Mission: possible: Financial crisis averted, but work remains

February 14, 2005

Humane Society of Indianapolis saved itself in 2004.

Poised on the brink of financial disaster, agency leaders came up with a deceptively simple recovery plan: Spend less, raise more and borrow some to make up the difference.

So far, so good.

Expenses last year came in about a half-percent under budget, fund-raising revenue was up 37 percent, and the shelter didn't use as much credit as expected.

Then there was the real victory-nearly 53 percent of the 8,985 animals that came to HSI in search of a new home found one.

Still, success was anything but effortless.

"The results almost make it look like it was easy," Executive Director Martha Boden said. "But if you lived through it, you know it was incredibly difficult."

Indeed.

The beleaguered agency started 2004 in crisis, unsure how long-or even if-it would be able to keep its doors open. Years of deficit spending and stock market losses had taken a toll on its endowment funds, and even scaled-back operations cost more than the shelter brought in.

The staff and board explored additional cuts before deciding that wouldn't help make a case for additional support. So they embarked on an ambitious idea: Use the remaining endowments as collateral for credit that would pay the bills while they worked to increase revenue, primarily through fund raising.

It was a gamble. If the money didn't materialize, HSI would be in an even deeper hole.

Detractors were skeptical the plan would work, and a handful of other animal-welfare organizations went to court to stop HSI from risking its savings.

"They really drew attention to how money was moving out of the Humane Society," said HSI critic Stacey Coleman, an Indianapolis resident who took the agency to task at its annual meeting last year. "That was very important."

The ensuing legal battle-still playing out in the Indiana Court of Appeals-slowed the shelter's momentum, but not its progress. And the obstacles may make the accomplishments seem that much sweeter.

"It was a constant roller coaster, wondering how this would shake out," Boden said. "We weren't sure how far to plan ahead, or whether we even would be able to implement our plans. That's a hard way to work ... and we still achieved an incredible amount."

That wasn't lost on board members, even if their focus was on the finances.

"I don't think I can say enough about Martha and the rest of the staff," said board President Brent Bolick. "These people were asked time and time again to work on scenarios that may or may not have included them. ... They really stepped up and answered the call."

He hopes there's more where that came from. HSI's plan calls for much of the same for the immediate future: flat spending and rising revenue. If all goes well, the shelter will stop borrowing money in mid-2006 and start repaying the debt in 2007.

Now is not the time to relax, Bolick said.

"I like to think we got our feet out of the fire," Bolick said, "but we're still sitting pretty darn close to the flames."

The shelter's fund-raising goals double in the next two years, from $800,811 in 2004 to $1.6 million in 2006, and animalplacement goals move from 50 percent to 55 percent. Expense budgets, on the other hand, barely keep pace with inflation.

Last year was a good start toward fiscal stability.

"I don't think this organization has ever made budget before," said Boden, who joined HSI in late 2002. "Certainly not since I've been here."

The difference is accountability, she said. Boden has decentralized the budgetwriting process, asking managers to come up with their own income and expense projections-and live with the outcome.

Monthly "variance reports" must explain the difference between estimates and actual results, and the board's finance committee reviews any discrepancy of more than 5 percent.

Managers share the responsibility with their employees so everyone understands the implications of waste and can look for ways to avoid it.

"There was a lot of creativity once people started owning the issue," Boden said, citing a change in the way the shelter buys flea treatments among the innovations. Rather than purchase the medicine in individual doses, HSI now buys in bulk and administers it as needed.

The shelter also has installed a computer kiosk in the lobby, so owners of lost pets can do an electronic search and save staff time once devoted to escorting them through the strays' kennels.

"We're making smarter staffing decisions," Boden said, "constantly looking at the flow, the process, the way we're delivering services. ... It feels like we're doing a better job."

Having a clear, concise strategy helps, she said. HSI's plan, adopted last year, spells out three basic goals: place more animals, solidify shelter finances, and improve fund raising.

"It's so simple, so clear," Boden said. "It's something we live and breathe. Every employee sees the revenue numbers, the expenses, the placement rate and has a part in making that happen. We have the right people doing the right work, as defined by the strategic plan."

The document also serves as a road map for the board of directors. Progress toward each goal is a topic of conversation at every board meeting, and their involvement is key to achieving at least one of them.

"Engaging the board in fund raising is huge," said Development Director Cassie Hall, who joined HSI in January 2004. "We're involving them in everything from thank-you phone calls to meeting with supporters and potential donors."

A fresh perspective has helped. At the organization's annual meeting in May, nine veteran directors voted 10 newcomers into the group. Two more have joined since then following resignations; the recruitment process is ongoing.

All the new board members signed on with the understanding that development would be their primary focus. That's a big change from past boards, which concentrated more on day-to-day shelter operations.

"We're out there asking our supporters for something more than psychic help," said former president Monty Korte, who has been on the board since 1999. "[The new members] are really outstanding. We've really been able to tap into their expertise in a way we haven't done in the past."

Board members are taking turns hosting private get-togethers to introduce potential donors to the Humane Society. They're also ramping up efforts to attract major contributors.

"It's a matter of getting out there and asking in the right way," Hall said.

That can be difficult for an organization like HSI. Soliciting donations for facilities or equipment are one thing. Funding ongoing operations is another.

"It can be hard to get the message out that you need money to feed animals every day," she said. "There's not a lot of glamour in a bag of dog food."

Even so, the shelter made strides last year. All told, 8,263 donors made 13,973 gifts to the Humane Society in 2004, up from 7,926 donors and 10,487 gifts the year before.

More than 3,800 of the donors were first-time supporters, Hall said.

"That's pretty amazing," she mused.

Mike Laudick concurs.

"It's a sign of strength," said Laudick, an Indianapolis fund-raising consultant. "It shows they're making some progress."

It's a start, anyway.

"Nothing will change unless they have more money," admitted Coleman, the critic who kept a close eye on HSI last year. "But they won't have more money until they gain public trust. It's a vicious cycle.

"How are they going to gain public trust? That's literally the $1 million question."

That's why progress on other fronts is so important.

"We have a good story to tell," said Hall, the development director. "People are coming here and having a good experience. That does a lot to help us."

About 10,300 animals came through the agency's doors last year; 8,985 needed a home. HSI found one for 53 percent of them, besting the 2004 goal of 50 percent-and the industry average, according to estimates from the Washington, D.C.-based Humane Society of the United States.

"That we've gotten to where we are is almost unfathomable," said Korte, who remembers when HSI took heat for its low placement rate. "We really want to get that number as high as we can."

He and Bolick credit the staff for operational improvements that contributed to the shelter's success. All dogs and cats are sterilized before going home. Sick animals are nursed back to good health. Everyone looks for ways to save lives.

Boden said it was a matter of shifting away from a black-and-white decisionmaking process to one that allows for shades of gray.

"Rigid rules are not necessarily in the animals' best interest," she said. "The reality is, animals' needs change every day. We need to have an environment that can respond to that kind of change and adapt to it."

Animals once considered too young or too ill to be adopted now are eligible for the shelter's burgeoning foster program, staying with volunteers until they're ready. Fosters also are included on HSI's Internet listing of available pets, so they could conceivably find a new home without returning to the shelter.

Cats that contract an upper respiratory infection, a common malady, are isolated and treated without ever leaving the adoption floor.

Special-needs animals-dogs with heartworm and cats with litter box issues, for example-also get a chance. Their situations are spelled out on special cage cards and many have been adopted.

Shelter staff and volunteers are work- ing on other ideas: enrichment activities for restless dogs, for instance, and a foster program to correct some behavior issues.

"I think everyone, in one way or another, the operations staff in particular, really owns that," Boden said. "It's a million different decisions every day. We're constantly challenging our assumptions about what can work and what can't.

"We give the staff the responsibility and authority [to take chances.] And we celebrate successes, so they can say, 'Hey, that feels really good.' These people want to make a difference."

Their work is far from done.

Pet overpopulation is a bigger problem than any one entity can address, and the fact is that finding homes for unwanted animals treats a symptom, not the cause.

"We can't adopt our way out of this," Korte asserted, echoing the animal-welfare community's unofficial mantra.

Eventually, he'd like to see HSI restore the educational programs cut in a 2003 attempt to balance the budget. But he learned the hard way that even not-forprofits have to live within their means.

"When you try to do too much, you can overextend yourself," Korte said. "We need to continue to focus on our core competencies and only expand when we can afford it."

So the course for the immediate future is clear: Keep up the good work, and keep looking for ways to bolster financial support.

"We're got two years to go," Boden said. "I feel more confident every day that we're delivering the services the community wants us to provide. The more we tell people about it, more excited they are. ... I think this community is ready to support the Humane Society as it delivers on its commitment to help animals."

Still, the shelter has its detractors. Criticism reached a fever pitch in October 2001 when The Indianapolis Star lambasted its operations in a series of stories. Four months later, the newspaper revealed some sloppy business practices.

HSI has been trying to recover ever since.

Some of the naysayers organized last year, forming an organization called Move to Act. The group raised questions about Humane Society's finances, asking for a full accounting of spending and endowment losses. It also called for all board members serving from 2000 to 2002 to resign.

Shelter leaders met with representatives of the group and released audited financial statements, but there was no board overhaul since new members already outnumbered veterans.

Move to Act also led the legal charge against HSI, recruiting four other organizations to join in a petition opposing the shelter's plan to borrow money. A Marion County judge eventually ruled they didn't have legal standing to protest, a decision the groups have appealed.

Still, shelter leaders made a number of changes in an effort to respond to the criticism.

Audited financial statements are available upon request. HSI's Web site provides a link to annual tax filings. Managers host quarterly information exchanges open to the public. And in January, directors turned out for the first "Meet the Board" event.

That's been a long time coming, said critic Coleman, who pushed for the session after tensions ran high at the organization's annual meeting in May.

"I'm afraid they may have waited too long," she said. "Several people told me as far as they're concerned, the Humane Society no longer exists."

With a volunteer moderator trying to keep the meeting from getting bogged down, Coleman and a handful of others talked with board members about the past, present and future despite an edict that the conversation be forward-looking.

"The wrongs of the past need to be recognized," said Coleman, who had a bad experience at the shelter several years ago. "It's taken me this long to get anyone to say out loud, 'Yeah, there were mistakes.' And very few people are as persistent as I am."

Bolick and the other directors-most of whom weren't around when the alleged problems occurred-said the changes at the shelter should be recognition enough.

"Don't actions speak louder than words?" Bolick said at the meeting.

Perhaps, but many critics still say HSI could do more.

"What happens at the Humane Society affects everyone else in the animal-welfare community," Coleman said. "They're worried about their own sandbox, when they should be thinking about the whole playground."

HSI should lead the way when it comes to education and spay/neuter advocacy, she said.

"It's their responsibility, whether they like it or not, to be an example for the community," Coleman said.

Shelter leaders don't necessarily disagree, but say they know their limitations. And no matter what they do, it's unlikely the criticism will end.

"We're criticized for being the 700-pound gorilla, and criticized for not using our position as the 700-pound gorilla," Bolick said. "At the end of day, it shows that the animal welfare in this community is alive and well. These are passionate people who care deeply for the wellbeing of animals."

"There seems to be this historic animosity," Korte concurred. "And look what we achieved despite that. If we could find some way to all work together, we could accomplish a lot more."

With or without the critics' help, HSI has a long road ahead.

Boosting revenue to match expenses is just the first step. Then the shelter must raise enough to pay off the debt. And as the agency approaches its 100th anniversary, who knows what its second hundred years will bring?

"We're poised for continued success, but we can't just rest on our laurels," Bolick said. "We don't ever want to be satisfied."

"In a way, having such a good '04 makes '05 kind of scary," Boden said. "I like to think we can do it again, but it's still a big mountain to climb. We've got to keep that going. And that's going to take a lot of courage."

Still, she's optimistic, given what's been accomplished so far.

"There's such an incredible resiliency inherent in this organization," she said.
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