What can a nonprofit board learn from the JTA budget crisis?

JTA runs public transit in Jacksonville. It's a public authority, not a nonprofit, but its financial problems raise questions that will be familiar to anyone who sits on a nonprofit board. It depends on a few large revenue sources, much of its money comes with restrictions attached, and its board relies on the financial information management provides.

The fiscal year that ended September 30 is projected to close about $39 million short. Nearly 200 employees have been laid off and bus service has been cut. The City Council approved up to $30 million in gas tax money to pay down the agency's line of credit, to be repaid over time, and Fitch lowered JTA's credit rating on October 21. The Florida Attorney General's Office has subpoenaed agency records, and a City Council committee is investigating.

It built up for years

When the City Council's auditors went back through JTA's budgets, they found the problems didn't start this year. Some departments had spent more than their budgets for several years running. In 2022, JTA reported no significant budget stress while spending about $4.8 million over budget. Auditors also identified overly optimistic projections and weaknesses in how budget changes and expenses were handled.

The deterioration became much more pronounced in the fiscal 2026 projections. The city's six-month review recorded a year-to-date deficit of about $15.7 million as of March 31, even though JTA projected a year-end deficit of only $2.25 million. JTA's report arrived four days late and had to be revised twice because of errors. The auditors' subsequent quarterly report identified a projected deficit of $31.8 million. The difference between the earlier year-end forecast and the later projection raises an important question: what changed, how quickly did management recognize it, and how was that change communicated to the board?

What one board member says the board wasn't shown

J. Daniel Vallencourt joined the JTA board in February. In a public statement on October 26, reported by News4JAX and the Jax Daily Record, he called for the agency's three top remaining executives to resign. He said:

• JTA drew $34.2 million from its reserves over about a year, and the board didn't learn the extent of those withdrawals until a retreat in August.
• The agency spent $181.1 million against a board-approved budget of $148.2 million.
• When management sought a $40 million line of credit in July, it was presented as a way to manage ordinary cash-flow timing. At the time, JTA owed vendors $24.9 million, including $5.5 million in bills more than 120 days past due.

He also took some responsibility himself. He said he should have demanded the underlying financial documents, including balance sheets and cash-flow statements.

These are statements by one director, not final findings of the investigations. The city's auditors have not established that financial statements were deliberately falsified. The allegations about what management disclosed, and when, remain important questions to resolve.

For a nonprofit board, the practical question is what its own financial reporting would reveal. Would directors see a deteriorating forecast, a growing reliance on reserves or a buildup of overdue bills? Would they know what had changed and what management planned to do about it?

Four warning signs that show up in nonprofits too

A forecast that doesn't keep up with changing conditions. If your projected year-end result hasn't moved since the budget was approved, it may not be getting updated to reflect what's actually happening. A reimbursement grant that starts late, a funder that pays less than expected or a program that costs more to run can all affect the year-end result. A budget-to-actual report may show the variance without explaining its likely effect on the full year. Ask for an updated forecast every month, along with an explanation of what changed and why.

Reserves used without a clear approval process. At some nonprofits, reserves are treated as whatever happens to be in the savings account. Without a written reserve policy, the board may not have agreed on how much should be held back, when reserves can be used, or who has authority to approve a withdrawal. A policy can establish a minimum balance, a target, permitted uses and approval requirements. Our article on how many months of reserves to keep walks through the calculation.

Unpaid bills that aren't visible in the cash picture. An organization can have money in the bank while overdue vendor bills accumulate. The bank balance alone doesn't show how much of that cash is already needed to pay outstanding obligations. An accounts-payable aging report shows what you owe and how long it has been outstanding. When a line of credit comes up, ask whether it covers a genuine timing gap, such as a government grant that pays 60 days after you incur the expense, or whether it is covering an operating deficit. A timing gap has an expected repayment source and date. A deficit requires a different plan.

Commitments that never made it into the budget. The auditors identified a contract that JTA's budget treated as a half-year cost when the obligation covered a full year. Nonprofits can run into the same problem with a position hired in March, a new lease or a multiyear software contract. The current-year budget may not reflect the full cost, and the next year's starting point may be wrong as well. Budget reviews should account for contractual commitments, not just expenses already recorded.

Two other issues raised by the JTA reporting deserve attention. Sales tax accounted for at least 40% of JTA's budget in some years, leaving the agency exposed when collections fell short. A nonprofit faces a similar risk when one grant or donor accounts for a large share of its revenue. The city also raised questions about turnover in JTA's chief financial officer role. Frequent changes in finance leadership can make continuity harder, particularly when reporting processes and institutional knowledge aren't well documented.

The annual audit won't catch it in time

Boards should take an independent financial statement audit seriously, but a clean audit opinion doesn't mean an organization has effective forecasting, budget monitoring or internal controls in every area.

An audit provides an opinion on whether the financial statements are fairly presented, in all material respects, under the applicable accounting framework. It examines a completed reporting period and is not designed to tell the board in March what the organization's financial position is likely to be in September. Nor does an unmodified opinion guarantee that every instance of fraud or every control deficiency will be detected.

Management is responsible for the organization's financial reporting and day-to-day controls. That includes monitoring actual results, updating forecasts, managing cash, tracking obligations and bringing material changes to the board's attention. Directors need enough information to oversee that work and should be able to ask for more when the reports don't answer their questions.

The answers should be specific enough for directors to understand the organization's position and what management is doing about any problems. If the information isn't available, or the answers don't reconcile with the financial reports, it's worth examining the underlying processes.

A closer look at your financial management and controls

Lyra Works' Financial Management & Controls Assessment helps nonprofit and small-business leaders examine how financial information is produced, how spending is controlled, and whether management has the information it needs to oversee the organization.

The review can examine areas such as financial reporting, budget monitoring, forecasting, cash management, spending approvals and the responsibilities behind key financial processes. Its scope is tailored to the organization and the questions that need to be answered.

The assessment is not an audit and does not provide an audit opinion. It is a practical review intended to identify weaknesses, clarify priorities and help leadership decide what needs attention.

You don't have to be in financial trouble to benefit from a closer look. Sometimes the right time to examine your financial management is when the numbers still give you room to make changes.