Audit: VB affordable housing non-profit bleeding $1.5 million per year since 2016

Virginia Beach

VIRGINIA BEACH, Va. (WAVY) — The CEO of Virginia Beach’s affordable housing nonprofit resigned in April amid a city audit that shows the organization has been bleeding about $1.5 million a year in operations costs since 2016. 

The audit was presented to the Board of the Virginia Beach Community Development Corporation on Tuesday night. 

Addie Wright Thomason joined the Virginia Beach Community Development Corporation as its president and CEO in 2014. She resigned from that position on April 25, while the organization was being audited by the city, citing a “hostile work environment” relating to “specific City Council members,” according to an email she sent to staff.  

Thomason told staff her last day would by May 31; however, she was placed on administrative leave on May 2, following a vote by the VBCDC’s board, according to the audit. 

The VBCDC is a nonprofit that was created by Virginia Beach City Council in 1985 to expand affordable housing and revitalize neighborhoods. Several of its programs – like the Homeownership Rehabilitation Program and the Transitional Housing Program – have been discontinued since 2016, leading to “mounting” financial losses, according to the audit. 

The two programs were discontinued without cost-benefit analysis or reliable data to back the decisions, leading to a loss of profit, according to the audit. 

Currently the VBCDC manages three properties with more than 100 units combined. About 73 percent of its $5.4 million budget came from renting these units in 2019. The city placed a strategic goal for the organization to acquire an additional 450 properties, but since 2016 it has only acquired 55 new units, the audit states. 

The results of the audit show that the VBCDC has been undergoing financial losses since at least 2015 when the organization had a $320,000 operating budget deficient. Those losses increased substantially in 2016 when the organization measured its deficient at more than $1.4 million. More than $500,000 of that years’ deficient came from a grant given to Second Act Communities. 

Second Act Communities is a nonprofit that was created by the VBCDC in 1992 to obtain federal funding used to rehabilitate affordable housing properties. Those properties would later be turned over to the VBCDC, which would manage and maintain them. SAC hasn’t received any federal funds for projects in Virginia Beach since 2016, the audit states. 

SAC and the VBCDC separated their affiliation in 2016; however, VBCDC staff continued to manage SAC and make thousands of dollars in extra income for the work on top of their original salaries. VBCDC staff also made the decision to give SAC the $500,000 grant in 2016, although they were in a budgetary deficient, according to the audit. 

The audit calls the management of both organizations by the same leadership team an “obvious conflict of interest.” 

The VBCDC continued to go over budget by about $1.5 million in 2017 and again in 2018.  

The audit called the VBCDC’s management choices “questionable,” stating that among other decisions, leadership financed the organization’s operations by using money that would normally be reserved for housing development opportunities. The amount the VBCDC owed on a line of credit also “sharply” increased over the course of three years – beginning at $313,000 in 2016 to more than $1.5 million in 2018, according to the audit. 

Other drains on the VBCDC’s budget included salaries for round-the-clock security and front desk personnel at one of its locations, Cedar Grove Apartments. The VBCDC sold one of its “revenue-producing properties” and used $75,000 of the profits to fund salaries for those positions until June 2019, the audit states. 

The VBCDC also lost $45,000 in failed fundraising, including $30,000 spent on a spring gala that they cancelled due to “lack of interested donors” and a 2017 event at Top Golf that cost more to host than it earned, according to the audit. 

“When land or a suitable project is identified, VBCDC lacks the development capital to compete with for-profit developers,” the organization wrote as one of its challenges when putting together a strategic plan. 

The audit also raised questions about staff expenditures, like travel reimbursement and dinners out. Many expense reports weren’t completed correctly, which made it difficult for the audit to determine whether the charges were valid and the total amount spent. 

This was “especially true” of Thomason’s expenses, which total more than $80,000 on her corporate credit card between January 2016 and October 2018. These charges included a dinner and stay at a hotel room that cost more than allowed by policy, according to the audit. 

Staff told the auditors that Thomason was away from the VBCDC office frequently on business trips, working from home, and taking compensatory time off. Auditors could not account for all of Thomason’s absences. 

“The CEO claims that ‘98%’ of her travels are ‘sales type’ for potential SAC development opportunities. However, there have been no leads to date that have materialized from any of those travels and documentation to support the business nature of the travels,” the audit states. 

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