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YMCA Board hears harsh words from national office

Beverly Bryant - April 25, 2017 8:23 pm

The Ponca City YMCA Board of Directors ran headlong into a wall of harsh reality Tuesday during a telephone conference with representatives of the national YMCA organization.

The local board had hoped to hear recommendations about the best way to move forward in light of the resignation of six key staff members last Friday.

But national representatives pulled no punches, saying the local Y is broke, not a good potential partner for a merger, and board members could be held personally liable for problems if things don’t turn around quickly.

In describing the situation,  YUSA representatives Jonie Welle and Brad Ellenbecker said they wanted  to help the local board make decisions about the Y’s future and help the board avoid entering into risks it should not.

“We want a thriving YMCA in Ponca City,” Welle said. “Does the organization have the capacity to be that? The elements provided in the documents lays out a summary about your organization, what’s brought you here.

She said the membership committee at YUSA has a compliance responsibility to look at the local Y’s financial position and risk in  the next four weeks as the six staff members leave.

Ellenbecker said YUSA looks at the larger picture, the local board’s financial capacity, its current financial position and its staffing structure.

Local board member Diane Anderson asked about red flags or signals the national organization may  have seen leading to the current crisis.

“Yes,” Welle said. “Every year you post an annual report. The red flags on the fiscal situation have been there. We tried to get some things done last year. We talked with the executive committee. We can help you make plans, but follow-through is still your responsibility.”

Ellenbecker said, “We don’t run or operate your business. We provide support strategy and physical resources in education and training.  We have an internet site to allow staff and board to have additional resources to see physical plans, fundraising ideas, ways to assess staff structure.”

He said YUSA had offered to partner with the local board to provide support.

“We can be partners so you can learn from us,”  he said. “We offered to help you build on opportunities. We’ve been talking to your CEO and board members.”

“We see your  situation in the financial data,” he said. “We see it through your annual reporting process. Even though we make it available to you, our help isn’t always taken advantage of. … It’s up to you as an organization — CEO and board — to embrace those services.

“We do control your charter,” Ellinbecker said.

Welle said the national organization does have some interim CEOs that might help the local board.

“They are typically retired and do interim work,” she said.  “The concern for you is while the interim CEO is not there, who leads the organization?”

Welle said the YMCA is required to have a CEO and staff is required to stay certified.

An interim CEO is required to have a four-year college education and can be a past board member, present member who would have to resign from the board, or someone from the community who is a good manager. That person may only serve for 12 months in an interim role. At that time, the board must decide to hire a full-time CEO, arrange for contract management or form a merger.

That clock starts ticking the day the last CEO steps down, she said.

“An interim can be hired as the CEO or the board can go through the CEO search process, which lasts up to six months,” she said.

A new CEO must go through the new CEO institute, and within three years must complete organizational leader training.

A board member asked if an interim CEO must be in place May 25.

“The true answer is the as soon as Shane (Harland,  current CEO) leaves, you are out of compliance and on conditional status,” Ellinbecker said. “There is a window of transition, but you need a person to help manage your risk. Summer includes much more risk, with children in your building, at camp, etc. This becomes a big concern of ours. Even with a grace period, that will be defined by your board and the risk.”

Board President Joel Gilliland asked about contract management compared to the possibility of the Ponca City YMCA merging with another Y.

“Contract management is done through a neighboring association with capacity and the willingness of the board of the neighboring association to do so,” Ellinbecker said. “It can last for 24 months.”

He said contract management can be compared to “dating before marriage.”

“If the organizations benefit from a collaboration, they would organize in a different way, with one of the organizations reorganizing as a branch, perhaps,” Ellinbecker said. “You would still need a manager, and it would be up to the other organization to hire that person. Fiscally, it doesn’t happen overnight. You have to decide; the other board has to decide. And honestly, you’re not an attractive partner. The organization is looking at a merger — the more in debt you are, the less attractive you are.”

He said there are 120 YMCAs in agreements to different degrees throughout the United States.

“Having a full-time staff member at an organization to mold into a CEO will take some time,” Ellinbecker said. “A management agreement allows them to meet compliance standards. You could be paying someone from the stronger organization $500 a month. … Eventually you have to decide if you’ll hire a CEO or plan for another strategy.”

Gilliland asked how long that might take.

“You have to find a partner,” Ellinbecker said. “You do that by being attractive. The more attractive, the better chance you have. Your financial position and staff vacancies make you very unattractive right now.”

He said a partner agency would have to modify its model to make changes for the Y to be a more sustainable organization.

“Regardless of what decision you make, the finding of a partner is the biggest piece,” he said. “Some take six to 12 months for that to develop. You don’t have that time. You have departures within the next four weeks. You have to have a plan in place to manage your risk.

“If you don’t have a staffing structure, you as a board could have personal liability. If you don’t have a CEO who understands the organization of our YMCA, you could be liable for a drowning or an abuse situation. You’re knowingly operating your system without hiring those people and having them in place.”

Ellinbecker said it would be a challenge to find staff to work with the local board.

“If you’re not sustainable now, what makes you sustainable 12 weeks from now? What assurances do they have of being paid? Ask yourself, can I provide the right resources?” Ellinbecker said. “And start asking yourself if you really want to do that.”

Ellinbecker said lowering risk for the board includes hiring a CEO and staff members who understand a series of defined best practices.

“The current CEO knows what those are. Certified CEOs coming to you would know those best practices. The CEO is responsible for hiring people with certifications and standards to meet the qualifications to manage risk in your environment,” he said. “The key position is CEO, who hires the other positions. Other resource specialists can provide support.”

Gilliland asked more about the board’s personal liability.

“We’ve had a good strong CEO since I’ve been here,” he said.” You can know the right thing to do and not do it — know the right person and not hire them. We can do the best we can do and you’re saying the board could still be liable if something bad happens?”

“Absolutely! Absolutely,” Ellinbecker said. “A suit can be filed against your organization for anything. The only way to eliminate liability is to shut it down — fill the pool with sand, lock the doors, don’t let children in. But you’re charged with managing risk. You  have to have the right person in the right seat and doing the right thing, based on compliance standards and best practices, standards of YUSA and the local/state organization for standards you have to meet for childhood services.”

Welle said,”The board needs to do due-diligence. Hiring someone less qualified would put you more at risk. You must manage people, manage risk, and manage the facility.”

Gilliland asked if mergers ever happen when neither YMCA partner is in trouble.

“Absolutely,” Ellinbecker said. “But I’m that person who provides support for Ys looking for a merger. A merger really exists around your capital structure, (which belongs to the city). Assets could be diminished if you take on more debt. You become less attractive to a partner.

“I would guide other organizations away from you,” he said.

With better financing, partnerships could bring strength to the other organization.

“We do not like to deploy a strategy to save a Y around a merger,” he said.

“The management agreement would be a great first step for you,” he said. … “If we could find an interested partner for you, that’s a great strategy, but I don’t think a merger is in your cards. You are depleting your asset over time.

“When you merge, your entity goes away and a new entity is formed. It is a marriage,” Ellinbecker said. “The challenge is two-fold: Asset structure and the weakness of the organizational staffing structure.”

He said a management agreement would give the local board time to gain momentum, change, and become stronger.

“We want to bring the right assets to the table at the right time,” Ellinbecker said. “The key to all of that work is to bring to you the right partner, and right now that would be difficult. An interim CEO could give you more time to develop.

“Your operating model is broke,” he said. “In essence, you are insolvent — technically bankrupt. You’re contemplating a loan and that will not solve your issues, just kick them down the road.”

The board will meet again at 3:30 p.m. May 16.

 

 

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