Local Y files for bankruptcy

Second of two parts

by MICHAEL J. MISHAK

In June 1999, a volunteer group of women sought to reverse more than two decades of decline at the historic Germantown Women's Y. Facing the institution's closure, the group led the first of two membership takeovers.

Saddled with a $450,000 debt, the new board quickly set out to improve conditions for the Y's childcare center, which had operated unlicensed for eight years, and to hire an executive director. According to Joyce Brown, then-board co-president, the group raised $60,000 in their first 60 days.

In February 2000, the board hired Antoinette Berger as executive director in the hopes of saving an institution crippled by circumstance and mismanagement, Brown said. Some current board members contend the move dragged them off the cliff and into a financial abyss.

According to Brown, the Y's decline began 25 years ago when Center in the Park, then called the Community for Older Adults, occupied much of the building's space. The Y's program's diminished as the senior group grew, she said.

Throughout the next two decades the Y experienced a drop in membership from about 18,000 to fewer than 200, Brown said.

Programming would be crucial to the recovery.

Initially, membership soared to 3,000 in two years, Brown said. But that surge ended when new programs failed to materialize and some of the few that already existed were lost, said then-board member Heike Rass-Paulmier. The Y's program director, also a paid position, did not expand programming, Rass-Paulmier said.

But both Brown and Rass-Paulmier, among other board members, began to notice an increase in paid staff. Brown described the situation under Berger's watch as "staff heavy, program light." Rass-Paulmier said the Y was employing nearly 70 employees without sufficient revenue from programming to support their salaries.

Also, incomplete capital improvements raised the suspicions of board members.

According to Rass-Paulmier, the board split over Berger's handling of the Y's finances.

Though the board met more than once a month, she said, "board members were not in a position to monitor things like we should have been."

Berger was not forthcoming when asked to provide financial information, Rass-Paulmier said. The executive director's answers led to more questions, she said.

"Money was going out, but not enough was coming in," Rass-Paulmier said. "[Berger] did not have a satisfactory plan."

In June 2003, half of the board, including Brown and Rass-Paulmier, resigned over their dissatisfaction with Berger and what they saw as an untenable fiscal policy. The other half of the board steadfastly supported Berger's efforts, Rass-Paulmier said, muting any vote to take corrective action.

Rass-Paulmier said communication problems between the board and the executive director and also among the board itself complicated the situation.

The board received "no satisfactory answers or documentation" to their questions about the appropriation of grants, she said. "We asked, 'Why isn't the gym finished? Where is the money going?'" she said.

"Things were falling apart," Rass-Paulmier said.

Antoinette Berger denied any charge of mismanagement and defended the size of her staff. State law mandates a particular ratio of staff to children for social service programs, Berger said. "You either run those programs or you don't," she said.

The Y's problems, and ultimately her departure, stemmed from a cash flow problem that was compounded by an aggressive debt repayment plan already in place upon her arrival, Berger said.

A $300,000 debt, inherited from the previous administration, was paid off in two and a half years, she said, devouring much of the Y's revenue and costing it future cash flow. The move was irresponsible, she said, especially after the Sept. 11 attacks when funding dried up for the nonprofit sector.

Still, Berger claimed that audits of her years as executive director would show an increase in income from about $400,000 to $1 million.

"I have 37 years of positive administration behind me," Berger said. "There's no reason to screw up an organization that's in my neighborhood. I had a strong, vested interest in the Y."

Berger also denied withholding any financial information from board members. "Whatever was asked for was given," she said. "I have nothing to withhold." Berger said her repeated cries to the board for increased membership were not heeded.

The turnaround time for grants, at times three months, further complicated an inherent cash flow problem, Berger said. At the end of her term, Berger said she had to turn down a $200,000 grant from the city for a summer camp program because the cash flow was unstable.

"I was charged not only with developing and growing the organization, but also bringing it out of the red at the same time," Berger said.

At times, the Y accumulated "substantial" utility bills, she said, recalling a $10,000 electric bill. "It's easy to create that kind of backflow," she said, citing the Y's cash flow problems and grant turnaround. Berger said that "to the best of my knowledge" all utilities were either paid or "just about up to date" with the exception of an oil bill.

"I'm not sure I know of any nonprofit that doesn't have more money going out than coming in," Berger said. She placed the Y's debt at $100,000 at the time of her departure. She said the level of debt was "not unusual" for what she considered a "start up" organization, citing the 1999 takeover.

Former board member Susan Wright said that while conditions under Berger's watch were far from ideal, the executive director "did her very best and worked hard."

Wright said Berger was so dedicated she returned to work just two weeks after receiving cancer treatment. She bristled at any suggestion of intentional mismanagement by Berger.

The circumstances at the Y during the period between June and October 2003, when the membership staged a second takeover, remain unclear. Wright considers the second takeover, when she and other board members were "forced out," illegal. Those who stayed after Brown, Rass-Paulmier and

Others resigned, worked hard, she said.

The new group of volunteers, who called themselves the "renaissance slate," discovered a fiscal crisis more perilous than any had imagined.

At its first board meeting, the new slate thought it had inherited a $100,000 debt from Berger's administration. They soon discovered the reality was six times that amount. In its Aug. 31 bankruptcy filing, the Y states it has $540,000 in debt, and owes $138,384 to the Internal Revenue Service and $60,760 to Berger for a "purported loan" that is under dispute. Berger declined comment when asked about the loan.

Unpaid utility bills contributed to the bankruptcy filing, said interim executive director volunteer Merrie Baldus. Many bills were not paid until the Y was threatened with service shutdown, Baldus said. Preparing for the Chapter 11 declaration, Baldus said the new board discovered that the water bill for the Y's childcare center had not been paid for three years.

Most disturbing, the board learned staff had not been paid for more than three months, Brown said. Baldus said paychecks started bouncing in April 2003. Though the Y's few workers are now paid on a monthly basis, they are still owed five weeks of back pay, Baldus said.

Now, restructuring under court supervision, the Y's new board says it's dedicated to paying its creditors and clearing its name in the funding community.

"We are people with a lot of enthusiasm and we're digging ourselves out of a financial hole," said Rass-Paulmier, now board vice president.

While spirits remain high, the situation facing the Y is precarious. With 50 broken windows, the Y's gym in is critical need of replacements, in addition to boiler repairs, before winter, Brown said. She placed the cost at $60,000. Also, the Y needs a new roof, work estimated at $70,000, and painting work, a $20,000 job, she said. The Y's heating oil bill is expected to run $35,000 this year alone, she said.

The Y is now looking for a full-time paid executive director with a nonprofit business background, Brown said. The institution is also looking for volunteers with skills in programming and program management.