should be reviewed now
to ensure proper context and understanding is conveyed in the discussion below.
$1,500 from the total disbursements of $27,500 appear to meet the purpose as stated for the
YFD Opportunity fund by the Council Resolution. Although the agreement between the City
and CF specifies disbursements are to be initiated by recommendation of the Advisory
Committee, it appears all disbursements from the YFD Opportunity Fund were initiated
unilaterally by Administrator Jennings. Regardless, the Advisory Committee members appear
to be primarily under the control of Administrator Jennings. The majority of disbursements
($18,500) were to Journey Educational Services (JES) where Administrator Jennings daughter is
the Executive Director.

1001 Lindsay Street Chattanooga, Tennessee 37402

(423) 643-6200 FAX: (423) 643-6204 E-MAIL: ssewell@chattanooga.gov

JES is a non-profit corporation whose registered agent and executive director is Luronda
Jennings, daughter of Lurone Jennings. The non-profit was established in April 2015 and is
registered with the State of Tennessee. According to the JES website, they have 8 Board
members, 3 of whom are current City employees. The 3 City employees are Jonathan Butler
(ECD), Chris Brown (YFD), and Ashley Anderson (YFD) who are lower level employees at YFD
(under the control of Administrator Jennings). Lurone Jennings is listed as the Senior Advisor to
the Board on the JES website. Per a search on Guidestar, it does not appear JES has filed a
Form 990 return with the IRS for 2015 (although services were launched September 8, 2015).
During an interview on November 22, 2016, Administrator Jennings stated he was just thinking
about the kids in need when he made the disbursements to JES. However, he realized it was a
problem after he made the payments. He stated he thought and expected it would come back
to haunt him. Mr. Jennings acknowledged the fact his daughter was the JES executive director
influenced his decision to disburse funds to her nonprofit. Later in the interview, Administrator
Jennings appears to have acknowledged he was aware of the conflict of interest (COI) prior to
initiating the payments to JES. Mr. Jennings stated his daughter was at a crucial time and he
had not been able to do things to help her in the past. He stated he wanted to help his
daughter and he made the wrong call. He said this one time he gave in. Mr. Jennings stated
Im guilty and whatever the consequences, the challenges I have to faceI have to pay the
piper too, as I have to be accountable, as I expect others to be.
The YFD Community Fund agreement stipulates that any Committee member will be required
to recuse themselves from the evaluation of any recommendation to the Community
Foundation regarding any grant, loan, payment, in which the Committee member has a
personal or financial interest and such circumstances shall be disclosed to the Community
Foundation with any recommendation. Administrator Jennings initiated requests for the funds
to be distributed to JES where his daughter is the executive director. Administrator Jennings
acknowledged he had a personal interest with regard to JES and did not recuse himself and did
not disclose such to CF.
The City has established ethics policies that are to be followed by City employees. Additionally,
administrators are required to sign an ethics pledge filed with the Citys Chief Ethics Officer.
City Code Section 2-751 defines a personal interest (in addition to more direct statements) as
Any such financial, ownership, or employment interest of the officials or employees spouse,
parent(s), stepparent(s), grandparent(s), sibling(s), child(ren), or stepchild(ren). [Emphasis
added] Administrator Jennings stated his interpretation of the City Code was that he did have a
personal interest with regard to JES (his daughters nonprofit).

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City Code Section 2-753 states An official or employee who must exercise discretion relative to
any matter, other than casting a vote, and who has a personal interest in the matter that
affects or that would lead a reasonable person to infer that it affects the exercise of discretion
shall disclose, before the exercise of the discretion when possible, the interest on a form
provided by and filed with the Office of the City Attorney. In addition, the official or employee
shall not participate in any way on matters in which they have a personal interest.
[Emphasis added] Mr. Jennings stated he did not make the required disclosure to the Office of
the City Attorney. Mr. Jennings further stated that by initiating the transfers of funds to JES, he
violated City Code Section 2-753.
City Code Section 2-757 may be relevant to the issues in this matter as it states an employee
shall not use his position for personal financial gain or to secure any privilege or exemption for
himself or others that is not authorized by the charter, general law, ordinance or policy of the
municipality. It is very likely the payments to JES facilitated a benefit to Administrator Jennings
daughter (in the form of salary, wages, etc.).
There is an appearance Administrator Jennings made unauthorized distributions from the
Bethlehem Centers V-Fund so he could provide funds to his daughters non-profit organization
via the YFD Opportunity Fund. It also appears Mr. Jennings violated the Citys ethics policy by
distributing funds to JES where his daughter is the executive director. Additionally, it appears a
majority of the YFD Opportunity Funds monies have been dispersed to entities or programs
that may not coincide with the Council Resolutions designated purpose.
The issues discussed in this memorandum are not the result of an audit performed in
accordance with generally accepted government auditing standards. Had we performed such
an audit, additional issues might have been reported. The purpose of this letter is to provide
information that may be useful to management.

cc: Henry Hoss, Audit Committee Chair

Stacy Richardson, Chief of Staff
Maura Sullivan, Chief Operating Officer

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City of Chattanooga Office of Internal Audit

YFD Opportunity Fund Conflict of Interest
Attachment to Memorandum dated December 7, 2016
OIA was provided with YFD Opportunity Fund statements from October 2014 to June 30, 2016
and a detail of fund activity for the months of July and August 2016. After reviewing
disbursements from the fund, it appears many may not meet the authorized designation set by
Council. Following are the disbursements:

Olivet Baptist Church Description per CF report: Support for Volleyball Tournament $500; 4/2/15
o Adm. Jennings stated this was for payments made by Olivet to students working
a tournament. This would seem to meet the Council Resolution requirement of
teen temp work.

Private Dispute Resolution Services Description per CF report: Mediation Training Fee
- $500; 4/21/15
o Adm. Jennings stated this was payment for 3 YFD staff to be trained in conflict
resolution so they can teach these skills to students. This payment does not
appear to be in-line with the Council Resolution.

Tech Town Foundation Description per CF report: Summer Camp Scholarships for 20
students - $5,000; 5/27/15
o Adm. Jennings stated this was a summer program to teach kids how to code,
operate computers, film making etc. Adm. Jennings agreed this training did not
meet the Council Resolution purpose.

Ms. Doreitha L. Powell Description per CF report: Independent Contract Services - Five
weekly payments of $200 each made during the month of June 2015
o Adm. Jennings stated Ms. Powell was an instructor for the Chattanooga
Ambassador Program (CAP). CAP is a 48 week program which provides
temporary work for teens. This appears to meet the Council Resolution purpose.
Highland University Description per CF report: Storage Space Rental - $1000; 8/11/15
o Adm. Jennings explained he had received about 300 donated computers for a
computer repair program. He rented space from Mr. Helton, owner of Highland
University, to store the computers. He partnered with Chattanooga States
Technology class to repair the computers. Local non-profits and churches were
given the computers. This does not appear to meet the Council Resolution
purpose.

Page 1 of 3

City of Chattanooga Office of Internal Audit

YFD Opportunity Fund Conflict of Interest
Attachment to Memorandum dated December 7, 2016

Olivet Baptist Church - Description per CF report: no detail provided - $1,000; 6/14/16
o Adm. Jennings stated the church setup a late night youth program and needed to
buy some basketball goals for the kids to have recreation. This does not appear
to meet the Council Resolution purpose.

Journey Educational Services, Inc. - Description per CF report: no detail provided $5,000; 6/14/16 See comment below.

Journey Educational Services - Description per CF report: no detail provided - $6,000;

7/12/16 See comment below.

Journey Educational Services - Description per CF report: no detail provided - $7,500

7/19/16
o Adm. Jennings stated these payments were all to support a summer camp for
special needs children with disabilities such as autism. The goal was to increase
their educational and social skills and train them for work. The majority were
elementary and middle school kids. Adm. Jennings stated his daughter is the
executive director of this organization. He also stated he shouldnt have made
that call and he realized it was a conflict of interest. This does not appear to
meet the Council Resolution purpose.

The Generosity Trust VD- Reim Description per CF report: no detail provided $24,000 08/09/2016
o Adm. Jennings stated this was a return of funds previously deposited to the YFD
Fund by the V-Fund of Bethlehem Center (held by The Generosity Trust).
o The YFD Opportunity Fund had a $30,000 donation from the Generosity Trust (VFund) on June 9, 2016. On August 9, 2016, $24,000 was returned to the V-Fund.
The V-Fund donation ($30,000) was disbursed at the direction of Lurone Jennings.
Per Bethlehem Centers Treasurer, Mr. Jennings was not authorized by the
Bethlehem Center to distribute funds from the V-Fund. However, Mr. Jennings
name was still listed as an approver for the V-Fund due to it not being removed
when he resigned his position as Executive Director at Bethlehem Center. The
remaining $6,000 was made-up by the Generosity Trust.

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City of Chattanooga Office of Internal Audit

YFD Opportunity Fund Conflict of Interest
Attachment to Memorandum dated December 7, 2016
o On the same day Adm. Jennings initiated the $30,000 disbursement, he also
initiated a $20,000 disbursement from the (Bethlehem Centers) V-Fund to
Bethlehem Center. Bethlehem Centers Executive Director stated he was
expecting a donation facilitated by Adm. Jennings. However, he was disturbed
when he received the check and realized it was from their fund at The Generosity
Trust. There was also a $2,000 transfer from the V-Fund on June 13, 2016
(Bethlehem Center Administration has not determined where this money went).
o Adm. Jennings stated he knew he did not have legal control over the V-Fund. He
stated he understood when he left the Bethlehem Center, he gave up control over
the V-Fund. He was trying to reestablish himself as having control over the fund.
He made the distribution to show potential donors he was the major player for
the V-Fund.

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