The YMCA of Stanislaus County has hired a new chief executive officer to help the organization escape a crushing financial crisis, board members announced Thursday.
In a letter to The Bee, the board did not identify the new chief executive, saying only that he was "a 15-year YMCA veteran" and would assume his duties by mid-December.
Among other developments Thursday in the YMCA's struggles:
The California attorney general's office confirmed receiving a complaint alleging that the YMCA of Stanislaus County misused endowment money meant to help poor children.
Leaders of one charity designated to serve those children are consulting an attorney to explore a potential response, its board president said.
Those actions came in the wake of a special report in Sunday's Bee outlining the YMCA's crisis, including nearly $2 million debt, declining membership, failure to complete two years of audits and difficulties with vendors and its bank. The YMCA may be forced to sell its building at McHenry and Floyd avenues, some board members acknowledged.
National YMCA consultants met this week in Modesto with some local board members, who refused Wednesday to discuss recovery strategy, saying they were preparing a response to Sunday's articles. Thursday, board president Steve Ward said the group decided not to answer questions or issue comments other than the one-page letter to The Bee.
Acknowledging "financial challenges," board members wrote in the letter, "We have learned from the mistakes our Y has made in the past, and we are committed to avoiding them in the future."
The letter says the new chief executive "will be instrumental in our YMCA's recovery."
"At the same time, we are grateful for the service of outgoing CEO Steve Smith and appreciate what he has contributed to our YMCA and community," the letter continues.
Smith became chief marketing officer of the United Way of Stanislaus in June, but continued running the YMCA as well until Nov. 1.
With YMCA board approval since his arrival in 2002, Smith paid some bills by using nearly 90 percent of three endowment funds that had grown to nearly $408,000. They were established by now-dead community leaders for poor and disabled children, said several people who helped create the funds, adding that endowment principal was not to be touched.
Tom Eakin, an emeritus YMCA board member not involved in operating decisions, issued a strongly worded statement Thursday demanding that leaders accept responsibility. He acknowledged for Sunday's articles that he had reluctantly allowed Smith to deplete an endowment established by Eakin's late father for construction of a summer camp cabin accessible by disabled children. The cabin at Camp Jack Hazard never was built.
"Public trust is not something that can be negotiated nor subject to interpretation," Eakin said in Thursday's statement. "We either have the trust of the community or we don't.
"The people who entrusted the Y with those funds and the ultimate beneficiaries need to know how those restricted funds were spent and who received them. Those of us who are involved with the YMCA must provide clear, concise answers. And if we handled the funds incor- rectly or if we have not followed the wishes of the creators of the funds, then we must make amends and restore those funds."
Complaint will be reviewed
Gareth Lacy, press secretary for California Attorney General Jerry Brown, said Thursday that his office had received an anonymous complaint about the YMCA of Stanislaus County.
A copy sent to The Bee cites the redirected endowment money, massive debt, lack of auditing and inattention by board members.
"We will review it just like any other complaint lodged against a charity," Lacy said.
If substantiated, violations of state law can result in serious penalties.
In July, Noah's Wish, a charity based in El Dorado Hills that misused much of $8 million specifically donated to help animals affected by Hurricane Katrina in 2005, relinquished $4 million to settle a fraud lawsuit brought by Brown's prosecutors.
Accepting donations "establishes a charitable trust and a duty on the part of the charity ... to use those charitable contributions for the declared charitable purposes for which they are sought," reads a section of state law used by Brown's office to prosecute nonprofit organizations.
Guidelines issued by YMCA of the USA read: "YMCAs need to be more than 'not-for-profit' organizations; they must be 'not-for-loss' organizations as well. ... Thus, maintaining a sound accounting and financial reporting system is essential for carrying out the mission of the YMCA."
Sunday's articles also cited the YMCA's failure to produce audits the past two years.
The national guidelines read: "Annual audits of YMCA accounting and financial records by outside auditors provide governing bodies, funding organizations and YMCA members with an independent verification that the organization's financial position is properly stated and that funds are being properly accounted.
"Annual audits are also required for YMCA certification, continued use of the YMCA name and continued participation in YMCA programs by local associations."
Documents locked in file
The local board's letter Thursday does not address the depletion of endowments set up by late community leaders Bart Bennett and Robert Babington Sr.
Board member Dennis Wilson last week said agreements signed by donors and the YMCA don't stipulate how the money was to be used. Smith said the documents were locked in a file and refused to produce them, though The Bee obtained Babington documents from a family member clearly showing he wanted his money used only for needy children wanting to attend Camp Jack Hazard.
On Wednesday, board members again declined to show the documents, and Ward on Thursday refused to answer questions about them.
"I'm not at liberty to explain every detail," Ward said. "That's all I have to say right now."
Board members last week said they used the money as col- lateral for loans to pay bills.
Modesto attorney Mark Kanai confirmed that he retains the living trust established by Bennett before his death, including directives for use of his money. But state law prevents Kanai from disclosing those papers, he said.
Last week, two people who helped Bennett establish the endowment disputed the stance taken by Smith and Wilson. Dianna Olsen, former executive director of Community Housing and Shelter Services, a nonprofit founded by Bennett, and his longtime friend Frank Riser affirmed this week that Bennett never agreed to let YMCA leaders use the money as they wish.
Riser, who kicked in $10,500 of his money into the endowment honoring his friend, said Thursday, "It's unfortunate this has occurred, but the YMCA must survive, and Bart would feel the same way I feel. They made a mistake, I think, but who doesn't make mistakes?"
Two others involved in the fund's genesis agreed this week with Olsen and Riser on Bennett's intent.
"It was created to take care of the (homeless) children housed in hotels," said Ken Diehl, who contributed $2,000 to the endowment.
'Principal would stay intact'
Bennett lived across the street from Karen Servas, Smith's predecessor at the YMCA, when Olsen, Riser, Diehl and Servas developed the endowment idea, Servas said Thursday.
When they approached Bennett, he said, " 'Oh, Sweeties, you don't have to do this,' " Servas said. "We said, 'We want to do this for you.' We wanted to honor him and wanted him to know how loved he was by the community."
Servas said she assured all involved, especially Bennett, that "the principal would stay intact."
Since Sunday's Bee articles, she said, she dug up documents verifying the version of events recalled by her, Riser, Diehl and Olsen, which mirror what is shown in the Babington documents obtained by The Bee.
Homeless children housed in motels by Bennett's Community Housing and Shelter Services regularly benefited from YMCA programs until 2002, Servas and others said. The organization's former executive director last week said no homeless children had been helped since Smith took over the YMCA 5½ years ago.
"It gave Bart satisfaction knowing that children can have some normalcy and love in a time that's very stressful and frightening for them," Servas said.
The Bee was unable to reach Calvin Bright, whose Bright Family Foundation donated $20,000 to the Bennett fund.
Chester Smith said he contributed $5,000 to the Bennett fund because Bennett was "an exceptional individual, one of those who stands out forever in a community." Also, "The Y has done a lot of good work," Smith said.
Gerry Caviness, president of Bennett's Community Housing and Shelter Services, said the board is consulting an attorney. "This is certainly something we'll be looking into," she said.
Karen Cosner, the organization's executive director, said Thursday, "It would be great if homeless children at CHSS could have access to programs set up through that fund."
Olsen said, "I just wish Bart's wishes had been kept. The Y has to keep open for that to happen."
Several people, in telephone calls and e-mails, have offered help.
"I'm very sympathetic to the Y," said Ron Emerzian, who works closely with Smith as United Way's volunteer campaign chairman. "I want them to succeed because they have significant value to the community.
"And I just think Steve Smith is a hell of a guy."Bee staff writer Garth Stapley can be reached at email@example.com or 578-2390.