Nonprofit Board Crisis

Church Goers Target of Grand Ponzi Scheme

Despite sites like Guidestar and Charity Navigator, not to mention nationally reported experiences with the likes of a Madoff, some folks are just willing to invest -- at least this time for the presumed greater good.

According to the Washington Post (via Linkedin Nonprofit Professionals Forum),

"a pastor and his sons "duped about 11,000 church members into buying bonds worth $120 million by urging them to fulfill their "Christian responsibility" to support church construction projects.  The men pocketed about $6 million, bought two airplanes, sports cars and vacations. Reeves also bought Porsches for family members."

So what do we learn? Some folks are really good at selling and some folks really want to believe.  And, maybe all the education in the world (about philanthropy) is just not going to help folks be more questioning -- especially about deals that just don't feel right.  In the meantime, folks like the Independent Sector and the National Council of Churches should maybe step up their efforts to educate and ensure that prospective donors know how to exercise due dilligence.  It's a starting point...

Nonprofit Merger Alternatives

According to the ThirdSector, "Two UK nonprofits, Homelessness charity Thames Reach and drug support agency Blenheim CDP have formed a partnership that will involve sharing office space but stops short of a merger."

Given that there seems to be some discussion in the nonprofit sector about the role mergers or shared services should play for struggling organizations, I believe it's important to highlight examples.  What these two nonprofits are doing is a prime case example.

A Great Nonprofit Periodical

I'm writing to plug an on-line newsletter that often-times provides great insights into nonprofit governance and management -- maybe I've plugged it before but what's once more?  The site is Blue Avocado, run by Jan Masaoka, a founder of Compass Point.  Jan and Blue Avocado are thoughtful, insightful and creative.  She is particularly clever at getting at nonprofit governance and management issues with a personalized approach.  Plus, it doesn't take much time or effort to read.

You really should subscribe (for free although donations are welcome).

Here's the address: www.blueavocado.org.

Charter School -- Opportunity for Embezzlement

An executive office with:

$145,000 in expenses that included flat-screen TVs, lavishly appointed bathrooms, and a kitchen with granite countertops; $46,000 in improvements to a principal's home billed to the school; and, $34,000 to the school board president who approved rasises for the top exec and a 20-year consulting contract for more than $100,000 annually for 90 days' work or less.

These are some of the abuses the Philadelphia charter-school CEO and Board President are being accused of, according to a story in the Philadelphia Inquirer.  The former founder, also implicated in this federal investigation, killed himself several weeks ago.

So clearly, the controlls needed to steer this level of embezzlement away were not in place or controlled so as not to be effective.  I've gotta admit that when the Exec and Board Chair are in cahoots, it's tough to be preventive.  On the other hand, I do wonder about the finance committee's capacity to ask financial questions effectively.  All must bear some burden for this situation.

Kennedy Center to Expand Helping Arts Agency Initiative

According to the Washington Post, the Kennedy Center for the Performing Arts' Executive Director has announced that he will be hitting the road visiting all 50 states and spreading the deep and profound wisdom the Center has to offer on "addressing the challenges in areas like fundraising, building more effective boards of trustees, budgeting and marketing".

As I stated back in the fall when this Initiative was launched, I don't understand exactly what the Kennedy Center will tell all the uber-struggling nonprofit art groups throughout the country.  Other than, or course, what it's like to have really deep pockets.  More importantly, I don't quite get what the Kennedy Center gets out of this effort.  

Do I think its bad someone wants to support arts organizations through this weather? Not necessarily, although it has the potential common to really big organizations, sucking up money away from a number of other arts-capacity building groups -- but maybe that's just the way the new economy will be in the nonprofit sector.

If you are particularly interested in the arts and this economy, the Washington Post has also published a special report specifically on this topic.

Can Nonprofit Trustees be Trusted?

Not all nonprofit trustees can be trusted as is highlighted in the UK's Third Sector On-line.

The case in question:

The charity's then chair and treasurer had been paid for five years for acting as its chief executive and deputy chief executive respectively, according to the commission's inquiry report, released yesterday.

The inquiry found that the treasurer had written out and signed at least two cheques to himself as payment for his services. The cheques had previously been signed in a blank form by another trustee – a practice that had been going on at the charity for 27 years.

I suppose the good news is that there was sort of a check-and-ballance (well, another trustee was signing the checks).  And, the chair of the nonprofit was subsequently removed by the trustees.  However, the treasurer was not removed "in the wake of an internal decision review after he and the rest of the trustees made a number of pledges, including to stop paying trustees and pre-signing blank cheques."  On the other hand, the treasurer is no longer treasurer.  I guess he has more friends than the previous Chair.

So questions: when a nonprofit's board is also staff (whether as individuals or in committees) should they be compensated?  And if also staff, what checks-and-balances can be put into place to ensure the situation played out in this case is avoided?  And, why wasn't that treasurer booted out too?

Nonprofit Board/Committee Not Representing Members

The Pastor of Riverside Church has resigned after just 9 months on the job (that's a short time for most jobs but really short in the pastor world).  For those who don't know, Riverside Church has been the home for some amazing social change-focsued pastors.

Well, this Pastor is resigning over a number of issues that are desecribed by the New York Times as  having included a fierce battle within the congregation over his compensation package and the mission of the church.  (Note, according to this article "his pay package exceeded $600,000 a year, including a $250,000 salary and a housing allowance").  By the way, yes it's a lot of money/value but this is not the focus of today's blog.

The controversy for this Pastor started "a week before his formal installation in April, a group of dissident congregants went to State Supreme Court in Manhattan seeking to block the ceremony, saying that he and the board had been unnecessarily secretive about the church’s finances. They also complained that Dr. Braxton was moving Riverside away from its tradition of interracial progressivism and toward a conservative style of religious practice."

So, I'm thinking that this fall-out could have been averted through any number of means but all at the pre-hiring stage.  I'm thinking something seriously went wrong in the way the Committee/Board did their job -- maybe they didn't talk to congregants about the member's needs and interests; maybe they didn't find a way to "test" their selection leanings; maybe they didn't "sell" their decision well to the congregants.  Certainly, they did not engage the congregants to the degree that some portion were willing to act strongly against the chosen candidate and in the end, leave the selectee needing to move on. 

I believe this story is really a lesson in governance and more specifically, engagement governance.  I hope the Board and Committee in particular are taking with them these lessons as they must now start over.

What Relief Will Foundations and Nonprofits Get From Madoff's 150 years?

As you likely have heard by now, Bernie Madoff got 150 years for "screwing" a whole bunch of individuals and institutions, including some important foundations and nonprofits.  The Wall Street Journal offers a great read on this story including some details about some of the sources of prospective cash the Justice Department is trying to recoup (even more about Mrs. Madoff and all she gets to take with her).

Well anyway, Mr. Madoff's 150 years are pretty silly -- at the minimum, he isn't going to really serve 150 years -- maybe not even 10 (they'll probably let him out in maybe even 5 years because he will be sick after a period of not living in the style he's become accustomed to). 

A bigger question: what good is Mr. Madoff's imprisonment to the foundations and nonprofits who must now proceed without the levels of support previously afforded them?  Can't we have Mr. Madoff use his obviously special skills to earn these foundations and nonprofits some of their money back? 

And, perhaps more important, what lessons have these foundations and nonprofits (those that still remain) acquired from this experience?  How will they change their behavior -- will their boards become more fiduciarily responsible?

Final bid for Buffett lunch -- no chump change even in this economy

"Warren Buffett's charity lunch sold for $1.68 million, a 20 percent drop from the price paid in last year's auction" reports the San Francisco Business Times.  The name of the final bidder has not yet been announced and the proceeds will again go to the Glide Foundation, a San Francisco church with a huge ministry to the homeless.

As much as the press was poo-pooing the final bid as being a 20% drop from the previous year, I don't think of 1.68 million as chump change (which according to thefreedictionary.com means a "a trifling sum of money"). 

Critics need a better life -- kudos to Warren Buffett for his gift of time and wisdom and mega-kudos to the top bidder!

Who Should Evaluate Health Insurance Plans?

According to the New York Times, "Senator Jay Rockefeller has proposed creating a nonprofit organization to grade all plans offered on a national exchange based on such factors as adequacy of coverage, affordability, customer and health provider satisfaction, and transparency of procedures and decision-making."

The Editorial from the Times essentially focused on the evils of the health insurance industry, even in the wake of a possible universal plan.  Of course, they are evil -- but that aside, wouldn't it be the government's job to regulate and monitor especially if the industry is not serving the public?