Questions Loom In Wake Of FEGS’ Fall


In the teeth of the Great Recession, UJA-Federation of New York launched a program that offered a life raft of sorts for those who had lost their jobs and whose debts were mounting.

In the five years that followed, Connect to Care helped more than 80,000 New Yorkers with career counseling, financial advice, legal services and emotional and spiritual support.

With the sudden announcement this week that FEGS, the organization that provided many Connect to Care services and one of the largest social-service agencies in the federation network, would shutter its doors in the coming months, the charity is figuring out how to continue these services and others that the Federation Employment and Guidance Service provides.

Federation officials said they’re committed to working out a smooth transition.

“We are in regular communications with FEGS to help support uninterrupted service delivery and are exploring the right place for Connect to Care, and other programs we support in the UJA-Federation network of agencies,” a statement from the organization said.

UJA-Federation of New York is not the only organization scrambling to find new providers to continue the services provided by FEGS, cited by Crain’s as one of the largest social-service agencies in the country. The 80-year-old organization serves about 135,000 New Yorkers each year, including about 20,000 Jewish clients, some of them poor or near poor. And the number of Jews in poverty is rising, according to a 2011 population survey by the UJA-Federation of New York.

With an operating budget of some $220 million, from charities and government contracts, FEGS runs some 300 locations across the New York metropolitan area, serving about 12,000 every day.

The organization confirmed Friday that it would be shutting down after unexpectedly losing $19.4 million last year.

FEGS provides services in such areas as health/disabilities, home care, job training and immigrant services.

The group made its announcement just days after another New York Jewish social service agency, the Metropolitan Council on Jewish Poverty, announced that it was looking to merge or partner with other organizations to improve efficiency.

FEGS officials have remained mum about the reason for the organization’s financial distress, but in a statement to The Jewish Week said that it decided to close “after rigorous evaluation … with outside financial and restructuring experts, and consulting with all of its government funders and other partners.

“This analysis showed that the financial situation which FEGS confronts was too deep to be resolved by continuing to run its programs,” the statement said.

Amish Mehta, a partner specializing in not-for-profits at the accounting firm Friedman LLP, said FEGS’s leadership should have taken steps to reduce the agency’s overhead long ago.

“I don’t think it happened overnight. There must have been a recurring trend or a pattern,” he said. “I don’t know why the board and management weren’t more proactive earlier on to try to reduce some of these issues.

“It would seem that someone really didn’t carry on their responsibilities, because if the board members and management had actively taken measures earlier on they may have been able to prevent this" he added. "Why this was allowed to fester and get to the place it did we don’t know.”

Jeffrey Solomon, president of the Andrea and Charles Bronfman Philanthropies, said nonprofits need to invest more in tracking the financial health of individual services.

"You need to have good financial reporting systems to know whether you’re making money program by program," he said. "If they had known, they could go back to the city to say: 'We aren’t making enough money on these programs,'" he said.

"I think what this underscores is the underinvestment of financial systems and legal support in nonprofits," he added.

FEGS said it will “transfer over the next several months of all of FEGS’ programs and services to other providers and is working closely with its City and State government partners, and other stakeholders, to effect those transitions.”

Both FEGS and the UJA-Federation of New York promise a smooth transition that will ensure continuity of services for clients and supports FEGS’ staff.” But Borough Park Councilman David Greenfield said there are bound to be people who will lose services.

“It’s really a one-two punch for desperately needed social services for the Jewish community,” he said, referring both to FEGS and the Met Council, which is struggling to bounce back from a corruption scandal that rocked the agency last year. “It definitely speaks to the need for more oversight for nonprofit organizations and perhaps more independent auditing.”

The organization’s sudden closure, Greenfield said, “speaks to the need for more oversight for nonprofit organizations and perhaps more independent auditing,” he said.

Two of the agencies expected to pick up the slack are the Jewish Board of Family and Children’s Services and the Jewish Child Care Association. But it’s unlikely they’ll be able to pick up all the slack.

One communal insider suggested moving some of the mental health services provided by FEGS to JCCA, which would free up JBFCS, which is considered one of the strongest agencies in the UJA-Federation network, to pick up more of FEGS’ functions.

“I am absolutely shocked, astounded,” said Borough Park Assemblyman Dov Hikind. “It’s a bad dream, almost, to be honest with you. FEGS is an organization I’m familiar with for the 32 years I’ve been an elected official and even before that. The people they serve, the work they do … they’re not the only [social service agency] having trouble. There are other organizations, too.”

Hikind wondered how such a big social service agency — he called it “too big to fail” — was allowed to fall so suddenly, right under the eyes of the Jewish community. “These things do not happen overnight,” he said of an organization with a budget of more than $200 million. “Someone’s got to find a way to save FEGS.”

Hikind said that he was going to reach out “tomorrow” to people at UJA-Federation,” to see if the charity had some answers. “Every problem has a solution.”

Web director Helen Chernikoff contributed reporting to this story.