Over the past year, interim director Douglas Macdonald has fought to rebuild the nonprofit after an exodus of key staff amid allegations of financial mismanagement under the former director. The flight of employees led to a flight of capital, too, as research grants went unattended and private donors lost confidence in the organization.

But the final blow may have been delivered late Tuesday by state Housing and Community Development Director Gordon Walker, who announced he is not renewing the nonprofit's core funding, a $120,000 Community Services Block Grant.

That money used to belong exclusively to Utah Issues, but Walker opened the field this year to other applicants.

Macdonald said he was shocked by the decision.

"It doesn't make sense," he said. "We were rebuilding and staffing up. Together our advocacy staff have 185 years of experience. I don't quite understand the decision, unless there's another agenda." He declined to elaborate on what that agenda might be.

But there were delays in the grant's announcement.

The grant was expected to be awarded in September, and at one point applicants were told not to expect word until late November, after the election.

Walker said the delay has "absolutely nothing to do with the election or politics." Competition was stiff, but Utah Community Action Partnership (UCAPA) promised to deliver more and underbid its competitor by $27,000, he said.

Still, Walker admits the decision wasn't easy, especially knowing the financial straits at Utah Issues, one of the state's oldest and well respected voices for the poor.

Adding insult to injury: UCAPA's grant application was submitted by former Utah Issues housing analyst Heather Tritten.

Signs of trouble at Utah Issues, whose full name is Utah Issues Center for Poverty Research and Action, began last fall when staffers warned board members of "an impending organizational breakdown" and complained of a leadership void.

Following an investigation of accounting and cash flow problems, Leticia Medina stepped down as director last spring.

Macdonald, former chief economist at Utah's Tax Commission, was hired to salvage the organization.

Macdonald said he is focusing his energies on fundraising and expects to win another grant, which could "keep us afloat for a month or two."

The nonprofit staged an anti-poverty conference last month and recently published its annual research document, the 2006 State of Poverty in Utah. Also, Macdonald has hired two new analysts with master's degrees.

But the board has yet to hire a permanent director. And last week, Macdonald was sounding less optimistic.

"Unless we find some funding, we're down to the last $1,000," said Macdonald on Thursday. "I have some receivables owed us, but we've been living on air here since August."

kstewart@sltrib.com