Nonprofit Board Crisis

Nonprofit Board Warning Sign: Bad Federal Audit

A nonprofit board should recognize something's not right when its funder steps in and says so.  That's the case for a local organization's board that got bad news from a federal audit and subsequently fired its executive of 17 years.

After a federal audit found that a local organization had misused $250,000, the senior center fired its longtime director. On Monday, a Boston-based management firm will step in to run the organization.

The board gave the Exec 30 days notice and hired the management company to take over on an interim basis.  The board also identified the "irregularities found by the HUD audit as 'unintentional errors' and stated neither the executive 'or anyone else acted unethically or were engaged in any kind of legal wrongdoing.'"  However, the board would not comment on why specifically the board had decided to fire their exec.

Compliments to the board for stepping-in and taking action. 

Lesson: the board should have in place reports that allow it to identify problems before being told so by their funders. 

Question: what else was going on that would lead to such an action as firing the exec with 30 days notice (not always considered best practice)?  Should the board have acted sooner? 

Nonprofit Board More Than Insensitve to Clients

I heard from an associate working with a nonprofit board recently who shared:

This may seem petty, but was a big deal to the clients.  The center, like many places, has a policy that tells clients if you mess up the common space, you clean it up.  Well, I think after the Board meetings, the common space in which the Board meets tends to be pretty messy with coffee cups, plates...that type of stuff sitting on the table.  So a representative of the clients attending a board meeting asked the Board to just be conscious about that type of stuff.  The clients basically asked the Board to observe the rules they are subject to.

One of the Board members responded, stating that the Board could just meet off site at a local hospital conference room where the Board used to meet.  Funny thing is...they would DEFINITELY have to clean up after themselves should they meet there.  Another Board member stated Board members are the superiors to the employees, clients and volunteers and that coffee and food should be prepared for the Board when they arrived.

Petty?  I think not! These board members need to take some time out and think about the fundamental beliefs and values that guide them as board members.  This type of attitude is not just insensitive, it suggests to me that the wrong people are "on the bus".  Instead, I want board members who care passionately about the clients, who see the clients as the driving force to what brings them to work together.  I also want the Board to view employees and volunteers as extensions of themselves -- individuals who also come to the table with passion and a desire to make a better world for the clients.  The attitudes expressed in this dialog do not represent caring, passionate people -- the main ingredient to a board that will do whatever it can to achieve success.

 

Nonprofit Board Chair Must Leave

Imagine: another nonprofit has agreed to takeover your beleaguered nonprofit subsidiary.  The subsidiary just isn't producing what you need it to and you want it gone from your fiduciary care.  Now further imagine that one of your conditions to the nonprofit willing to take on your subsidiary is that they must get rid of their board chair -- a donor who is also a substantial contributor.  You basically don't like the style of their chair and believe that they would not do well for your subsidiary.

Impossible?  Maybe, maybe not.  But this is one of the three terms being presented by GM to a Dutch company that wants to take over Saab (I've owned 4, this is close to my heart).  If you were the nonprofit board facing a similar-ish situation, what would you do? 

Note, this is not a purely academic question.  In these times of mergers and acquisitions, the disposition of the board chair and other board members is certainly one of the "to-be-determineds" on the table.

To read about the GM part of this story, go here.

Nonprofit's Value Seeps Away

The Tea Party is in trouble.  It's followers are not sure it's all its cracked up to be.  But this grassroots (maybe it was and maybe it wasn't) movement, is beginning to get tears in its bag while its value is slowly seeping away.

The issues appears to be, not surprisingly, money, whose money is in the game and who's profiting along with a question of purpose and what it is they really stand for.

Consistent with my 7-Signs (of when you know your nonprofit is in trouble), this organization has its members AND its sponsors asking the question: what exactly is going on here and who's profiting? 

Is the Tea Party another ACORN?  And, where exactly is the board in all this?

I'll be listening.

For more on the story, see the New York Times.

Nonprofit That Depends on Philanthropy

In this blog I frequently challenge the philanthropic nature of the really big universities (and some that are small) and hospitals.  Sometimes I refer to museums as well, particularly those that are really big and pay outrageous salaries to the execs -- oops, Presidents.

A Wall Street Journal article on Symphonies has helped me understand the business model of Orchestras, and for sure, there's no question that "nonprofit" describes these institutions.  Here's the financial formula:

Orchestras lose money on their operations—ticket sales do not cover the cost of presenting the concerts, even at prices that often exceed $100 for premium seats. For most of the second half of the 20th century, the difference was made up with funds from recording income (which for most ensembles disappeared entirely about 15 years ago) and gifts from individuals, foundations and corporations.

Now, what was it I was saying about salaries?  Note though, this does appear to be the going rate to retain "talent".  In Cleveland, Conductor Franz Welser-Möst received compensation of $1,316,120. Concertmaster William Preucil (the orchestra's most highly paid member) received a salary of $414,159 and benefits of $19,658."

The focus of the WSJ article is how the business model for orchestras must change with the times and has changed in some other communities.  The article concludes stating:

...the survival of orchestras involves the reduction of their cost base, and for that to happen, managements across the country need to make their financial situation transparent to their musicians and make them full partners in creating fiscal viability for the enterprise.

Hm, now what about other nonprofit sectors?

Nonprofit Board Chair Departs

Pete Carroll, the current coach of USC, is leaving his job for the pros.  And, according to the LA Times, he will also be leaving his position of Chair of the Board of the nonprofit he founded, a Better L.A.

The so-what to his departure provides some good insights about how important a good nonprofit Board Chair can be and also provides some fodder for an even less frequently discussed topic: succession planning within the nonprofit board.

Nonprofit board chairs -- take a look -- this could be you.

Nonprofits (i.e. the Poor) Lose Most from Supreme Court Ruling

The Supreme Court just decided that corporations and unions are now "equal" with individual citizens.  The consequence: corporations and unions, can spend as much money as they want to influence public policy, and get politicians elected.   But nonprofits are left out of this ruling as most laws that govern them are not over-ridden by this decision.  So, the consequence?  The one voice for those who have limited if any voice are left out of the "equal citizen ruling" AND, even if they were included, they would not have the resources to equal their for-profit brethren in whatever they choose to influence.  This is bad for all of us but particularly, the poor and disenfranchised.

Robin Williams recently suggested that legislators should wear those jackets that race car drivers have -- you know, the ones with all the corporate sponsor patches.  Essentially, the Supreme Court has just said this is probably a reasonable step.  But of course, there will be no patch for those without resources.

Nonprofit: 73 Years Old and Nearing the Finish Line

2010 is the 73rd birthday for the All-American Soap Box Derby.  And, if I translate an article I just read, the Derby may indeed have reached its own finish line.

According to the San Francisco Chronicle, "The nonprofit derby has gone two years without a corporate sponsor, and an Ohio bank is suing the organization to repay a $580,000 loan."  Meanwhile, Corbin Bernsen, the actor from L.A. Law, is trying to get $1 million from investors to finance a movie about the derby.

So, let's see: the Board took out a loan which it can't repay for more that 1/2 a million dollars.  At the same time, it or its staff have found a movie star to do a movie which I can only guess will steer some profits toward the organization.  Interesting strategy for sure.  But what about this board -- is this really good governance?

Nonprofit "american idol": Philanthropy at its Best?

Once again, an "american idol" game is running -- yes, 9th time on TV but the game I'm focused on is being run by Chase, the bank.

Chase is running a contest.  I think it's mostly about how many hits a nonprofit can get on Facebook (I know, I should dig deeper around the details).  The winning organization gets $1 million.

Great reward but a huge amount of work and pretty much, the grassroots, popularity raising type of work.

Is this philanthropy at its best?  I certainly hope not.  Popluarity vs. fully informed passion.

Nonprofit Proliferation

In recent years many foundations (and community foundations in particular) have bemoaned the proliferation of nonprofits.  "There are too many",  "They are replicating services", "We do not need another nonprofit", etc. Calls for mergers and partnerships very much reflect these feelings.

A quick glance at any number of newspapers this week, particularly around the Haitian story, can probably challenge the assumption that proliferation is a bad thing.  At least in the world of international aid (although likely in other areas too), innovative solutions to various types of challenges are being developed.  The New York Times identified a few nonprofits that have been developing new approaches to addressing the delivery of health care and housing services -- workable methods that had not been developed by the long-standing nonprofits with similar missions.

As much as I firmly believe that there are many opportunities for partnerships, alliances and mergers, I am reminded that innovation often comes from newer and/or smaller groups.  The donor sector must find a way to accommodate and support both for the betterment of society.