According to financial records provided to the IRS by Mobile Development Enterprises, the non-profit subsidiary of the Mobile Housing Board was more than $500,000 in the red in 2011 even as its number of employees exploded by 300 percent.

Those records and others also appear to show that as MDE’s ranks have grown, the Housing Board itself has seen a drastic reduction in the amount of employees still working under the oversight of the Mobile County Personnel Board.

MDE was incorporated as a non-profit in 2003 by then-Mobile Housing Board Executive Director Stevens Gregory. Housing Board Chairman Clarence Ball and Vice-Chairman Donald Langham also were listed on the MDE board of directors and remain there today, according to Mobile County Probate Court records. The Housing Board also incorporated a for-profit version of MDE in 1997 that remains active as well. MDE’s articles of incorporation were updated in 2010 to replace Gregory with current MHB Executive Director Dwayne Vaughn.

Vaughn has described MDE as doing primarily construction management. It was active in working the first phases of the HOPE VI revitalization program that built the Orange Grove and Renaissance developments north of downtown.

MDE had its tax-exempt status yanked by the IRS in May 2010 for failing to file its 990 financial forms for three straight years. Vaughn says the 501(c)3 had that tax-exempt status restored a couple of months ago after submitting the proper forms for IRS review. He provided Lagniappe with financial records for the company from 2008-2011.

Those records, though, paint a picture that is difficult to understand. For example, the company’s 2010 records state it had only 18 employees during the course of the year and a payroll of $973,000. However, the 2011 filing say 72 employees worked at MDE that year, but the payroll dropped more than $250,000. The 2011 Form 990 has MDE with a total loss of $582,000. Minus the small amount the company carried forward from 2010, MDE was more than $550,000 in the hole at the end of 2011, according to the records Vaughn provided.

Lagniappe contacted Vaughn about this and other questions more than two weeks ago and he said he would review the records and offer explanations. Despite numerous attempts to have him explain MDE’s poor financial performance in 2011 and its reported explosion in employees, Vaughn did not respond. In March, however, he told Lagniappe MDE had 30 employees.

When sending the records via email, Vaughn wrote they had not been accepted by the IRS, even though the tax-exempt status was reinstated. He also said MDE had been given a dispensation by the IRS from having to file annual reports. The IRS has not yet answered requests for information pertaining to MDE’s status with the agency.

In 2008, MDE listed a total income of $1.6 million, most of which came from contributions and grants through the Housing Board, as well as income from running day care facilities. Expenses were almost identical to income for the year. Then-director Stevens Gregory earned $176,727, although he was compensated by the Housing Board, not MDE.

In 2009, MDE’s income jumped to $1.845 million, with a payroll of $925,000 for 18 employees. Again, expenses were virtually the same as income and the company rolled little forward into 2010. In 2009, Gregory also saw his income jump to $204,779 — still being paid by MHB though he ran both entities.

The following year’s totals saw revenue drop a bit to $1.82 million, but payroll moved up to $973,000. The company ended the year more than $26,000 to the good, still carrying 18 employees. That year Vaughn was brought in to run both MHB and MDE, with a starting salary of $157,298 — again, paid for through the Housing Board.

The 2011 form shows a massive downturn in income for MDE, falling to just $677,000. The form also claims 72 employees, although with a payroll of just $721,000, workers would have averaged roughly $10,000 a year. Even with a reported decrease in expenses of more than $500,000, MDE still recorded a loss of $582,060 for the year, leaving its tally for the four-year period at a negative $552,000.

Despite the poor year, Vaughn’s Housing Board salary jumped to $181,000, and MDE listed its first employee making more than $100,000 annually — Adline Clarke, who made $108,000. Clarke was recently elected to the state House of Representatives.

Though Vaughn did not supply a reason for the change in MDE’s economic fortunes, the Housing Board did lose control of federal Community Development and Block Grant (CDBG) funds after HUD ripped the board and the city for improper use of the funds. HUD required the handling of CDBG money to be placed under direct control of the city, which is a more common arrangement in other cities.

Although Vaughn says MDE is an entirely separate entity from the Housing Board, despite sharing a board of directors and executive director, it can sometimes be confusing to separate the two. MDE lists the Housing Board address as its own and also shares the phone system.

Still, even with the Housing Board carrying office expenses, it isn’t clear how MDE managed to make payroll in 2011 when it was more than half a million dollars in the hole. The records showed no reserves for the company and no outside loans that would have covered payroll, much less any other expenses.
Vaughn also did not respond to those questions.

Merit system losses?

Meanwhile, Vaughn’s other charge — the Mobile Housing Board — appears to have seen its roster shrink dramatically. Though no one was able to provide a solid number for the employees who used to work under the merit system at the Housing Board, its own website still puts the tally firmly over 200.

“Currently, the MHB employs approximately 220 individuals who are involved in administration, maintenance and social service activities,” the site says.

The number provided by Mobile Personnel Board Director Donald Dees, however, was far lower. Contacted last week, Dees placed the current number of housing board employees at 126. He said at the end of 2011 there were 141. He said he wasn’t able to look back historically to see when or if the number had ever been close to 220.

The possible seesawing of the number of workers between MDE and the Housing Board raises the question of whether positions are being moved out from under the jurisdiction of the Personnel Board and the merit system and into at-will jobs with the private MDE. The significance of that would be not only that workers would lose their traditional civil servant protections, but that hiring would be done outside the merit system. While that could lead to a streamlined hiring process, it also creates a situation in which current employees may be passed over in favor over outside hires.

Mayor Sam Jones, who appoints the members of the Housing Board, offered a spirited defense of the merit system June 4 during a mayoral debate. He talked about how he appointed the Housing Board members and said the city always gives priority to merit system employees.

When contacted to see if the mayor is aware of what seems to be a large decrease in the number of merit system positions at the Housing Board, city spokeswoman Barbara Drummond said Jones could not address the matter because he was out of town.

Personnel Board Assistant Director Jim Hansen said the Housing Board would not be able to simply reduce the amount of merit system positions it has or move them over to MDE without first consulting the board.

“No, they can’t do that, not by our rules,” he said.

He said the Personnel Board has not been made aware of any drastic changes in the number of merit system employees at MHB.

“Nobody came to see us about that and we don’t know if that is happening,” he said.

City of Mobile Firefighter Bryan Lee, who sits on the Personnel Board’s Supervisory Committee, said he is unaware of an effort to move MHB employees out from under the merit system, but said if that is the case it is reminiscent of what happened in 2008 in Prichard. In that case, police officers were being hired without going through the Personnel Board, some of those positions were filled by relatives of the police chief.

“If you’re outside of the merit system you’re an at-will employee with no type of appeals if you’re fired,” Lee said.

He did acknowledge hiring might be quicker sometimes outside of the Personnel Board, but also said the merit system is designed to protect employees and prevent nepotism.

The Supervisory Committee is scheduled to meet June 11.