Spokane ending contract with homeless shelter operator just weeks after embezzlement allegations

Spokane is ending its contracts with the Guardians Foundation and hiring the Salvation Army to run its homeless shelters on Cannon Street and Trent Avenue.

The Spokane City Council at 12:30 p.m. on Thursday will hold a special meeting in order to sign two contracts with the Salvation Army, one for each shelter. The city is declaring an emergency in order to approve the contracts more quickly and bypass competitive bidding requirements.

The rapid switch to a new shelter operator comes just weeks after City Council members Karen Stratton and Lori Kinnear disclosed that a Guardians Foundation employee may have embezzled as much as $1 million. Stratton said she learned of the possible fraud through two separate community members, not Mayor Nadine Woodward’s office.

The Spokane Police Department is investigating the incident and the city is conducting an internal audit. It’s not clear how much money may be missing or if any of it came from the city of Spokane. Guardians Foundation CEO Mike Shaw has said he believes far less than $1 million is missing.

Spokane has two multimillion dollar contracts with the Guardians Foundation. The City Council last September signed a $1.9 million agreement with the nonprofit to operate the 72-bed Cannon Street shelter through June. In August, the City Council approved a $6.6 million contract with the foundation to operate the Trent Resource and Assistance Center.

That facility, which opened in September, is expected to eventually have 250 beds. Woodward has said she hopes in the coming weeks to transition many of the 450 homeless people at Camp Hope to the Trent Avenue shelter. She has said the former warehouse could hold far more than 250 people if necessary.

According to a description attached to Thursday’s council agenda, the Salvation Army’s contracts will begin on Nov. 1, with the Cannon Street contract ending on Dec. 31 and the Trent Avenue contract running through 2023. Financially, the contracts will be identical to the ones Spokane had with the Guardians Foundation.

“The annual operations costs for TRAC (the Trent Resource and Assistance Center) and Cannon are proposed at NO CHANGE from the past contract and provider,” the summary attached to the agenda reads.

Spokane will pay the Salvation Army $341,000 million to operate the Cannon Street shelter through 2022 and $5.6 million to operate the Trent Shelter through 2023.

Shaw did not respond to a request for comment. Salvation Army spokesman Brian Pickering provided a one-sentence statement saying the organization would make a presentation at Thursday’s City Council meeting.

City spokesman Brian Coddington said he couldn’t answer questions Wednesday but released a three-paragraph statement. The news release does not say why the city is ending its contract with the Guardians Foundation or mention the fraud allegations directly.

“The decision to make the change was difficult, but it was done in the best interest of everyone concerned,” the news release reads. “Review activities already underway remain open and are separate from this discussion.”

According to a summary attached to the City Council’s agenda, the change in shelter operators is needed because “current ability for existing provider to make ongoing payroll and operating requirements is at risk.”

Shaw said he learned of the possible embezzlement earlier this year as part of an annual audit but wanted to wait to alert the city until an investigation had been completed. He said the misuse of funds appears to have begun a year and a half ago.

The woman who managed the organization’s financial records had attempted to cover her tracks by manipulating the Guardians Foundation’s financial records in QuickBooks, Shaw said. He said once the audit uncovered her behavior she attempted to delete transaction records.

The bookkeeper has not been arrested nor charged in court for any wrongdoing.

The Guardians Foundation has lost its 501(c)(3) status with the Internal Revenue Service after failing to file its tax forms. According to the Washington Secretary of State’s Office, the Guardians Foundation’s business license expired on July 31.

Spokane’s contract with the Guardians Foundation states that it may end the contract at any time.

“The CITY, in its sole discretion, may terminate this Contract for convenience at any time for any reason deemed appropriate by the CITY,” the contract states.

Spokane City Council President Breean Beggs said he hopes changing operators won’t affect the people staying at the Trent Shelter.

Despite the turbulent start to the Trent facility’s existence, Beggs said he believes Spokane is on the right path toward solving homelessness.

“We have turned a corner,” he said. “We are so close to making actual progress.”