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Cash crisis sinks health nonprofit - but maybe not for good
The nonprofit behind Portland's 2013 vote on mandatory water fluoridation, Upstream Public Health, has laid off all its employees and is struggling to pay off debts and rebuild after a new director discovered cash-flow problems that had gone unnoticed.
The financial crisis surfaced immediately after Mel Rader, the longtime head of the organization, stepped down at the end of December. The non-profit's sudden shut-down left its board and ex-employees stunned and blindsided.
"It was absolutely a shock to all of us," board chairwoman Ellen Falbo said. "As you're asking yourself what happened, we're asking ourselves the same question — and all of our stakeholders are asking us the same questions."
Upstream Public Health was about more than fluoridation. For more than a decade, Portland's most prominent public health nonprofit — one of two in the city — pursued nutrition reforms such as the Farm to School program, school gardens, getting junk food out of schools, battling youth smoking, a soda tax and other goals.
On Feb 27, the nonprofit board sent out an open letter that said: "We have taken a hard look at our finances and our options, and concluded that Upstream can no longer remain an independent organization."
But based on a surge of responses from people who want to help, the board has been meeting weekly to see if the organization's debts can be paid off and its efforts restarted with the help of volunteers.
On Tuesday, the board voted to keep the organization going by adding three board members who will work with creditors, help pay off debts and plan the organization's future.
"They've done a lot of great work in research and advocacy," said Craig Mosbaek, a former board member who stepped down in 2009. He said a total shutdown would have been "a big loss for the fight to improve the health of Oregonians. I'm excited to hear that there are possible ways that Upstream can continue."
As Upstream tries to recover and figure out what happened, some of the questions concerned Rader, who spent most of last year ready to leave the nonprofit he headed.
On Jan. 28, 2016, he filed to run for the Multnomah County Board of Commissioners, a job that pays about $100,000 a year — a big jump of his last reported Upstream salary of $62,000 in 2015.
In last May's primary, he finished third of seven candidates with nearly 6,500 votes — just over a quarter of the tally garnered by Sharon Meieran, who proceeded to win the November runoff.
Rader's loss was not for lack of trying. He went part-time for part of the campaign, and raised $64,000 for the effort, including a $10,000 loan from himself and personally contributing another nearly $32,000 on top of that, his campaign filings show.
Not long after the election, Rader informed the Upstream board of his intent to leave the organization. However, he continued on as executive director through Dec. 31.
Rader dismissed the question of whether he took his eye off the ball for Upstream during the four-month campaign or his six-month transition after losing the county race.
"I don't see that the campaign is relevant to the situation at Upstream, since it ended 10 months ago," Rader said. "In regards to the transition, that was the timeline set forth by the board, after I signaled my intention to leave."
On Dec. 16, Upstream announced the hiring of Samantha Shepherd, who'd held a variety of nonprofit, policy and campaign jobs, most recently serving as operations manager for a Providence Health-affiliated research center.
"I am confident that I am leaving the organization in good hands," the news release quoted Rader as saying. "Ms. Shepherd has the experience and skills to lead the organization to the next phase of positive impact on Oregon's health."
Shepherd had read the group's past tax returns and saw a history of healthy — though not large — income. Neither Rader nor the board warned Shepherd of financial problems during the interview process.
"I thought I was stepping into a long-term executive director role," she said.
But even before Christmas, as Shepherd started going through contracts and looking at the fundraising plans she'd be inheriting from Rader, she grew worried. She contacted Falbo, the nonprofit's board chairwoman, warning her that the upcoming year might not be as ambitious as they'd discussed.
Unlike some nonprofits, Upstream had no corporate backing or member base to generate revenue. It lived a hand-to-mouth existence of task-specific grants and contracts, with slim reserves.
Two weeks after formally taking over on Jan. 1, Shepherd finally received Rader's sign-ins to the nonprofit's accounts. She pored through invoices, mapped upcoming contract payments, and worked up her own cash-flow forecast.
In late January, she alerted Falbo to the grim news: the organization had contracts and grants covering less than a third of the funds it needed for the coming year — and much of that wouldn't be available until May.
Falbo compared Shepherd's cash-flow projection to the version left behind by Rader line item by line item, along with supporting documents.
"I reached out to Mel and tried to see if there was anything we were missing," Falbo said. "In one (cash-flow) model a particular grant was expected to be received in March or April and when we read what was committed to, that money was going to come in in May."
"So I wish Mel had caught it sooner," Falbo added, saying grant denials contributed to Upstream's dire straits. "I don't think there was any sort of bad intent."
The urgent cash crunch prompted the nonprofit to limit employees' hours in January and issue layoff notices last month.
"We had to stretch to cover payroll in January," Shepherd said.
Rader said he left the nonprofit in a decent position, but can't speak to what happened after he left.
"In regards to the issues you raise around budgeting, etc., like many nonprofits, the budget was tight throughout 2016, but I saw a clear path for managing the situation at the time I left in December," he wrote in an email. "I have not seen the financials for January or February, so I can't comment on what happened there with regard to revenue and expenses."
In January, it was clear that the nonprofit couldn't ethically continue operations, Falbo said. Upstream would have needed to cut six staffers to continue, and the less than two full-time positions that remained wouldn't have been able to perform the contracted work.
"We wanted to be respectful of our contracts and our funders and our staff," she said.
Falbo says once the funding base is rebuilt, the volunteer board will "try to define when and how Upstream can bring staff back on and move toward being the type of organization that Upstream has been in the past."