(task) With Little Warning, Agency Aiding New York’s Most Vulnerable Crumbles - NYTimes.com

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> http://www.nytimes.com/2015/02/09/nyregion/with-little-warning-agency-aiding-new-york-citys-most-vulnerable-crumbles.html?_r=0 <http://www.nytimes.com/2015/02/09/nyregion/with-little-warning-agency-aiding-new-york-citys-most-vulnerable-crumbles.html?_r=0>
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> With Little Warning, Agency Aiding New York’s Most Vulnerable Crumbles
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> Faced with a budget shortfall of $19.4 million, FEGS Health and Human Services recently announced it would be closing its programs. Credit Bryan R. Smith for The New York Times
> The bombshell dropped on a quiet Friday evening. Steven Banks, the commissioner of the city’s Human Resources Administration, was in his office when he got the call.
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> On the line was Kristin M. Woodlock, the new chief executive of FEGS Health and Human Services <http://www.fegs.org/>, one of New York City’s largest social service agencies, a venerable institution often praised by corporate titans and community leaders alike.
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> But this was no social call: FEGS, the Human Resources Administration’s biggest provider of job placement services <http://www.nytimes.com/2014/08/04/nyregion/a-fitting-for-a-second-chance.html?smid=tw-share> to the impoverished and disabled, had discovered a gaping hole in its budget and was suddenly struggling to stay afloat.
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> Shocked, Mr. Banks listened as Ms. Woodlock described a $19.4 million shortfall. He had a crisis on his hands.
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> That crisis, which came to the city’s attention in December, deepened in recent weeks when FEGS announced plans to shutter all of its programs, leaving city and state officials scrambling to find new providers of job placement, housing, mental health care and other services for tens of thousands of vulnerable New Yorkers.
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> Steven Banks, commissioner of the city’s Human Resources Administration. Credit Victor J. Blue for The New York Times
> Even in a city inured to tales of mismanagement and financial irregularities, FEGS’s downfall has stunned decision makers in government and nonprofit circles, who are asking: How in the world does an 80-year-old agency with an annual budget of over $200 million crumble with so little warning?
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> Annual audits filed by FEGS, which has $202 million in multiple-year contracts with city agencies, failed to indicate any significant problems, officials say.
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> “There was never even a hint that the organization was about to go into a financial tailspin, or perhaps was already in one,” Mr. Banks said of the agency, which served more than 100,000 clients annually.
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> Ms. Woodlock, who was chosen to shepherd FEGS through its difficulties after the budget shortfall came to light, declined to comment for this column. Her spokeswoman, Julie Farber, said that “no fraud or malfeasance has been identified” so far by a forensic audit that is currently underway.
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> But when asked whether FEGS had been contacted by criminal investigators at the Manhattan district attorney’s office or by the state attorney general’s office, Ms. Farber declined to comment. Officials at those offices also declined to comment.
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> So what do we know? FEGS reported operating losses two years in a row, according to the agency’s tax returns from fiscal years 2011 and 2012, the most recent returns publicly available.
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> Thirty percent of FEGS’s budget went toward administrative costs, including salaries, which is considerably higher than most watchdog groups recommend. In fiscal year 2012, Gail Magaliff, the previous chief executive officer, earned a base salary of $482,436, plus additional compensation of $156,444, for a package of $638,880, the tax return shows.
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> (In New York, nonprofits that receive state funding can use that money to pay executive salaries of up to $199,000, though agencies are not barred from using different funding sources to cover higher salaries and administrative costs. In April, the law will also preclude state funds from covering administrative costs that exceed 15 percent of the budget.)
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> And there is more: The agency had leases for offices it did not need. FEGS also counted money that it expected to receive from the government as money it had actually received, and it lacked adequate financial controls and computer systems to make that disparity clear, according to government officials and others who have become familiar with the agency’s accounting in recent months.
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> Although the agency had long prided itself on its professionalism, it was not meeting some of the performance milestones required in city contracts, failing to evaluate some clients in a timely manner, place them in jobs or sign them up for disability benefits, officials say.
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> But none of those problems were on the public agenda when hundreds of black-tie guests poured into Cipriani 42nd Street in Manhattan to celebrate FEGS’s 80th anniversary in May.
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> Instead, the benefit gala, which raised more than $1.4 million for the agency, commemorated FEGS’s transformation from a tiny charity, established during the Great Depression <http://topics.nytimes.com/top/reference/timestopics/subjects/g/great_depression_1930s/index.html?inline=nyt-classifier> to help young Jewish men and women find work, into one of the largest social service agencies in the country.
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> That night, Ms. Magaliff, the former chief executive, said she was inspired to see so many people gathered to “celebrate our shared commitment to serving people who face barriers to economic and personal independence.”
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> Ms. Magaliff stepped down as the financial crisis erupted. City and state officials say they are working closely with Ms. Woodlock, a former acting commissioner of the New York State Office of Mental Health, and other nonprofit groups to try to ensure a seamless transition for FEGS’s clients.
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> Advocates for the needy and the disabled say they will be watching closely.
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> “What we worry about, obviously, as things shake out, is that services may be diminished,” said Roberta Mueller, a director of the Disability Justice Center at New York Lawyers for the Public Interest, an advocacy group.
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> The people who work for FEGS and its subsidiaries — some 4,000 employees — are worrying, too, as the agency prepares to close its doors.
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> For years, many have offered advice and counsel to clients searching for jobs <http://www.nytimes.com/2014/03/31/nyregion/older-and-out-of-work-but-not-out-of-contention.html?smid=tw-share>. Now they may need that kind of counseling themselves.
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