Sinking SAAA desperate for cash

FRONT ROYAL — A precipitous drop in donations and other factors have left the Shenandoah Area Agency (SAAA) in a cash crunch again — this time to the tune of at least $100,000.

And its financial consultant says the agency needs about 10 times that amount to get back to normal operations.

A cash-flow projection through the end of 2012 shows that SAAA will have operating shortfalls in each of the next three months that total $66,942.

Adding $41,694 in accounting fees owed to Winchester’s Yount Hyde & Barbour — so it can contract the firm to perform a required annual audit — the amount needed is $108,636. The audit is needed for the SAAA to have access to other funds.

“This is just to keep the doors open,” Chairman John Hudson said at the group’s Friday meeting of the money needed in the near future.

No formal action to resolve the financial problems could be taken at the meeting because a quorum of board members was not in attendance. However, to deal with the issue as soon as possible, their next meeting has been moved up a week to Nov. 2.

Board members learned in August 2011 that the SAAA was in dire financial straits when nearly $265,000 in unmailed checks to vendors was discovered in a safe at its headquarters.

Helen Cockrell, then its president and chief executive officer, and John Shaffer, then its finance director, were fired Sept. 8, 2011, for their roles in the fiscal woes.

Cockrell sued the agency for wrongful termination and back leave pay, and the SAAA filed a countersuit alleging that she embezzled money from and defrauded the agency of as much as $20,000.

The agency accumulated about $135,000 in accounting and legal bills related to the lawsuits, which were dropped in August when it became apparent that Cockrell would not be able to pay any damages a judge might award. She and her husband Stanley filed for bankruptcy days later.

The Virginia State Police have been investigating the matter for months, but no criminal charges have been filed.

Jonathan Price, the SAAA’s director of fiscal operations, said the agency paid $250,000 in bills in July and August, significantly reducing its liabilities. But unrestricted public donations plunged from $29,000 in April to a $35,000 total during the next four months, including just $4,000 in August.

Several board and staff members said they think the donation decline could be attributable to the fact that no one has been held legally accountable for the agency’s financial problems.

“A lot of people are still sitting on the fence,” said Bob Haas, the SAAA’s director of transportation. “They haven’t seen anything that says, ‘This is what happened, and this is who to blame.’

“Closure rests with the legal action that still needs to be taken.”

Hudson agreed. “I think the public is angry that no one has paid for this,” he said.

“It takes a while to regain trust,” board member James Edwards added.

To exacerbate the agency’s fundraising woes, Roberta Lauder, its director of resource development and primary fundraiser, is expected to be on medical leave for six weeks.

For months, Price said, the agency has done the equivalent of “living paycheck to paycheck” and was unable to weather the unexpected donation decline.

Hudson told the board the issue was identified this week.

If the agency paid all of its most pressing bills, including recently accrued expenses that it is six weeks behind on, it would be $24,000 short at the end of October. The deficit would grow to $32,642 by the end of November and $66,942 in December.

The agency has $219,492 in outstanding debt to vendors — including $101,000 linked to the cache of unmailed checks — and $72,000 in current accounts payable. It also has a $200,000 loan and a $100,000 line of credit.

“You really need $1 million in cash to get you back on your feet, to pay off past bills,” said agency finance consultant Cindy Vance, participating via speakerphone.

Hudson likened the debt paid down during the summer to a financial “stress test” for the agency.

“We’ve been thinking things were getting a little better, getting a little better,” he said, “and then we pay a quarter of a million dollars in bills and find out we’re not healthy enough to be able to do that.”

Vance said accurately projecting revenues has been almost impossible because the agency’s books were “in disarray.”

Reducing services is not a consideration at this point, Hudson said, but might have to be considered later.

Service or staff cuts would do little to help the larger problem because reducing those reimbursement-eligible expenses would result in a corresponding drop in revenue. However, Vance said that if the agency doesn’t have the money to pay bills, it can’t be reimbursed.

Haas said that under the previous leadership, checks were written so reimbursement could be obtained but were never mailed, and the reimbursement was not used to cover the check that was written.

“That’s a classic Ponzi scheme,” Vance said. “Because the money was not used as it was intended to be used, we have these back bills.”

Said Price: “We will not do that because that’s not ethical.”

The agency cannot draw on some of its financial allotment from the Virginia Department of Aging and Rehabilitative Services (DARS), he said, because the SAAA’s books show too much cash on hand.

But most of that money can be used only for specific programs, leaving the SAAA cash-poor when it comes to paying many of its bills.

Board members discussed numerous ways to deal with the cash-flow and audit issues, including asking DARS to allow it to draw down more money because its cash is restricted, seeking early payments from its member jurisdictions and hiring another accounting firm for its audit.

If any potential large donor wants to review the agency’s finances, Price said his “door is wide open.”

Hudson said he plans to write a letter to the public regarding the agency’s situation and to obtain corporate sponsors so it can be published as a full-page advertisement in local newspapers.

He also asked staff members to extend cash-flow projections to determine if a recovery point is on the horizon.

The SAAA provides services to senior citizens in six localities, including Winchester and Frederick and Clarke counties.

Attending the meeting in the Shenandoah Area Agency on Aging offices were Chairman John Hudson and board members Violet Carter, James Edwards, Mari-Ane Fowler, Teresa Strohmeyer and Angela Whitacre. Board members James Brinkmeier, Travis Clark, Wanda Shoemaker, Cheryl Swartz and Johnny Woodward were absent.

— Contact Vic Bradshaw atvbradshaw@winchesterstar.com