Payout to CEO by Nonprofit Rankles

Monday, February 16, 2015
Brattleboro, Vt. — Former Health Care and Rehabilitation Services CEO Judith Hayward received a $650,000 compensation package when she retired in early 2014, and now HCRS officials, and lawmakers, want to make sure other social service agencies that work with the state are protected against such payments in the future.

The HCRS Board of Directors approved the deferred compensation package in June 2010, upon the recommendations of the executive and finance committees, and current HCRS CEO George Karabakakis said there was nothing illegal about the payment. Still, when the payment was uncovered in a recent audit of the HCRS budget, Karabakakis told his staff and traveled to Montpelier to meet with legislators from Windham and Windsor counties to inform them of the payment as well.

“It felt to myself, to the board and to the senior leadership team that it was really important to come out and share the information,” Karabakakis said. “I don’t want legislators, or our staff, or anyone to get half truths or hear about this through the grapevine or the rumor mill. It’s important to put it out clearly and say ‘This is what happened.’ ” Hayward could not be reached for comment.

HCRS, with offices in Brattleboro, Springfield and Hartford, is the designated mental health agency for Windham and Windsor counties and the organization contracts with the Department of Mental Health, Department of Aging and Independent Living and Department for Children and Families to serve mostly low-income children, individuals and families in crisis.

About 85 percent of the approximately $49 million HCRS budget comes from state taxpayers and from federal Medicaid payments.

Hayward, who was paid about $163,000 annually when she retired, worked at HCRS for 19 years, and served as its executive director for 17 years. She helped grow HCRS from a small organization with a budget of about $8 million to the almost $50 million agency it is today, with more than 600 employees serving about 4,500 individuals each year through its five major service programs.

“Everyone on the board thought she did a tremendous job. She brought the organization out of bankruptcy, developed new programs and everyone who had contact with her, including people from the state, thought she did a magnificent job,” said J. Allen Dougherty, former HCRS Chairman of the Board of Trustees who signed off on the package. “She never had a retirement package and the board thought this was a way we could make it up to her.” The HCRS board approved a $450,000 package, which was scheduled to be made in three payments of $150,000, but in 2013 when it was discovered that Hayward would be immediately taxed, the board approved another $200,000 to cover the projected tax payments Hayward would be required to pay.

Budgets are being squeezed across the state, and last year, for the first time in at least 10 years, HCRS employees did not receive raises. Upon informing the HCRS staff about the payments Karabakakis said people have been “disappointed, angry and outraged. ... Some people may see it as excessive,” he said. “If we’re going to provide a deferred compensation package it’s important that we look at the industry standard, and make sure that we do have a culture of openness and transparency.”

Karabakakis took over as CEO on Jan. 1, 2014. He said since discovering the Hayward deferred compensation package he and the board have been going over its employment policies, which include establishing a personnel committee to oversee employment policies at the board level, and a “commitment to open and transparent communication with all concerned.”

“Reviewing those polices has been a big piece of making sure we have the checks and balances in place,” he said. “We have to ensure we have the policies and the procedures in place, and ensure we are good stewards of the funds we receive.”

Board Treasurer Gregory Kennedy said the board has developed oversights to make sure salaries for top leadership are reviewed.

“The HCRS Board approved a deferred compensation package in 2010 for former CEO Judith Hayward in recognition of her many years of service to the organization during a very challenging period of growth and change,” Kennedy said. “The current Board of HCRS has proactively taken steps toward ensuring that policies and practices are in place for prudent review of all compensation for the CEO and senior officers.”

Karabakakis has been visiting Montpelier to meet commissioners, committee chairmen and chairwomen and staff from social service agencies, and to talk with lawmakers from Windham and Windsor counties.

Rep. Michael Mrowicki, who serves on the Human Services Committee, said he wants to talk with other lawmakers to see if there are ways for the state to oversee executive payments to CEOs who run the agencies that receive a large proportion of their budgets from the state.

“These payments seem to have been structured in a way that they are legal, but they don’t really pass the smell test,” he said. “We are trying to figure out our next step.”

Mrowicki said the Vermont State Auditor might be called in to see if the payments were legal, and he said there should be a way to prevent boards from handing out generous retirement packages to executives who have signed contracts and who are already receiving sizable annual salaries

“Mainly we want to make sure this doesn’t happen again,” he said. “We wouldn’t want to set a precedent for other people to think they deserve more than they have been paid. The staff at these agencies work incredibly hard, and you don’t have to go very far to find people who are being denied services because they are told there is not enough money. These state agencies are entrusted with public money and the taxpayers deserve to be protected. It is frustrating and disappointing on a very basic level.”

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