Nonprofit Board Crisis

Neighbors Complain About Nonprofit Museum Condition

One of our Seven Warning Signs that something may not be right in your nonprofit includes client complaints.  And while not exactly clients, a whole neighborhood has complained as described in a recent story in the New Haven Register.  In addition, the state attorney general (a regulator) has gotten involved.

Here's an account from the Register:

"The house, which was burned by the British, rebuilt and expanded over the years, has peeling paint, plastic sheets covering broken windowpanes and some missing clapboards.

The East Shore Management Team recently decided to press the New Haven Museum to account for money that William Pardee left for upkeep of the Lighthouse Road house and grounds, which have been closed to visitors for several years.

But museum board President Walter R. Miller Jr. said there are no books to show the East Shore residents. Sometime in the last three years, most paper records were destroyed and computer files deleted, he said.

Miller said he doesn’t suspect malfeasance, but because of several management issues, Creative Director William Hosley’s three-year contract has not been renewed. Miller took over in December when the board removed Hosley as executive director.

So, as we've learned, when a nonprofit hears from the public and from regulators, it's time for action. 

And, the musuem board has responded. (Although it's not clear where they've been before now, but they didn't expect malfeasance?)

A great nonprofit board would certainly not have fallen into this situation.

Why is this Nonprofit a Nonprofit?

The nonprofit College Board, home of the SAT and ACT (you know, the test almost every high school student takes) is a nonprofit.  Oh, I said that didn't I.  You know its a nonprofit because, whoa, why?

Did you know that in 2006, the College Board's president was paid a salary of $673,000+ and that the average salary of its senior staff members is $239,000+?  And did you know that in that same year, the College Board's revenue was $582.9 million. Meanwhile, it spent only $527.8 million. That leaves it with a $55.1 million surplus?  You can check this out in its 990 tax return or take a quick glance at The Big Money (an on-line magazine by Slate).

Well, those are some mighty good salaries and some really great revenues and this place isn't a college or high school or anything but a place that conducts testing services.  So let's see: it has a great revenue model, a product(s) that's in high demand, seemingly competent staff.  So what am I missing?  Oh yeah -- a nonprofit mission -- a reason for it being nonprofit.  I mean really, why can't this place pay taxes?  And better, with these prices, why don't schools create their own nonprofit to make a service that's just takes money out of their coffers?  This strikes me as a problem that is perfect for a nonprofit to solve.  Oh wait, um..., a nonprofit is solving the problem......

Nonprofit Exec fired for Political Activity: Maybe

Joyce Jones, the former executive of the Black Equity Alliance in New York City was recently fired.  She's suing her board in the State Supreme Court stating "that before she was fired, several board members scolded her for endorsing the mayor without their consent.  Such an endorsement, board members told her, could jeopardize the group’s nonprofit status, which prohibits political endorsements. " 

Ms. Jones argues that :

"it was illegal to terminate an employee for political activities done outside of work. Ms. Jones, in her lawsuit, said she endorsed the mayor on her personal time – and in her personal capacity, not as chief executive of the Black Equity Alliance.

The lawsuit claims that race played a role in Ms. Jones' dismissal. Mr. Bloomberg is white; his rival in the mayor’s race, William C. Thompson Jr., is black.

“It is clear,” the lawsuit claims, that the board of directors “has an ulterior political agenda, namely, to thwart, even by unlawful means if necessary, the re-election of Mayor Bloomberg based on his race.”

Putting aside the race issue, I'm thinking that the board certainly has had issues with Ms. Jones as their exec and have found a reason for separation.  I am fairly confident that Ms. Jones understands the board's policy about political action.  From what I can tell, Ms. Jones is politically savy about how to pursue personal interests without violating policy.  This confidence leads me to firmly believe that what we have here is a board looking for a reason to install a new exec -- right or wrong, justified or unjustified. 

Bottom line, when a nonprofit board's trust in its exec fails, there's very little the exec can do to regain that trust -- again, warranted or unwarranted.  The board will then look for opportunities to disengage and in this case, it looks like they found one.  Perhaps a better question now: given all that has gone on to date, and even if she wins her suit, why would Ms. Jones want to continue to work for this group of people?

For the story, go to the New York Times.

Fannie and Freddie Reducing Charitable Giving

The Fannie Mae and Freddie Mac corporations are radically reducing their charitable giving and also focusing more on housing-related issues.  And this is a surprise?

Read the full story in the Washington Post and the so-what to the nonprofits who used to get their money but weren't all in the housing-related business.

Nonprofit Lesson: When something goes wrong

From the Baltimore Sun and carried in a number of papers (Hartford Courant) is an article that might prove useful to nonprofit administrators and board members for that one day when something goes wrong.  And yes, there's tips about managing the press, funders and public perception.  Definitely worth a read.

Jobs in the Social Change Sector

Looking for work in the social change sector?  Maybe these folks can be helpful. 

Jobs for Change, a career service and marketplace for social change jobs that they’ve created in partnership with dozens of nonprofits, including Young Nonprofit Professionals Network, AmeriCorps Alums, Echoing Green, Network for Good and Encore Careers.

You can check out the site here.

L3C An Answer for the Newspaper Industry?

Sally Duros in The Huffington Post has a solution for how to save newspapers.  It's called an L3C which is a "low-profit limited liability company".  This new kind of corporation is slowly gaining traction as a way to attract donative and investment money (recalling that nonprofits have a challenging time attracting private investors).  Ms. Duros makes some good points that may make her right, although I believe that while she correctly notes how much donative money exists in Illinois (where she is writing) she neglects to note how much these folks have lost and how competitive the nonprofit grant seeking market is without newspapers added to the fray.  That point aside, yes, the L3C may indeed offer a solution.

Nonprofits may still have to pay

Maybe nonprofits thought their tax exemption provdided them with some benefits in their communities.  And for the most part, this is true.  But with the economy the way it is, non-taxpaying nonprofits become a possible source of revenue.

According to the May 2009 issue of Governing Magazine, states and local officials are looking for new places to impose fees.  "One of those places is charitable institutions--also known as 501(c)3s.  They don't have to pay property or sales taxes, but they are liable for fees.  One Minnesota city is charging a curb fee based on property frontage as a way of generating revenue for street upkeep--and as a way to get 501(c)3s to chip in for the local services they receive."

So nonprofit execs -- be sure you are paying attention to what's going on in your local Council.  And, nonprofit Board members -- be prepared to start speaking loudly.  It may cost your nonprofit if you are not on top of this public policy shift.

*For non-subscribers to Governing Magazine, this article may not be accessible until June, 2009.

Boy Scouts as Future Storm Troopers

If you didn't get the opportunity you have just got to see the picture of Explorer (Boy) Scouts in full SWAT border patrol uniforms in the New York Times.  It's a shocker and should make mental shock waves for many.  Perhaps these pictures and the accompanying story more fully explain the real mission of this federally chartered organization -- to train US youth in paramilitary skills.  But is that what citizens really want and value?  I would think not.

Oh, and I must of course mention that the only "slight" problem these scouts have been having is a few sex abuse incidents by scout leaders.  But they are committed to reducing this -- all leaders must now go through an on-line course.  So, the same folks that brought you anti-gay policies can teach their leaders how not to be sex abusers on an on-line course. 

My position -- these folks need to lose their federal charter and donors need to start thinking twice, no three times about why they are supporting this kind of nonprofit.

University President resigns after 3 years in office.

The President of Charles Drew University has resigned after 3 years in office.

For those of you who follow or even think about the average length of terms for a University President, as I understand it, 3 years is a really short period.

According to the LA Times, this president never really gained the support of the faculty (which is generally critical).  She was also unsuccessful in raising money.  And, the school really took a heavy hit in the value of their investments. Comments following the story suggest that the President had other "competency" issues as well.

Apparently, the Trustees did not think their President was worthy of their going to bat.  These are hard times and as we have seen in the for-profit sector as well, an institution's leader must really perform or else.  It looks like the president failed the test. 

All nonprofit execs should keep this case in mind.  Boards are just not that tolerant and/or frequently look to the paid leadership for responsibility when things go bad.  And, in these times, a lot can go bad without even lifting a finger to help.