East Side Neighborhood Services (ESNS) is going through an extensive restructuring that will likely continue until March.
The ESNS Board hired Thomas Plumb, the managing director of Cordes & Company, as its chief restructuring officer. Cordes specializes in companies or nonprofits in distress. ESNS has been in distress for some time.
In October, ESNS parted ways with Executive Director, Mary Ostapenko-Anstett.
Plumb, who grew up in Northeast, said, “We’re not focused on why a situation happened, but in how the business can be turned around.”
Plumb did say there was no indication of any wrongdoing. “We have not observed any fraud or misappropriation of funds,” he said. “We’re just focused on the ‘go forward.’”
He said the situation built up on ESNS over a period of years. “It’s a matter of they were not bringing in enough funding and the bills were too high.”
He said that, moving forward, it’s just a matter of getting things done and getting the revenue and expenses to correlate.
Ostapenko-Anstett’s view
Ostapenko-Anstett said she is relieved to be out from under the stress of being the president of the organization.
She’s been spending some time making Christmas ornaments and just generally relaxing. “It’s the first time I’ve haven’t been working since I was 16,” she said. The last 29 years have been with ESNS.
“The news story that came out broke my heart. My reputation was on the line.”
She said her departure was a mutual decision between her and the board. “We left on good terms,” she said in an interview at her Northeast home on Dec. 5.
She began working for ESNS, now a $7 million organization, as a family resources advocate and eventually became the nonprofit’s chief fundraiser. She was asked to take the presidency on an interim basis three years ago, when former President Kristine Martin retired.
“I knew what I was walking into because I had seen the finances being stretched for a while.”
ESNS mainly works on grants from various sources and on fundraising.
A recent Nov. 3 meeting reported in the Nov. 19 Northeaster was not called by the nonprofit’s Board of Directors, but by a group of staff. Ostapenko-Anstett had already reached an agreement with the board to step down and for the board to hire a consultant to try and solve the organization’s financial woes.
“No board (members) were invited to the meeting. It was very unprofessional. It’s good for staff to be empowered, but I think they’re getting the opposite of what they wanted. And they put out a lot of bad information.”
Ostapenko-Anstett said that earlier this year the board asked her and other senior staff to come up with scenarios to deal with ESNS’ financial problems. “We came up with basically three scenarios. One was to just shut it down. The second was to cut programs. The third was to merge with another nonprofit.”
She said ESNS has already been working with a nonprofit called The Change, and three programs have been taken over by that group.
Ostapenko-Anstett said local legislators have been supportive, but they don’t understand how nonprofits work. “For instance, they got us a $300,000 grant in 2023, but we would have had to put a lien on our building to get it. That wasn’t going to work. We still have not received that $300,000.”
She said that nearly all nonprofits are fighting financial problems right now. “I was just at a meeting of nonprofits, there were 44 organizations there. They asked how many had a cash reserve. Only one raised their hand.”
Grants from government and other sources do not fully fund programs, in that they don’t pay for overhead. “We still have to pay for electricity and trucks and more.”
She said ESNS has a $7 million budget, but the agency depends on about $550,000 to $600,000 a year in fundraising to survive, adding that last year the organization raised $370,000 — meaning major cash flow problems have arisen. The organization’s lack of cash reserves has created problems for staff.
Another problem is that most grants for programs are only paid or reimbursed to the nonprofit after the work is done. Meanwhile staff must be paid, a difficult task if there are no cash reserves. “For instance, in January of this year, we went the whole month without one payment coming in. Not one.”
She said staff was always paid, and that some senior staff, including herself, did not cash their checks until there was money available. She said when she left ESNS, she had four checks she hadn’t cashed.
East Side Neighborhood Services (ESNS), a social service nonprofit based in Northeast Minneapolis, has signed an agreement with Cordes & Co., a company dedicated to helping nonprofits in distress. In recent years, ESNS has had little in the way of cash reserves. According to Mary Ostapenko-Anstett, former president of ESNS, many nonprofits are facing financial difficulties right now. (Provided)
Moving forward
As the chief restructuring officer, Plumb monitors every dollar that comes into the program and every dollar that goes out. “What we’re doing right now is cleaning up the books. There was kind of a backlog.”
The organization has entered an agreement with Change Inc., a Northeast Minneapolis agency that aims to improve the lives of all people. Much of their work involves schools. The programs they took over were: Out of School Time Programs, Family Healing and ASPIRE, a student and parent assistance program. Eleven ESNS staff members will now be working for Change Inc.
The contract with Cordes & Co. is “open-ended,” according to Plumb, but they hope to be done within 90 days. “It’s pretty clear that it’s not an overnight fix,” Plumb said. “We’re not looking at it to see if the programs are valuable, they all are, but whether they are fiscally viable. We don’t have program experience. We can’t run a day care or a high school. Each has different dynamics.”
“We work as a team” Plumb said. Cordes meets weekly with a leadership group at ESNS. At time of reporting, the ESNS website lists team members David Baack, Tony Brown, Carolina Elizondo, Caitlin Enright, Kim Ferencik, Liz Handschy, Angelina Harris, Debi Krause, Laura Lewis and Becca Moga and board members Bryan Altman, Laura Bereiter, Marquitta Frost, James Hanlon, Sitara Johnston, Jai Kissoon, David Oman, Brian Recker, Kevin Reich Harper Rooney, Sara Scofield and Alec Sherod.
The goal, Plumb said, is to develop a permanent structure with a new executive director. He said he is looking at all the finances including investments that didn’t work out.
“It’s a block-and-tackle approach. We’re just aiming at getting things done.”
Union activity
In the midst of all the financial problems, the group of staff members who called the meeting in November have also been trying to organize a union at the nonprofit.
Ostapenko-Anstett said a union won’t work with a nonprofit. “That would be a dealbreaker for the ESNS. I don’t know of any nonprofits that have a union. It just doesn’t fit our financial model.”
In the end, though, Ostapenko-Anstett said she has no hard feelings for the staff. “I know their intentions were for the good. But they don’t know how to run a business.”
A leader of the employees group declined to comment for this story, saying the group would like to wait until the new year before issuing any statements.