January 5, 2011; Source: Modesto Bee | Community Housing and Shelter Services, an agency dedicated to helping homeless families find transitional and permanent housing, has spent more money than it had, finding itself unable to pay expenses in November and December. The scenario that enveloped the Modesto, Calif. group is increasingly common.

The 30-year-old nonprofit shut down over the holidays and reopened vastly downsized this past week. It closed the drug and alcohol recovery home it operated for mothers and their children and reduced its 19-person staff to five. The executive director resigned and the board president will serve as interim executive director without pay, which means that for all intents and purposes, CHSS will operate without an executive director. But it has a $2.2 million budget. It will continue to offer HUD-approved housing counseling and motel vouchers, and will help families get into rental housing.

What happened? The agency was outspending its budget for two years but, painfully tucked away in one line in the article is a small reveal – CHSS “did not understand that it could be reimbursed for more of its costs through the U.S. Department of Housing and Urban Development, its primary funder.”

NPQ has seen variations on this theme for years – groups either overbill or underbill contracts. Either scenario can be devastating even in the best of times, but when a group’s ability to fundraise is constrained by a bad economy, it can be close to fatal.

Kim Martinez, president of the board, said, “It’s really important for the community to understand that no one did this intentionally . . . We just did not completely understand the billing process, and as a board we thought we were asking the right questions based on the information we had . . . But we still are here. We are not running away. We are taking care of this . . . And we will be better because of this.”

It is a good reminder for others to review their contracts to make sure that they are getting what they are entitled to – no more and no less. —Rick Cohen and Ruth McCambridge