In their last years, generous donors long ago designated that endowments to the YMCA of Stanislaus County be used only for specific programs helping needy and disabled children.
At first, they were.
But in the past five years, YMCA management has nearly depleted three "restricted funds" as collateral for loans just to keep the YMCA's doors open.
"It's sad to see Bart's wishes and hopes and dreams for children gone," said Dianna Olsen, who helped establish the YMCA's Bart Bennett Endowment in 1997.
That fund and two others held $407,698 in 2002. YMCA management regularly used the interest generated to give homeless children free experiences with YMCA activities and summer camp.
Since then, board members -- against the advice of their former longtime accountant, who warned of "exposure to legal inquiries" -- have given former YMCA Executive Director Steve Smith approval to use all but $41,790 elsewhere.
United Way of Stanislaus hired Smith in June as its chief marketing officer, and he split time between that organization and the YMCA until Thursday.
Emeritus board member Tom Eakin said he reluctantly
agreed to let management drain all but $25 from a $52,136 endowment established by his late father, William, whose dream for a mountain cabin catering to disabled children then vanished. Tom Eakin said he was fearful the YMCA would close down without a cash infusion.
In an interview Tuesday, three other board members insisted they did nothing wrong by redirecting the earmarked money, saying the accountant must not have understood that the bequests had no such restrictions.
But internal YMCA documents and others produced by a survivor of the most generous donor suggest the opposite. And people intimately involved in the funds' creation, such as Olsen, say the donors never wanted their gifts used for standard operating expenses.
Sold property to start fund
Before his death at age 88 in 1998, Bennett was a community giant in Modesto, serving groups such as Boy Scouts, Jaycees and The Salvation Army. He also founded Community Housing and Shelter Services.
Ken Diehl, his longtime friend, visited Bennett two days before he died. "He said, 'I'm so happy, Ken,' " Diehl recalled Wednesday. "I said, 'Why?' and he said, 'I gave it all away.' He didn't have one dime when he died. That's pretty phenomenal."
Bennett, who had no children, sold a rental property to establish the YMCA fund bearing his name, which doubled in size to $140,000 with donations from friends and supporters. He had been pleased with the YMCA's outreach during the 1997 flood to homeless children from his Community Housing and Shelter Services, and wished to see that cooperation continue.
"That's what he wanted," said Frank Riser, who co-founded the Community Can Tree with Bennett and who helped him establish the YMCA endowment. Riser added $10,500 to beef up the fund. Diehl pitched in $2,000, according to a YMCA endowment list obtained by The Bee.
"(Bennett) specifically stated, 'I want to send to camp for a week or two the kids who can't afford to pay,' " Riser said. "That's what (the fund) was established for."
Olsen, who was executive director of Bennett's nonprofit at the time, said everyone agreed that, because of its stature, the YMCA should manage the endowment. Olsen and former YMCA Executive Director Karen Servas used its interest to help more than 200 children, according to solicitation letters from 2002.
Allowable uses in dispute
Robert Babington Sr. was even more integral to the YMCA's legacy. He was general secretary of Modesto's YMCA from 1948 to 1962 and ran Camp Jack Hazard, the High Sierra summer camp known to thousands of children over many decades.
Babington then joined the YMCA's national staff and traveled with his wife, Dorothy, throughout many states for 11 years to help with major fund-raising drives for capital improvements.
Their son, Dick, also worked at the YMCA in Modesto and Livermore but died of cancer in his 30s. In 1991, his parents set up a memorial fund in his name for "camperships," or camp scholarships, for needy children.
"Camp Jack Hazard was one of (my father's) favorite things," said Bob Babington Jr., who lives in Modesto.
Board member Dennis Wilson on Tuesday said the board had used endowment funds to leverage loans under Servas' watch. But those were flush when Smith took over as chief executive officer in 2002, according to YMCA financial documents.
Servas on Friday disputed Wilson's claim. She said she used a portion of the Bennett fund principal to cover payroll in December 2001, with approval from Wilson and the board's finance committee, and repaid it with event fund-raising checks less than two weeks later. Restricted funds never were used for loan collateral, she said.
Allen Layman, another YMCA board member, and Wilson on Tuesday said the board agreed to let Smith redirect the endowment money for loans to keep the YMCA afloat. But the bank hasn't been repaid, and a current line of credit with Modesto Commerce Bank increased from $86,250 in June to $145,750 in August, according to YMCA balance sheets obtained by The Bee.
"If the donor never says (how the money is to be used), it gets doled out whenever the organization needs it," Smith said. "There was nothing in directives from the estates that says it can't be used for other things."
Smith said the directives are kept in a locked file and refused to show them to The Bee.
Olsen, Riser, various internal YMCA documents obtained by The Bee and Babington's Dec. 9, 1992, last will and testament indicate the donors had specific goals in mind for their money.
Babington Jr. on Wednesday produced the "Intervivos Gift Agreement" signed Dec. 5, 1991, by former YMCA President John W. Ward and secretary Robin Gould. It spells out that interest must be spent only on Camp Jack Hazard, "and more specifically ... to provide free camperships for needy individuals."
Current YMCA board President Steve Ward, who joined the board 2½ years ago, is not related to the former president, who was The Bee's general manager at the time.
A YMCA resolution with the same date, signed by Gould, accepts the Babingtons' initial gift and refers to the signed agreement, stipulating "use and benefit of campers at Camp Jack Hazard." And subsequent wills of the elder Babingtons reaffirm the intent.
"It's real specific as to where the funds should go," Babington Jr. said.
'Promise to Bart'
In Bennett's case, a Nov. 22, 2000, internal document titled "YMCA of Stanislaus County Assets" includes a note reading, "Promise to Bart was to have $140,000 in principal, interest used for kids."
Notes from an annual financial statement ending March 31, 2002, state that such funds are "restricted in perpetuity. Income generated by these assets can be used for designated YMCA activities." The document also shows that the Bennett and Babington funds were untouched at that time.
The YMCA's accountant tried to warn board members in mid-2004 before quitting in frustration the next year.
"The association has borrowed from restricted funds to meet current obligations, causing the association to be in noncompliance with donor restrictions and at risk of losing donor restricted funds, as well as exposure to legal inquiries," certified public accountant John Sereno wrote in a 2004 audit letter. "Management must stop the practice of temporary borrowings from restricted funds," he continued.
Sereno also blasted management, saying the YMCA "did not prepare a realistic budget," compiled tardy monthly financial reports and was inconsistent with reimbursement checks. Sereno also said the YMCA "sustained material operating losses and allowed trade accounts payable to become increasingly overdue," resulting in late charges that could create "potential negative impressions from the commu-nity."
Asked about Sereno's letter, Wilson said, "He may not have known enough about (the endowments). They were for the benefit of the YMCA."
Sereno could not be reached for comment.
Wilson produced a document suggesting that the YMCA gave 23 free scholarships to Camp Jack Hazard this year worth about $140 each, plus 10 unspecified camperships worth $420 each. Smith refused to say whether any were funded by endowments, whose principal has been reduced to $41,790.
Sixty-nine others attended camp at no charge, the document shows. But Child Welfare Serv-ices reimbursed $27,860 for those campers.
No camperships have gone to Bennett's Community Housing and Shelter Services since summer 2001, said former Executive Director Nancy Cook, who took another job in March. She was a CHSS board member when the Bennett fund was established and was hired to lead the organization in March 2002, just before Smith took over at the YMCA.
Legacies appear lost
When she asked Smith about camperships for her organization's homeless children, "He said he would check into it," Cook said. "Then he said there was no interest because the stock market was dropping."
"On several occasions I asked to talk about it and he always put me off," Cook said. "Then he told me there was no money. The sad part is, that was a legacy to some people. It's sad they're gone, and perhaps the opportunity is gone, too."
Eakin, the emeritus board member, has no voice in operations. But he remembers the painful decision to let his father's endowment be used for loan collateral.
"My father was a very athletic, very energetic man who ended up in a wheelchair," Eakin said. Philanthropic discussions led to the family designing a wheelchair-accessible cabin to be built at Camp Jack Hazard, enabling disabled children to enjoy camp.
Eakin said Smith asked to use the principal "for emergencies," and Eakin agreed. When the YMCA could not repay the money, Eakin said, he kissed it goodbye.
"I agreed only because there wasn't going to be a cabin if there wasn't a Y," Eakin said.
"That money is gone," except for $25, he continued. "I will never see that money again. The sad thing is, both of my brothers and several other people put that money in a trust to build something my father would have liked, and it was never built."
Bee staff writer Garth Stapley can be reached at email@example.com or 578-2390.