March 18, 2008

From: Margaret Siemsen

PEN Board President

The PEN web servers have been moved to their new home! If you would like to check your email go to webmail.parented.org.

YES, most of the things you have heard about PEN in the past two weeks are true. At the board of Directors meeting held on February 28, the decision was made that continuing the operation of the agency has it had been was not an option. Significant changes had to be made in the immediate future. For the past two weeks staff and board members have been striving to make these changes. Two principles drive this effort. First every consideration is being given to see that clients of the agency can continue to receive services with as little disruption as possible. It is clearly recognized that the needs of clients have not changed just because of a crisis in the agency. Second every attempt is being made to do the right things for the members of the PEN staff. These people are recognized both within the agency and within the broader community as being providers of excellent service and PEN wants to meet all if its obligations to them and to assist in any way possible to see that they have continuing employment opportunities. Talks have been held with the agencies with whom PEN had contracts and with other service providing agencies in the community. The hope is that ways can be found to continue providing services to clients with as little disruption as possible. One large contract has already been passed to another agency and several of the PEN employees working on that contract have agreed to continue the work through the new agency. Other contracts may go to other agencies. In some cases the agencies contracting with PEN may choose to bring the contracts and at least some of the employees working on them in-house and continue to provide the services in that way. It is anticipated that PEN will cease to provide services under all its contracts by the end of March. How did PEN get to the present state? Three major factors have contributed. The first is the fact that one of the largest contracts of the agency, a contract with Butte County Mental Health to provide services paid for through MediCal funds has been a late and undependable payer for the past several years. Some years ago such contracts as the one entered into by PEN, were paid by the country when services were rendered and invoices submitted. The county then waited to be reimbursed by the state and federal governments, the ultimate payers for such services. About three years ago the contracts were changed. Instead of Butte County paying and then waiting for its money, the contracts became passthrough. Agencies such as PEN submit invoices after services were rendered. The County passes the invoices along and the agencies are paid when it receives the money from the state or federal agencies. When the details of such an agreement were presented it was represented that there would be an initial gap of about 90 days before payments would be forthcoming. It was further represented that after that time payments would be made on a regular basis. ie the agency bills for June, July and August without receiving payments but then supposedly in Sept., the payment for June comes in, in October the payment for July etc. This was the way it was supposed to work, In practice it never has. The first payments were delayed by almost 6 months. Over the remainder of the time PEN has been in such contracts payments arrive on an erratic schedule. There may be gaps of several months and then a few payments will come in followed perhaps by another gap of an undetermined time length. In the mean time the agency has to pay the workers on this (and its other contracts) and pay all of the other expenses of doing business. It has been no secret to those in the community who supply goods and services to PEN that cash-flow has been a major issue for several years. PEN has routinely been unable to meet its obligations in a timely manner, not for lack of desire or effort but simply because when it has not been paid, it cannot pay. Much staff time and effort has been devoted to simply staying afloat. It has cost the agency financially as it has paid such things as late fees on the mortgage, bank charges, interest on a line of credit and some short term loans. Anyone with a bit of business sense will see that this is no way to run a business. A second factor contributing the the decision is the fact that over the past several years PEN has become a smaller and smaller agency. It has now reached the point were economies of scale are not in place to allow contracts to pay a sometimes low rate of indirect costs , and allow the agency to have the funds it needs to keep the rent paid, the lights on, and the administrative staff paid. Some growth opportunities were on the horizon but several multiyear contracts will come to an end in the next few months and it did not seem that it would be reasonable to grow fast enough to make survival possible. One can wonder if the time spent in recent months fighting the cash-flow battles could have been instead spent looking for new contracts and funding sources if the outcome could have been different but what´s past is past and PEN had to move on. A third factor, closely related to the second is that some long-term obligations had been assumed when the agency was much larger. Even though efforts have been expended toward reducing these it comes down to too little too late. Soon, PEN will cease to be the homegrown nonprofit success story it has been for the past 26 years. PEN is trying hard to bow out with its head held high, remembering the good things that have been done. Literally thousands of families in the community have benefited from its programs and services. Thousands of children have had their chances for success in life enhanced because of what PEN has done. PEN will not be gone entirely. After all its obligations are met and all its bills paid there should be funds left for the MediCal accounts receivable so that a legacy fund can be left with the North Valley Community Foundation. Details will be worked out later but it is hoped that this fund can become a source available to enable other agencies to offer parenting skills classes to families need them and unable to pay for such service.