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UC Hillel Board Response

UC Hillel Board Response

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Published by slurie4723
Response made by members of former Board toward prior JUF communications.
Letter dated April, 19 2012
Response made by members of former Board toward prior JUF communications.
Letter dated April, 19 2012

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Published by: slurie4723 on Apr 19, 2012
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19 April 2012Dear Friends,Over the last five years, we have asked many of you to support the superb work at Newberger Hillelunder the leadership of Dan Libenson. We have worked with you and enjoyed Hillel events together.Most important, we have worked together to support innovative and exciting programming that engagedthe students at The University of Chicago.In the last two weeks, much has been said by the Jewish Federation of Metropolitan Chicago (JFMC)about its dismissal of the board and executive director of the Newberger Hillel. We are greatly troubled by the accusations made, particularly those of ingratitude, fiscal irresponsibility, indifference to budgetdeficits, ineffective fundraising, and disregard for costs. To assure you that we have stewarded your contributions of money and time on behalf of the students at the University of Chicago, we offer a fuller explanation of some of the partial truths stated by JFMC in this regard.
“Over the last decade, Federation support has increased dramatically from $213,000 in FY2002to $483,000 in FY2011.”
This claim relies on a misleading calculation of “support.” JFMC’s actual cashsupport rose from $170,000 in FY02 to $183,000 in FY11 and fell to $172,000 in FY12.JFMC includes three components in their calculation of support: 1) allocations from The Hillels of Illinois; 2) Newberger Hillel endowment payouts; and 3) payments for deficit reductions.1) Allocations. We are grateful for the JFMC Hillels of Illinois
s to Newberger Hillel, which, asmentioned above, went from $170,000 in 2002 to $172,000 in the current fiscal year.2) Newberger Hillel Endowment Fund Payouts. JMFC includes as its support the payouts Newberger Hillel receives from its own endowment, which JMFC holds in trust for Hillel. These endowment fundsrightfully belong to Newberger Hillel and should not be represented as additional JMFC support. Thegifts to create these endowments were intended for Hillel in accord with donors’ wishes.
Payouts on these endowments more than quadrupled between 2002 and 2012, from $40,000 to$170,000, for two reasons. First, during this period the Newberger Hillel endowments themselvesincreased by over $1 million as a result of fundraising and donor generosity to Newberger Hillel --not because of management decisions made by JFMC. Second, these payouts increased becausesome of these endowments are being drawn down at the potentially unsustainable rate of 9.4% per year in an attempt to compensate for the JFMC-organized capital campaign that did not reach its goal(see below).
JFMC elected to finance building renovations in 2000 through a bond issue rather than paying for therenovation directly with capital campaign gifts. Newberger Hillel is charged approximately $55,000 per year to pay off this bond. JFMC includes the interest payout on the capital gifts in its calculationof its support, despite the fact that this element of the JFMC contribution is offset almost dollar for dollar by the bond payback expense.3) Deficit Reductions. JFMC's calculation of its support in FY2011 included funds to cover that year’sdeficit, which we believe (and can document) includes substantial over-charges (see below).
 A Note on the Building.
The Newberger Hillel Center building was assigned to JFMC in 2000 for $1.00.As consideration for this asset, JFMC agreed to raise $1.6 million for Hillel in a capital campaign. Theyraised only $869,000. Had JFMC met their commitment, Hillel would have had substantially greater cash flows from this endowment -- at JFMC's standard 7% draw, for example, Hillel would have had anadditional $50,000, an amount that would have covered the bond issued to finance the rehabilitation of the building. Instead, Hillel not only covers the bond out of other funds but also pays JFMC rent for the building.
“Annual budget deficits averaged $100,000 per year.”
JFMC’s calculation of the deficit is in error for two reasons. First, they charge Newberger Hillel above-market costs for facilities management, infrastructure services, and fringe benefits. Second, as noted above, they are charging Hillel for their failure to complete the capitalcampaign as agreed in consideration for obtaining the building.
Overcharges. JFMC charges Hillel for facilities and other infrastructure expenses and also managesHillel's payroll, charging Hillel for fringe benefits provided to staff. As part of our negotiations withJFMC, we obtained firm verifiable quotes from outside vendors for these services that were $100,000less per year than the comparable JFMC charges.
Capital campaign. As noted, JFMC did not complete its end of the bargain when it obtained the building for a dollar. Had it provided the agreed upon consideration, our endowment, and thus our cash flow from the endowment, would have increased.
“Your utter refusal to engage in any constructive discussion of fiscal responsibility.”
We offered to eliminate $120,000 in expenses, multiple times.
When we developed the FY2012 budget in March 2011, we were prepared to eliminate $120,000 inexpenses related to building maintenance, equipment, and personnel benefit charges (JFMC chargesHillel for benefits even for personnel that do not receive benefits), which would have achieved a balanced budget. All of these expenses were charged by JFMC, and we identified less expensivesources for these services and equipment. We found, for example, that we could purchase utilities
 Newberger Hillel Center Page 2/5
from Commonwealth Edison and People’s Gas at lower rates than we were being charged by JFMC.Our plan to outsource these items, at substantial savings, as a means of reducing the deficit wasrejected by JFMC.
We believe that all line items in a budget contribute to fiscal responsibility, not just those selected byone party or another. JFMC, however, insisted that all the cuts be made to program or to staff rather than overhead, and did so when we were already seven months into the fiscal year.
During the course of our discussions with JFMC over the past year, we cut costs whenever we had theopportunity to do so without affecting the student program. For example, we chose not to fill the position of the Director of Operations (who was on leave) as well as the Director of Development(who took another position in February). The savings from these two positions came to $45,000 — over and above the $120,000 we had already recommended as savings in rental, maintenance,equipment, and other administrative costs.
Despite requests over the last several years, JFMC has been unable to provide a complete accountingof the Newberger Hillel endowment funds, including the $200,000 Rabbi Daniel Leifer Speaker andScholarship Fund that was entrusted to JFMC in 2006.
“We repeatedly offered to work with you on fundraising—something that JFMC excels at—butat no time did you accept our offer.”
 Newberger Hillel board and staff members, without assistance from JFMC, more than tripled Hillel’sfundraising success between 2006, when we raised just over $100,000, and 2011, when we raised$343,000. These amounts do not include the tens of thousands of dollars in competitive grants wereceived from Hillel International.
 Nancy Newberger said in an email to JFMC: “I was deeply offended by the hypocrisy of JFMC inyour discussion of fundraising efforts given the past 10 years of requests by NHC for such fund-raising support from Hillels of Illinois and JFMC and assistance with reducing management costswhich were all met with resistance.”
One of the root causes of current financial difficulties is that JFMC has not been able to reach its owngoals for the capital campaign at Newberger Hillel. It has also not reached its capital campaign goalsat Northwestern Hillel or the University of Illinois, Urbana-Champaign.
Work with potential major donors requires considerable time and conversation so that assistance withfundraising would not alleviate the immediate budget cuts that JFMC demanded.
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