Nonprofit Board Crisis

Is it up to the Nonprofit and For-profit Sectors to Run Public Libraries?

Is it up to the Nonprofit and for-profit sectors to run public libraries?  That is essentially the question the Mayor of Philadelphia is asking as budget challenges have moved along a proposal to close 11 libraries until public-private "knowledge centers" can re-open each closed branch.  The mayor says that the closings will save the city $8 million.

The American Library Association president Jim Rettig was quoted in the Philadelphia Inquirer story saying that "libraries work best as publicly funded entities with trained staff. It makes as much sense to privatize your libraries as it does to privatize your police force".

The Mayor's proposal for a private-public partnership also introduces the question about which public services in a city really can be "jobbed out".  And, is it not better to job out if it means having the services versus having no services?  If we revisit the basic paradigm - that the public sector does what represents public need and interest and is paid for by taxes; and, that the for-profit sector does what there is a (financial) incentive to do; and, the nonprofit sector fills the void where there is no public demand and no/less financial incentive; then, what happens to the definitions of who does what when one of the parties can't meet demand?  It's just so complicated.......

Sometimes Deep Pockets and Big Names Can't Save A Nonprofit

Yes indeed, some nonprofits have everything going for them and still they go under. 

That's the reality for Copia, the Napa Culinary Center which, on "Dec. 1 closed its doors and later made subsequent revelations that the nonprofit corporation could no longer meet operating expenses or service its debt.  Court filings show that the institute owes about $1.5 million to 369 creditors and employees, on top of an unpaid $78 million bond."

This place had a lot going for it - property with an assessed value of over $53 million, Robert Mondavi's deep pockets (at least 'till he died in May), a long and deep connection with Julia Child, etc.

And still, the place just couldn't or wasn't managed to afford itself.  Note the last sentence in the LA Times article: "Copia collected about $50 million in initial financing, about half of that directly from Mr. Mondavi, and leveraged that into a $78 million bond before opening in 2001. But neither Mr. Mondavi nor the board established a foundation or capital financing source for Copia."  

This is a good nonprofit financing lesson.

A Person's Gotta Eat Sometime

Apparently with the belief that "a person's gotta eat sometime", The Kitchen at Billings Forge celebrated being a new, nonprofit.

According to the Hartford Courant, the farm-to-table cooking program will include job training, catering business, artisan bakery, community garden and cooking school. 

In reality and from what I can tell, Billings Forge (Hartford, CT) is an already existing nonprofit that has specialized in using food as both a means and an end.  This is a pretty traditional social enterprise effort that has proven successful, particularly in good times.  Opening another nonprofit with the features described in the article, well, time will tell but it seems pretty brave if not just plain risky to me.  Certainly this is a time honored tradition but in this environment?  Let's hope there are some really deep pockets ready to provide back-up support until the economy rights itself.

Hospitals are in Trouble - especially urban and rural

Hospitals are in big trouble what with the economy and all. 

That's the "news" according to the Chicago Tribune's December 27 article describing a condition of "tight credit, higher borrowing costs, investment losses and a jump in patients -- many recently unemployed or otherwise underinsured -- not paying their bills.  Most endangered are rural hospitals and urban ones in areas with excess hospital beds and a lot of poor, uninsured patients."

The expert's solution appears to be either severe downsizing, mergers or closings.

I don't agree.  Now is the time for federal intervention, just like the car companies and financial services industry.  Really, who needs more bailout support than hospitals?  Here is a truly worthy beneficiary (the under or uninsured) rather than a corporate board or executives. Come-on Washington - get this over with and nationalize health care - we all need it.

Hiring Nonprofit Execs -- Factors Often Missed

I beleive that the Conference Board's November/December Review (magazine) is worth a look-see by every nonprofit board who will or is currently facing the need to recruit a new Executive.

The article titled "Your Next CEO, Why succession planning is more important than ever." takes a wide and deep look at the variables that make good execs great as well as the role of Boards, their traditional deficits when hiring and other matters to consider.

A particularly important section in the article is titled "The Increasingly Stagnant Board of Directors."  Nonprofit Boards take note, this is important! The author notes that generally the CEO assessment process is not inclined toward depth and diligence.  Some members view comprehensive methods involving deeper assesmsents and more structured decision processes as "too burdensome and limiting; directors fear that the process will constrain their freedom of judgement or turn off would-be candidates whom they believe would prefer not to be assessed.  As a result, organizations often employ more structured processes for selecting frontline supervisors than for identifying their next CEO.

Other habits of Boards hiring a CEO include valuing industry experience and track records over competence, knowledge over personal attributes, politics over precision, and, replacement over development (from internal). 

I beleive these habits to be worthy of consideration and change.  The real lesson: hiring a new exec is one of the most important activities a board does in fulfilling its fiduciary duty of care.  When hiring, that board should consider a number of factors that go way beyond whether the individual has the right degree and/or experience in the particular discipline of the nonprofit. 

Please read the article - it's worth the time.

University will examine conflict-of-interest policies and governance structures

Yeshiva University's president has distributed a letter that states that the "school had hired lawyers and investment consultants to examine its conflict-of-interest policies and governance structures."

According to the New York Times, Yeshiva University has lost about 8% of the school's $1.2 billion endowment thanks to Mr. Madoff's now infamous ponzi scheme. 

But as the school reflects, Mr. Madoff, while dasterdly indeed, had a bit of the advantage in the case of Yeshiva when, a close acquaintance, investment fund manager, fellow Yeshiva board member and chair of Yeshiva U. investment committee turned over a significant sum of investment money to Mr. Madoff's fund.  And apparently, Yeshiva had no or at least a poor conflict-of-interest policy that, on a good day, would have prevented such a transaction.  Sample conflict-of-interest policies can be found here.

Could this tragedy have been prevented or at least reduced in scale?  Yes.  At least Yeshiva is being a learning organization and turning its head in the right direction towards conflict-of-interest policies and improved governance.

3 Boards, No One With Authority.

The National Academy Museum in New York is profiled with all its challenges in a New York Times article titled: "Branded a Pariah, the National Museum is Struggling to Survive."

The story really tells the saga of a Musuem which in the simplist terms is out of money, alienating tons of folks, starting a new director and trying to determine its future.

The part of the story that fascinated me most focused on the Museum's governance.  The Musuem has a 20-member board known as the Council and a "council" of professional artist members known as the "academicians.  Additionally, the museum has an advisory board.  The academicians appear to have some control over finances such that the Council does not.

Well, if most think one governing board can be a challenge, this arrangement certainly trumps this thinking especially given the "authority" one governing body would traditionally have.  I will try to dig up more details but I can fully understand why the Museum may be having trouble, according to the article, in getting a clear direction and solution for a less struggling future.

Ex-Charlotte United Way Exec Has Her Say

If you followed my blog during the Charlotte United Way drama (when the Exec was essentially fired for making too much money), I made the point that it was the United Way Board who set the standard and, if blame was to be had, should be blamed.  At the same time I maintained that the Board firmly believed it was getting its monies worth and the proof was in the till - some pretty successful fundraising on the part of the former Exec.

According to the Philanthropy Journal, Gloria Pace King "said in an exclusive interview with the Philanthropy Journal that she helped raise awareness about the need for better pay for nonprofit professionals.

"I tried to create an organization where people were paid and benefits are great," King said by phone the week before the Dec. 14 release of a task-report that concluded she had pushed for big increases in her pension despite concerns of a lawyer advising United Way.

The report also found United Way board's compensation and executive committees acted "without sufficient information, attentiveness, independence and sensitivity, abetted by a flawed process in which authority and responsibility were ill-defined and broadly delegated."

King did not acknowledge any wrongdoing over her pay or apologize for the size of the compensation package, which grew to include a $2.1 million retirement plan.  She described herself as a visionary leader, not a fundraiser, King said she had raised over $500 million for United Way of Central Carolinas as its CEO.   During that period, United Way increased the funds it raised in its annual campaign to $45.3 million last year from $18 million the year before King began her job in Charlotte."

While I generally am not convinced that nonprofit boards always know best, Gloria Pace King makes an interesting argument that some boards, guided by their execs, can know better.  At the same time, I am not convinced that the pay and benefits Ms. King received and the drama that resulted is going to do anything to achieve anywhere near Ms. King's goal of "creating an organization where people were paid and beneffits are great."  There is no evidence that the amazingly huge sum of money paid for Ms. King represents a distribution to the rest of the United Way staff, then or in the future.  It is unlikely that the grumpy public that blew the whistle will let this happen.

Nonprofit Means More To Some Politicians Than...Nonprofit

Some folks, particularly politicians as I like to highlight in this blog, have a different understanding of the purpose of a nonprofit than say, those who want to make a difference for more than themselves.  Clearly the duty of care is just words to folks like this.

Sunday's Chicago Tribune offers another illustration of this sad understanding of what some folks think nonprofit means. 

In the "Senate-for-sale case" in Chicago, we learn "that the FBI taped conversations reveal (Governor) Blagojevich telling others to float his idea by the president's adviser of forming a nonprofit that he hoped would, with Obama's help, receive millions of dollars that the governor could tap later."

For shame, for shame, for shame!  When will politicians learn that nonprofits are not designed for their personal gain - they are designed to fill the voids the public and private sectors don't fill; not fill the pockets of politicians.  And yes, I get that Blagojevich appears to have many deficits but this blog is only focused on nonprofits.

Does a US Foundation's Giving Represent the US' Interests?

Does a US Foundation's giving represent the US' interests?

This is what I believe to be one of the questions raised in the "controversy" over the who donates how much to Bill Clinton's foundation.  See related article from the Wall Street Journal.

But, aside from the many interesting questions about policy influencing and what does "arms length" mean, I am wondering how much US policy is actually reflected in a foundation's grantmaking. 

Is it not possible to believe that the intent of all the Clinton Foundation's donors was around solving the problems the Foundation cared about - and not about influencing US Policy?  Isn't it also possible that Foundations don't particularly represent anything American but more importantly are about solving problems in the world?  

Maybe a USAID grant does reflect US Policy (like family planning grants which aren't in the best interest of the country where the AID grant recipient is dwelling) but is this the exception or the rule?  Don't Gates and Ford operate where and how they do because they think they can be helpful and responsive, not because they are American or want to represent US policy? 

Too many questions?