Nonprofit Newswire | Three Hundred Workers Laid Off After Nonprofit Runs out of Money

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July 21, 2010; Source: nj.com | We’re getting used to the daily deluge of bad news about nonprofits, especially reports about how many are being forced to take drastic steps to cut expenses. But this story about how a nonprofit in New Jersey is responding to its fiscal squeeze was painful to read.

According to nj.com, the First Occupational Center of New Jersey has shut down for at least three weeks, laying off 300 workers. And when it reopens, it plans to operate with only 200, and it expects to offer fewer programs. At one time, the Orange, N.J.-based center, which provides vocational training and placement services, employed 500. The center has been wobbling for years, running up more and more debt. Even now more than 60 employees, mostly administrative and executive staff, are owed more than $300,000.

Rocco Meola, the president and chief executive officer, who is among those who have been working without pay, said, “We’re basically living week-to-week with our money. It’s not a good way for an agency of this size to operate.” The agency’s funding comes from state contracts and four businesses—including janitorial and grounds keeping services—that it runs.

The state’s Department of Human Services did not renew contracts worth $1.6 million for the fiscal year beginning July 1. Spokeswoman Pam Ronan said the department took that action because the center had shut down and was not providing services. In addition, it had not repaid its loans on time. For now, First Occupational is paying its employees money as it comes in, and Meola hopes to settle up with everyone by the end of the month.—Bruce Trachtenberg

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    While it’s always a shame to see a non-profit go under, I have been exposed to the mismanagement & waste of a few non-profits over the years. My question is: Why do we (boards of directors, non-profit staff, auditors, the non-profit community) allow this to happen? In this case, it seems clear that the CEO/president & CFO/treasurer are the ones responsible for the financial management of the non-profit. When interviewing candidates, every Board of Directors should inquire about how a CEO/president & CFO/treasurer will handle the finances and the board should also have a board member who is watching over the finances/budget. It just seems like common sense…