Seattle nonprofit Urban League, which received the biggest chunk of money from the Seattle school district as part of its $1.8 million financial scandal, rushed to do damage control today by defending its actions. Urban League acting CEO Tony Benjamin insisted today at a press conference that his organization "did nothing wrong."

A state audit found that Urban League had received nearly $600,000 for contracting with the district's Regional Small Business Program, money the audit described as "questionable use of public funds." Read Urban League's interview with state auditors here (.pdf).

The audit's findings set off a criminal investigation for fraudulent activity. The district's small business program was run by Silas Potter, who was awarding contracts to vendors which didn't really help the school district or ultimately benefited his private company, the audit found.

The Urban League was one such vendor. It signed a $235,000 contract with Seattle Public Schools in 2005, and another one amounting to $350,000 over the next three years. But the audit found that the Urban League had overcharged the school district to fund one of its own programs—the Contractors Competitive Development Center (CCDC) which helped minority contractors become more competitive in order to bid for city jobs. Urban League didn't provide details as to how the money was spent, auditors said, but simply said it was needed "to keep the doors open."

Benjamin did not deny that the statement had been made, adding that it had been taken out of context and that Urban League depended on public funds to stay afloat.

Auditors said Urban League submitted vague invoices and often provided services that were of no use to the school district. For example, the district paid Urban League $25,000 for a software subscription fee for a database designed to match small business owners with general contractors. Urban League told auditors that this database was not functional and district employees said they never used the database.

Benjamin said today that the database had only been a 30-day trial and that the school district had not wanted to turn it into a fully functional program. Additionally, the audit found that Urban League charged the district for indirect costs which sometimes exceeded direct costs by three times.

Benjamin said that the recent allegations against his organization were untrue. “Despite the allegations, inferences, audits and headlines, let me be clear: we lived up to contractual obligations and requirements to the Seattle school district—and then some—and, to the small business community we serve," he said in a statement.

The audit also found that Urban League hired third party contractors to work for them even though their names were not mentioned in contracts with the school district. Auditors were concerned that the district was charged by vendors who did not have contracts or purchase orders with the district. In interviews with state auditors, Benjamin and Urban League CFO John Chuta said they brought in third party contractors under Potter's direction.

The City of Seattle recently slashed funding for Urban League, including its CCDC program, criticizing it for submitting sloppy, inaccurate invoices—concerns which echo those in the state audit report.