Nonprofit Board Crisis

Founding Museum Director "Too Lavish" - Must Repay Some Back - Board Failed

Richard West, the founding director of the Smithsonian's National Museum of the American Indian must repay $9,700 after spending "$250,000 in institution funds over the previous four years on premium transportation and plush lodging in hotels around the world, including more than a dozen trips to Paris" according to the Washington Post. 

Interestingly, Senator Grassley  "said in a statement that the Smithsonian governing board should consider demanding additional reimbursements from West. "Mr. West seemed to do whatever he wanted, whenever he wanted. He traveled the world, stayed in fine hotels, personally kept honoraria even when he was speaking on Smithsonian business, and accepted and helped to arrange an elaborate send-off for himself."

I pretty much agree but would wonder where the board was the first couple of years this took place and why Mr. West wasn't reigned in then.  Did he have that much "power" over the board that the board couldn't say no?  Or maybe the board thought this was actually ok?  Perhaps we will never learn the truth to the situation but are we really going to be that excited over a $9,700 repayment?  I'm not thinking so.

Nonprofit Systems, Policies or Governance Failed

It had a small role in the saga of Ex-Detroit Mayor Kilpatrick's downfall but a role nonetheless and one which illustrated either bad systems, policies or governance.

According to the New York Times, "text messages indcate that Mr. Kilpatrick paid for a weekend with a "close associate" in Colorado with money from a tax-exempt nonprofit group."

So was money passed through a nonprofit for a non-mission related activity?  That is certainly the right question.  And, if it was, how was this made possible?  Did the organization not have systems or even policies that could have prevented such an activity?  And what is the board doing about this in retrospect?  Has the board even had a conversation?  Definitely a tangled web that challenges even the best governors.

Nonprofit Provides Lessons For the For-Profits in its Field

The nonprofit Christian Science Monitor is getting out of the printed-paper business.  For primarily financial reasons, the Monitor states that the printed newspaper business is no longer viable - at least from where it sits. 

The New York Times article says more.

As you know, I have been occasionally reporting on one trend in the newspaper business: the trend for for-profit newspapers to become and develop as a sustainable nonprofit. 

It remains too early to tell if this is indeed a viable model.  In the meantime, perhaps we must muse even more as THE nonprofit newspaper says being a nonprofit is not a singular factor in making its business sustainable.  A lesson to consider, no?

New 990 Asks Lots of Accountability Questions

The Chronicle of Philanthropy (10-16-2008) reminds us all in its article tiled "More Scrutiny of Charities Expected" that beginning with the newly revised IRS Form 990, there are lots of new questions and pieces of information that will help the IRS and the public know how well a nonprofit is safeguarding the non-taxable dollars that are in their charge.

One question that is visited in the article represents I believe a healthy trend towards increased nonprofit accountability and especially of the nonprofit board.  It asks: "Did the organization become aware during the year of a material diversion of the organization's assets?"  If yes, the organization has a lot of explaining to do and I believe, it's about time! 

This is good stuff and I look forward to learning what the IRS learns from this new form.

Nonprofit Financial Survival

Here's a pretty good analysis of nonprofit financial issues in this economy from ABC.com.

What Should Being A Nonprofit HealthCare Provider Require?

What should being a nonprofit healthcare provider really require in terms of accountability?  That's the question Walter Smith (Executive Director of the DC Appleseed Center) partially answers in his letter to the (Washington Post) editor.

Some of his "requirements" include:

• engage in community health benefit programs
• be consistent with financial soundess and efficiency
• not accumulate excess surplusses
• not pay excessive executive salaries
• not negatively impact its financial strenght and viability
• devote its entire operation to serving, directly or indirectly, the charitable, public health purposes for which it was chartered.

Thank you Mr. Smith.  This is a good beginning list that I believe all nonprofit healthcare providers (be they insurer or primary care provider) should subscribe to. 

Nonprofits Could Be More Efficient With Technology

According to a recent McKinsey & Company report, nonprofits are missing huge opportunities because they are basically, not like business who are using technology to achieve efficiencies.  The New York Times article sharing the findings of this report as well as offering some analysis of the field is, in my opinion, basically correct: many nonprofits are missing opportunities for achieving efficiencies that technology could address.  Fundraising is one area with the biggest potential.

I must say though, that in my experience, this article and report has made one big generalization that I think deserves further consideration or clarification.  Basically, only a small part (5%) of the big nonprofits use technology to solicit web donations with even fewer using other e-commerce applications.  Among the remaining nonprofits, the numbers are smaller according to the article.

I would offer one more consideration: like in business, this adaption of technology, while being affected by price as the article notes, is much more a reflection of age - that is generation - than other factors that influences the use of technology in nonprofits.  From my consulting experience, it has been and remains the purview of the 25-40 year-old nonprofit managers, particularly in small nonprofits, who have not only embraced technology but use it for almost every aspect of their nonprofit management and program.  So what, you ask? 

The so-what is this: the use of technology among nonprofits is about to change - not because business consultants think it should but because, simply, the age of who's running nonprofits is and is about to change.  As Casey Foundation has documented, there will over the next few years, be a huge change in leadership.  I propose that with this change, the need to maximize the use of technology and other tools that help achieve efficiency will be embraced.  I am not worried.  It's coming.

Near Death Nonprofit Offers Lessons while prepping for Day of the Dead

I wrote about Self Help Graphics in East LA, I think during the summer, when it was bemoaning the transfer of its building by Religious Nuns to a private owner thus jeapordizing its whole future. 

That part of the story is not over but meanwhile the organization is still working and engaging its community.  Today's LA Times story shares some of the factors that have contributed to its survival including the taking on of the organization's leadership by a young couple who in their youth were beneficiaries of Self Help's efforts. 

This is a good story that provides hope in otherwise bleakish times while providing some good answers as to how to keep hope alive.

City of Irvine, CA to pay $285,560 to fundraising firm to study

The City of Irvine, CA will pay Washington, DC based Chora LLC, $285,560 "to study how to line up $22 million for a 27 acre 'preview park.'  The consultant is expected to write five reports, but not required to raise any cash." 

Whew!  Simply put, that's a lot of money to do a feasibility study and for sure, feasibility studies are important.  But, that's a lot of money to do a feasibility study.  Go read the LA Times article which does a nice job of presenting backgroun and pluses & minuses to undertaking this effort.

That's a lot of money to do a feasibility study.

Phony Nonprofit Used To Embezzle $450,000

From the Providence Journal we learn of the indictment of Robert Felner "a nationally known educator and former director of the University of Rhode Island's School of Education".  Dr. Felner was indicted by the Secret Service and US Postal Service on federal charges of "money laundering, conspiracy, mail fraud and tax evasion".

Dr. Felner seems to have set up another nonprofit in Illinois with a very similar name as the "real" center where he worked at at URI and basically transferred funds as he pleased.  For those who don't think about academic centers much, these little "fiefdoms" within a University are created to provide space for folks whose value in pursuing scholarly study/research and/or action ultimately adds value to the University that may not be in the form of teaching.  They generally do really interesting work but can be challenged by the kinda "arms-length" rules of the University; sometimes have governance structures that are more advisory than authoritative; and usually benefit from the many infrastructural services and benefits a University can provide rather than being a stand-alone nonprofit.

While the article stresses that "everyone" is satisfied with the work of Dr. Felner's legitimate center, the same center will "now be placed under the College of Human Science and Services and monitored more closely".  And it would appear, increased monitoring is the least that should happen when I think about how the system even made it possible to embezzle this kind of money.

Then of course there's the "phony" nonprofit which appears to have absolutely no governance or accountability either internally or externally.  Basically this was an organization "on paper" as best as I can tell thus leaving it enough out of the eyes of anyone who might care to raise questions.  This suggests that there remains some loopholes in both the creation of and ongoing monitoring of the nonprofit "system".