Nonprofit Board Crisis

Note to self: Diversify Your Funding Base

An LA TImes article out today noted the woes of nonprofit organizations in New York City and elsewhere whose fortunes rested in the rise and fall of corporate philanthropy.  Highlighted in the article was a nonprofit hunger relief program that was immediately feeling the Bear Stearns failure both from the corporate losses and the laid-off employees.

Note to self: corporate money is good when you can get it but corporate money may not make a very reliable ongoing source of income.  Lesson from long ago: diversify sources so never too dependent on one source. 

The big question for many nonprofits going into a clearly declining (declined?) economy: is it too late to diversify?

Permanent committees for nonprofit boards?

Give and Take Blog asks: should we keep permanent board committees?

Depending on the life stage of the nonprofit board, I believe that it is time to say goodbye to Permanent board committees except for a governance committee whose job of caretaking the board can never be done.

Permanent committees add little value, are difficult to maintain and most folks, except for the experts on a committee (e.g. finance) don't enjoy them.  Plus, ongoing committees provide too much opportunity for micro management.

Let's take a good look at task forces as the answer to how to get the homework of the nonprofit board done.

And back to life stages, a nonprofit board in its infancy and maybe juvenile stage may not escape the need for working committees pondering a variety of issues.

License Plates for Christ

The state of Florida's legislature is considering adding another personalized license plate to the 100 such plates it already allows.  Personalized plates are generally approved for nonprofit causes or organizations and raise money for those casues (like the university alumni program).  An "I Believe" plate sponsored by a christian church is being debated over a number of issues not the least of which includes whether such a plate would posture Florida as a christian state. 

Florida's identity as a christian state is not what bothers me as much as what would clearly be an endorsement of a particular faith practice resulting in seriously thinning the line of church:state relationships.  Such approval of a plate would in essence say that one faith and one church (the sponsor) in particular has state approval.  I believe that even if the state were to approve a plate for each faith practice it would be violating the church:state principles.  Florida and every state does enough by allowing every church/faith practice tax exempt status.  A plate for one particular faith practice goes too far. 

The article may be found here in today's Chicago Tribune.

Running for Charity in the Boston Marathon

I don't have much to say about it except that the Wall Street Journal article covering individuals who run the Boston Marathon for charity offers insight into the minds of those who are passionate about a charity.  Check out the article.

Activist Nonprofit Illustrates Problem Solving, Sort Of

PETA, the often quite controversial animal rights activist organizaiton, has announced it will give away a $1 million prize for someone who can come up with a way to produce "commercially viable quantitites of in vitro meat at competittive prices by 2012."

While this offer is quite the story in and of itself, several media picked up a story within the story.  Specifically, as headlined by the San Francisco Chronicle, "Food fight over PETA fake meat contest."   

The "other" story is about mission and how this prize does or does not comprimise mission.  One side of PETA is quite adamant about not eating "animal tissue."  Another side is adamant about not killing animals.  Have folks really resolved their issues.  It appears as though it has and if that is the case, PETA can stand tall not only as an animal rights organization but as an organization that has learned how to resolve problems in nonadversarial ways. 

Small Business Folks Make Different Decisions as Board Members

It is written and stated that a question the IRS asks to test whether good governance has taken place (by a nonprofit board) is "would the decision have been the same (or what would the decision be) had it been that board member's own business?"

As I have been lately working with a few boards of organizations with annual budgets of less than $2 million I have been struck with the idea that the standard of care, that is, the decisions members are making, are clearly affected by their view of the world vs. the view of the world of the institution of which they are caretakers. 

In more illustrative language, small business owners view the world (and nonprofit policy, planning and evaluation questions) differently that do corporate executives.  What the one, small business owner, would do in a business situation is perhaps different that what the corporate exec would do given the same business situation. 

The so what?  Perhaps, micromanagement by some; not-so-smart questions by others.  What then a conundrum in selecting nonprofit board members, but just the same, what a useful framework to assess candidates for nonprofit board membership.  All the nonprofit governance/recruitment committee needs to do is screen prospective members based on their answers to scenarios that in the end ask: what would you do if this was your business.

Archdiocese creates lots of nonprofits to protect its holdings

The Archdiocese of Portland (Oregon) is turning over the deeds and titles of properties it currently holds to the parishes which now make up the body of the Archdiocese.  To enable this transfer, each parish is going to become a free-standing "member" nonprofit.  This action will in effect save the Archdiocese and its members from losing its properties to the defendants in the priest-sex abuse suit.

With the reputation church bodies have for mediocre and essentially, untrained governance, I certainly hope the Archdiocese is including a huge training program to ensure that parish councils fully understand and know how to exercise their fiduciary responsibilities.  I am sitting now scratching my head thinking this really can't be good other than saving assets for the church (and that good is debatable). 

But, can the parishes take on all this property responsibly?  Can they exercise good governance?  If their Archbishop is any example, I certainly wonder.  For more on the details, see the article in the Washington Post.

Bad Governance AND Nonprofit Fraud

You may remember just a week or so ago when I reported on a bad budgeting practice in NY where a bunch of fake organizations were being assigned budget amounts as placeholders for projects (yet unknown) that may occur later in the budget year.  While the practice was meant, on the positive, to ensure that funds were available for whatever came up, a bad budgeting practice (effectively, lying or misrepresenting) is a bad budgeting practice and ultimately, bad governance.

Today, the NY Times reports that bad budgeting and setting up fake organizations as placeholders wasn't all that was going on.  Some lawmakers, or at least the staff of lawmakers, actually used the fake organization as a way to pilfer funds for personal gain. 

Good governance whether it be of the public or nonprofit sector, requires honesty in addition to sound checks and balances.  What we have in New York is an example of no transparency or accountability.  The voter should demand more and certainly should change the process for how budgets are created and overseen.  What the voter will get from this incidence is more of the money taken by trusted people who failed to be trustworthy. 

Nonprofit Board Fails Fiduciary Duty

The San Francisco Chronicle reported today that San Diego County was going to cut off its $270,000 in contracts with an Escondido nonprofit homeless shelter.  The shelter's annual budget is around $2 million.

An audit showed significant financial mismanagement.  The founder says the officials "exaggerated the financial woes and insists accounting problems are being fixed".

You know, one of the 7 warning signs that something isn't right with the management of a place is that the funder says something isn't right.  Knowing little more than the facts presented above I would offer that here's another example of a board not stepping in to right wrongs recognizing that it's rare for government to step in and cut a contract, espeicially something of an obviously sensitive nature. 

Me thinks there is something fishy and I congratulate the County for its action.  At the same time I ask: Board, where were/are you?  Leaving life to a founder (been there since 1983) has some obvious pluses but as is evident, some risks. 

The question to the board: if this was your business, is this the way you would run it?

Bigger Fraud than 1st Thought

Wow, the fraud is up to $300,000 by a California Youth Shelter employee according to the LA Times. 

While the employee and her spouse are no longer connected to the organization, the damage they did in bilking money by setting up an AmEx line of credit account continues to rise.

Message to Nonprofit Boards, if it was your business (the IRS standard), would it have happened to you?