Nonprofit Board Crisis

Helping Nonprofits: A Golf Lesson

Interesting New York Times article about the Zurich PGA Tournament just completed in New Orleans.

Maybe it's just New Orleans and all the stars are really aligned but I propose that the public-private-community partnership appears to be a true win-win-win and a lesson for many communities.

Paying Fees for Martin Luther King's Words

There's a new monument going up in DC.  It's one for Martin Luther King, Jr. 

An article in the San Francisco Chronicle notes that the King family is getting a licensing fee for the use of Dr. King's words.

The monument is a nonprofit effort that when complete will be turned over to the National Park Service.  There is certainly no direct profit to be made from this work of love.  So what gives?

This story certainly gave me pause.  What about you?

Nonprofits to Lose Free Trash Pick-up Service

According to the Hartford Courant, the Town of West Hartford is planning to end its free trash pick-up service to nonprofit and religious organizations.  The savings to the town: about $94,000 annually or in reverse, the additional cost to these organizations will be at minimum the same.  Another sign of the times, although certainly not as bad as proposing to tax these organizations.

So, if I was a nonprofit in West Hartford, one of the steps I would take would be to organize all the other nonprofits into a buying group to negotiate as a unit with a private hauler.  Here's one of those rare opportunities for a really large partnership that who knows, could lead to other opportunities that in the end might result in lower costs for all the organizations.  ...lemons into lemonade.

Nonprofit Mergers as Solution to Economy

There are many articles currently circulating speculating about how the size of the nonprofit sector will likely shrink as a result of the economy.

One that caught my eye was in the Chronicle of Philanthropy, although the primary focus of the article was how some folks will create nonprofits as an opportunity for essentially ripping off the public (like some of the credit counseling types).  Anyway, the head of the IRS division that oversees charities and foundations was quoted as saying:

The difficult economy could claim the lives of some organizations, whether newly formed or long established, Ms. Lerner said. “Those that are not able to benefit from economies of scale may have a more difficult time surviving,” she said. “For that reason, we are hearing more about tax-exempt organizations considering mergers and acquisitions involving other exempt organizations.”

Ms. Lerner said that “traditionally there has not been widespread merger and restructuring work” in the world of tax-exempt groups.

“It involves a number of legal issues, many of which fall under state laws, and a number of which can be thorny,” she said. “The involved organizations must consider whether a change in the use of the assets is consistent with donors’ intentions and charitable trust principles, for example.”

I concur with Ms. Lerner's opion: merger is a great response and definitely a vehicle for achieving better efficiencies and effectiveness - but, good mergers take good planning and certainly lots of buy-in from both the boards and their execs.

Meanwhile and back on the economy and rip-off issue, tough times may encourage bad behaviors by board and staff.  Nonprofit boards would do well to review their policies to ensure that embezzlement in particular is really difficult to accomplish.  Don't think it's possible? Just a couple of days ago I wrote about the board assistant treasurer who somehow managed to steal $700,000.

Social Enterprise: Face Cream by Monks

As this catholic religious order was facing economic disaster, its creativity apparently strengthened.

According to the Hartford Courant, a small group of Carmelite monks in Worcester, Massachusetts are putting their hope in a special face cream.  The Religious Order has big plans for the cream - saving them economically and serving the homeless. 

The article offers some good insights about how the Order got into this high-end face cream product and some of their mission-related issues with selling it.  The article also provides a brief insight into how other religious orders pursue social enterprise products to help finance their operations.

For sure this story reinforces the importance of being creative and hopeful in finding revenue solutions during very challenging times.

You can check out the Teresian Carmelites and their product by visiting their website.

Nonprofit Book Review: Broken Trust: Greed, Mismanagement & Political Manipulation at America's Largest Charitable Trust

Would you like to learn the history of Hawai'i, and how high net-worth individuals accrue and transfer wealth, and how major gifts left with the best intentions and clear guidelines can be abused and mismanaged?  If you say "yes" you have got to read "Broken Trust: Greed, Mismanagement & Political Manipulation at America's Largest Charitable Trust".

Broken Trust, written by Samuel P. King & Randall W. Roth and published by the University of Hawai'i Press is a docu-drama that does a great job of describing how a really large nonprofit trust can be wrongly managed to the benefit of the trustees.  King & Roth do a great job of documenting the failure by the trustees of the Kamehameha Family Trust (the first royalty of Hawai'i) to fulfill its nonprofit fiduciary duty.  The authors tell what happened, how it happened and the consequences.  The Council of Foundations should incorporate this book into their Foundation trustee training courses.

Fine job and worth the read. Oh, and, there's a happy ending.

Click here to visit the book's very own website (although its not for sale there).

Nonprofits in New York City To Be Supported

According to Reuters.Com:

New York Mayor Michael Bloomberg proposed increasing bridge loans to nonprofits by 150 percent and expanding the city's revolving loan guarantee program to nonprofit borrowers.  He also proposed that the New York City Returnable Grant Fund be increased to $20 million from $8 million for the next two fiscal years. The mayor also proposed increasing the amount of organizations the loans can be extended to and the conditions under which they would qualify. 

The city has contracted with a group of lenders specializing in nonprofit lending and revolving lines of credit. The group includes Nonprofit Finance Fund, Citibank, Accion, Brooklyn Cooperative and Seedco. The city will continue with a pilot program in which separate nonprofit organizations will collectively purchase goods and services in order to preserve cash.  The mayor said joint purchasing of information technology will begin for all nonprofits this summer and a plan for insurance purchasing will be in the place by the end of the year.  The city will also speed the process for nonprofits to show they comply with the city's charity regulation and post all contract information online so organizations can easily check their status.  Bloomberg will also assist nonprofits by teaming up with philanthropists Blair and Cheryl Cohen Effron and Gretchen and Jamie Rubin to create Greater NY, a program aimed at pairing business executives with nonprofit executive directors in two-year one-on-one partnerships.

So, a recipe to help preserve the NY City nonprofit sector -- loans, joint purchasing, improved contracting processes and "free" technical assistance -- ?  Maybe.  Certainly the lenders will help ensure the nonprofits have the potential to repay their loans or line of credit (this presumes there are sources to help repay and that the City budget for contracting remains steady).  Joint purchasing can help save some overhead costs - especially with IT.  I am not really sure what the business executives can accomplish through their partnerships but maybe they can be helpful (if they understand nonprofit management and governance).

Overal though, I give this effort a B+ and certainly an effort worth monitoring and maybe replicating throughout big-city America.

 

Nonprofit Board Member Steals Nearly $700,000.

Whew! Usually I am reporting on stories about a nonprofit staff member stealing from the organization.  Today I am reporting about a nonprofit board member who managed to steal nearly $700,000 from a Catholic Charity. 

The embezzler in question was apparently the Vice President of Finance and he managed to transfer this money from the Knights of Columbus owned nursing home to his own account.  Talk about a failure in checks-and-balances!  And what is this board position anyway -- Vice President of Finance?  The position gave a board member enough authority to transfer this kind of money? 

This place needs some seriously revised systems at the very minimum and should do some rethinking of board positions and authority.

Click here to view the story from the San Francisco Chronicle.

Should Shriners Reconsider Strategy to Achieve Mission?

Should the Shriners reconsider the strategy they have used to date to achieve their mission? 

That's the question I ask after reading the Chronicle of Philanthropy's (may not be accessible to non-subscribers) brief survey of nonprofits regarding their responses to reduced endowments. 

According to the Chronicle:  

Shriners Hospitals for Children, which operates 22 hospitals, appears to have lost at least $3-billion of its endowment last year.  The endowment was worth nearly $8.9-billion at the end of 2007, according to the charity's informational tax return — roughly two-thirds of its assets were invested in stocks, with most of the rest in bonds.  Shriners is suspending repairs at its Galveston, Tex., hospital, which has been closed since Hurricane Ike struck the city last September. The charity is also delaying construction of new hospitals in St. Louis and Los Angeles.  Ralph Semb, Chief Executive of Shriners Hospitals for Children, told reporters in St. Louis and Houston last month that the endowment had shrunk to $5billion, which would imply a loss of nearly $4-billion in 2008.

Marlena Lagina-Kleine, the charity's vice president for communications and development, said the loss was not that big, but she declined to provide further details and she said she was unable to arrange interviews with Mr. Semb or Keith Gardner, the charity's Chief Financial Officer.  Shriners hospitals do not accept insurance payments, and they provide services to all eligible patients at no charge.  "Our endowment, and how our endowment grows, is vital to our operation," says Ms. Lagina-Kleine. "There is no other funding."

Actually, I believe that the individual Shriner operations throughout the country also raise money for the hospitals (or they say they do) so there is another source but can local fundraising make up for a loss of this magnitude?  And, given that Shriners, like many civic/service associations, are among a breed of dying groups, does that not make the possible less possible?

I would say it might be time to go back to the drawing board and rethink just how the Shriners want to achieve their mission.  For instance, do Shriners really need to operate their own hospitals?  Can't they support other area hospitals to do what they try to do? 

As we learn from other examples in the article, bad times can be good times for gaining focus and realigning activities to mission - doing best what one does best.

Nonprofit Liability: A Lesson for Boards

Did you hear the one about the nonprofit that got sent a nearly $3 million bill for the cost of putting out a really big fire?

Well, it's a true story.  According to the San Francisco Chronicle, "A Santa Clarita therapeutic riding center has been billed nearly $3 million for the cost of fighting a 2007 wildfire that investigators say was started by a child near the charity's property.  The fire in October 2007 ravaged 38,000 acres and destroyed 21 homes in northern Los Angeles County. Tomey has said the 10-year-old boy responsible for starting the fire was playing with matches about 30 feet away from the ranch's property. The child belonged to a caretaker who lived at the ranch."

Now, we can guess that the nonprofit doesn't readily have the cash for such a payment.  Do you think the nonprofit's board ever even thought that such a situation was possible?  And if such scenario planning did take place, what did the board decide to do about it?  Do they carry enough insurance?

Remember that the fiduciary duty of care calls upon all board members, individually and collectively to be prudent as they think about the needs of the nonprofit as though it was their own business.  Have these folks?