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Saturday, Jul 2, 2022

Money Tactics Turn Around MEND

When Janet Marinaccio became chief executive of Pacoima poverty alleviation services nonprofit MEND in 2017, the organization’s finances were a mess. But with a few savvy business moves over the last two and a half years, Marinaccio, with help from her board of directors, has managed to transform $600,000 of debt into a nest egg of about $1 million for the charity. “We’ve had to make hard decisions like a lot of businesses do,” Marinaccio said. “It hasn’t always been super popular, but it’s been necessary for the long-term life of MEND.” MEND, or Meet Each Need with Dignity, founded in 1971, exists to serve the Valley’s homeless and at-risk populations and to increase their access to long-term employment and residential opportunities through referrals and relationships with other community organizations. Its food bank is the Valley’s largest and provides canned goods and fresh produce to more than 90 local food pantries and community organizations. MEND also collects and distributes clothing and shoes to homeless Valley residents and offers case management and support programs to help stabilize homeless and low-income individuals and families. Lots of nonprofits across the country ride waves of good and bad years, using long lines of credit to get through tough times, Marinaccio explained. MEND is no different. But when she first came onboard, she said, the organization’s $600,000 credit line was being used partially as operating cash to support its programs and daily duties. “(Credit) became a crutch instead of a bridge,” Marinaccio said. She knew this was a problem that couldn’t be solved with fundraising. And if she didn’t find a solution quick, MEND, bleeding cash, wouldn’t last much longer – a scary proposition not just for her and her employees but for all the nonprofit’s homeless clients as well. Also complicating the matter was a new auditing standard known as “going concern,” implemented that year, in which the auditor considers whether substantial doubt exists regarding an entity’s ability to continue operating for another fiscal year. MEND’s auditors that year decisively identified the organization as a risk of a going concern. Marinaccio said that MEND’s chief financial officer presented the board of directors with 16 possible scenarios for restructuring the organization’s finances. “Nothing got us to a place that would satisfy the auditors unless we sold our building,” she said. In 2008, MEND had moved from a 17,000-square-foot building at 13460 Van Nuys Blvd. in Pacoima to a 40,000-square-foot headquarters on the corner of San Fernando Road and Pierce Street, also in Pacoima. But it still owned the first building and used it for volunteer-led education and training programs. Auditors said selling the building was a necessary first step if MEND was to turn itself around, so that’s what Marinaccio did. Shuttering the building’s volunteer programs immediately made room in MEND’s operating budget, and the building received offers as soon as it hit the market. But the process was delayed for months by an L.A. Water Quality Control Board investigation of chemical contamination left behind from a dry-cleaning business that had formerly occupied the building. That scared away some prospective buyers until the board approved the building for sale around Thanksgiving 2018. Luckily, Marinaccio found a buyer not deterred by the building’s history: the city of Los Angeles. Councilwoman Monica Rodriguez, worried about gentrification, saw an opportunity to keep the building for the community’s benefit. In March 2019, the sale finally closed at market price. “We almost ran out of money during that process,” Marinaccio said. To keep afloat, MEND took out a short-term loan of $250,000 while it was in escrow. Once the transaction closed, it was able to pay off that loan, as well as the full $600,000 in credit-line debt. The rest of that year was spent setting up a working capital fund that filled out MEND’s operating budget, as well as several reserve funds, including an investment fund, that could carry MEND through dire times. “The auditor came around this year and said (we had) more than a $1 million surplus,” Marinaccio said. “But (we) still had programs that were losing money.” Chief among them was MEND’s free health care clinic. In February, MEND announced it would close the clinic permanently, effective March 6, to reduce overhead. Marinaccio said that when the clinic first opened in the 1990s, there weren’t many options for homeless or uninsured residents to access affordable health care. “That has since changed,” she said. “In a 3-mile radius (of our headquarters), there are six Federally Qualified Health Clinics.” Now, ahead of its 50th anniversary next year, Marinaccio is leading a needs assessment with MEND’s board to help the nonprofit figure out how to best allocate resources.

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