The Federation Employment and Guidance Service's (FEGS) salaries for its top executives increased even as program revenue declined. It's financial management system was 'outdated," and its administrative cost structure was "overly prohibitive" was "significantly more than target industry standards."
The UJA-Federation's lead social services agency, the Federation Employment and Guidance Service (FEGS) filed for bankruptcy yesterday, meaning the top two UJA-Federation agencies meant to help the poor, disabled and ill have now crumbled. The first to self-destruct was the Metropolitan Council on Jewish Poverty, whose Modern Orthodox CEO William E. Rapfogel and top employees, including a haredi rabbi, looted at least $9 million from the anti-poverty agency.
And now, as Capital New York reports, FEGS has just officially imploded due to serious mismanagement, leaving two open questions: exactly what oversight to the UJA-Federation actually give to the agencies it funds, and what were these agencies boards doing as their nonprofits were crumbling around them?
At any rate, Capital New York reports on the FEGS bankruptcy:
…"An outdated financial management system led to delays and considerable losses in billing and cash collections, causing a further drain on available cash and also compromised management's ability to make responsive business decisions in a timely manner," wrote FEGS C.E.O. Kristin Woodlock in her affidavit.
Woodlock cited the generally challenging climate for nonprofits, decreases in revenue and increases in operating costs, and an over-emphasis on growth, without due consideration of whether new contracts were viable.
She also pointed to an "overly prohibitive administrative cost structure which was significantly more than target industry standards, coupled with the inability to keep pace with the growing organizational complexities of the organization as a whole."
FEGS' salaries for its top executives increased even as program revenue declined in recent years. And the charity's for-profit subsidiaries—particularly AllSector, HR Dynamics and Single Point, which have come under scrutiny since the announcement of FEGS' troubles in January—were established in an effort to generate income, Woodlock said. But in practice, they did not attract third-party clients and ended up being funded largely through work for their parent company.
"As a result, instead of its administrative costs subsequently being reduced, FEGS was forced to fund these affiliates' cash requirements and losses," wrote Woodlock.…
[Hat Tip: dannyb of Harlem.]