CAA Closes Doors After Bank Drains Account

One of New Haven’s largest anti-poverty agencies abruptly shut its doors Friday. It couldn’t make payroll after its bank drained $200,000 from its account, in part to pay another social-service group to which it owed money.

(Update Friday 4:51 p.m.: The agency’s director said it will reopen on a limited basis starting Monday.)

State politicians scurried Friday to find a way to reopen the doors at Community Action Agency on Whalley Avenue and address the longer-term problems that led to the closings.

Amos Smith, CAA’s executive director, told the Independent that he informed his employees at the close of business Thursday that the agency didn’t have money to pay them. Smith also informed his board in a letter about the situation.

“You have reached the Community Action Agency of New Haven,” a recorded message informed callers to the agency Friday. ​“We are closed today. However we look forward to serving you in the near future. If you need assistance, please call the state of Connecticut’s information line at 211.

“We apologize for any inconvenience and wish you a blessed day.”

CAA may reopen soon, at least for now: The city is expediting payments to the agency and transferring $44,834.32 Friday to try to keep the agency open, according to mayoral spokesman Laurence Grotheer.

CAA, with a $2.1 million annual budget, has 17 full-time and 23 part-time workers, some of them former clients of the agency, according to Smith. Last year it served 10,400 families, or a total of about 25,000 people, with emergency-heat, food, weatherization, and senior and youth programs. Most of its contracted work comes through the state. The city has contracts with the agency to help people who come to warming centers and who are experiencing homelessness or coming out of prison.

“What’s happening now is totally avoidable,” Smith said Friday in an interview. He said the state’s budget crunch has squeezed the agency, as the state has many other social-service groups.

“This is part of the indirect attack on poor people and indirect attack on those organizations that serve poor people,” Smith said. ​“The budget at the state and the budget at the federal level have everybody rushing to find protection.”

Update: Smith said late Friday afternoon the bank has agreed to release some of the money for now, and CAA will reopen with ​“limited staff” on Monday to handle emergency heating requests. He said he and the board have agreed to keep the agency open on a limited basis through the heating season, then reassess their next move.

The trigger for the closing was a court action taken by another group, the Area Agency on Aging of South Central Connecticut (AAA).

Since 2013, CAA has paid AAA $6,400 a month as part of a court settlement over a debt from the Meals on Wheels program for seniors that Smith said predated his tenure as director, which began 12 years ago.

CAA had been meeting those payments, he said. It used profits earned on its weatherization program — the only one of its programs that generates unrestricted revenue that can be used for other purposes, according to Smith.

Then the state budget crisis hit last year. Lawmakers failed to produce a new budget until November, four months late. Social service agencies like CAA were not getting paid. They were running out of cash. During that time, AAA agreed to give CAA a moratorium on debt payments.

But after the new budget, CAA still couldn’t make payments. That’s because it had lost the contract for its weatherization program, and it wasn’t allowed to use money from any other programs to meet debts. Smith said the weatherization program, which is partly funded by utilities, was transferred from one state agency, the Department of Social Services (DSS), to another, the Department of Energy and Environmental Protection (DEEP). Rules changed, and instead of generating extra revenue, CAA was now losing money on the program, Smith said.

CAA asked the Agency on Aging if it could restructure the debt payment plan. The Agency on Aging instead made use of the terms of its court settlement: It declared the debt in default. Last week it obtained a Superior Court warrant and presented it to Liberty Bank, where CAA has its account. Liberty responded by withdrawing $39,000 from CAA’s account to pay the Agency on Aging.

Liberty also exercised its rights under the terms of a line of credit it provides CAA. It withdrew $156,000 from CAA’s account.

Which left CAA broke, according to Smith.

“This event has emptied our bank account and we now do not have the ability to meet payroll,” Smith wrote Thursday in his letter to board members, elected officials, and supporters.

AAA CEO Ted Surh told the Independent his agency had no choice but to take the action.

“We’re a nonprofit, just like the CAA,” Surh said. ​“We’re in a rock and a hard place.”

His agency has a responsibility to pay back the state for money it had passed through to CAA for Meals on Wheels and which CAA had misspent in the past, Surh said. It’s up to the state, not his agency, to forgive that debt, he argued.

He said he had asked the state if the debt could be forgiven, but did not obtain that permission.

What Now?

Elected officials are scrambling to help CAA reopen.

New Haven State Rep. Juan Candelaria said he has appealed to DSS to advance CAA some contractual payments a month early so it can meet payroll. He also asked the state banking commissioner, Jorge Perez of New Haven, to examine whether the bank had the right to withdraw all the money.

“Those are federal dollars. Did the bank have the authority to take those dollars? I don’t think that’s the case,” Candelaria said.

“I got a complaint, and I’m looking into it,” Perez told the Independent. ​“We’ll make sure that all the rules and regulations are followed.”

Liberty Bank CEO Chandler Howard did not immediately respond Friday morning to a phone call seeking comment.

Meanwhile, Smith said that employees from other community action agencies in the state might be coming to the Whalley Avenue office to pitch in on Friday so at least the emergency-heating program can function and people can stay warm.

State DSS learned only late Thursday that the agency would close on Friday, according to spokesman David Dearborn. He said DSS officials are speaking Friday morning with members of the statewide association community action agencies to help with contingency plans in wake of the ​“sudden shutdown.”

“We are very concerned of the impact of this action on those in need in the New Haven catchment area, especially those who need delivery authorizations and those with pending applications for” emergency heating fuel, Dearborn stated. If it doesn’t work out to have workers from other cities come to the New Haven office, he said, DSS might shift the emergency heating program temporarily to another city’s office.