Last July, Multnomah County placed Impact NW, one of its biggest nonprofit contractors, on a "get-well plan" because Impact's financial situation was so dire.
Impact had just signed contracts to run the Schools Uniting Neighborhood program at nine public schools, for which it would be paid more than $7 million over the next five years. But the county was worried about the agency's survival—and placed it on six months' probation to rectify its finances.
Eight months later, according to records obtained by WW, Impact NW is still struggling.
"February was not a stellar month," wrote Impact's chief financial officer, Kevin Washington, in an April 3 email to county officials.
The monthly figures showed continued losses, leaving Impact $260,000 behind target for the year to date. That's a significant shortfall in an annual budget of $12.3 million.
Impact NW's executive director, Jeff Cogen, presented the county with a series of cost-cutting measures he'd made since July, but they haven't outpaced revenue shortfalls.
For the past two years, Impact has hemorrhaged money, reporting an operating loss of $817,000 in 2015 and $1.2 million last year.
Cogen says Impact NW has made significant improvement both in reducing expenses and generating cash flow, which means Impact is taking in more money than it's spending. He attributes the loss so far this year to depreciation, a non-cash expense.
"We've scaled back our management team, moved our office out of downtown and trimmed some benefits," Cogen says. "I think we've made tremendous progress."
The agency's financial issues are significant for two reasons.
First, they matter because Impact gets most of its money from public sources—about $4 million a year from a mixture of federal grants and nearly $4 million a year directly from Multnomah County. Second, as the county launches its budget-setting process later this month, Impact's struggles raise questions about the county's oversight of contractors, which the county pays more than $1 billion a year.
Founded in 1966, Impact is one of Portland's oldest social service agencies. It provides a variety of services to needy children, families and seniors. In addition to SUN schools, where it leads chess lessons and dance classes, it provides services to preschoolers, people facing eviction, and disabled seniors.
Cogen joined Impact in January 2015 and became executive director July 1, 2016. His long-standing relationship with the county complicates county oversight of Impact NW. Cogen served as county commissioner from 2006 to 2010 and chairman from 2011 to 2013, when he resigned after an affair with a subordinate.
The county responded to Impact's dire finances last July by demanding monthly financial reports and face-to-face meetings. Top officials didn't mince words.
"The county requires additional information, transparency and commitments from Impact NW to avoid contract termination," wrote county chief operating officer Marissa Madrigal to Impact NW on July 20, 2016.
County chief financial officer Mark Campbell says his staff is treating Impact NW no differently from any other contractor. He says since Impact went on a plan of assistance last July, the nonprofit has been transparent and responsive—although it has also failed to meet financial goals.
"We are very concerned because they are not hitting revenue targets," Campbell says.
"If we feel the services aren't being performed or they were headed to another million-dollar loss, one of my roles would be to recommend no more business with them," Campbell says. "We're not at that stage, and we're not hearing concerns about the services they provide."
Previous losses cut into Impact's savings and forced the agency to tap another nonprofit, the YWCA of Greater Portland, for a new $750,000 loan, a transaction about which the county expressed concern because it "might affect the long-term financial viability of both organizations."
Impact also pursued a merger with the YWCA. But in January, Cogen told the county a previously announced combination of the two agencies was off.
"Last night our board reversed its decision to merge," Cogen wrote in a Jan. 26 email to a county accountant. In that email, Cogen listed $268,000 in budget cuts he'd made this year and a list of others he's still considering.
On April 14, Campbell is pulling together county contract officers who do business with Impact NW for a review. He says he'd hoped the agency would have been done with its plan of assistance by now.
Cogen says he expects Impact to be strong enough by the end of the fiscal year (June 30) that it will no longer need special monitoring. He adds that throughout a difficult process, Impact's clients have always come first.
"We've focused our cuts on administration," he says. "We have never impaired our ability to provide services."