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Recently there have been two articles published about the Humane Society and MovetoACT 

One article is a March 26th article by Bill Theobald of the Indianapolis Star:
Humane Society controls sought
Animal advocates go to court to get more disclosure and a panel to oversee trust fund.

Another article is a March 29th article by Andrea Muirragui Davis of Indiana Business Journal.
Clawing for a Future
Humane Society launches financial plan to avoid 'death spiral'

There is also a third article "Turning Compassion into Action" also by Andrea Muirragui Davis of IBJ.
A subscription or fee is required to access that article.
Below is mtA commentary on:
Clawing for a Future
Humane Society launches financial plan to avoid 'death spiral'

An occasional series

Almost 100 years after opening its doors, the Humane Society of Indianapolis faces closure. The agency has this year to improve its financial fortunes, and IBJ is following its progress.

- - - - - - - - -
(For context on this reporting it should be noted here that an HSI board member works for IBJ)

The Humane Society of Indianapolis seeks salvation each year for thousands of unwanted pets.

Some don't make it. That's a fact of life--or death--in a shelter that accepts all animals regardless of their physical condition or emotional status.

HSI has recently activated a $20 surrender fee which is diverting surrendered animals elsewhere. This practice is neither good nor bad.  Adopters should have to bear the burden of the disposable mentality, but the target for donor dollars should be put on the front-end of the equation, adoption education and aggressive initiatives of low-coast spay/neuter.  This is why educational initiatives should not be the first program dismissed from an animal welfare agency's services. 

But others do get a second chance, and that's what has kept the agency going for nearly 100 years.

It just may not be enough now.

Expenses increased in recent years even as fund-raising faltered. Deficit spending and stock market losses whittled a $12 million endowment to less than $5 million. And 2003 cuts to programs and personnel did little to close the gap.

Now the Humane Society is making one last attempt to save itself.

Board members have approved a plan to use the remaining endowment funds as collateral for a $2.3 million line of credit that will cover the shortfall through mid-2006. In the meantime, the organization will keep tight rein on costs and try to develop new sources of revenue.

The ever-present source of revenue for HSI survival rests in the integrity of the board character and the public who can trust that their donation is being used responsibly

If it works, the debt will be repaid beginning in 2007.

If it fails, the Humane Society could be forced to shut its doors, sell its assets and start over on a much smaller scale.

Why wait for that to happen?

Agency leaders admit it's a gamble, but they don't see another option.

An option is being offered to the HSI leadership by a larger-than-life contingency of the community. This option is to excuse current HSI board members who were either active or passive during the creation of this current crisis, and welcome community volunteers who are offering themselves to step up as replacement board members and redirect the ship.

"Something needed to happen if we wanted to maintain a basic level of service," said board President Monty Korte. "If we cut more from the budget, we wouldn't be able to take in as many animals. Then we wouldn't adopt as many animals. And then we wouldn't get as many contributions.

"It's a death spiral."

Community support is key to the Humane Society's success. The agency's plan relies in large part on increasing fund-raising income, which needs to more than double, to $1.8 million, by 2007.

But first things first.

Board members agreed in January to stick with the debt-financed plan for the rest of 2004, keeping a keen eye on expenses and revenue.

A debt-financed plan?

The organization is allowing IBJ to join the vigil, sharing the story as it develops.

"We want to be as open about this as we can," Executive Director Martha Boden said. "We think the community is excited about the services we provide and finds them really valuable.

"We may all decide 12 months from now, 18 months from now that it was a grand experiment, but (if) the community isn't behind it. I don't think that will happen."

The "community" isn't behind it.  The "community" is behind resignation of the "old-guard" board who led the humane society to this crisis and replacement with well qualified community volunteers willing to assist the organization get back on course.

The stakes are high.

If the Humane Society doesn't make it, the city's Animal Care and Control facility would feel the impact.

"It would be absolutely devastating for us," said Margie Smith-Simmons, community outreach director for the city shelter. "We would not be able to handle it."

Big ambitions, big spending

The Humane Society's current situation is a fairly recent development.

In the late 1990s, the agency was doing well financially. Its endowment soared with the stock market, reaching $12 million in 1998, and the future looked just as bright.

Hopes were running high when officials decided to build the Wellness Center in 1999 to allow the agency to perform its own spay/neuter procedures and care for sick animals.

The wellness center was not actually spay/neutering all adopted animals until spring 2003, several years after the Wellness Center was operational.

"Finances weren't a concern," said Korte, a board member since 1999. "Times were good. Our main focus was expanding our presence, our services. We were talking about establishing a footprint in other parts of the city."

So when a capital campaign to fund the $2 million Wellness Center project fell short, it didn't seem like a big deal to pull $1 million from the endowment. That's why the funds were there, after all.

The facility opened in 2000, the same year the Humane Society expanded its reach by taking over operations at the city's shelter on the near-south side.

Convinced that it fit into their mission, agency leaders felt compelled to do what they could to improve conditions there. But in hindsight, the management agreement may have been a misstep.

"We probably had no business doing that," said President-Elect Brent Bolick, a board member since 1999.

"We were pretty full of ourselves. The coffers were fat and there didn't seem to be anything we couldn't do."

It turns out there were limitations. The city employees were members of a union, which relegated the Humane Society staff to a largely advisory role.

And business, unfortunately, was booming. More than 30,000 animals came into the two shelters in 2000, putting a strain on resources.

Falling fortunes

That was the year the Humane Society's financial fortunes began to shift. Market losses took about $450,000 from the endowment, and the agency pulled out another $530,000 for operations.

Then things got worse.

Terrorist attacks cast a pall everywhere in 2001. The economy soured. Fund-raising slowed.

And in October of that year, the Humane Society found itself in the harsh glare of the media spotlight when The Indianapolis Star lambasted its operations.

The Star's "Destined to Die" series reported a 70 percent euthanasia rate for the two shelters in 2000. The newspaper also criticized the Humane Society for accumulating $14 million in assets.

The coverage drew attention to the issue of unwanted animals, an important step in addressing what is essentially a community problem, Korte said, but it raised questions about the Humane Society's commitment to animal welfare.

Response within the organization ran the gamut--hurt, dismay, outrage--before settling on a common notion.

"There was a sense that this was really going to hurt us for a long time," Korte said.

How much damage it did is anyone's guess, given the economic woes sweeping the nation at the same time. By the end of 2001, the endowment had taken another $2.3 million hit: $1.3 in market losses and $1 million in spending.

Then came a February 2002 Star report that Executive Director Marsha Spring had used agency credit cards for personal purchases.

Spring did not break any rules--the Humane Society didn't have a credit card policy at the time--and repaid the debt through payroll deduction before it came due, but she resigned less than a week later.

No one has seen the documentation.

 If one revisits the library archives of press conferences during the time regarding the previous ED putting thousands of dollars in personal expenses on a society charge card and even using a society check:

"Officials say that is allowed by policy, that the money was repaid, financial controls were in place, no money missing, they say no donor dollars misused." -Rich Van Wyk, (Channel 13 News).

"Our controls were absolutely found to be doing exactly what they were supposed to do which is to make sure no, uh,  entity resources, no humane society funds were misused, stolen, or used inappropriately, and so to that extent we've got exactly what, they've done exactly what they were supposed to do."  - Monty Korte, HSI board president., (Channel 13 News with Rich Van Wyk).

"It was a practice that was allowed, use of the card brought funds to the humane society, it was an affinity card..." previous E.D.,  (Channel 8 News).

"The board said the humane society policy allows about 4 employees to use the credit card to buy things for themselves as long as it is documented and paid back immediately through payroll deduction."   -  Julie Pursley, (RTV6).

Board members were surprised by the Star's discovery and quickly instituted a policy forbidding the practice, but they supported Spring nevertheless.

"It wasn't a good business practice and we changed it immediately," Korte said. "Still, it was difficult to think about a punitive reaction when she hadn't technically done anything wrong."

Looking at Part V of the 2002, 990 Income Tax return, she (the previous E. D.) had a "punitive" experience of  $103,347.00 compensation for January and February of 2002.

The board was sorry to see Spring leave, he said, given the strides the organization had made during her 14-year tenure. Even so, they understood.

There were strides with building an attractive facility but where were the strides in reducing the shelter admissions or the kill rate?  This is where to be pointing the resources. 

"You can only live for so long under a microscope," he said.

The same could be said for the Humane Society.

By the end of 2002, donations had dropped 38 percent. At the same time, the agency pulled $1.5 million from the endowment to cover expenses and lost another $1.1 million in the market.

The looming crisis had arrived.

Saving services

The Humane Society operated for most of 2002 without a full-time executive director. Former board President Lu Hamilton took the reins on an interim basis while the agency conducted a national search.

Korte, elected president of the board that year, tried to look on the bright side.

"We saw it as an opportunity to prove to the community that we were committed to making changes to improve animal welfare in central Indiana," he said. "We wanted to find the best possible person for the job."

Minnesota technology consultant and animal rights advocate Martha Boden fit the bill and started work in October. Her first charge was to improve operations, a task she tackled with gusto.

By the time she started drafting the 2003 budget a couple months later, she had a pretty good idea that she'd be facing a challenge there, too.

"I was concerned about our dependence on the trust," Boden said. "We were pulling from it to make payroll at that point, and it looked to me like that wasn't a very viable method going forward."

The board ultimately approved a $2.6 million budget that included $1 million from the endowment, but members asked Boden to come up with a plan to cut expenses by as much as $500,000.

"It's one thing to live with a $750,000 or $1 million deficit when you have $12 million in the bank," Korte said. "It's another thing if you only have $6 million."

Boden enlisted her staff's help, working through several scenarios before settling on a plan that left basic services intact: The shelter would maintain its open-acceptance policy and continue to sterilize all animals before sending them home. To make that work, the agency would eliminate education programs, cut about 20 percent of its staff and close one day a week.

"Open acceptance" does not equate with the practice of a surrender fee - initiated at the beginning of March.  -  Staff cuts were from direct animal care and education staff - the 2 most important areas of any animal welfare agency.  No shelter has ever adopted their way out of the pet over population problem and no high profile shelter relies on adoption fee revenue as the source for sustaining their operation. 

"The board had to step back and say, 'Well, everything we're doing is really good, but which of these really good things are we not going to do?'" Boden said. "It was hard."

The changes took effect in April 2003, but it soon became clear that income projections were off. It was time to get creative.

'Can we do it?'

Rather than continue eating into the endowment, the board decided to use it as leverage. In September, they used some trust funds as collateral for a $700,000 line of credit to keep the organization running.

Services and expenses already had been trimmed to what many considered the bare minimum.

"We were to the core of the core mission," Korte said. "Now we had to ask ourselves, 'Can we do it?'"

Board member and Boden explored that for months, knowing all the while that the line of credit would only stretch so far.

Their discussion revolved around a central question: Are those basic services so important that the Humane Society should maintain them until it runs out of money, or is it more important to maintain some sort of ongoing operation?

The answer wasn't simple. Or unanimous.

Some board members weren't comfortable with the idea of using debt to fund operations. At their request, Boden and her staff took another look at cutting expenses--and services--to match income.

But revenue was likely to be reduced as a result.

"It was an option, but I'm not convinced it was one that gave us a future," Boden said. "I think it would have brought our death a lot sooner."

Several volunteers from the community are stepping forward as board candidates to assist the humane society in preventing the later "death." 

Another possibility was to shut down, sell the property and start over. But that would have had a major effect on the community, which brought more than 12,000 animals to the Humane Society last year.

In January, the board approved a $2.6 million budget for 2004 that includes regular draws from two lines of credit. It also includes a modest increase in fund-raising income, to about $800,000.

But development income must continue to rise to make the three-year plan work. By the time the agency begins to repay the debt in 2007, fund-raising is expected to generate $1.8 million a year.

And there are a lot of variables to consider.

"This is realistic, it's doable," Korte said. "But it's not a slam dunk."

Rebuilding trust

This theme sounds like it's borrowed from the mtA campaign!

So the board and staff are keeping a close eye on the books--and the community.

Expenses were on track for the first two months of the year, and fund-raising income was strong.

Development Director Cassie Hall, who joined the Humane Society in January, knows the pressure is on. But she sees plenty of opportunities for improvement.

(Note: In the private sector, development equates to "achieving excellence."  In the public sector, it translates to "fundraising").   - Opportunities for improvement are very clear. 

She wants to refine the agency's special events schedule--a new fund-raising walk, Mutt Strut, is set for April 25 at the Indianapolis Motor Speedway--and get donors more engaged with the organization.

"The Humane Society has stepped up and done what is expected of us," Hall said. "Now we just have to figure out how the community can help us pay for it."

But not everyone is on board.

A small organization calling itself Move to Act has raised questions about the Humane Society's situation, asking for a full accounting of agency finances, the endowment losses and records proving Spring repaid the credit card debts.

As of this writing this organization has 70+ supporters listed on the mtA web site and the number grows daily. There are 144 individuals logged into the mtA data base as members as of this writing. The mtA initiative is endorsed by ARPO, Indiana Sheltie Rescue, Inc., The Williams Foundation, Jesus MCC Animal Ministry, for the Dogs! Inc., and just recently Spay-Neuter Services of Indiana, Inc., one of the oldest proactive animal advocate organizations in the community. In addition, mtA has been collecting hundreds of signatures asking resignation of HSI board members who served during 2000-2002 and replacing those individuals with candidates from within the community who represent the pulse of animal welfare and understand the respectful stewardship of donor dollars. 

The group also wants board members who were serving from 2000 to 2002 to resign en masse.

MtA wants those 11 board members present during 2000-2002 to step aside.  They never apologized for allowing HSI funds to be used for personal expenses.  They never apologized for running multimillion-dollar deficits while blaming the stock market and negative media coverage. They contributed to the crisis in which our humane society now finds itself and that is a crisis of credibility.  Credibility is critical for the survival of any agency that relies on donor dollars.

"We want to rebuild public trust in the Humane Society," said spokesman Paul Ponticello.

Agency leaders are trying to respond to MTA's concerns, within reason. They've met with the organization's leaders and provided audited financial statements, but no board overhaul is planned.

Maintaining the old board will achieve realization of the "death spiral" in which the agency finds itself.  Officials always look elsewhere to blame: the stock market, the "Destined to Die" series, etc., but never board governance and/or behavior. 

Several members are leaving the board this spring because of term limits, so it's important to keep some institutional knowledge in place, Korte said.

Institutional knowledge of...?

And actions may be the best way to build public trust.

MtA offers those actions that can be taken to build public trust.

"We have taken the criticism seriously and really committed ourselves to making changes," he said. "We can't go out and ask for support based on a promise. We have to show actual accomplishments."

"...but no board overhaul is planned."

Chief among them is last year's success at increasing the number of animals who leave the shelter alive. A record 5,593 animals went home last year--a 48 percent placement rate--despite the budget cuts, layoffs and reduced hours.

"The sad reality is it would be a whole lot cheaper if all we did was euthanize animals," Boden said. "But we don't."

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