Nonprofit seeks nearly $1M loan to pay staff

McHENRY – McHenry County's second largest social service agency is looking to borrow nearly $1 million from the McHenry County Mental Health Board so it can meet payroll this fiscal year.

Because the state of Illinois continues to be months behind on reimbursing nonprofit agencies for the work they provide, Family Service and Community Health Center asked for a cash advance of up to $900,000 to be paid out over the next nine months.

Without the loan, Family Service, which serves 6,000 people locally, might be forced to make significant cutbacks in services.

This week's loan request might just be the first of many from local nonprofit agencies stung by the state's fiscal crisis.

Sandy Lewis, executive director of the Mental Health Board, said Tuesday that the board conducted a survey of several area agencies to see whether they too would need cash advances in the future, and if so how much.

Lewis said the state is behind between three and nine months in payments to the nonprofits, and now Medicaid payments are expected to be delayed seven to nine months, further hurting their cash flow.

Lewis said it would be difficult for the Mental Health Board to predict whether and when other agencies would need help, because each receives a different level of funding from the state and might have separate fundraising efforts as well.

According to the survey, some of the agencies said they did not have enough in reserves to meet anticipated shortfalls during the year. Options and Advocacy said it might need to ask for $50,000, and Pioneer Center for Human Services, the county's largest social service agency, said it would consider asking for $400,000.

A vote on whether the loan to Family Service would be approved by the Mental Health Board is scheduled for a special meeting July 5.

The proposed loan would be paid out monthly, and the advances would be used to allow Family Service to meet payroll and keep services at status quo.

How much would be lent monthly would depend on the individual month's cash flow, Lewis said.

"We don't want to ask for more of an advance than what we need," Family Service CEO Lori Nelson said. "We do anticipate other providers to be in the same situation."

For fiscal 2011, the Mental Health Board already allocated $2.3 million to Family Service to provide services in the county.

State grants account for 32 percent of the Family Service's $6.5 million budget.

Nelson said the agency had about $200,000 left in reserve, enough to cover one payroll for the agency's 105 full-time equivalents.

Nelson said the cash advances would be made in anticipation of state payments and Medicaid payments.

"As soon as we receive those payments, they'll go back to the Mental Health Board," Nelson said.

Without the loan, the agency might stop some of its services so it could keep its more crucial programming, such as its psychiatric services, crisis services, and substance abuse care.

During the economic downturn, Family Service has given employees furloughs and pay cuts of between 3 and 6 percent, Nelson said. About a dozen positions have been eliminated.

The agency is working on "creative" ways to increase revenue, such as renting out space, increasing fundraising, and contracting with more insurance providers, Nelson said.

Under the proposal, Family Service could borrow up to $100,000 a month, Nelson said.

"This is no long-term solution," Nelson said. "We are so grateful to the Mental Health Board. We're going to continue to work with them ... [and] come up with every strategy to address this problem. We don't anticipate it's going to get cleared up next year."

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