Goliath, Meet David

A St. Louis charity tries to kill a Cleveland program for children, but the little guys fight back

Two years later, the county selected the home for a pilot program serving troubled kids and their parents. Instead of separating child from parent and sending them through different bureaucratic mazes, the new program handled them as a single unit with symbiotic needs. "We'd never tried it before in Cuyahoga County," McCafferty says. "We had trouble getting it up and off the ground."

Adding the program meant start-up costs of about $300,000. But Lundeen was confident the program would eventually pay for itself: "If we're growing, we have to invest money to do that."

The home ran deficits, but they weren't huge -- $272,091 in 1998, $24,344 in 1999, $270,028 in 2000. Rather than panic, the home borrowed the money from NBA.

Christian Home CEO David Lundeen
Walter Novak
Christian Home CEO David Lundeen

NBA wasn't pleased. A good bond rating is essential in getting low-interest credit for future building projects, but the loans hurt NBA's balance sheet. In October 1994, Fitch Ratings lowered its rating from A- to BBB+. Fitch dropped it again in February 2001, this time to BBB.

NBA needed to restore profitability, and Cleveland's expansion efforts looked like a fiscal drain. "When NBA's income goes down, we must lower our spending," Dougherty was quoted as saying in an agency newsletter. "If we don't, we risk damaging the good name which has enabled NBA to serve so many."

Bob McCarty, an NBA spokesman, refused repeated interview requests but did offer a written statement. He says the Cleveland home registered a deficit of more than $3.4 million since 1993, a source of constant concern in the St. Louis office.

"NBA officers and staff have met with the CEO and the NBA Cleveland Christian Home Board on numerous occasions to discuss Cleveland Christian Home's financial reserves," he writes. "In light of this, the decision to close NBA Cleveland Christian Home could not have come as a surprise." He adds that Cleveland isn't close to becoming a self-sustaining operation.

But Cleveland's board believed NBA was exaggerating its role in the fiscal mess. An NBA press release in February said the national organization was underwriting the Cleveland home for "over $1 million a year in losses." That may have been close to true in 2001 -- a horrible year for nonprofits everywhere -- when the home's shortfall reached $878,847, according to the home's financial records. In the years before that, it never exceeded $275,000.

In fact, the Cleveland home actually paid NBA "supportive service fees" of $1 million from 1997 to 2001, though it seemed to get little in return. "I don't know what that bought," Hrbek admits. "It seems like the only thing that gave us was the ability to be part of a larger collective." NBA allowed the home to buy insurance in bulk, for example, but the home still covered the tab, Hrbek says. Without the fees, the Cleveland home would have posted a $300,000 surplus through the end of 2000, Lundeen says.

Even before February, some Cleveland board members were questioning the benefits of NBA's umbrella. Rhee, who took over as the Cleveland home's board president in 2002, says NBA was heavy-handed concerning money but otherwise uninvolved in the home's operations: "They didn't have any idea what sort of programs we were running, and they never sent anyone to find out."

"The question I used to ask was 'Does NBA exist for these ministries, or do these ministries exist for the sake of NBA?'" Hrbek says.

Even if both agencies saw plenty of reasons to split, NBA's method of making it happen bewildered the local board. Lundeen attended the November meeting when NBA voted to kill the Cleveland home, but he wasn't even aware the plan was on the table. He was told that the board was meeting in executive session and that he was not welcome. The vote was taken in secret.

Even then, NBA didn't inform Cleveland or allow it to develop an alternate plan. It wasn't until February that Dougherty announced the three-month-old decision.

In his statement, McCarty writes: "In the case of Cleveland, the board decided to wait on announcing the decision until year-end financials were available in hopes of an unexpected turnaround. When that turnaround didn't happen, the executive committee of the NBA Board reaffirmed the decision at its meetings Feb. 11."

When Dougherty arrived in Cleveland, some officials -- including Lundeen -- thought Dougherty had come to fire the CEO because she was unhappy with the home's financial state. Instead, she offered grim news. "She said, 'We're here to let you know we're closing you,'" says Lundeen.

Hrbek was angry. "For an operation that has its roots in a church, their reason for making this decision indicated a whole different sense than what the church is about. At one point, they said something like 'This is what corporations do.'"

The board made up its mind that evening. "We had a mission to children and their families," says Tim James, a board member and pastor of Fifth Christian Church. "To close us point-blank -- we deserved more integrity than that, and so did the people we serve." Whether NBA liked it or not, the Cleveland Christian Home intended to stay open.

It would not be easy. NBA owned the property and the endowment. The local board couldn't stop NBA from sending out letters announcing the shutdown. When NBA insisted that the home take down a Web site detailing its plans to stay open, it had no choice but to comply. NBA also insisted that the residential center accept no new charges after April 1. And despite its determination to continue, the board couldn't even raise money without it legally belonging to NBA.

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