Nonprofit Board Crisis

Nonprofit Real Estate Tax Exemption and PILOTs

If I've said it once I must keep repeating: nonprofit boards beware!  In really difficult economic times for municipalities, counties and states, your tax exemption likes like a relief strategy.

Here's some musings in the Philadelphia Inquirer which pretty much says to universities and health care institutions, "if you can't voluntarily be more forthcoming with your PILOT (payment in lieu of taxes) we the citizens should think about helping move your thinking along. 

As for our hospitals and universities, they do have the option of making payments in lieu of taxes, known as PILOTs. But total contributions in Philadelphia are less than $1 million a year, with some of the major schools stiffing the city entirely.

Compare this to Boston, where 13 colleges pay the city $8.4 million a year - Boston University $4.9 million all by itself. Still, a task force established by Boston's mayor is recommending that the nonprofits contribute up to 25 percent of what they would otherwise owe in taxes.

Certainly, many of our hospitals and universities are great institutional citizens, making valuable contributions to the city in terms of jobs, their purchases of local goods and their support of the arts and other important projects. But the same can be said of many of our for-profit businesses, like Citizens Bank or PNC (where I once worked) or Aramark and many others, which are not tax-exempt and contribute mightily to the city.

The Nutter administration recently met with representatives of some of Philadelphia's nonprofit institutions and is in a fact-gathering process, according to press secretary Doug Oliver, who told me the administration wants to make sure it doesn't make decisions that "unintentionally choke the economic activity that the city needs so badly.

Nonprofit boards beware!  Just because you don't see conversations like this in your local paper, it doesn't mean they aren't taking place.

Nonprofits To Be More Outcome Focused

The many New York nonprofit boards that have chosen to pursue mission and rely in part on contracts with the City may have an easier time in the future managing the consequences of these contracts.

As it stands now, these nonprofits have faced significant delays in getting their payments for service rendered and have also been knee-deep in paperwork in addition to bearing additional costs for borrowing bridge funds. Now the city is proposing to centralize contracts as an approach to at minimum, reduce the demands of the paperwork.

But are the nonprofit boards and staff prepared for new rules that may include a higher and more outcome-focused or results-based level of accountability?  Many other institutional donors already set these standards for accountability. I believe it's certainly about time that municipalities set similar standards as funders.  But more importantly, maybe this will be an opportunity for these nonprofit boards to become results focused as well.  Being results focused is good for all: nonprofits, donors, and most important, those who are the nonprofit's beneficiaries.

See the New York Times for more details.

Nonprofit Boards and Sustainability

Earth Month is about to draw to a close and it makes me wonder: has your nonprofit board had a conversation about how its mission, policies and procedures are contributing positively to creating a sustainable environment? 

I believe that most nonprofits live in a bubble believing that because they are all about "giving back" and addressing this or that, they themselves could not possibly do harm. 

So, nonprofit boards, is your nonprofit immune from doing harm to the earth?  What's your sustainability policies look like?  Are you contributing to the problem or being a strong environmentally responsible citizen?

Nonprofit Sector: Thought for the day.

Here's a question I heard Diana Aviv (Independent Sector) ask at last week's Georgetown Law School day on nonprofit governance:

"Why hasn't the (nonprofit) Sector solved the greater social ills given the amount of money being spent?

To start with the answers--there's Boards --volunteer leadership.....

Nonprofit Board And Exec To Go

Does the government think nonprofit governance matters?  You bet it does!

Whenever I see one of these occasions where a politician uses a nonprofit for personal gain, it's irritating.  But of course, my big question is always -- where's the board?  It's generally a silly question because we all know, when a politician is gaining personally through a nonprofit, the board is often "in" on it -- either gaining as well or compliant for other reasons.

According to the New York Times, Attorney General Andrew M. Cuomo has filed a civil lawsuit against Senate Majority Leader Pedro Espada Jr. alleging that Mr. Espada, his family and his political aides had siphoned more than $14 million from a health care nonprofit he founded to pay for meals, vacations and campaign expenses.

The lawsuit, part of an ongoing investigation by Mr. Cuomo into Mr. Espada’s political and business activities, seeks to remove Mr. Espada from his position as president of the nonprofit, Comprehensive Community Development Corporation, which runs a network of Bronx health care clinics that receive the vast majority of their funding from the federal and state governments.

The lawsuit also seeks to remove the nonprofit’s entire board, which Mr. Cuomo said was stacked with Espada family members and friends who rubber-stamped millions of dollars’ worth of inappropriate contracts and expenditures.

Go Mr. Cuomo and Boards beware!  You are responsible and the consequences could be as much yours as your executive's.

Nonprofit Boards BE WARE!

Nonprofit Boards Be Ware!

I mentioned it Friday but it's worth mentioning again as did the New York Times.

"As many as 400,000 nonprofit organizations are weeks away from a doomsday.

At midnight on May 15, an estimated one-fifth to one-quarter of some 1.6 million charities, trade associations and membership groups will lose their tax exemptions, thanks to a provision buried in a 2006 federal bill aimed at pension reform.

The federal legislation passed in 2006 required all nonprofits to file tax forms the following year. Previously, only organizations with revenues of $25,000 or more — or the vast majority of nonprofit groups — had to file.

The new law, embedded in the 393 pages of the Pension Protection Act of 2006, also directed the Internal Revenue Service to revoke the tax exemptions of groups that failed to file for three consecutive years. Three years have passed, and thus the deadline looms."

Nonprofit Governance: Thoughts From Georgetown Law School

Just back from a day-long session sponsored by Georgetown Law School co-sponsored by the Independent Sector and, yes, the IRS.

Great session and I plan to parcel out my take-aways in snippets over the next couple of weeks (depending of course on what's in the news).

Anyway, one learning from the IRS -- it cares about nonprofit governance.  "It" believes that nonprofit governance is particularly important as the primary vehicle for risk management.  But, only a board that is engaged, informed and independent can effectively manage risk.

Another learning: the IRS understands that no 1-size (in terms of how nonprofit boards are structured or work).  However, all boards must build good governance habits. I have and will continue to regularly visit this principle -- it makes a difference when we advise a nonprofit board on how to be great.

Finally, for today, just a reminder that ALL nonprofits must make some kind of annual filing.  Failure to file in 3 years means automatic revocation of tax exempt status (meaning -- it's gone!). 

And, if you would like to be kept apprised about the IRS' exempt related doings and thinking, you can get their nifty newsletter.

Thanks again to Georgetown Law, Independent Sector and, never did I expect to say this, thanks too to the IRS and Sarah Hall Ingram from the Exempt Division.

Nonprofit Lesson In Governance

The Boy Scouts are again on the stand for sex abuse.  This time, the cost may be expensive for the Scouts as the alleged victim is seeking $25 million in punitive damages for the organization's failure to prevent the abuse.

Yes, this is a lot of money but more importantly, this is a case about governance: did the board, via its staff, fail to exercise its duty of care, by providing appropriate polices and training, in implementing its mission of mentoring boys? 

While the Scouts may be an exception in terms of the depth of their resources (see LA Times article) all nonprofit boards should pay attention to their policies, training, and of course, liability insurance needs.  It's a matter of fully exercising its duties, not to mention, achieving mission.

Nonprofits And $1 Million

$1 Million is a lot of money for pretty much any nonprofit.  It's even "life changing" for the majority.

So, how far should a nonprofit go to get it? 

I honestly don't know the answer to this question but I do know that these "American Idol" type awards bug me and, to get one, a nonprofit has to do some pretty heavy lifting.

Case in point: I just received a poster, yes, a poster, from CRF.  CRF is the Community Reinvestment Fund.  CRF is, from my experience, a great organization that, according to the poster, "puts Americans back to work by financing small business growth".  CRF does good and important work.

So what's my problem?  Back to the poster.  CRF designed, printed and postal-mailed a poster to ask its constituents, I presume, to "vote (on-line) for CRF USA every day, now through May 2nd."  You see, CRF is a finalist competing to receive a $1 million operating grant from the Sam's Club Giving Made Simple campaign.  One winner will be selected, not because they do particularly great work or are really efficient or effective, but because they receive the most on-line votes from Sam's Club Members.

And therein lies my problem with "American Idol Philanthropy".  A bunch of nonprofits are knocking themselves out, taking time away from mission, to get "hits".

So, is there anything a nonprofit should not be willing to do to get one million dollars?

Nonprofit "Rock" Star Diminishes Role of Board

The Philadelphia Inquirer tells a story about Sister Mary Scullion, her HOME Project and the many rock stars, like Bon Jovi, and dignitaries attracted to and supportive of Sister Mary's work.  Sister Scullion is most impressive having made a career that appears to have had a positive impact on the homeless in Philadelphia.

Throughout the article, one element was missing for me: any reference to a Board of Directors.  Now, I know this article was focused on Sister Scullion and her associate, Joan Dawson McConnon.  And, these two women do appear to have played a significant role in generating HOME's accomplishments. 

But, to be honest, nonprofit founder "stars" make me anxious.  And yes, I know, funders and donors give to people and Mary and Joan appear to have given good reason in lots of confidence.  But where is the Board?  Are they just the strong silent type who do what's needed and don't themselves need credit or a visible role.  And why doesn't Sister Scullion refer to them as her back-up team or some such other status?  And, what happens when the day comes when Mary and Joan are moving on?  Is there a plan?  And what is the board's role in ensuring all is internally strong? 

Many questions.  The lesson: nonprofit "rock" stars can be important change agents and attract lots of money and press for a nonprofit's work.  But, let's not forget: the star is not the nonprofit.  All, including the star do well to remember this lesson, particularly the board.  As we know, even if the board is not out front in the public's eye, it is they who must oversee as though the nonprofit was their own business as well as ensuring adherence to mission and assuring results, in the immediate and long term.