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NEON eyeing layoffs due to ‘critical situation’

Norwalk NEON 081413 088
Norwalk Economic Opportunity Now (NEON) Board member Alan Rossi pushes for more financial status reports at Wednesday’s board meeting.

NORWALK, Conn. – The negative cash flow and a history of poor financial record-keeping at Norwalk Economic Opportunity Now (NEON) is coming home to roost, making layoffs imminent, board members were told Wednesday.

The bad news flowed at the NEON board meeting held in Stamford: It might be necessary to reduce health benefits to NEON workers, interim NEON President and CEO Pat Wilson Pheanious said, and layoffs are likely within five weeks. Pheanious agreed with board members that they should be getting monthly financial updates – they haven’t yet – but said it isn’t so easy because the information isn’t available.

In addition, the Department of Social Services is conducting an audit and a federal audit is due by Sept. 30.

She accepted responsibility for the intensity of the upcoming layoffs, which haven’t been defined yet.

“My feeling about not wanting people to lose their jobs and trying so hard to not have people lose their jobs has driven us, in part, to the point that more people are going to have to lose their jobs because you had some of these very extreme decisions made earlier. … This is long overdue,” she said. “We are now at the point were there ain’t a choice, folks.”

Pheanious added that there would be recall lists, as money might be pending for programs, but has not yet been received. NEON has used up much of its reserve, she said, and Mayor Richard Moccia has refused to restore Norwalk funding cut in the wake of a federal audit that turned up financial irregularities under previous CEO Joe Mann.

“We don’t have that stretch we used to have,” she said. “You know why we don’t have the stretch and why we had to use what little stretch we had in order to meet the ongoing needs of this agency. We don’t have that stretch, that 1.5 million from the city of Norwalk, which was a critical part of that stretch. We haven’t had it for a long time and now there’s nothing left for people. Now, every time we cut a person, we are in some ways cutting services. I recognize that.”

Board member Alan Rossi provided some information that has been eluding board members – “reports of the financial situation of the corporation.”

Rossi said he had been at a meeting at NEON.

“We saw the following picture,” he said. “The budget, which, by the way, the board has not been able to review or approve, shows a deficit of $3 million. Management told us that if immediately they begin to make expense reductions beginning with those unfunded programs and then, after coordination with the appropriate agencies, eliminating duplication, we could reduce $1 million of that $3 million deficit.”

He made a push for more numbers.

“How can we as a board have fiduciary responsibility as a corporation when we are navigating blind?” he asked. “We don’t have the information to make informed decisions or comments, or anything else.”

Board Chairman William Westcott also said that was important.

“One of the most important things that we should be doing at this meeting, and we’re not, is looking at this month’s cash flow, compared to last month’s cash flow, and seeing where and how the window is closing,” he said.

Treasurer Christopher Ruzzi expressed some exasperation on that front, saying much time had been spent on getting the information the board had.

Pheanious elaborated on that point several times.

“I think your points are very well taken, but, as I tried to explain to you before, the information you got was the best information this agency has ever had,” she said. “What you’re asking for is a perfectly reasonable response, it’s a perfectly reasonable question, but not a reasonable situation that we have been in. This is an agency that operated off of not even balance sheets and income statements for years. The information that has been provided by this team, as inadequate as it looks to you, is the best information that has come out of this agency.”

She said she would not commit to honoring the “perfectly intelligent and cogent, rational and appropriate request” for more accounting because she had done that in the past and failed.. NEON Chief Financial Officer Danielle Watson-Yates wasn’t there to consult, and she didn’t know if the work could be done, she said.

“We have eight people doing the work of 20 trying to work with equipment and records that aren’t in place, not because we didn’t have them in place but because the history of these two agencies has been such that that information has never been available,” she said.

Chief Operating Officer Chiquita Stephenson said the cost of merging NEON with Stamford’s CTE was $466,000 more than allowed for by DSS. She said she expects to speak to DSS Monday and get some help with that gap.

Cutting employees is not as easy as it would be for a private corporation, she said, as NEON must ask for approval from the agency’s various funders. Even cutting employees from unfunded programs requires written approvals, she said.

The discussion about cutting health benefits was equally painful. Pheanious talked of $50 co-pays for employees, and said she knew it was likely people would simply not go to the doctor.

“We have more employees and benefits than we have money to manage it,” she said.

Insurance premiums are expected to go from 1.218 million to $1.6 million, and NEON pays 80 percent. “I’m sweating that $150,000 every month,” Pheanious said.

The $20,000 a year salary many employees get isn’t enough to live on, she said, but the benefit package is “like wow.”

“You’ve got long-term care – who has long-term care?” she said. “Nobody but NEON.”

Board member Michael Berkoff agreed that cutting benefits was undesirable, but said there is a reality to the situation.

“Nobody wants to hurt the employees that are there, but what are you going to do if you can’t pay it?” he said. “It’s not like there’s excess cash flow coming in. … Everything is negative, negative cash flow.”

Board member Cynthia Bowser said she would work to bring funds to NEON, and so should everyone else.

“I don’t want to see anyone lose their job, but we are at a critical point,” she said. “For those people who are employed here they need to have comprehensive services so that they can address their needs.

“We have a situation here in terms of trying to meet the monthly bill, trying to keep people on staff, as well trying to seek resources so that people who are here can remain employed and hopefully additional staff come on board to meet the needs of people in lower Fairfield County.”

Comments

10 responses to “NEON eyeing layoffs due to ‘critical situation’”

  1. EastNorwalkChick

    According to their 2011 Federal 990, 58% of their expenses went to salaries and benefits, I’d love to know who negotiated and signed off on these benefits. Paying 80% of benefits is a thing of the past….and who the heck ever had long term care in their benefit package?
    .
    Sounds like they need to clean house in their finance department if they can’t even come up with a Balance Sheet and Income Statement…

  2. ScopeonNorwalk

    $3 MILLION DEFICIT?????

  3. loveforthecity

    And here it comes, the financial mismanagement of the current leadership at NEON. Can’t wait to see what else DSS comes up with. This place and the people running it are a complete joke.

  4. Norwalk Spectator

    Why am I not surprised?

  5. Neoscam

    In the real world, any CFO who could not produce basic financial statements would be fired pretty quickly. This has been going on for how long? 8 people doing the work of 20? Sorry you don’t need more than two or three bean counters to run an outfit as small as Neon is. This sounds more and more like someone should be facing some prison time.

  6. The Norwalker

    1. There are a lot of lower level people at nonprofits who do a wonderful job in fulfilling their workstations. They are at the low end of the salary scale with Management Staff making many more dollars.

    2. The higher paid management staff make the decisions and are responsible for the management and administration that created these problems.

    3. Most likely the lower level employees will receive the brunt of the layoffs.

  7. Piberman

    When the BOE faced financial reporting issues a year ago the City stepped in to assist and the BOE hired an accounting audit. Why is the City refusing now to lend a hand and why didn’t take an interest in examining the books. Most importantly why hasn’t the NEON Board hired an audit firm to find out the true financial facts ? And what is NEON’s CFO doing ? If NEON has been so poorly managed in the past what does this say about Norwalk and its concern for the needy ? And why are both Mayor Moccia and the Democratic candidates fraying “mum” on NEON ? All in all both a tragedy for NEON and an embarrassment to the City.

  8. oldtimer

    Of course, the 1.5 million a year that Moccia withheld from NEON for the last few years has nothing to do with their budget shortfall, does it ?

  9. jlightfield

    Staff and the CEO report to the Board of Directors. The liability on any financial mismanagement falls on the Board of Directors including city appointed directors. None of these issues are new, and the blame goes right to the successive boards who never held the financial staff accountable.

  10. piberman

    The real trajedy here is that Neon’s past Board were mostly made up of Common Council members including its current president. They are the ones responsible for overseeing NEON’s former CEO, paid $150,000, and failures to keep appropriate financial records.
    The current Board seems similarly irrresponsible in not hiring an outside audit of the troubled NEON’s finances and hiring an interim CEO from internal NEON ranks who doesn’t have the qualifications associated with successfully managing a sizeable multi-million budget and organization. Mayor Moccia has commendably restricted the City’s contribution to such obvious mismanagement but unfortunately has not taken the initiative to more forcefully extend its financial management resources to remake NEON into a credible agency as it did when the BOE floundered several years ago. All in all it looks increasingly as the City’s elected officials – Mayor and Common Council – are distancing themselves from a major financial embarrassment. And the newly appointed NEON directors are demonstrating their inability to secure both basic financial information and appoint a credible CEO. It’s hard to imagine a worse situation. No doubt both state and federal investigators will identify NEON’s continuing financial and management failures while City officials just “look the other way” hoping no one will notice. NEON’s failures both cast dispersion on Norwalk’s reputuation and reinforce increasing perceptions of failing governance, e.g. recent disclosures of BET and BOE failure’s to advocate the City’s interest in negotiating union contracts with our public school teachers ranking 5th highest in the state.

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