FEGS Gets $10 Million Loan, Files For Bankruptcy
March 19, 2015 Mark Hrywna
Six weeks after closing its doors, New York City-based human services agency Federation Employment & Guidance Services (FEGS) has filed for bankruptcy protection. FEGS secured an up to a $10-million loan from ones of its funders to support continuing operations.
FEGS announced yesterday that it filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Eastern District of New York. Meanwhile, UJA-Federation of New York will provide a loan facility of up to $10 million to support continued operations as programs are transferred and to ensure payment to suppliers and service provides. FEGS will seek immediate approval of the borrowing from the court.
“The filing will provide the best opportunity for the uninterrupted continuation of FEGS programs and services to clients under different agencies,” according to a statement.
FEGS had revenues of $220 million last year and millions in city contracts but an unexpected $19.4-million shortfall was discovered this past December. The organization blamed the deficit on a number of things, 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 is a for-profit care management company, one of 16 for-profit and nonprofit subsidiaries, affiliates, social enterprises and ventures within the FEGS network.
The organization said it “fully expects” to continue to operate during the process, including maintaining wages and benefits for employees, with full protection under federal law for qualified retirement plans; continuing to deliver service for clients, and payment to vendors and suppliers for all goods and services provided after the date of the Chapter 11 filing.
“This filing represents the next step in our commitment to transfer all programs and services to appropriate parties in a way that ensures our clients experience uninterrupted care and support,” said Kristin Woodlock, a former chief operating officer who took over as CEO in December.
A bankruptcy filing was expected, according to a story on Friday by Capital New York, which detailed an assortment of financial and deals and subsidiaries, both for-profit and nonprofit, gleaned from financial disclosure statements and tax forms. The Jewish Daily Forward reported that FEGS in the past three years transferred more than $30 million to AllSector Technology Group, a for-profit corporation it owned.