FAIRBANKS—Fairbanks Community Behavioral Health Center plans to file for bankruptcy, a move that caps a summer of catastrophic financial news for the nonprofit organization.
The facility’s board voted unanimously Tuesday to pursue bankruptcy protection, soon after an audit showed the center has only enough funding to continue operating for about three weeks. The center, which provides mental health services in the Fairbanks area, plans to continue to serve clients as it navigates the process.
The board also voted unanimously to pursue negotiations with former University of Alaska Fairbanks administrator Jake Poole to serve as interim executive director. The position is vacant after the abrupt resignation of Kelly Shanklin on Monday.
The moves come amid a devastating period for the organization, which is $1.2 million in debt and struggled to make payroll for its roughly 60 employees in May.
Board members said that was the first time they were made aware of the center’s poor finances. President Barbara Burch said they were “blown away” by the extent of the troubles.
“We saw financial reports that looked like everything was fine,” Burch said.
Burch said the heavy debt at the center was compounded by other problems. A pair of major medical claims staggered the self-insured organization, she said, while a huge backlog of Medicaid reimbursements crimped the revenue flow.
Still, board members said they had little indication there were major concerns until several months ago. Board member Deben Das said one of the weaknesses of the board is that none of its members has an accounting background, which made it difficult for them to scrutinize the financial information they were given.
“The board has always felt confident that we were looking at the right numbers,” board member Yonni Fischer said.
Burch said it’s unclear why the financial reports didn’t mirror the center’s actual performance. State auditors plan to begin a comprehensive review next week to determine what happened, she said.
With those problems in the background, executive director Kelly Shanklin abruptly resigned Monday. Poole, who retired as UAF vice chancellor last year, has been targeted as a short-term replacement.
Burch and board member Craig Partyka said Shanklin had done some admirable work during her 2 1/2-year tenure but that the financial problems were clearly overshadowing the center’s other efforts.
“I think she just saw the writing on the wall,” Partyka said.
The next step is still hazy for the center, its staff and its clients.
A meeting was held Tuesday at the center’s South Cushman Street building to discuss the problems, with more than 50 people packing a conference room.
The center’s officials plan to consult with a bankruptcy lawyer to weigh options. Various filings could either buy the organization more time to restructure — the preferred outcome — or force it to liquidate its assets.
Bruce Hilton, a finance specialist with the Foraker Group consulting firm, said he thinks it’s likely the center will get another chance.
“The odds of coming up with a plan that will bring you out of this are good,” Hilton said at the meeting.
The center also needs to solidify its status with the state, which provides grants to the organization. Melissa Stone, director of the Alaska Division of Behavioral Health, said the agency has the authority to terminate its arrangement with the center and work with another agency or organization. She said the state is reviewing its options, with a primary goal of maintaining services for Fairbanks-area clients.
The center offers treatment to more than 1,000 local residents during a typical year, including emergency psychiatric care, chronic mental health problems and residential care.
“We need an entity that has the ability to provide the services,” Stone said.
A follow-up meeting is scheduled for 11:30 a.m. today at Access Alaska, 526 Gaffney Road, to review the next steps for the center, its partners and clients.
Contact staff writer Jeff Richardson at 459-7518. Follow him on Twitter: @FDNMbusiness.