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New details on how close MHA came to financial ruin

STORY BY MEG LAUGHLIN, (Week of February 28, 2013)

The new board chairman of the Mental Health Association laid out in horrifying detail last week just how close to ruin the organization came before its financial backers forced out the former CEO and most of the nonprofit’s board members.

“It’s a pretty sobering situation,” Joe Smith told Hospital District members before asking them for emergency money to stabilize the association, which provides mental health services to the poor in Indian River County.

By January, when Smith, the new board and a new CEO took over, MHA had just $17,000 left in the bank, monthly bills of more than $25,000, and was $251,000 in debt.

The former board contributed to these money woes by giving former CEO Kris Sarkauskas an $85,000 severance when she was forced out of her job at the end of December.

Although the Hospital District, the United Way and the Robert F. and Eleonora W. McCabe foundation voted to restore monthly funding once the personnel and board changes took place, “we did not have a good way to make it to the end of the month,” said Smith.

While the remaking of MHA requires a lot of work and money to make up for huge financial and management deficits, the association’s major financial backers are quick to say the changes came just in time to save the organization.

“Absolutely correct,” said Smith.  “Stay tuned because we expect things to get better and better.”    

As a show of confidence in the organization’s new leadership, the United Way gave MHA a lump sum of $40,000 to cover its January expenses rather than doling out about $6,600 a month that it had pledged through the end of June.

In addition, the McCabe Foundation, which gives about $6,000 a month, pledged an additional $25,000 for February and $25,000 more for March.

At the Hospital District meeting, the district board voted unanimously to give MHA $100,000 in two payments of $50,000 each.

But even with these generous donatrons, Smith said, MHA faces a shortfall by the end of June.

MHA needs at least $30,000 more, Smith said, and in mid-March the nonprofit will approach the United Way for additional funds and will also begin approaching other former donors.

According to the nonprofit’s 2011 tax statements, past supporters include The John’s Island Foundation, which gave over $27,000 to MHA last year, and philanthropist Barbara Hurley, who gave $60,000.  

Smith said if he had to prioritize MHA goals under the new board, they would begin with the goal of meeting client needs with no interruption in services.

Next, would be the goal of establishing a sustainable economic model, and third would be launching new fundraising efforts. “We need to build capital reserves,” said Smith.

John Taylor, a new MHA board member, said the groups focus also would shift “so that the focus will be on core programs and services over marketing.