Nonprofit Board Crisis

New Guy To Head Up Smithsonian

There's a new guy, a Mr. Clough, originally at the Georgia Institute of Technology, who by New York Times' account has all the credentials needed to succeed at the Smithsonian. 

You may recall the last Exec went down' in a plume of flames having exercised some questionable (to the board) approaches to raising huge amounts of money.  At the time I suggested that the board didn't really understand fundraising and let appearances lead them down a path that resulted in the exec's firing.  I still believe that was the case and believe the board should have first fired itself and reconstituted a smart, thoughtful caretaking group of people who were singularly focused on the Smithsonian's welfare.

Mr. Clough appears to have the knowledge, skills and experience the Smithsonian needs.  Let's hope he can take ALL the actions needed.

$131 Million would buy a lot of.....

According to today's Chronicle of Philanthropy, the Whitney Museum received a gift of $131 million.  $131 million could buy:

mortgages

food for the homeless

treatment for Iraq warriers

..........priorities........

If someone can steal funds, a nonprofit's board has failed

The Chicago Tribune reported on a guy who stole $260,000 from donations to a place focused on helping veterans.

Folks, I've said it once and I'll say it 1,000 times more.  If someone is able to steal big pots of money from a nonprofit, the systems are broken and the board is responsible.  This should be a mantra.  And, nothing should be forgiven -- at least the thief should not be in a position that would enable future theft.  More importantly, the board should understand how theft was possible and put into place policies, procedures and/or systems to prevent the future possibility of theft and to recognize when theft has occurred.  This is a basic duty of care -- the nonprofit board member should govern a nonprofit AS THOUGH THAT NONPROFIT WERE THEIR OWN BUSINESS!

Study on Foundation Expenses

The Center on Nonprofits at the Urban Institute, the Foundation Center and Guidestar have recently released findings from their study of the nation's 10,000 largest foundations based on 2001 data according to the <a href=http://philanthropyjournal.org/newsarticle.cfm?%20siteid=1664%20&ARTICLEID=143586%20&BANNER1IMG=banner_1H.JPG%20&BANNER2IMG=banner_2H.JPG%20&BANNERBG=banner_bg_h.gif%20&PAGEID=15163%20&PTSIDEBAROPTID=7549%20&RETURNTO=page15163.cfm%20&RETURNTONAME=US/World%20&SIDEPAGEID=15163>Philanthropy Journal</a>.  (Click <a href="http://www.urban.org/url.cfm?ID=411614">here</a> for the full study.)

If there was ever a "so what" from a study, that's certainly my take.  Here's some of the findings:

7 in 10 foundations have no paid staff (ok, maybe this is interesting)

Among foundations with paid staff, the median compensation for top execs exceeds $100,000 in 2003 and tops $500,000 for the largest corporations (ok, equally interesting, telling a big story)

For foundations that have staff, the ratio of administrative expenses to charitable expenses is higher (duh -- a better survey would have dug deeper to understand what all these staff do)

There is an economy of scale among foundations who give more (in other words, it doesn't necessarily cost more to give bigger sized grants)

It costs more to give away money for international programming (there are more government rules wouldn't you expect) and to do program-related investments (yup, of course)

Independent foundations with staff and large grantmakers are more likely to compensate their governing boards at a median compensation rate of $8,000 (gotta say that THIS item is most interesting and really deserves more study -- maybe some implications for the nonprofit sector?)

So, bottom line, there are some interesting findings but on the whole...?

Can't Afford to Be A Private Nonprofit School: Go Public

Yup, the Catholic Archdiocese in Washington, DC can't afford to run its private nonprofit schools so it's making them public schools. The "voluntary" nonprofit Archdiocese, running bunches of private schools it can no longer financially support (and no longer has all those volunteer nuns who teach for free) is going to convert a bunch of its schools to become publicly supported charter schools (see Washington Post).

There are certainly good things to be said for this scheme.  The kids will keep their school open; and, in theory there is a certain quality of education that will be retained.  Hooray on that count.

But no one, except perhaps the current students and parents, are asking the Diocese to stay in the education business.  Not even the Diocese, due to the cost of schools, believes it should be in the education business, unlike once upon a time when the education business was a part of the Diocese's calling/mission and was very much tied to the propagation of faith.  Now that the time of eduction as mission has come to an end (at least that's how it looks if it isn't going to put up the money) must the public sector step in?  I am just not convinced.

When nonprofits go belly-up, is it board or staff responsible?

"The agency received both public and private support. The mayor said the problem was that the nonprofit failed to maintain its external fundraising. 'They started out great and kept going until they ran into fundraising problems,' he said...

"Apparently some national funders backed out, for reasons unrelated to the project. The mayor said the agency didn't come to the city to for more funds to make up the difference."

This quote is taken from yesterday's Hartford Courant in an <a href="http://www.courant.com/news/opinion/editorials/hc-plccondon0217.artfeb17,0,6022723.column">editorial</a> about a nonprofit that was engaged in neighborhood revitalization and is closing its doors.

So who is responsible when the well dries up?  Is it the nonprofit's board or staff?  Were these folks not strategic enough to think beyond one year at a time.  And if the mayor says the city wasn't approached (as though they would have responded), was that the board's or staff's failure?

One thing that was clear from the article: this nonprofit's job is not done, there is still a need.  So don't the board and staff have a responsibility, as the organization's owners, to find a solution for the future?  Even a sell-out to another organization is a solution that keeps services coming.

When a nonprofit is a personal business

The guy (Jimmy Wales) over at Wikipedia, (a nonprofit) is having some challenges.  These are not the unusual challenges facing small business owners who are really successful.  Take for instance the break-up with a newspaper writer and her putting some of his clothing on ebay (after all, the Wikipedia founder's "experienced" clothing must be worth something in the auction market place).

All this humor aside, the guy at Wikipedia is being treated and followed like any successful small business owner.  This would be fine except, the guy at Wikipedia is founder and director of a nonpofit.  Yes, Wikipedia is a nonprofit.  There's a board of directors.  There's policies and procedures (I like to believe).  There's public accountability.

But I certainly wouldn't know this from the way the guy at Wikipedia is storied.  If I were a board member, I would be having some serious conversations about Jimmy Wales.  As a board member, I would be Wikipedia's owner, not Jimmy Wales. 

Maybe or maybe not.  Maybe Jimmy Wales and Wikipedia represents the new nonprofit where board members don't really matter that much as long as the bottom line or anything else doesn't get board members personally in trouble.  And maybe this is the future of nonprofits, just like it has been for some of the nonprofits whose founders never really transfer ownership to the public.

15 Years of fake legal aid

It has taken 15 years for a fake legal aid "nonprofit" in Colorado but operating nationally to get caught and shut down (Click <a href="http://www.nytimes.com/2008/02/16/us/16legal.html?_r=2&sq=nonprofit&st=nyt&adxnnl=1&oref=slogin&scp=4&adxnnlx=1203365978-Wv5IBJeuSjMI7hDoulJaVw">here</a> for the New York Times story.)

No one ever asked the question, and I guess the brothers and wife operation never conducted public fundraising or grant seeking operations -- they just posed as a nonprofit without declaring otherwise to give folks in need a false expectation.  In reality, they never even delivered the promised services.  And noone noticed that the board was composed of all relatives?

So, had they sought grants or donations, they likely would have been caught a lot sooner -- grants and donations help define a nonprofit?  One would think that failure to fulfill promises would have had them caught a lot sooner too -- but why didn't they get caught?

Shady Nonprofit is Front for Political Contributions

Senator Grassley, if there ever was a nonprofit worth your look-see this organization highlighted by the LA Times certainly qualifies.  Sham nonprofits, particularly those that are effectively family businesses must be evaluated and pulled off the shelf.  Let's start with this one.

Market Forces Rule

Looks like the One Lap Top Per Child has another problem in the market place.  The nonprofit is being sued for its keyboard design by an individual who says the nonprofit copied it from him -- it's  a $20 million suit too.

Check out the San Francisco Chronicle for details. 

This does make me think I am more right -- we don't need a nonprofit to pursue this effort -- good and bad market forces will ensure that technology gets around the world.