Nonprofit Board Crisis

Paying taxes, doing good, fulfilling mission

Paying taxes, doing good and fulfilling mission -- that's what the nonprofit religious order the Cistercian Abbey of Our Lady of Spring Bank are doing through their for-profit subsidiary, LaserMonks Inc.

The New York Times and Fast Company and a number of other business magazines have featured stories on LaserMonks Inc. According to the Times, last year the monk's business sold $4.5 million worth of products.  And there's only 6 monks at this Abbey.

What the monks are demonstrating is that with will and a few resources, non-donor support is possible.  At the very minimum, nonprofits should think about ordering through these folks as a part of supporting mission all the way around.

Reasonably Good Nonprofit Sector News Source

The Philanthropy Journal is an on-line news and education resource for nonprofits.  This news source doesn't cost you and occasionally has some helpful ideas on nonprofit management.  It may give a bit too much attention to Bridgespan but if that's its only fault, that's not so bad.   Objective nonprofit news and education is not that easy to come by.

Hospitals and Fundraising

I am a strong believer that hospitals are just not being charitable to the point that taking away their tax exempt status seems a reasonable act.

The San Francisco Chronicle recently initiated its own survey of 12 Bay Area hospitals about these hospital's fundraising practices.

Five hospitals do not directly solicit patients for fundraising purposes (although one does solicit folks who have made gifts previously).  Seven do and primarily through direct mail. 

What I am scratching my head about is what the so-what of this survey is.  Is a hospital nobler and maybe more responsive to those in need because it does or does not solicit funds?  Is that even the question? 

Perhaps there's the question of how hospitals, all nonprofit, are actually surviving without direct fundraising - ie, no public support.  Are they not taking patients who can't pay?

Certainly there are more questions than answers.

Kazoo: A Nonprofit Revenue Generating Venture

My wife keeps a kazoo in her purse.  Today's New York Times tells the story of the kazoo.  Quite entertaining.  More importantly, the original kazoo company is now owned by a nonprofit.  Ckeck out the story.

Why Most Small Businesses Fail

As a partial follow-up to yesterday's thoughts about nonprofits being targeted to pay taxes and my note about UBIT (unrelated business income tax), an article in LiveScience of a study about why more than 50% of small businesses fail (important to note for nonprofits looking for a revenue stream).

The study researchers (out of Britain) set up a game in which prospective entrepreneurs decided whether to launch a new restaurant in an established community.  The findings indicated that the most confident game players--those who appeared "full of themselves"--fared worst, becauses they ignored signs that the market was already filled to capacity.  "Market entry decisions tend to be overoptimistic," says the lead researcher Briony Pulford.  She warns people starting businesses to "beware of overconfidence," and to be "especially wary when entering small markets or markets that seem to present easy business opportunities."  For people launching businesses, self-confidence is essential, but that trait is useful only when it's based on a realistic assessment of the competition and other market conditions.

From my consulting experience, unrealistic market assessments or failure to believe realistic assessments has proven the downfall of many a nonprofit starting a revenue generating venture.

Tax Exemption Threatened

Interesting article in today's New York Times about how charities' tax-exempt status around the US are being challenged. 

While an interesting article raising an important set of questions, I don't believe the article's author did as good a job about distinguishing the real issues as might be helpful. 

Three types of exempt issues were introduced although not with distinction.  The distinctions are important as they serve as lessons for nonprofit managers and boards.

So....the IRS/Federal Government gives a tax-exempt status that exempts nonprofits from having to pay corporate income tax for the work they do.  This exemption also then ensures that contributions by individuals to these organizations are exempt for filing and tax payment purposes.  The IRS has some nebulous set of standards for determining when a charity is in default or failing to perform as a charity.

This nebulousness is true but for one aspect which is referred to as UBIT - unrelated business income tax.  This tax can be assessed, in simple terms, when a nonprofit conducts activities that generate income (through fees and sponsorships) that are not central to the core mission.

Municipalities/counties also grant tax exempt status for property owned by tax exempt organizations.  Many colleges and some hospitals make payments in lieu of taxes to help offset a town's cost for services to the tax exempt organization.  Municipalities, as noted more or less in the article, have the option not give tax exempt status and try to do so particularly for any part of a property that is not being used specifically for the charity's purpose even if it is used to generate income that the IRS accepts as tax exempt.

Nonprofit managers and boards need to pay attention to these issues but I believe only the big guys, hospitals and colleges, really do have something to worry about as the public calls to question what the return on tax exemption is giving them.

Big Event Fundraising for the Arts gone "small"

Interesting story in the San Francisco Chronicle about a shift in fundraising tactics. 

Instead of the traditional galas or big events to raise funds, a few arts institutions are returning to what is much more common in the political fundraising field: the dinner party or personal house tour.

Yes, this is the way money is still raised by politicians and once was the source of money-raising by many groups.  Why has it returned?  Well, it can raise a lot of money on a more intimate basis and actually be equally if not more satisfying to donors and board members alike.

To me this is a reminder that really good fundraising is really good marketing: an exchange takes place that satisfies both parties (the seeker and the giver). 

Nonprofit management experience may not be grounds for public sector

Interesting LA TImes story about what was thought to be a reasonably experienced nonprofit professional administrator who got a top appointment running a California agency that was in need of serious management help. 

Bottom line, the candidate hasn't been successful.  Check out the story -- it's a lesson for all nonprofit managers who would be state administrators -- a lesson that may also hold true in the reverse.

IRS watches out for "donor" citizens

According to the Chronicle of Philanthropy, the IRS has determined that a "charity" using less that 5% of its income for charitable purposes can not qualify for tax-exempt status.  This organization was closing its doors and, I understand, needed a ruling that could affect the distribution of assets.

Comments to the article note that the IRS might be now more aggressive in its pursuit of non-charity charities but I can't help floating the idea that the donor is a better decider of what's worthy of charitable support than the IRS.  Guidelines are important but when the federal government starts making the rules without consultation, at the very least, I get worried.  Maybe it's lack of confidence but. 

By the way, I think a charity that's spending less than 10% of its income does challenge the purposefulness of tax exemption (return on investment to the public good). 

A Clear Mission Matters

Did you know that the US Congress has authorized $34 million annually to maintain the US voice in Cuba, or something like that, maybe.

According to the San Francisco Chronicle, the US Congress authorized these big bucks to support the US Office of Cuba Broadcasting to provide a "free exchange of ideas" by broadcasting stories that would otherwise not get told because of the governmental influence over media within Cuba.  The US Congress pays this amount of money to support US-owned media as well as nonprofit media. 

But, and here's the rub: no one is quite certain about what the desired purpose, that is results, are that should occur from this effort. 

It is good not all government spending is so unfocused and unguided.  This situation at minimum speaks to the value of clarity of mission and purpose -- something where the Congress isn't always focused (if ever).