Nonprofit Board Crisis

Nonprofit Boards Establish Trust

There's a brooha going on in DC over a Trust Fund that was created by the city council. It appears, based on a Washington Post investigation, that the Trust Fund, created to support youth programming in the city, has become a questionable funnel for the diversion of city money and possible misuse of these funds, once transferred, by council people. One quote from a former donor reminds us all that one important contribution a board provides a nonprofit is trust, an element that many in DC appear to be losing in this Trust if not council members themselves. Interesting enough, the element most missing is even part of the name of the fund in question.

Rubie G. Coles, associate director of the Moriah Fund, a Jewish social justice foundation, stopped contributing to the trust three years ago, when its leadership changed. “We hope that board members would be appointed who have expertise in youth development and have some real skills and experience,” Coles said. “That would go a long way.”

Donors, nonprofit leaders and council members need to have confidence in the trust’s ability to award public funds based on merit, said Winifred Carson-Smith, chairwoman of the trust’s board.

Nonprofit Boards and Business Lessons

From Eugene Fram (author of Policy vs. Paperclips)

I totally agree with your analysis, "there are practices that are business
specific that may prove beneficial for a nonprofit's adoption." As you know, I
have proposed that some nonprofit boards experiment with adopting a lead
director position, like many public corporations. (June 2nd Chronicle of
Philanthropy). It has been surprising how some have rejected the idea out of
hand because the position originated in the business environment. A lead
director could provide a great deal value in many ways, especially with boards
where strategic planning is often postponed, and a designated director advocate
can help focus on it.

Nonprofit Too Good To Be True

MegaChurches are nonprofits that I believe may be too good to be true. Most often created by a talented entrepreneur focused on expressing a spiritual leaning, Mega Churches are, well, "mega" in pretty much every dimension: finances, number of congregants (who definitely must be getting some real needs met), finances, number of various types of activities, finances, oh, and did I mention, finances . Take for instance New Destiny Church. With over 8000 members, this church grew in less than two years from nothing to a building sitting on 21 acres and even gave away cars among other such gifts to the members and most importantly, made a millionaire of its founder. Really meeting needs? Really good investing? Really good governance? Too good to be true?

Nonprofit Boards Can Take Lessons from State Park Officials

State Parks are facing severe funding shortfalls similar to if not worse than many nonprofits. Governing Magazine of August 2011 offers some strategies the state officials have employed to address this reality of dimenishing resources but not dimenishing demand. Of course, there's the stuff everyone has begun: raising user fees, laying off staff and relying more heavily on volunteers. But the big shift, especially for parks is focused on what governing calls, adopting a "business-oreinted governance model". Not really new for some nonprofits, Parks are turning to the corporate sector (what's left of it). But one important twist: these are "partnerships -- the corporation has to get something out of it." Really a new twist? No, more like the way folks should be thinking when they approach corporations for support but for Parks -- even approaching corporations is new and that's one lesson for many nonprofits as well. "And equally important, this approach has to be conducted in steps. First, there's educating the public; then seeking out potential corporate donors and trying to figure out what exactly constitutes an approprate relationship between a profit-driven company and a public agency." And for the parks don't just want any corporate partners -- they want one that reinforces mission. This of course is what every nonprofit board values most as well -- sustainability that reinforces mission.

Nonprofit Boards and Business People

To this day I continue to hear nonprofits admonished for not acting more business-like.  And, indeed, there are practices that are business specific that may prove beneficial for a nonprofit's adoption. 

At the same time, there are also those who believe that business people can make an important addition to a nonprofit's board. I too believe that some mission-focused people with business skills may well be able to lend their skills but not exclusively.  The bottom-line (one of those business-specific references) is that while business and business people may have some pearls and experiences to offer nonprofits, particularly boards, these folks will only contribute positively if they understand and support the "stuff" nonprofits excel in.

A recent article from Stanford Innovation titled What Business Leaders Don't Know - bust should - about Nonprofits is most helpful in pointing out the opportunities for learning by both parties but particularly business folks who want to lend a hand.

Nonprofit Board May Want To Rethink Mission

Ok, so maybe the Friends of Youth Board should remain dedicated to mission but rethink its program after its offices were broken into and computer equipment stolen by four area youth.  Of course, as its name suggests, the "organization uses adult mentors to try to keep at-risk children and teens out of trouble". 

Isn't it ironic?  See the San Francisco Chronicle for the full story.

Nonprofit Hospitals Merge, Fold

A report out by the Wall Street Journal says that the 401 nonprofit hospitals that exist are barely making it and the solutions tend to look more like buyouts / mergers, with many going to for-profits.  Note that currently, these hospitals constitute 80% of the total acute care hospitals in the US.

I have traditionally railed about nonprofit hospitals not being all that mission focused - certainly not always willing, if at all, to be there for those who can't afford care.  Being bought out, particularly by for-profits is kind-of bittersweet.  As for-profits, these hospitals will be able to justify the behavior towards those without means.  And, in the process of the buy-out, a sizeable chunk of money is often left for a conversion foundation which often goes about doing much of the work around health policy and health education that the nonprofit hospitals didn't get around to doing.

Still, these conversion foundations have really long roads to get what's right for those without means and in the meantime, the sick and dying may just stay sick and (well you know).  And, for-profits have little or no incentive to involve anyone in decisions about who is served so "community voice" either directly or in the form of governance is lost.

At very minimum, the boards of these departing hospitals should ensure that community voice has a role the new hospital in addition to ensuring that those without access to care don't stay "without". 

Or is this latter dream just that?

Nonprofit Board Has a Lot of Faith in CEO

Giving new meaning to the Board's Duty of Loyalty, the attorney for the Soundview Health Center CEO has stated that the trustees of the nonprofit network of centers "have a lot of faith" in their founder and CEO.

Praiseworthy for most boards but not when the CEO has been charged by the US Feds with "embezzling more than $500,000 from the non-profit; tax evation; and, paying for personal expenses—Broadway shows and Yankees games, lavish dinners, home renovations and a down payment on a $125,000 Bentley—with Medicaid dollars that were supposed to serve poor patients".  And to top-it-off, the Center has been banned from Medicaid reimbursement which one might think would at least raise some of the trustee's eyebrows.

Whew!  To read the full story, check-out the Wall Street Journal. 

By the way, Duty of Loyalty does not actually refer to the relationship between the trustees and the CEO but instead might be summed up as having to do with conflict of interest.  Duty of Care on the other hand, that's pretty much missing with this board.

Nonprofit Board Versus Board Members

We nonprofit governance consultants generally preach that boards should have a 30,000 foot view.  30,000 feet contributes to a board staying results focused while making policy and reducing risks where appropriate in addition to figuring out what results were achieved and progress toward mission.

I for one don't as much differentiate between what the board should do and what board members should do specifically when the demands really call for more hands as is true for snonprofits that have few if any staff managers.

One simple answer: when the board governs i.e. planning strategy; setting policy to reduce risks; and, evaluating results, it does so at 30,000 feet.  When board members are called-upon or call-upon themselves to volunteer or supervise or manage, they should do so not as board members governing but as individuals taking on these roles and tasks.

So, I believe a nonprofit board has one hat and that is to govern, as the whole, not as individuals.  But board members may wear other hats as volunteers within the organization.  And, when they do so it is important to recognize they are wearing other hats, so everyone understands expectations and so that their authority is only as designated and agreed upon. 

Separating board meetings into the Governing Role and non-governing role is another step to help ensure clarity about the role being played at a particular point in time.

Nonprofit Learns Lesson

The former controller of the Mark Twain House has made it into the Wall Street Journal. Alas, it's not because she was such an amazing controller (responsible for supervising the organization's quality of accounting and financial reporting).  Alas, it was because, over 12 years, she was successful in stealing over $1 million.

It took 12 years for anyone - the board, the finance department, the accountants, the auditors - to question where approximately $83K went every year!  Ok, maybe she started slowly and took a little at first and maybe then maybe there wasn't enough money missing but eventually.....?