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Lilliam Barrios-Paoli, senior vice president of United Way of New York City, abruptly resigned last week, surprising the nonprofit world.

Barrios-Paoli’s resignation was first announced in an August 26 letter sent by United Way’s president Lawrence Mandell to hundreds of its partner agencies. The letter, which praised Barrios-Paoli’s contribution and contained details of an interim leadership, didn’t explain why she was departing.

“It’s such a shock,” said Margie McHugh, executive director of the New York Immigration Coalition, who was part of a task force on immigrants’ needs convened last year by United Way. “It’s very disappointing. We are very grateful for the leadership that she has showed for so many years in moving United Way to being more sensitive to the needs of immigrant communities.”

Barrios-Paoli played a vital role in redefining the role of the charity giant. Known for her frankness and tenacity, she is a veteran in the human services field and has headed the city’s welfare, employment and housing agencies. She lost her post as commissioner of New York’s Human Resources Administration in late 1997 when she publicly criticized then-Mayor Giuliani’s welfare reforms.

Sources said that Barrios-Paoli, who joined United Way in 1997, had long had a strong alliance with Mandell, who was employed by the agency for 17 years in various positions. Mandell helped recruit Barrios-Paoli, and she supported Mandell’s candidacy for the presidency last summer, following the retirement of Ralph Dickerson, Jr. The two also worked closely on establishing and shaping the Sept 11th Fund, a temporary charity for the victims of the 2001 terror attacks, which will end this December.

Last summer, the board of United Way of New York City voted for a historic overhaul of its strategy. It stopped being a membership organization and instead focused resources on five key areas, including homelessness and affordable housing. The organization’s role has shifted from being a middleman between donors and nonprofits to more of a partner with nonprofits in providing community-based social services.

According to sources from partner organizations and the United Way itself, Barrios-Paoli, who was in charge of the Community Investment department, played a significant role in the process. “Lilliam was a real champion of the new strategy,” said a United Way employee who prefers to remain nameless.

But several sources close to Barrios-Paoli say that her relationship with Mandell had deteriorated in the past year. “It was not the substance of the work as much as how they worked. It’s the differences in approach between Lilliam and Larry,” said a source familiar with both. “Before, they were colleagues. Now Larry is the boss. It’s no longer the kind of environment Lilliam wants to stay in.”

Others at United Way said they hadn’t noticed a problem. “Larry is a big fan of Lilliam’s. I saw nothing to suggest the relationship has been strained,” said one employee.

Both Mandell and Barrios-Paoli are on vacation and could not be reached for comment. Barrios-Paoli’s resignation is effective September 17. Elwanda Young, senior vice president of Program Integration and Strategic Planning, will be interim director of the Community Investment department.

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