Nonprofit Board Crisis

Nonprofit Executive Committees: The First Line of Exclusion

In the most recent Utne Reader, Eric Utne lamented over how his food coop of 5,000 plus members had decided to relocate from the heart of the neighborhood where it started 34 years earlier to a mile away on some busy thoroughfare.  Mr. Utne's lament was focused on the question of "when growth is good" but he then morphed his article into an equally important question framed by the fact the decision to move was singularly made by the board without consultation of the members.

This issue, decisions without consultation or even engagement, should be quite familiar to the likes of the customers and members affiliated with nonprofits, including I might suggest, those who are often the "out" board members.  In many nonprofit boards, executive committee board members have and frequently take the opportunity to make decisions or alternatively, predetermine decisions on many matters, usually thinking that they are caring for the organization and relieving burdens from the rest of the board. In my experience, those so-called burdens are more likely those of the executive committee having to convene and explain and even defend.

I would like to recommend that boards think twice about the role they have their executive committee play, if they have an exec committee.  I think executive committees can serve as a great sounding board and/or kitchen cabinet, providing a brain trust for the exec.  Board Chair actively consulting with other task force chairs and the exec can certainly plan board meetings. 

Bottom line: exec committees, more often than not, disenfranchise the balance of the board.  I believe that if someone becomes a board member, they bring with them the capacity to be included in the discussions needed to steer the organization and assess results. 

As Mr. Utne noted: we need open, public discussions, without predetermined outcomes, in order to give collective wisdom a chance to emerge.  And of course, this applies as much to nonprofit board members as it does to an organization's members and customers.  There is much value in full community engagement. 

Nonprofit Executive Hotline

The New York Community Trust recently awarded a grant to the Community Resource Exchange to "provide free practical advice to nonprofit leaders who need answers to management questions."

The Community Resource Exchange is good people in New York focused on nonprofit capacity building (essentially, helping nonprofits strengthen their governance, management and planning components).

That said I must say I would be very interested in learning who exactly calls and what needs they have that can be addressed over the phone.  Or is this a service more like a suicide prevention hotline -- "I'm an exec and I can't take it anymore"?  In these times, is a hotline the answer to what's troubling our nonprofit execs?  Maybe.....  Although I must say, such a service might be even more useful for nonprofit board chairs.

Nonprofits Too Close To Public Sector

A New York Times article about a charter school included a small note regarding that school's founder and chair.  Back in June this individual was indicted for embezzlement charges.  "He and another SBCC official, Margarita Villegas, were accused of spending the money on luxury goods, including plane tickets for Assemblywoman Carmen E. Arroyo, Mr. Arroyo’s grandmother, for whom Mr. Arroyo continues to work as chief of staff, and his aunt, Councilwoman Maria del Carmen Arroyo." Last week I blogged about another New York legislator who was being indicted for transferring funds, in the form of grants to nonprofits that were managed or staffed by associates and relatives.

What exactly should be done to reduce these incidences where public sector officials use nonprofits as vehicles for personal gain? For sure, one must seriously question how well these groups are governed.  Conflicts of interests would seem apparent but it's unclear why no action is taken after years of bad deeds.  Will the new 990's be more illustrative and will the IRS be more assertive in following up where "things" look fuzzy?  I do believe this all starts with governance -- that is, holding boards more accountable to step up: pay attention to finances, ask questions and follow-up when things look odd.

Nonprofit Seed Companies

From the Christian Science Monitor we can learn about some really special and unique seed companies.  Seed companies, as their name suggests, grow and harvest seeds that gardeners use to produce flowers, fruits and vegetables.

There are quite a number of seed companies and while I am a farmer and make use of these companies, it was only in reading the Monitor article that I realized that their are both nonprofits and for-profits seed producers. 

Now just why is this?  If there are plenty of for-profit seed companies, why exactly do we need nonprofit companies?  Yes, the nonprofits tend to have specialties like preserving antique items or vanishing breeds but is this enough to demand a nonprofit sector within the industry?  I'm not totally making sense of why these folks have their tax-exempt status.

Your insights welcome.

Nonprofit History for President's Day

According to Ronnie Daniels, 501(c)3 tax status was created through the Revenue Act of 1954.  However,  

From 1913 to 1918 the Congress passed laws regulating taxes and establishing tax-exempt status for philanthropic organizations. In the Revenue Act of 1918, tax deductions for charitable bequests were established. This was important as it gave incentive to the wealthy to donate to charity.

Because it is Presidents' Day (a dubious holiday at best) I thought I would take a look at how charitable some of our Presidents have been.  Woodrow Wilson was president in 1918 (World War I), he was the second seated president to receive a Nobel Peace Prize.  Wilson pocketed the money (i.e. kept if for himself) unlike his predecessor, Theodore Roosevelt, who distributed his money to 28 charities in addition to some family and friends.  (see Slate.)

Dwight D. Eisenhower was president in 1954 (Korean War, Cold War); Nixon was his vice president.  President Eisenhower established the Department of Health Education and Welfare.  In a speech memorializing Alfred Smith (governor of New York), President Eisenhower stated:

But should we ourselves ever permit the spirit of charity to weaken among us, we shall by that much weaken America. Thereby, we can lose that will to sacrifice, which in hospital ward and on battlefield, in the daily living of the home and the bustle of an industrial world, only arouses men and women to the heights of greatness. Thereby we can lose the recognition of our spiritual brotherhood, of our duty that the more fortunate help those less fortunate amid the accidents of life. And that recognition is a tie binding tens of millions of Americans into a single family.

There is a responsibility on every one of us that we, by word and deed, further the practice of voluntary giving. This practice is rooted in a spirit that is at once a mark of the American dream and an essential influence toward its eventual realization.

Yet, so important, so grave, is this responsibility for the care of the unfortunate, that it must be borne not only individually but collectively. In these days of complex and mass living, we must recognize that disease and calamity, their prevention and correction, require a broad and concentrated effort, in which the Government has a significant role.

Nonprofit Fundraising: Where's The Money?

Earlier this month, Slate Magazine posted the Chronicle of Philanthropy's largest American charitable contributions of the year and who received their largess.  Interestingly, Bill Gates was only #3.  More interesting: Bill Gates' gift of $350 million is for the building of the Gates Foundation building.  And yes, Mr. Gates has been steadily depositing 10's of millions to the Foundation for an eventual $3.3 billion.

Now, back to that building......

Nonprofit Sector Will Change

The nonprofit sector is changing, now!  The bad economy has had its impact and the nonprofit sector has been hit.  How it will look 2-3 years from now is anyone's guess but the Wall Street Journal offered some insights which I think are fair predictors for the Sector's future.  The title of the article: Once-Robust Charity Sector Hit With Mergers Closings.

Not a whole lot more to say .... pretty sobering stuff.

 

Nonprofits As Vehicles For Graft and Broken Monitoring Systems

Once again a New York City Councilman is in the news with a federal indictment for stealing funds.  The Councilman used what effectively served as "personal" nonprofits to redirect funds for himself, family members and friends.  According to the New York Times, the councilman was able to do this,

..prosecutors contend, in part by repeatedly inflating expense claims to the city on the part of the nonprofit groups, including rent costs. From 2002 to 2009, the councilman directed more than $1 million to the groups while never disclosing his close affiliation with them.

...the 13-count federal indictment revolve around Mr. Seabrook’s use of Council discretionary funds, known as earmarks, to finance a string of nonprofit groups that city and federal authorities say ultimately did little for the communities they were supposed to aid.

The councilman managed to pull off this theft for 7 years!  That to me seems as much a crime as the actual thefts.  What we have here is a gross failure in monitoring and enforcement systems on the part of local and federal enforcement officials.  Sure, everyone's all caught up now but does it really take this long to figure out that a nonprofit is just not performing; that there is something fishy about who exactly is on the payroll; and, most incredibly, reimbursements to the tune of "$177 for a $7 bagel and soda"? 

Yes, for sure, the councilman and all those who benefited should not go unpunished for their deeds.  They should all have to pay back what they've stolen (note: I do not believe that prison either changes behavior nor makes right a wrong).  But, really, let's not go long without figuring out how to make the monitoring and oversight systems more effective so that folks like this councilman aren't even tempted to go astray. 

Nonprofit Board Doesn't Like Its Clients

I recently learned about a nonprofit board that received a petition signed by over 1/2 of its clients asking the board to make a change in the way it conducted its meetings as a matter of respect to the clients.  The board, legally required by its grant agreements to have clients on its board and maintain a client advisory board voted "not to respond to the petition".  This same board occasionally invites a client to talk about his or her experiences to provide insights to the board.  After a recent and particularly raw presentation, the board has decided it will not invite client presentations to occur more than once a quarter.

So, what do you think?  Is this a board that has a "love-hate" relationship with its customers or what?  Frankly, I'd say it's time to get some fresh blood on this group - preferably folks who care more about creating an environment that is supportive, welcoming and, say it ain't so, client friendly.  Meanwhile, if I were the clients, I might start spreading some really nasty rumors about this board, particularly to the funders.  Ok, maybe that's not the best advice but when the governing body of an institution consistently exhibits signs that it really doesn't like its clients, how can I the donor be certain that my grantee really shares my values?  And really, who else can ensure that clients are served best when it's not the board?

Nonprofit Economic Development Agency is LDS

Some cities, let's say Detroit for instance, would be ecstatic to have $1 billion dropped on them for economic development.

In Salt Lake City, $1 billion is being spent for urban redevelopment creating retail and residential space as well as some 1800 jobs to create it all.  Whew!

Now normally you might say, wow, that's a big deal but isn't that the cost to do massive redevelopment?  What exactly is the story?  The story is that this redevelopment is the efforts of the Latter Day Saints -- yup, the folks who founded Salt Lake City.  Do try to put aside any "attitude" you might have about the LDS to get through the remainder of today's blog.

The New York Times picked up on this story, and while I'm not really sure there's as much of a story here as the NY Times makes it out to be, the story does serve as a reminder that all nonprofits have their roots a set of fundamental beliefs and values.  Missions which are based on theories of change are all based on these sets of fundamental beliefs and values.

The LDS could just be making a good economic decision to revitalize tracts of land that will hopefully increase the value of its investments and in-turn increase its ability to perform as an effective faith-based organization.  Or, as noted toward the end of the article, the LDS could be practicing its faith.

In the Great Depression, the church established a food and clothing distribution system for destitute members and bought land all over the state, establishing a precedent for wading in during hard times.

This is the stuff that demonstrates how nonprofits in America make a difference.