NEON eyeing layoffs due to ‘critical situation’

NORWALK, Conn. – The negative cash flow and a history of poor financial record-keeping at Norwalk Economic Opportunity Now (NEON) is coming home to roost, making layoffs imminent, board members were told Wednesday.

The bad news flowed at the NEON board meeting held in Stamford: It might be necessary to reduce health benefits to NEON workers, interim NEON President and CEO Pat Wilson Pheanious said, and layoffs are likely within five weeks. Pheanious agreed with board members that they should be getting monthly financial updates – they haven’t yet – but said it isn’t so easy because the information isn’t available.

In addition, the Department of Social Services is conducting an audit and a federal audit is due by Sept. 30.

She accepted responsibility for the intensity of the upcoming layoffs, which haven’t been defined yet.

“My feeling about not wanting people to lose their jobs and trying so hard to not have people lose their jobs has driven us, in part, to the point that more people are going to have to lose their jobs because you had some of these very extreme decisions made earlier. … This is long overdue,” she said. “We are now at the point were there ain’t a choice, folks.”

Pheanious added that there would be recall lists, as money might be pending for programs, but has not yet been received. NEON has used up much of its reserve, she said, and Mayor Richard Moccia has refused to restore Norwalk funding cut in the wake of a federal audit that turned up financial irregularities under previous CEO Joe Mann.

“We don’t have that stretch we used to have,” she said. “You know why we don’t have the stretch and why we had to use what little stretch we had in order to meet the ongoing needs of this agency. We don’t have that stretch, that 1.5 million from the city of Norwalk, which was a critical part of that stretch. We haven’t had it for a long time and now there’s nothing left for people. Now, every time we cut a person, we are in some ways cutting services. I recognize that.”

Board member Alan Rossi provided some information that has been eluding board members – “reports of the financial situation of the corporation.”

Rossi said he had been at a meeting at NEON.

“We saw the following picture,” he said. “The budget, which, by the way, the board has not been able to review or approve, shows a deficit of $3 million. Management told us that if immediately they begin to make expense reductions beginning with those unfunded programs and then, after coordination with the appropriate agencies, eliminating duplication, we could reduce $1 million of that $3 million deficit.”

He made a push for more numbers.

“How can we as a board have fiduciary responsibility as a corporation when we are navigating blind?” he asked. “We don’t have the information to make informed decisions or comments, or anything else.”

Board Chairman William Westcott also said that was important.

“One of the most important things that we should be doing at this meeting, and we’re not, is looking at this month’s cash flow, compared to last month’s cash flow, and seeing where and how the window is closing,” he said.

Treasurer Christopher Ruzzi expressed some exasperation on that front, saying much time had been spent on getting the information the board had.

Pheanious elaborated on that point several times.

“I think your points are very well taken, but, as I tried to explain to you before, the information you got was the best information this agency has ever had,” she said. “What you’re asking for is a perfectly reasonable response, it’s a perfectly reasonable question, but not a reasonable situation that we have been in. This is an agency that operated off of not even balance sheets and income statements for years. The information that has been provided by this team, as inadequate as it looks to you, is the best information that has come out of this agency.”

She said she would not commit to honoring the “perfectly intelligent and cogent, rational and appropriate request” for more accounting because she had done that in the past and failed.. NEON Chief Financial Officer Danielle Watson-Yates wasn’t there to consult, and she didn’t know if the work could be done, she said.

“We have eight people doing the work of 20 trying to work with equipment and records that aren’t in place, not because we didn’t have them in place but because the history of these two agencies has been such that that information has never been available,” she said.

Chief Operating Officer Chiquita Stephenson said the cost of merging NEON with Stamford’s CTE was $466,000 more than allowed for by DSS. She said she expects to speak to DSS Monday and get some help with that gap.

Cutting employees is not as easy as it would be for a private corporation, she said, as NEON must ask for approval from the agency’s various funders. Even cutting employees from unfunded programs requires written approvals, she said.

The discussion about cutting health benefits was equally painful. Pheanious talked of $50 co-pays for employees, and said she knew it was likely people would simply not go to the doctor.

“We have more employees and benefits than we have money to manage it,” she said.

Insurance premiums are expected to go from 1.218 million to $1.6 million, and NEON pays 80 percent. “I’m sweating that $150,000 every month,” Pheanious said.

The $20,000 a year salary many employees get isn’t enough to live on, she said, but the benefit package is “like wow.”

“You’ve got long-term care – who has long-term care?” she said. “Nobody but NEON.”

Board member Michael Berkoff agreed that cutting benefits was undesirable, but said there is a reality to the situation.

“Nobody wants to hurt the employees that are there, but what are you going to do if you can’t pay it?” he said. “It’s not like there’s excess cash flow coming in. … Everything is negative, negative cash flow.”

Board member Cynthia Bowser said she would work to bring funds to NEON, and so should everyone else.

“I don’t want to see anyone lose their job, but we are at a critical point,” she said. “For those people who are employed here they need to have comprehensive services so that they can address their needs.

“We have a situation here in terms of trying to meet the monthly bill, trying to keep people on staff, as well trying to seek resources so that people who are here can remain employed and hopefully additional staff come on board to meet the needs of people in lower Fairfield County.”