$19 Million Loss Slams Doors on NY Agency

February 3, 2015       Mark Hrywna      

A $220-million social services organization in New York City will abruptly shut down as a result of a $19.4-million shortfall last year.

FEGS filed a Worker Adjustment and Retraining Notification (WARN) with the New York State Department of Labor on Jan. 20. The notice indicated “company restructuring” as the reason for 281 layoffs that would take effect April 20, with a total of 976 employees affected. About 40 sites would be impacted, according to the notice, mainly in the Bronx and Long Island, with the largest affected number of employees, 222, at one of the more than 20 sites in the Bronx.

The organization blamed the $19.4 million shortfall on a number of factors, including an unsuccessful mission-related venture in SinglePoint Care Network, “poor financial performance on certain contracts, contracts that did not cover their full costs, write-offs of accrued program revenue, and costs resulting from excess real estate.” SinglePoint, a for-profit care management company, was among 16 for-profit and nonprofit subsidiaries, affiliates, social enterprises and ventures within the FEGS network.

In response to an inquiry, FEGS issued a statement today but declined further comment or questions: “FEGS has concluded that its clients are best served by the transfer over the next several months of all of FEGS’ programs and services to other providers. FEGS is now working closely with its city and state government partners, and other stakeholders, to effect those transitions.

“FEGS is committed to ensuring that this process is undertaken in a sensitive, constructive and orderly manner that ensures continuity of services for clients and supports FEGS’ staff. Wherever possible, FEGS will work to facilitate transfers of staff to other organizations, or where that is not possible support them in identifying other opportunities.

“FEGS reached this decision after rigorous evaluation to ensure the best possible outcome for FEGS’ clients and staff, working 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 runs its programs.”

FEGS Health and Human Services has headquarters in Manhattan with an office in Syosset, Long Island. In its most recent Form 990 filing, for the year ending 2012, FEGS reported an operating loss of about $1 million and about $40,000 in the previous year. Total revenue was $219 million, with some $94 million from government grants and $119 million in program service revenue, mainly Medicaid reimbursements. Total assets were listed at $139 million, with net assets of $56 million.

The Jewish Daily Forward reported in December about the $19.4-million loss as well as a shakeup among executives in the organization. Ira Machowsky, an executive vice president, was in line to become CEO on Jan. 1, succeeding Gail Magaliff but he resigned in December. Former Chief Operating Officer Kristin Woodlock instead became CEO. FEGS revealed the $19.4-million loss in an email to staff on Dec. 12, according to The Jewish Forward.

UJA-Federation of New York allocated $5.135 million to FEGS for the 2014-15 fiscal year, including a $3.2 million grant for core operating support, as well as specific programs:

  • $295,000, Connect to Care: Region-Wide Employment Services
  • $238,889, Partners in Dignity
  • $225,000, Experience2Work
  • $177,563, New York Times Neediest Cases Cash/Direct Assistance Grant
  • $168,646, Partners in Caring on Long Island
  • $155,000, Long Island Senior Support Network
  • $150,000, Pathways to Success
  • $150,000, Refugee Resettlement Program Services
  • $100,000, FEGS Partners in Caring in Day Schools
  • $100,000, Partners in Caring Initiative for the Bukharian Community of Central Queens
  • $87,500, Employment Services at Single Stops
  • $84,096, CUNY Hillel Career Services Initiative

UJA-NY distributes some $135 million in grants annually to its network of organizations.

Founded by the Federation of Jewish Philanthropies (now UJA-Federation of New York) in 1934 as Federal Employment Service, the organization changed its name to Federation Employment & Guidance Services after World War II and today goes by FEGS Health & Human Services. FEGS serves about 12,000 people every day through workforce, education and youth services, behavioral health and family services, and residential and housing services for people with disabilities special needs.