Reports from a recent audit point to mismanaged funds, conflicting interests and grant-funded nepotism stemming from Joan Jackson Johnson’s activities as director of Lansing’s Department of Human Relations and Community Services. And now the Michigan attorney general will decide what happens next.
“There is no doubt that Dr. Joan Jackson Johnson has done incredible work on behalf of the neediest in the city,” said Mayor Andy Schor. “However, upon receiving and reviewing the completed forensic audit report, it alleged many improprieties and inconsistencies with our local ordinances, state law and federal regulations.”
Jackson Johnson, Lansing’s human relations director since 2006, was placed on paid administrative leave this month after auditors found that she “performed transactions in a manner that lacked transparency and may have misrepresented her actions, potentially to conceal her violations,” according to the recently released report.
The bulk of an audit report, which was released Monday in response to a Freedom of Information request, centers on an alleged conflict of interest in which Jackson Johnson’s department, under her direct oversight, funneled at least $1.38 million in city funding to various community service nonprofit groups in which she was either directly involved or had ties to her immediate family members.
Records show One Church One Family, a local nonprofit geared toward homelessness prevention, received nearly $500,000 through the city while Jackson Johnson served simultaneously as its human relations director and as the nonprofit’s president, secretary and treasurer. Her daughter, Nikki Johnson, was also listed as one of the directors of One Church One Family, among other nonprofit groups, while the city funding flowed.
Loaves and Fishes, a homeless shelter, received another $300,525 from Jackson Johnson’s department while she controlled the city’s purse strings. According to state records, her husband, Vernon, served as treasurer for at least 11 years, through 2018.
Auditors contend the financial arrangements at times posed a “blatant” conflict of interest and broke the law.
The close-knit deals — in which Jackson Johnson essentially formed contracts with herself and had little oversight outside of her own department — had teetered into a legal grey area in which she cashed several city-issued checks that carried her own signature. The AG’s office will determine whether any transactions were illegal.
Invoices raise questions
Did Jackson Johnson take cash for personal gain? She vehemently denies it. Many in the community served through her charitable work simply refuse to believe it’s possible. And auditors aren’t making any conclusions. But the recent report on the finances of Jackson Johnson’s department detailed a few of the ongoing suspicions.
Auditors said two “questionable” invoices paid by Teen Challenge — another (now-shuttered) nonprofit organization in Lansing — that were found inside a file cabinet at her department are raising some additional concerns over financial mismanagement and appeared to have personally benefited Jackson Johnson.
The invoices, purportedly paid by One Church One Family and bankrolled with city funding, were spent on “work duties” that included renovations at Jackson Johnson’s residence and at one of her rental properties, auditors found. In total, $4,230 was spent on bathroom renovations and a variety of other fixes.
Jackson Johnson had told city officials that she — and not her nonprofit — paid for those renovations personally. Auditors, however, noted that without a more expansive audit into the finances of One Church One Family that they couldn’t make any conclusions about whether the funding had remained separated.
“It would be unusual that, in a drawer full of OCOF documentation, there would be two random non-OCOF invoices in the files belonging to the HRCS director,” auditors noted.
Additionally, auditors said Jackson Johnson had spent about $100,000 from an emergency Community Development Block Grant using her city purchasing card but that she could only generate about $15,000 in “acceptable supporting documentation.” Auditors noted that they didn’t research that issue any further.
Schor said the U.S. Department of Housing and Urban Development notified the city late last year about a series of alleged “legal concerns” tied to various “issues with contracts” signed by Jackson Johnson. The city hired an auditor to probe into her department.
Schor said the report was of “such material significance” that City Attorney Jim Smiertka felt obliged to pass the findings on to the AG’s office while Jackson Johnson was placed on paid administrative leave. The final say on whether Jackson Johnson stays or leaves now likely hinges on the results of that ongoing review.
“We hope to hear back from those authorities quickly so we can come to a resolution,” Schor said.
In the meantime, former department director Willard Walker has offered to manage the department on an interim basis until the situation with Jackson Johnson can be fully resolved, Schor announced this week.
The audit cost $29,390, Schor’s office said.
Jackson Johnson had final say
Jackson Johnson’s department receives a portion of the city’s general fund budget — about 1.25%, or $1.6 million in 2018 — to use at its own discretion, mostly by distributing grant funding to nonprofit entities.
Auditors found the staff works collaboratively, but Jackson Johnson carries “ultimate authority” on spending.
And while the department’s budget has certainly been used to help to fund various community service-oriented programs within the city over recent years, auditors largely took issue with the process behind the scenes.
One city invoice was found to have been paid to One Church One Family with $4,903 from the city’s general fund, designed to prevent tenants from being evicted from one of the nonprofit’s rental homes on Stillwell Avenue. In other words, taxpayer dollars were being used to pay back rent purportedly owed to the nonprofit.
Jackson Johnson was found to have been “essentially using city dollars to fund a cash shortfall” at One Church One Family during a time when she served as its president, secretary, treasurer and as a director, the report states.
Auditors, without having access to nonprofit financial records, largely stopped short of directly alleging Jackson Johnson or her family took any cash for personal gain. But those dueling familial roles pointed to a conflict of interest through a city executive signing off on funds that went to nonprofits that she and her family controlled.
Jackson Johnson previously told City Pulse that she had been working to divorce herself from One Church One Family. State records show she resigned her leadership roles last month.
She labeled her recent suspension as the product of a “witch hunt” against her and contended that she didn’t receive any personal financial gain from her involvement with the city or other local nonprofit organizations.
Jackson Johnson, however, stopped returning calls to City Pulse after the AG’s office announced it would conduct a review. Attempts to reach Vernon and Nikki Johnson for additional comments have also been unsuccessful.
Auditors further noted that Jackson Johnson brokered deals that, separate from the “problematic relationships and affiliations,” also were labeled “questionable.” The report identified multiple instances of Jackson Johnson requesting funds on behalf of her nonprofit and then personally approving them on behalf of the city.
The report also found those annual disbursements were left mostly unreviewed by anyone outside of Jackson Johnson’s department. Additionally, receipts and invoices weren’t typically required for reimbursements and prior attempts to monitor departmental spending were mostly fruitless given “time and staffing” constraints.
Even funding that required board approval lacked appropriate checks and balances, according to auditors. The report noted that Jackson Johnson has long carried “significant influence” over how those votes were decided. The report also raised concerns over Jackson Johnson’s close ties to organizations that received the cash.
One Church One Family, for example, maintains nine homes in Lansing that were purchased from the Ingham County Land Bank in 2010 and 2011. During that time, Ingham County Treasurer Eric Schertzing was listed as both a director of Jackson Johnson’s nonprofit and had served as chairman of the land bank’s board of directors.
Wearing “two separate hats,” as Schertzing described it, he played a role in both selling and purchasing the land. He said he wouldn’t be surprised if his signature was penned to the final sale agreements. At the time, he didn’t see a conflict of interests. The nonprofit had been viewed as a sort of pseudo-entity of the city, he said.
“That independence between the nonprofit and the government entity — I’m not sure how clear that was,” Schertzing explained. “Yes, there is a competing interest. There’s a conflict, if you want to use that term, but it just goes with the territory. You wear multiple hats. It was all part of an effort to do this work to help people.”
Contracts mentioned in the auditor’s report also included a conflict of interest clause that mandated employees of the city who exercised “any function or responsibility” with administration of the contract would not have any interest — either directly or indirectly — in the proceeds of city-allocated funding or distributions of grants.
Still, the Lansing City Council had also approved each contract with One Church One Family. Each of the agreements also carry the signatures of first Mayor Virg Bernero and then Schor, who succeeded him in 2018.
“There is nothing financial going on,” Jackson Johnson told City Pulse this month. “I’ve been told there’s a conflict of interest with my position in different organizations. I was working on that. After a while, you have to think they’re on a witch hunt against me. I’m not sure I really understand anything.”
Dozens crowded City Hall after the news broke to support Jackson Johnson, repeatedly lauding her department for its charitable efforts throughout the city.
Former Mayor Virg Bernero — among others — recognized the funding protocol might not have followed best practices but it resulted in a positive impact in Lansing.
“The main question for me is whether the money went where it was supposed to go,” Bernero said. “We should follow guidelines on these things, but I’m more concerned on whether the cash was spent as intended. That seems to be what people care about, and Joan’s department has always been there to take care of people.”
What exactly is the AG’s office reviewing? Here are six key takeaways listed in the recent auditor’s report: