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Portland City Council candidate Jo Ann Hardesty is running on the strength of her long record of public service. That record has made her the frontrunner in the campaign and has her poised to become the first woman of color elected to City Hall.

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It includes her stint in the U.S. Navy from 1978 to 1984 as one of the first women deployed on a ship and two terms as an Oregon state legislator from 1997 to 2000. In the past decade, though, Hardesty’s public service has largely been as a volunteer on the boards of local nonprofits.

Most notably, Hardesty helped revive the Portland NAACP after the group became defunct. She was elected president by members of the Portland branch, 1120B, in late 2014, took office in January 2015 and stepped down earlier this year.

Portland City Council candidate Jo Ann Hardesty at a protest in downtown Portland, July 1, 2018. Bradley W. Parks / OPB

“This was an organization that was just about to celebrate 101 years of existence,” Hardesty said. “I could not, with any blood left in my body, allow the oldest civil rights organization in Oregon to fold if there was anything I could do about it.”

In her volunteer role as president, Hardesty led monthly meetings, served as chair of the organization’s executive committee and co-signed checks from the branch bank account.

But records and interviews raise questions about financial oversight and record keeping of the NAACP chapter during Hardesty’s term and her attention to details.

The Portland branch lacked or failed to enforce the financial controls most nonprofits use to ensure they can account for their spending — controls that are spelled out in a bookkeeping guide the national NAACP publishes for its members annually.

Records also show that while Hardesty has characterized her work as the Portland branch president as volunteer service, she collected more than $13,000 in income from the organization in 2017, including a travel stipend and a payment to her for-profit consulting business. Hardesty and the NAACP chapter did not report that income to the IRS or pay taxes on it. Hardesty said she is now correcting her personal income tax returns.

Related: Smith, Hardesty Advance To November Runoff For Portland Council Seat

The poor record keeping posed a challenge for the leaders who stepped in to serve as president and treasurer after Hardesty stepped down from her post earlier this year.

“It’s no secret that there was mismanagement in the administrational piece of our organization,” E.D. Mondaine, who became branch president in February, told members at a meeting Aug. 25. “When we received the reins and understood that discrepancies were in place, we contracted a bookkeeper, placed a treasurer and made sure we were strong.”

The Hardesty campaign cooperated with this story and provided OPB with emails, documents, and tax documents. Hardesty and her campaign staff also answered dozens of questions in person and in writing regarding the NAACP Portland branch.

By spring 2017, two years after Hardesty took office, the NAACP Portland chapter had allowed its incorporation in Oregon with the secretary of state’s office to lapse. As of this spring, the Portland branch was not registered as a charity with the Oregon Department of Justice, also a legal requirement of nonprofit public benefit corporations.

The branch also fell behind on filing key annual financial reports to the national NAACP. The reports are due annually on March 1, and the parent organization uses them to file critical 990 tax forms in a group return on behalf of local branches.

The Portland chapter submitted its annual financial report in 2015, fulfilling its obligations to the IRS. The branch worked on a 2016 financial report, but the Hardesty campaign said it can not find a copy of it. The 2017 financial report still hasn’t been completed.

Nonprofits automatically lose their tax-exempt status if they fail to file the 990 form three years in a row.

To rectify the problems, the branch’s new treasurer submitted filings to the IRS in August for all three years.

A spokeswoman for the national NAACP did not respond to multiple calls and two emails regarding reports from the Portland branch.

Hardesty and her general election opponent, Multnomah County Commissioner Loretta Smith, are both running on their deep experience in Portland civic life. The winner will be responsible, under Portland’s unique commission form of government, for direct day-to-day oversight of a portfolio of city agencies assigned by the mayor. That portfolio would include the Portland Fire Bureau and the retirement system for police and firefighters under the current bureau assignments — agencies with combined budgets of more than $350 million a year.

Later this month, OPB will take a close look at Smith’s history as a manager, including her successes as a Multnomah County commissioner but also Smith’s own well-documented problems. In 2017, for example, Smith was the subject of a county investigation after people on her staff alleged that she had inappropriately used county resources and bullied them.

In Hardesty’s case, a close examination of her time at the NAACP reveals numerous successes — the organization is far more active today than when she took over — but an overarching lack of attention to detail and governance rules, particularly when it came to the nonprofit’s finances. Hardesty said the problems there were typical of a volunteer-run nonprofit.

“Has it been perfect? Of course not,” she said. “But no all-volunteer organization is perfect.”

She also said that the problems with record-keeping at the NAACP, while she was president, are not relevant to her future performance in office.

“I will not be personally the one putting together those documents. I will have staff, and there will be bureau directors doing that,” she said. “I think there’s not a comparison between what I’ve done as a volunteer, what I’ve done as a community member and what role I play as an elected leader.”

Successes And Messy Finances

Hardesty took over a branch that had been by all accounts defunct, and she brought in new partnerships and revenue.

In 2015, the branch worked with the nonprofit Common Cause to celebrate the 50th anniversary of the federal Voting Rights Act. In 2016, the chapter brought activist groups and families impacted by police violence from Spokane and Seattle to Portland for a summer conference on police accountability.

In 2017, with a grant from Oregon Humanities, the local affiliate of the National Endowment for the Humanities, the chapter created a Black Legacy Project bus tour, exploring the history of the civil rights movement and the black community in Portland. It quickly sold out.

During Hardesty’s tenure, the branch’s membership grew and its revenues quadrupled.

“Jo Ann has the charisma of a person who can bring people together from a broad variety of backgrounds,” said James Posey, a Portland contractor and small-business owner who served as the chapter’s vice president under Hardesty and is now the chapter’s economic development chairman. “If you add the layer of a constituency base that’s underrepresented, impoverished in most cases, it’s remarkable seeing what she’s been able to do.”

But problems tracking spending and filing reports dogged branch leadership.

Two people served as volunteer treasurer of the Portland NAACP during Hardesty’s three years as president.

Bryant Enge, at the time the director of Portland’s Bureau of Internal Business Services, started keeping the chapter’s books in 2015.

Enge resigned as treasurer in July 2016. He gave the branch just one day’s notice.

"Portland NAACP 1120B Branch has in a short amount of time reestablished itself as a prominent part of our community," Enge wrote in his resignation letter. "I am glad that I could be a small part of that success."

Enge didn’t respond to requests for comment. Portland’s chief administrative officer, Tom Rinehart, eliminated Enge’s bureau and laid Enge off earlier this year.

Enge declined Hardesty’s request that he stay on longer to give her time to find a new treasurer.

After he stepped down, the branch went six months without anyone in the critical role.

Cleophas Chambliss was elected treasurer in January 2017.

“The books for 2016 were a total mess,” she said.

Chambliss, 61, is not an accountant. But she had owned a small business, RJ And Company Property Maintenance, and handled the company’s payroll, accounts and ledgers.

Chambliss said the work she was expected to perform as treasurer was overwhelming, in part due to the organization’s history of poor record keeping. The time she spent piecing together a profit and loss statement for the NAACP’s prior year left her with little time to track the organization’s spending in 2017.

In September 2017, she said, she had surgery, making it hard to fulfill her volunteer responsibilities. In December 2017, Hardesty asked her to step down.

“I greatly appreciate your service, but I need to be able to depend on our treasurer being available for NAACP Portland Branch business,” Hardesty wrote in an email Chambliss shared with OPB.

During her brief time as treasurer — just under a year — Chambliss said she tried to ensure fiscal accountability by requiring people submit requests in writing when they wanted to use checks from the NAACP account

“Jo Ann would just write checks for whatever. That was difficult. According to the bylaws, checks were to be requested,” she said. “She would do anything she wanted, with no accountability. That started way before I got there, and I didn’t have the power to change it.”

Hardesty said Chambliss wasn’t responding to requests or fulfilling her duties in a timely manner.

Chambliss shared with OPB multiple emails from 2017 she sent to Hardesty and others affiliated with the NAACP. In them, she raises concerns about the excessive number of different checkbooks the local branch had and her difficulty tracking the purpose of individual checks.

“There needs to be some oversight of how monies are being spent and are those funds being spent on the Chapter or per the NAACP guidelines,” Chambliss wrote in a final email after Hardesty asked her to step down.

Discovering Problems

In February 2018, Hardesty stepped down from her role with the NAACP after the alternative newspaper Willamette Week raised questions about her use of the civil rights organization's brand in campaign events.

The branch’s first vice president, E.D. Mondaine, was selected president to replace her. Mondaine is a military veteran, musician and the senior pastor of the Portland’s Celebration Tabernacle Church. Jeff Strang, a member who had chaired the branch’s economic development committee, agreed to serve as treasurer.

In March, after media inquiries about the branch, the Oregon Department of Justice contacted the organization to inform its leaders they needed to register as an Oregon charity.

Mondaine and Strang hired an accountant to do bookkeeping and help them submit filings they believed were past due for 2015 and 2016 to the IRS. They filed for an extension for the chapter’s 2017 tax filings.

The accountant’s review found serious problems with financial oversight.

The problems included transactions that could not be classified due to inadequate record keeping and the use of a petty cash fund with little documentation.

Related: Candidate For Portland City Council Did Not Register Business, Opponent Says

"Based on some of the general ledger reports provided by the prior bookkeeper, there were several transactions that she could not classify due to inadequate record keeping as well," the accountant wrote in a letter to the Executive Board.

The accountant also noted that a $300 monthly stipend to Hardesty was incorrectly referred to on some checks as “per diems,” an important distinction for tax purposes.

The $300 “reimbursement stipend” was approved by the Portland NAACP’s executive committee in January 2017. It was designed to cover Hardesty’s local public appearances, travel and parking for the year ahead, according to board minutes shared by Hardesty’s campaign. She was not required to provide receipts or documentation.

In total, Hardesty received $3,300 as stipends in 2017.

Hardesty said, in addition to the stipend, the branch paid for her travel to the 2017 national NAACP convention.

Hardesty said she felt the organization could afford it.

“I’m required to attend a lot of meetings; I’m required to drive a lot. I’m required to engage with people in preparation for bringing them into the NAACP,” she said. “The first couple of years I wasn’t the primary breadwinner, so it wasn’t necessary for me to have the stipend. Once I was on my own and paying my own bills, it became more important for me to do that.”

But the IRS requires nonprofits to follow strict guidelines when they reimburse paid staff or board members because reimbursements are not taxed. People have to show receipts documenting costs they’ve incurred on behalf of their nonprofit for expenses.

Nonprofits generally must pay payroll taxes on stipends such as the one Hardesty received, and the recipient must report the stipend as taxable income.

The NAACP first reported Hardesty’s stipend to the IRS last month. Hardesty is now correcting her 2017 tax return.

Hardesty said the board was not aware there was a distinction between a per diem and a reimbursement.

The stipend bothered some longtime members.

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“It’s a volunteer organization. She’s the first one ever been paid like that,” said Odessa Hendrix, 75. Hendrix said she’s been a member of the Portland NAACP, paying annual dues, since 1965.

“You don’t get any money,” she said. “I’ve paid everything out of my pocket.”

Hendrix served on the Portland NAACP’s finance committee this year. Frustrated with the organization’s financial problems, she said she ended her lifelong membership in the NAACP.

Undocumented Spending

Sheila Randall, the accountant hired after Hardesty stepped down as president, was hindered by poor record-keeping, according to a letter she wrote to the executive board.

“Unfortunately, we were unable to obtain the bookkeeping data previously recorded by the prior bookkeeper for 2015, 2016 and part of 2017,” she wrote. “We compiled data based on bank statements and receipts that could be found.”

Randall declined to comment on this story.

She produced a statement for each year from 2015 to 2018, summarizing the chapter’s revenue and expenses, based on the records she could find.

Her overview of the branch's activities in 2017 could not explain $18,414.37 in spending — an amount that totaled more than half the organization's 2017 expenses.

The accountant’s report classifies the $18,414.37 as “suspense expenses.”

That’s an accounting term for spending that is “in suspense” because while the money was clearly spent, its business purpose hasn’t yet been determined.

Smaller expenses weren't documented or clearly tracked in other years that Hardesty led the local chapter: $2,364.83 in 2015 and $1,440 in 2016.

Related: Portland Council Candidate Jo Ann Hardesty: On The Record

OPB shared a copy of the accountant’s work with Beatrice Dohrn, the director of the University of Oregon School of Law’s Nonprofit Clinic.

“You don’t spend $18,000 out of a budget this small and not have it categorized if your organization is decently managed,” Dohrn said.

Dohrn said having a large amount of spending in suspense doesn’t necessarily indicate that money has been misused.

“But it does tell you that somebody is not managing well,” she said.”It’s just a basic thing that you do, is have systems that track where significant amounts of money go.”

OPB also gave Hardesty a copy of the accountant’s reports and provided her with written questions regarding the 2017 spending for which the accountant couldn’t find a documented purpose.

Hardesty initially told OPB the money was for food, lodging and travel for the Northwest Community Coalition for Police Accountability Summer Gathering.

That conference took place in 2016, not 2017.

After OPB requested documents that would indicate how the money had been spent, the NAACP sought additional information from its bank.

Bank records showed that two checks, written from a chapter checkbook the current NAACP officers could not find, explained most of the $18,000 that had puzzled the accountant.

OPB has not seen the checks but received a detailed description of them. One of those checks is for $7,537.50 and made out to a firm that conducted polling on a green-energy ballot measure for the NAACP and three other organizations. Proponents of the measure, including the NAACP, succeeded in getting enough signatures to put it on the November 2018 ballot.

The other check, for $9,000, was made out to Consult Hardesty, Jo Ann Hardesty’s for-profit business.

Governance rules developed by the national NAACP for its branches require all checks from branch accounts be signed by two people, the chapter treasurer and the president.

But that didn’t happen in this case. The check was cut in September, the same month Chambliss said she had surgery. Only Hardesty signed it.

Hardesty initially offered another explanation for the 2017 spending but corrected herself after being informed about the bank documents by OPB.

She said it was the first installment of $10,000 she was paid in total for work on a contract.

In September 2017, the NAACP collaborated with two non-profits — APANO, which works with Asian and Pacific Island immigrant communities, and Common Cause, an election reform group — to convene a day-long event on strategies to strengthen the voice of communities of color in Oregon’s political system.

The strategy session was funded by the Piper Fund, a Massachusetts private foundation.

APANO received the funding for the event and then signed a contract with the Portland NAACP to pay $10,000 for help convening it. Hardesty's campaign provided OPB with numerous documents related to the event, including emails, proposals and contracts.

Duncan Hwang, APANO’s associate director, said the gathering was a success.

“The collaborative scope of work was completed on time and on budget and our stakeholders were pleased with the final product,” he said.

But the contract between APANO and the NAACP, which the Hardesty campaign shared with OPB, says nothing about the payment going to the for-profit Consult Hardesty rather than the nonprofit NAACP.

The grant proposal the partners submitted to the Piper Fund includes $10,000 for NAACP staff time for the event but also doesn't mention the for-profit Consult Hardesty.

And the payment violated a number of NAACP rules and federal tax requirements.

Nonprofits, including NAACP branches, are supposed to file a form 1099 with the IRS when they pay consultants for services worth more than $600.

The NAACP Portland Branch did not report the $10,000 total payment to Consult Hardesty to the IRS, and Hardesty did not report the payment on her 2017 income tax return.

“There’s no way that I was trying to hide or obfuscate anything that was taking place. This was simply not having the documents that I thought I needed. Taking them to my guy, and doing what he told me to do,” she said.

The undeclared payment was roughly a quarter of Hardesty’s total business income in 2017, based on what she reported on her tax return.

Spending more than $100 from the branch's account requires a vote of approval from the executive committee, usually four or five people, per NAACP bylaws.

Hardesty initially told OPB that “every penny that was spent by the NAACP was spent with the approval of the entire executive committee.”

But the executive committee never voted to approve the $10,000 payments to Consult Hardesty, though they did discuss the project, she said.

Hardesty conceded that the NAACP did not go through any real process when it came to the payment to her consulting business.

“I guess that’s fair,” she said.

The $10,000 payment, along with the $3,300 stipend, also conflicts with how Hardesty characterized her role with the NAACP: as strictly volunteer work.

“I have never used any resources from the NAACP to benefit myself or my Portland City Council campaign,” she told Willamette Week earlier this year.

Hardesty stands by her characterization of her time with the NAACP as volunteer work.

“The fact that I was compensated for specific work, and I did specific work for a democracy reform effort does not take away from all the hundreds of hours I spent volunteering for the NAACP,” she said.

In spite of the financial chaos at the branch, many of the people who volunteered alongside Hardesty remain loyal to her. They say she is hardworking, committed to the cause of civil rights and dedicated to reaching people often left out of politics.

James Posey described her as somebody who isn’t influenced by money.

“Any reasonable, rational person can see that in the course of how Jo Ann does her business and who she associates with,” he said.

But Posey and others acknowledged that she can be “laissez-faire” about some things.

“Is she perfect? Hell no, she’s not perfect.” Posey said, laughing. “I’ll tell you about that, as soon as the election is over.”

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