Nonprofit Board Crisis

Nonprofit Hospitals to Be Held Accountable for Being Nonprofit!

Thank you Senator Grassley for once again stepping forward to ensure that nonprofit entitites, in this case, hospitals, are nonprofit. 

According to the Wall Street Journal, Senator Grassley is "weighing proposing legislation in early 2009 that would hold nonprofit hospitals more accountable for the billions of dollards in annual tax exemptions they enjoy."  Grassley's legislation "would require nonprofit hospitals to spend a minimum amount on free care for the poor, also known as charity care, and set curbs on executive compensation and conflicts of interest." 

The Journal notes that "nonprofit hospitals account for the majority of hospitals in the U.S.  In return for not paying taxes, (my note: this applies to every nonprofit like Universities and museums) they are expected to provide benefits to their communities, including charity care.  Some, though, have curbed charity care, while others have closed facilities in blighted inner-city neighborhoods while building new suburban campuses."

Senator Grassley, you certainly have my support on this effort and I will be sure to advise Senators Dodd and Liberman of the same (maybe they are on board with this?).  Senator Grassley, thanks for continuing to look out for the taxpayer and those who have few means to afford, in this case, what should be a right for every U.S. citizen - no cost and high quality health care.

CT Senior Job Bank To Close: Lessons?

Connecticut's only Seniors Job Bank is anticipating closing its door, facing the likelihood it can't generate the money it needs to stay open. See Hartford Courant.

Here's a lesson all nonprofits facing these issues (who doesn't) can consider.

The Job Bank "links people 55 and over to corporate jobs or steers them to area residents who needed home services.  But, private donations and grants, 80% of the free referral support, have dropped dramatically in the last two years".

So of course there's the basic questions, really unanswered in the article but essential as a lesson.

• What else has the board done to raise funds over these two years?

• Has the board changed in any way to accomodate raising more money?

• Has the board considered any merger or partnership options (say, with a home-health agency)

• What other approaches might the organization take to accomplish mission and stay in business?

Yes, there are questions to be answered which might serve as lessons to all nonprofits facing similar issues.  Closing doesn't strike me as the most immediate answer and maybe, just maybe, this article is another one of those "crying wolf and hoping for solutions" approaches that sometimes work and sometimes doesn't.

Ponzi Scheme Takes Swipe at Foundations among others

Maybe the title tells the story but for sure, a whole lot of folks, especially foundations and charities have been injured by an investor who used a classic ponzi scheme and didn't safeguard their dollars - now, no more money for many.

According to the AP:

In a Connecticut town, local officials scrambled to get a handle on damage to pension funds held for its police officers and firefighters. A Massachusetts charity announced it was shutting down. In New York, a distinguished economist feared he had lost his $2.2 million nestegg.

Damage continued to ripple from the massive fraud allegedly engineered by storied Wall Street money manager Bernard Madoff Monday, even as investigators worked to unravel the scheme's working and its reach.

While details remained sketchy, the sudden collapse of Madoff's firm began revealing an impact far beyond the world of the ultra-wealthy and well-connected who were the mainstay of his client base. And the firm's extensive dealings with charitable foundations and other groups suggests the fraud may take a toll in unexpected places.

"It's devastating to people and communities and lives," said Deborah Coltin, executive director of the Robert I. Lappin Charitable Foundation, a Salem, Mass., organization that sponsors Jewish educational program and is being forced to close it's doors.

The 70-year-old Madoff (MAY-doff), well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors. Some investors claim they've been wiped out, and it is thought many more are yet to come forward.

Shouldn't foundations know better?  Don't they make sure that really smart people sit on their board or investment committee to catch when things don't feel right?

The big question: what could folks, especially institutions like foundations and charities who usually engage smart people to oversee their investments, do to prevent this catastrophe?  The answer, have smart people oversee their investments and be sure to ask the right questions. 

And for sure, I am way more worried about what little money I have when smart folks like this fail to get it right!

 

Grantmakers For Effective Organizations Call for Change to Respond To Crisis

Grantmakers for Effective Organizations (GEO) is calling upon funders to make some changes in order to be responsive to the economic crisis facing the nonprofit sector.

The Philanthropy Journal reported that GEO sent an "open letter" to its 1,700 individual members who represent some 350 funders.  GEO offered five pieces of advice:

* Hold 2009 grant budgets steady at 2008 levels, a move that could mean paying out more than 5 percent of assets.

* Look for "no-cost" ways to boost nonprofits, including releasing restrictions on current grants, and thus allowing nonprofits to react to the changing environment.

* Give grantees more flexibility to update, alter or replace programs by providing operating grants; consider providing cash-flow loans or access to credit.

* Continue making high-dollar, multi-year grants, investing in leadership support, and funding efforts to learn and evaluate.

* Engage with key stakeholders to better understand the challenges they face and how funders can help. "

We can only hope funders hear and act.

Maybe Universities Can Now Focus On Their Tax-Exempt Purposes

"Harvard has seen its $36.9 billion nest egg shrink by more than $7 billion in just three months (Eric Gibson, Wall Street Journal as quoted in The Week).

I have of course been railing about private colleges like Harvard who seem to have forgotten their tax-exempt missions even though they have been making a teensie effort at letting kids who haven't all the means into their institutions.

One factor identified by Gibson, possibly contributing to the outrageous cost of these schools (up to $40,000 a semester) is "libraries and gyms open around the clock, and cafeterias offering every variety of cuisine imaginable."  I would add that colleges like Harvard and Yale, have (to their detriment or advantage depending on which side of the tax exemption argument you are) dabbled heavily in economic development and effectively "owns" the business community servicing the student. 

Yes, I agree with Mr. Gibson, maybe the changing economy will be a good thing in the long run for private colleges - maybe they will get back to the basics of educating and get out of all the related efforts to amass wealth - not otherwise a tax-exempt mission.

A Hospital That Earns Its Nonprofit Stripes

According to the Wall Street Journal, "Providing all patients, rich or poor, the same standards of care is one way that Mount Sinai tries to live up to its obligations as a nonprofit hospital exempt from taxes. Located amid the blight of Chicago's West Side, Mount Sinai also tries to tackle its community's social ills."

Senator Grassley, this is what tax exempt health care should be about.  Please take note.  If the rest of the health care community can't meet this standard, take away their exemption and use the taxes that come from their income to subsidize the Mt. Sinais of the world!

Nonprofit Assets At the Disposal of Board Member(s)

An interesting case reported by the Philadelphia Inquirer involves a former state senator and nonprofit museum board member's use of the museum's yachts.  The feds say the former senator bilked the nonprofit museum (from 1993-2003) of $100,000 by using the yachts for free.

With a little homework I learned that the Independence Seaport Museum, located at Penns' Landing in Philadelphia rents the yachts for rentor's purposes as a source of museum revenue and a "living" museum artifact.

Clear to me: the nonprofit Museum board did not either have or enforce sufficient policies to avoid the limelight, true or false, created by the Feds and the former senator.  Messes like this can be avoided with good nonprofit governance, policies and processes. 

And, should a nonprofit board member be able to rent?  Sure I say.  Such rentals are a perfect opportunity for board members to provide support to the nonprofit institutions on which they serve.  But, these same board members can not ethically or even within the rules that govern nonprofits, personally gain from the use of the nonprofit's resources.  And of course, this brings us around to the issues our former Pennsylvania state senator now faces.  But we must also ask: where was the rest of the board in these matters?

Let Ford Save Ford

"Let Ford Save Ford" writes a Wall Street Journal opinon offeror.

Huh?  Smart investors and managers don't invest in less smart investments and management unless they truly get to make changes where they are needed.  Alas, managing a car company is not the business of the Ford Foundation.

Donor's Intent Trumps Princeton!

According to the Wall Street Journal,  Princeton University agreed to pay about $100 million to settle a lawsuit by one of its major donor families, who accused the Ivy League school of failing to honor the terms of a gift that fueled the growth of a prestigious graduate program.

One lesson, you can fight the windmill and win - but, you have to have some very deep pockets.  Another lesson: the donor is always right - maybe.

Nonprofit Audit: Factors to Consider

Terrie Timkin has some words of wisdom to small nonprofits about when and if they should get audits.  These are some good thoughts and for those in this category, do read please.

Also, on a related matter, I am still mulling over why more nonprofits, no matter the size, haven't taken up the creation of independent audit committees as recommended by Sarbanes Oxley.  Note: I believe "Independent" to be the operable word here.  Independent means that the organization's treasurer and CFO or whoever handles money does not chair the committee.  Also, this does not need to be a standing committee.  It works just fine as a task force meeting only a couple of times and overseeing the auditor if there is one to be overseen.

Just some simple thoughts for very demanding and accountable times.