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Fighting to Survive-NCCJ

Beset by financial and organizational problems, a venerable charity makes major changes to stay afloat

By Grant Williams



The National Conference for Community and Justice has spent the past 78 years fighting prejudice. Now it is fighting for its life.

The organization, which for most of its existence was called the National Conference of Christians and Jews, is beset with financial and organizational problems that threaten its future. Its endowment has dwindled, it has shut down more than a third of its 60 regional offices, and last year it laid off eight, or one-fourth, of the employees at its national office in New York.

"The current state of NCCJ's finances is grave but not irretrievable," warned a report issued in September by a consultant hired by the organization. Without major changes, it said, the group would probably "become insolvent at some point in FY 2006."

The group -- which opposes bias, bigotry, and racism -- is also undergoing a major change in leadership. In December the organization's president, Sanford Cloud Jr., resigned after nearly 11 years on the job, amid strong criticism from some of the organization's regional offices. Mr. Cloud says his departure was not related to the complaints. This month Brian Foss, the group's executive vice president, said he would soon leave the organization after more than a decade to let "the new leadership form its own team" and to pursue new challenges.

The organization has asked a longtime volunteer to step in and help the charity get out of its difficulties. Alan A. May, the organization's interim president, has volunteered with the charity for 25 years, and his father helped start the organization's office in Detroit in the 1930s.

Mr. May has hired a specialist in working with organizations in financial and management trouble to help chart the charity's future.

$30-Million Budget

The human-relations organization's struggle for survival sheds light on how a long-established and respected group can thrive for many decades and then quickly fall into disarray.

The charity, which has had an annual budget of about $30-million, says that its troubles stem from a combination of factors. Like many nonprofit groups, it says it had trouble raising money in recent years because of the turbulent economy and the aftermath of the September 11, 2001, terrorist attacks, and its endowment lost money because of dips in the stock market. The organization has also had trouble getting a handle on its finances because of the way its major fund-raising events collide with the end of its fiscal year.

In addition, the charity says it spent a lot of money on much-needed improvements in the past few years, including upgrading the charity's computers, developing a walkathon fund-raising event for regional offices, and conducting a national marketing campaign.

The organization also cites difficulties caused by its structure as a single entity -- rather than as a national group with regional affiliates -- which has led to conflicts between its national and local offices over money and authority. Regional offices operate an array of programs that include organizing discussions among people of different races, religions, and cultures; staging diversity-training sessions for employees and employers; and teaching young people about diversity. As a result of the conflicts, the charity is seriously considering changing its structure in coming months.

Demoralized Employees

Many current and past employees of the National Conference for Community and Justice also blame top leaders in the national office -- especially Mr. Cloud -- who they say were slow to react to alarming trends. They say those executives have performed incompetently and have failed to communicate clearly, leaving many current and former employees feeling bitter and demoralized.

The national office waited too long to close regional offices with fund-raising deficits, they say, and then shuttered some offices that should have been left open, following what some regional officials called a subjective and secretive process that they found infuriating.

Mr. Cloud, the former president, and other officials adamantly reject the criticism and the notion that they failed to act quickly and properly. "I have let it be known clearly to the regions that their financial performance had to improve," he says. "It's not as though no one knew all this was happening."

He adds: "I haven't been a Lone Ranger leader, aloof and separate and apart from the organization. I've been the voice of the organization and I've also been a decision maker."

Mr. Foss says Mr. Cloud and the charity moved decisively to make fundamental changes. "I understand that people are upset," says Mr. Foss. "But among many nonprofits, there is nothing unusual about what NCCJ is going through. We're right-sizing the organization for its future. Do we wish we were doing this? No, we wish we had all the resources in the world. We wish we were back in the days where we could absorb deep deficits, but we did that for four years, it cost us a humongous amount of money, and we just can't do it anymore."

While opinions differ over who deserves blame and what to do now, all involved seem to agree the organization has been scrambling to stay afloat.

When revenue began to drop in 2001, says Mr. Foss, charity leaders expected soon to see an upward tick in the organization's investments and fund-raising results. In subsequent years, they used part of the endowment to absorb the losses of the regional offices to keep the charity's programs operating in as many communities as possible.

Many people at the organization believe an underlying problem has been that the charity operates as one entity. The national and regional offices are each responsible for raising money, and that revenue goes into one pot. The national office then pays all the bills from that pot, including salaries of regional officials.

Regional offices that unexpectedly raise more money in one year than they budgeted for do not keep the excess funds because the money is invested in the organization's endowment. But they are credited with a reserve. If they happened to run a deficit in a future year, they could "draw" on this reserve and receive the funds they need.

For many years, the system worked well as few regions had deficits. But in recent years the arrangement soured as many regional offices fell into the red and the charity began taking money out of the endowment to help them. That meant that reserves that individual regions figured they had were actually used to cover deficits in other regions.

The report by the charity's consultant said that the organization's national office has also shown a deficit for several years. Mr. Foss says the national-office deficit appeared only in 2004.

Mr. Foss says that when shortfalls appeared in the charity's 2001 and 2002 fiscal years, "all of us said, This is just a blip. The economy is going to spring back, fund raising is going to come back after September 11. We didn't panic, we just kept doing our work, despite huge losses. It was not a big problem because we had the resources to pay for those losses. But then it didn't get better."

In 2003, the organization decided it had no choice but to close three offices -- in Houston, Oklahoma City, and Reno -- that it said had financial problems. By the fall of 2004, the organization had closed eight more offices. "We had given them plenty of opportunity to get out of financial trouble," says Mr. Foss. "The boards tried, the staff tried. They couldn't."

In another cost-cutting move, the national office in 2004 trimmed its budget by $1-million, laid off eight workers in its New York office, reduced salaries of senior staff members by 10 percent, and eliminated contributions to all employees' pension plans.

Some employees say they believe the charity should have reduced the $25,000-per-year housing allowance it provided to Mr. Cloud, which he used to defray the costs of a Manhattan residence that he maintained in addition to his home in Hartford, Conn. Others say Mr. Cloud made a bad impression by billing the charity for his extensive use of a car and driver to travel between his Connecticut home and New York, as well as to move within cities during visits to the charity's offices across the country.

Mr. Foss, speaking for Mr. Cloud, says that the housing allowance was appropriate as part of the president's overall compensation package, and notes that Mr. Cloud took a 10-percent salary cut last year while donating $25,000 to the charity.

He says that Mr. Cloud frequently drove his own car, and that Mr. Cloud's car and other expenses were regularly reviewed and approved by the chair and vice chairs of the charity's board.

Last spring members of a group that represents the charity's employees challenged the national office's handling of the financial situation in a memorandum submitted to James A. Joseph, the chair of the organization's board, and demanded the departures of Mr. Cloud and Mr. Foss.

"Sandy [Cloud] has not demonstrated effective leadership to make strategic decisions to close regions or turn them around," the committee members said. They added: "We are a broken organization."

Consultant's Review

In response to these and other concerns, the board hired a consultant to review the organization's operations and recommend improvements.

When the consultant's report was released at an annual conference the charity held in September, many regional officials were stunned by its sweeping conclusions. In 2000, the charity's endowment was worth $22-million, but by 2004 it had spent all but $4-million of that money, in part to cover deficits incurred by its national and regional offices, it said. Mr. Foss says regional officials should not have been surprised by the financial picture because the charity had provided them each year with copies of audits and other reports.

"The organization is very probably unviable in its current configuration of mission, form, and operational capacity," said the report by the consulting firm Hamilton, Rabinovitz & Alschuler. "Fundamental changes are needed."

Among a dozen and a half conclusions reached by the consultant: The charity's national fund-raising department was "essentially defunct"; efforts to rescue financially troubled regional offices had generally been ineffectual; and no set of activities existed that could be described as the charity's "core program" that was operated in all locations.

'Ransom Note'

In November came a crushing blow: The national office sent e-mail messages to 24 regional offices saying that they would be closed as soon as possible unless their local board members, corporate donors, or others signed a pledge to cover any deficits accrued in 2005.

An executive director of one of the regional offices who asked not to be identified says the "blast e-mail" was unexpected and impersonal. "I call it my ransom note because that is what it felt like: 'If you don't pay us a zillion dollars by next month, we are killing you and your region,'" the official says.

Toby Ayers, who was executive director of the charity's regional office in Providence, says she did not immediately get the closing notice sent to her office because she and her board were on a retreat that was, ironically, devoted to devising an updated fund-raising plan.

"I came out of the retreat, went over to my computer, read the e-mail, and nearly had a heart attack," she says.

Even though her organization had a deficit of about $61,000 in 2004, she says, it had built up reserves of more than $88,000 with the charity based on past revenue that it expected would have offset its recent deficit.

The Rhode Island office's board members decided not to agree to the national office's terms.

On January 31, she says, the NCCJ closed the office. On February 1 Ms. Ayers and her board started a new organization, Rhode Island for Community and Justice, which she says could decide to affiliate with the NCCJ if the national charity eventually reorganizes itself and has independent affiliates.

Twelve of the 24 regional offices that received closing notices will remain open this year because they agreed to assume responsibility for any deficits or found other ways to stay in business.

But 23 of the 60 regional offices that the group had in 2003 have folded or will be closed soon.

All the while, many regional offices have continued to see donations climb, despite the controversy.

The regional office in Washington, D.C., for example, raised $114,000 more than expected from its major fund-raising dinner last spring. "Our donors and volunteers are as supportive as they have always been," says Cheryl Kravitz, executive director. "I sincerely doubt that this region will fall because of this mess."

Seeking New Approach

In December, regional board members who represented eight offices went to New York City to appear before a meeting of the national board. By the time they spoke, their first request had already been met -- Mr. Cloud had resigned. He says he had planned to retire from the charity for a year and that his departure was not a result of any demands that he step down.

The regional representatives insisted that the money they generate at home be spent there and not go to underwrite national or regional deficits. "This is the implied understanding we have with our communities when we raise funds, and our historic understanding with the national office," they said in a statement.

Three days before Christmas, John H. Conley, a seven-year veteran of the national board from Omaha who once served as treasurer, resigned because he says the charity needed new leadership.

Mr. Conley says that the board and the charity's top leaders acted in good faith and made the best decisions they could over the past four years without the advantage of hindsight. But, he says, "you can say that NCCJ has been mismanaged and the old guys should be thrown out and a new team brought in, and to a large extent I don't disagree with that -- that's why I offered my resignation." He adds: "The work of the organization is just far too important to do anything to erode the confidence of the donor."

Meanwhile, the charity -- which continues to press its mission, including fighting "unfair and unjust stereotyping" of Muslims and Arabs living in the United States -- awaits recommendations for the future from Mr. May, the interim president.

"There is going to be total transparency here -- everybody is going to know what we're doing," says Mr. May. "Down the road, NCCJ will still be here. It may be here in a little different form, but its substance is going to be exactly the same."
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