HOUGHTON - In 2012, the members of the BHK Child Development Board were concerned expenditures were getting out of hand, but one year after changes in management were made, the agency's financial situation has turned around, according to Chip Law.
Law, who is BHK executive director, said at the Nov. 12, 2012, board meeting, members decided $660,000 in expenses needed to be cut.
"That's what they were overspending, in our view," said Law, who was hired as BHK financial director in October 2012. "There was just far too much more going out for what was coming in."
Kurt Hauglie/Daily Mining Gazette
BHK?Executive Director Chip Law looks in on a classroom. The non-profit agency suffered a total $1.2 million dollar deficit and cuts totaling $660,000 had to be made. The school is now on firm financial footing.
BHK administers the Head Start program for Baraga, Houghton and Keweenaw counties, and provides other services for families and children from birth to 5 years old.
The total $1.2 million deficit occurred under former BHK executive director Michael Poma, Law said.
As finance director, Law said he determined almost immediately there was no suspicion of fraud causing the deficit.
"The audit brought it out," Law said. "It was easy to see that very early on."
The problem was fiscal mismanagement, Law said. BHK also owned many properties, which were draining funds from the organization.
"We were spending a lot of money managing properties," he said. "We'd rather sell them and use those assets for something more productive."
Some of those properties have either been sold, or are for sale, Law said.
Law said although it was popular with the public, the BHK Chinese-language program was also eliminated as part of the cost-cutting effort.
"That was tough, but it was part of our deficit-spending problem," he said. "It just was something we couldn't sustain financially."
Because it is so involved with BHK, Law said in October 2012, the organization's board asked the Copper Country Intermediate School District board to temporarily oversee management of BHK. Law was hired by Poma a week later. In November 2012, the BHK Board members hired local educators Pat Rozich as executive director and Bill Polkinghorn as assistant executive director, both on a temporary basis. In July, the board hired Law as permanent executive director.
Mick Hagwell was hired as finance director after he was hired, Law said. Hagwell has experience in non-profit organizations.
"He's an excellent technician," he said.
Law said BHK receives about $4 million per year from the federal government for Head Start and Early Head Start. The organization receives about $1.1 million per year for Great Explorations and after school programs. An $800,000 contract was recently signed with Michigan Works! and its Upper Peninsula workforce development board, also.
Although BHK usually receives funding from AmeriCorps, law said the most recent application has so far been denied.
However, Gale Eiola, chairman of the board, said there is still a possibility that Americorps funding - which is usually in the hundreds of thousands of dollars - could be received in time for the BHK summer programs.
Eiola said he sees significant improvement in the operation of BHK.
"Things are in a lot better shape, financially," he said. "The personnel are a lot happier."
On October 1, the federal government went into sequestration, which means funding for federal programs has been put on hold, and Eiola said it's uncertain what, if any, affect that will have on funding Head Start at BHK.
Law said during the difficult times, the BHK staff were prominent in helping the agency get through its troubles.
"Those are the people that went unnoticed through all this," he said. "(They) truly never fell down through all this. Even with the deficit spending, they continued to do their jobs in a manner that was considered exemplary."
Currently, Law said there are about 250 BHK employees, both full and part time, including the after-school programs. Some administrative staff were cut as part of the cost-cutting effort, and the remaining staff was reorganized.
Although donations to BHK are few now, Law said there will be an effort to increase that form of funding.
"That's the only way we're going to be able to sustain a lot of these programs is with community support," he said.
Law said there was never a time when it was thought BHK would have no money or that it would have to cease operations.
"We never got to that point," he said. "We still had operating reserves. The way it was being managed clearly wasn't sustainable, long term."
Law said BHK is no longer in deficit.
"At this point, I don't think we're in a deficit situation," he said. "If anything, we're probably gaining a little ground, at least as much ground as a non-profit can gain. I don't expect to be in a deficit again."