Denver city auditor criticizes Caring for Denver’s fiscal procedures and transparency

The Caring for Denver Foundation, a nonprofit that grants more than $40 million in city sales taxes annually for behavioral health and substance abuse programs, is not able to “prove taxpayer dollars are used effectively or for Denver residents,” according to a new report from the Denver auditor.

The audit found that Caring for Denver expensed alcohol purchases for the executive and staff without documentation, relies on self-reported data from grantees, and doesn't conduct background checks on nonprofit leaders before granting millions in tax dollars. 

The audit discovered multiple nonprofits that received city money “falsely reporting or overstating” their relationship with other city agencies on grant applications.

“Some grantees claimed they had contracts with Denver Human Services, the District Attorney’s Office, and the Denver Sheriff’s Department. But when we contacted the departments, staff from each said they did not have a formal partnership with these grantees,” reads the report, which doesn’t name which nonprofits misled Caring for Denver. 

One unnamed grantee that received $310,000 “relied on a falsified partnership” in their grant application.

Donna Lynne, a board member for Caring for Denver, said the auditor’s conclusions that they couldn’t prove effectiveness were “absolutely not true” and were “hyperbole” from the auditor’s office, in a brief interview after the audit committee was presented with the report on Thursday morning. She didn’t offer specifics, and cut the interview short.

The audit follows a 2024 CPR News investigation that found Caring for Denver granted millions in city tax dollars to some organizations that had no history or licensure to provide substance abuse or mental health treatment. The years-long reporting project found that some nonprofits were run by felons, some with extensive violent criminal records. One nonprofit executive funded by Caring for Denver is scheduled to stand trial for murder this spring in Adams County.

Foundation funds numerous nonprofit organizations

Caring for Denver has funded 270 different organizations, many working hard to serve communities, that hire licensed staff and return good data on who they serve and why. But a number of the nonprofits are small and new, and therefore risky ventures for hundreds of thousands in city tax investment, with little oversight. 

In a sample of 35 funded grantees, auditors found: “One applicant with a formal allegation of domestic violence with children present.” That grantee is not named in the report, but at the audit committee meeting on Thursday, auditors said that the nonprofit “works with children.”

Caring for Denver noted that the 35 funded grantees represent only 3% of the grants they have awarded.

Caring for Denver and Denver’s Department of Public Health and Environment disagreed with many of the auditor’s recommendations to strengthen due diligence and quantitatively review grant applications and performance. They maintained that it is uncommon for foundations to do background checks on grantees, that it would be onerous and exclude nonprofits run by people with lived experience.

Lorez Meinhold, the executive director of Caring for Denver, said there was no correlation between someone possessing a criminal record and ability to run a nonprofit.

“That somebody has served their time and now either in a leadership role or serving as a peer specialist that there's nothing to say they can't do that well,” said Meinhold to the audit committee.

The audit manager for the report, Kharis Eppstein, countered: “I don't think that's what we were trying to say. I think we were just saying you should be aware of those risks, so that you can make an informed decision as to whether or not the foundation is willing to take on that risk and not at least checking.”

Caring for Denver is itself a nonprofit that is fully funded by Denver city taxes amounting to about $40 million per year. The city contracts with Caring to grant those tax dollars to city agencies and community nonprofits. As a nonprofit, it claims to not be subject to many of the rules and laws that would apply to city agencies spending tax dollars, like open records laws. Meinhold is paid $257,398 by Caring for Denver to administer the tax dollars, according to a 990 tax form filed last summer. 

The auditor, Timothy M. O’Brien, told Meinhold that he was “disappointed” that they disagreed with his team’s recommendations for basic fiscal transparency and due diligence recommendations. He noted that Caring disagreed with seven of the 15 recommendations. 

“That’s your record!” said O’Brien, his voice raising.

Caring for Denver agreed to better record keeping for employee reimbursement, but disagreed with the recommendation to consider amending the contract to require Caring to adhere to relevant city fiscal rules. Caring for Denver agreed to training and to better document due diligence of grantees, but disagreed that they should verify financial and legal histories of applicant leaders and key staff. 

Auditor makes 15 recommendations for improvement

Caring for Denver disagreed with the auditor’s recommendation that they use “objective criteria to rank and compare grant applications.” Meinhold said that wasn’t common industry practice, though it’s used by state agencies like the Behavioral Health Administration to score grantees.

Meinhold said there appeared to be a disconnect, she said they would have partially agreed to many recommendations, if that were allowed.

“I don't know that that might've made it better or happier, but I think if there was the ability to ‘partially agree,’ there wouldn't be as many ‘disagrees,’ respectfully,” said Meinhold.

Meinhold said that Caring for Denver is making substantial changes to strengthen its grant process, but steadfastly refused to implement changes like a score card for grantees for a more fair distribution or background checks for grantees.

“We've been evolving as an organization, we don't make as many grants as we did early on,” said Meinhold. “They tend to be sort of a lower number but larger in scale as we learn what works and what can have the greatest impact in our community.”

She cited improved numbers in the state’s Healthy Kids survey as evidence that at least some of their work is having an impact, but she conceded that would be difficult to show what role Caring for Denver played in that.

McKenzie Lange/CPR

Part of the problem, according to auditors, is that Caring for Denver relies on unverified self-reported data from grantees, which the organization disputed.

“We do (employ) a highly structured reporting structure, we have a high touch,” countered Meinhold. “So at the start of every grant we have an evaluation partner as well as a program officer sit on a call to understand what is the data, what is the outcome, what is it that we want to collect? We meet at six months and then at a year to evaluate that data. So it's very high touch and we take a lot of that responsibility for aggregating data.”

The Caring for Denver tax was overwhelmingly passed by Denver voters in 2018. It allows for administrative expenses of no more than 5% of the tax dollar revenue, which equals an annual budget of $2.5 million

The audit found that Caring for Denver grants money to itself to help provide services for smaller nonprofits they work with, like for communications and human resources.

“I think we noted that one of the writers of the grant also approved the grant, which seems a little bit of a conflict to me,” said O’Brien, who noted that the grants look to be for administrative expenses.

The audit also found that the Caring for Denver Foundation regularly expensed alcohol for meetings with grantees.

To figure that out, auditors had to get creative, because Caring for Denver’s record keeping was lacking: “94% of the administrative expenses we reviewed were missing at least one of the key aspects city fiscal rules require,” reads the report.

But upon learning that 173 meals occurred at “one high-end Denver cocktail lounge,” auditors reached out to the restaurant and found that alcohol was included in the meals. In an interview after the committee meeting, Meinhold said that the lounge in question is Death & Co in the RiNo art district.

Jack Blumenthal, vice-chairman of the audit committee, noted that there are questions swirling around “public trust in government” and “I guess my question is: Having spent that money, do you feel perhaps that the organization ought to get reimbursed for what just absolutely didn't follow any kind of common sense ... ?”

Director says Caring has strengthened expense policies

Meinhold said they had made changes to their policy around alcohol-related expenses, but that the money reimbursed for alcohol would not be repaid by the Caring employees.

“We support strong fiscal accountability and transparency. What I'll just say our policies at the time, none of these were unallowable, but our policies weren't strong enough,” said Meinhold.

But she declined to give specifics, when pressed on the policy for alcohol purchases.

“We put guardrails around the meals, coffee, we require business purpose now and we've shared those new policies with the department (DDPHE). Alcohol, we've put very strict guardrails around, but I think that's part of the conversation we'll continue to have. And if that is not to be included, we will make those changes,” said Meinhold.

Auditors said that some of those meetings, with meals paid by Caring, were with grantees that applied to Caring for Denver in a competitive process.

“How do you make sure that you're being fair and selecting another organization over the one that you have meals with?” said the audit manager Eppstein at the audit committee. “You need to be able to support why you picked someone over another person or another organization, especially if a grantee or an applicant says, ‘Hey, why didn't I get picked?’”

After the audit meeting, Lynne declined to answer if it was appropriate for an organization that grants millions to sober living and substance abuse nonprofits to expense alcohol purchases during meetings with grantees. Lynne is also the head of Denver Health, which is a major grant recipient from Caring for Denver.

During the audit committee, Lynne said the board was active in reviewing grant applications and making changes, but auditors pointed out that, while those board meetings are public, the meeting minutes didn’t document that. Minutes are barebones, and recordings of past meetings don’t exist.

Lynne did say that she felt sorry for Meinhold, “and I think it's unfortunate that she has to go through what she's going through.” 

The Denver Department of Public Health and Environment provides oversight and contracts with Caring for Denver to distribute the tax funds. 

“The things that the auditor identified were things that we weren't aware of,” said Karin McGowan, DDPHE’s executive director. She added that they don’t have the resources to do full due diligence on Caring for Denver, whereas the auditors have a team of people. “And so I think to the extent that we have the funds to hold our vendors accountable, we do the best in our due diligence. And I think that looks different than a full-blown audit team.”

Caring for Denver’s contract is through mid-2027, but McGowan said it’s unlikely they can pick someone new to manage the grants: Caring for Denver Foundation is the only nonprofit that matches the criteria that voters approved in the ordinance as qualified to grant the tax money.

Still, the audit will result in changes, she said. 

“I think the audit is fair, and we need to put things in parameters in place to make sure that they are serving the right people."