Nonprofit Board Crisis

Nonprofits Win With Wal-mart?

According to the Chronicle of Philanthropy and USA Today, Wal-Mart "topped the list of 2009 charitable cash contributors having distributed $288.1 million and pledging $2 billion over 5 years to fight hunger".

Hooray for Wal-Mart?  Hooray for the nonprofits that benefited from Wal-Mart stockholders' largess?  Maybe. 

For sure, the nonprofit recipients of Wal-Mart bucks are no doubt grateful.  But at what cost to the life of their respective communities, Wal-Mart employees, and the communities where all the Wal-Mart products are made?

I understand that there is little that can change now that communities have embraced Wal-Mart and its cheap prices and products over US manufacturing and locally owned small businesses.  And, it's likely that all the little retailers, and some who were big, that no longer operate where Wal-Mart has located, might not have been able to give this much money, cumulatively. 

But allow me to express my hope that now that Wal-Mart has established itself as the dominant corporate charitable player, it will consider going the next step and become the leading corporate social citizen and as a start, paying living wages and establishing positive work environments for its employees and those who make its products; investing in local products and services where available.

And, while nonprofit boards don't have many alternative sources of giving these days, it might be worth the conversation to consider the compatibility with your values and mission of accepting Wal-Mart contributions. You know...that "tainted money" thing.

Nonprofit Healthcare Provider: Not

Not paying property taxes, for nonprofits that own property can be a really big and costly deal.  So, as we've seen in New Haven, CT, a nonprofit may have to demonstrate that it is indeed doing nonprofit work.

A Wisconsin State Court of Appeals ruled today that Wheaton Franciscan Health care failed to prove one of its outpatient clinics was indeed doing nonprofit work and the ruling means it can not recoup the $2.9 million in property taxes paid in part of 2003 through 2006.  According to the Milwaukee Journal Sentinel, 

Two floors of the building are devoted to medical offices, and Wheaton Franciscan never sought tax exemptions for that part of the building. The outpatient center's services include cardiology, pulmonology, surgery, pain management, radiology, physical therapy and a sleep disorder center.

It also includes an urgent care center - though one that differs significantly from what most people consider urgent care because its physicians bill at rates similar to those at hospital emergency departments.  In their opinion, two of the three appeals court judges noted the outpatient center's set hours, its focus on outpatient care and its policy of not accepting ambulances transporting patients with emergency conditions.

They determined that the clinic was essentially a doctor's office and therefore subject to city property taxes.

Wheaton says it "continues to maintain that the majority of the facility is dedicated to hospital-based services as an extension of Wheaton Franciscan-St. Joseph and, the nonprofit health care system, affiliated with the Catholic Church, also reinvests all of its net income in the communities its serves."

Perhaps we are getting closer to the idea of the charitability documentation idea employed in the UK where nonprofits must demonstrate they are being charitable.  The difference: these property-tax rulings are local and not national.  But for that matter, maybe it is the local "people" who are in a better position to judge what is charitably benefiting the community.  Perhaps.

Nonprofit Governance: When it's bad, you know it when you see it

What is "bad" nonprofit governance?  I believe you know it when you see it.  In a worse case scenario, when you do see bad governance, it looks like there's been no checks-and-balances, or planning or evaluation but there's been lot's of money and lot's of politics, on the inside.  Maybe there's not very good relationships with constituents.  Maybe there's individuals benefiting financially but the community is not and mission, well, that's just not getting accomplished.

Want to see a good example of "bad" nonprofit governance?  Check out this New York Times article about the Greater Harlem Housing -- a perfect example of bad nonprofit governance.

Nonprofits and Property Tax

It seems this is the week for nonprofit property tax issues.  Earlier this week I noted what was going on in New Haven, CT with an over-aggressive tax collector not apparently believing that churches and nonprofits weren't all living up to their tax-exempt status and subsequently sending tax bills, many which are being contested and some that have been overturned.

In Philadelphia this week, according to the Philadelphia Inquirer, the Redevelopment Agency was doing its job to move along delinquent development deals.  One of the deals successfully moved along focused on creating a Mormon Temple.  The question: "can the city afford another nonprofit entity that is exempt from paying taxes?" This is a question I propose will be asked more frequently as tax bases diminish.  And isn't this a reasonable question?  

If municipalities really can't collect taxes from the many nonprofits, what to do?  Certainly not create more non-taxable properties.  But for the moment I propose that the first line of order for nonprofit boards is to take some time to make the case that your work offers substantive value and contributes to the community as much as municipal activities.  A public that accepts this principle, really the principle that drove the creation of tax-exempt, must be fully equipped to step-up and defend its communities nonprofits.  Nonprofits must tell their story to ensure this outcome.

Nonprofit Jawdropping Compensation May Achieve Mission

Simply jaw-dropping: President of the American Museum of Natural History: $877,000 compensation package plus free rent in $5 million East Side apartment; the director of Metropolitan Museum of Art lives in a $4 million 5th Avenue apartment; and, the director of the Museum of Modern Art gets a $2 million salary plus benefits and lives in a $6 million condo again, owned by the Museum.

Jaw-dropping?  Yes indeed!  Why?  Because these aren't the compensation or percs for my job.  And that's it!  Yes, I would welcome having this level of income and live in these places (although I also like my farm).  But would I or you be prepared to do what it takes to earn this compensation?  There's the untold all-hour meetings with a wide range of people that includes staff and really rich people.  There's the details I would have to think about, every day and night.  There's the fundraising -- endless.  There's the regular use of my "house" where those who "have" expect certain levels of comfort.  Not to mention the miles of credentials I would have needed to acquire just to get the job. 

Yes, the list of what it takes to earn the money these three folk make is long and hard.  Not that there isn't pleasure and joy to be had but I have to ask myself: do the people sitting on the governing boards of these institutions -- these folks of "accomplishment" have a complete understanding of what it takes to do these jobs?  I think they do understand the value of a dollar and understand what it takes to do the job and as a result have established compensation levels to reflect this understanding.

Jaw-dropping?  Yes!  Reasonable in today's market?  Likely.  Good governance?  Probably.

Thanks to the New York Times for this story which focused on the taxation issues around employer paid living expenses.

Nonprofits Under Seige: Another Thought

Earlier today I spoke of the situation in New Haven, CT where an overly zealous tax-collector decided to levy property taxes on a bunch of churches and nonprofits.  It turns out that the tax-collector didn't do a very good job documenting the rationale for these tax bills (usually the best argument is around unrelated mission/business activities) and the City is now having to review each claim and reverse its bill.

I did have an additional thought on this matter.  The nonprofits and churches involved in this situation spent a lot of energy rallying their respective troops.  From what I can tell they did not rally together and approach this situation en mass.  Such organizing can generate an even greater public sector response and validate the individual group's issues.  Such organizing can also help build partnerships and longer-term relationships between organizations leaving open possibilities for shared resources and program collaboration.  State Associations of nonprofits might also get engaged as it is likely that tax collectors everywhere are feeling a need to be pro-active.  Bottom line: this is an opportunity to build community and also create a "watchdog" to prevent future attacks on the nonprofit community.

Nonprofits Under Seige: Tax Assessor Goes Crazy!

The City of New Haven, Connecticut Tax Assessor had decided that tax exemption does not necessarily mean that nonprofit organizations and churches shouldn't have to pay property taxes.

In a move perhaps to offset dwindling tax income, the Tax Assessor saw it fit to revoke the property tax exemption of lots of nonprofits and churches.  The expected consequence: nonprofit and church constituents have rallied.  And, according to the New Haven Register:

In recent weeks, the city has taken steps both publicly and behind the scenes to address concerns about tax assessments. In addition, to recent reversals on tax exemptions for nonprofits, Mayor John DeStefano Jr. last month announced changes to the tax and assessor’s office to address recent complaints: Audio will be added to cameras in both offices; a log will be kept of customer concerns and complaints; feedback cards will be provided; a hot line with a guaranteed timely response; recording of all telephone calls; cross-training between the assessor’s and tax collector’s staff; and customer service training of employees in both offices.

Yes, "justice" can be done thanks to squeaky wheels.  But is this really justice?  Maybe the tax assessor actually makes a good point in arguing that not all that nonprofits do is necessarily, nonprofit.  And if the city can accurately document the non-tax exempt activities then the City actually has a responsibility to collect the appropriate taxes. 

This situation actually does serve as a lesson for both parties.  For nonprofits, be sure you are really pursuing your mission when undertaking activities or else, be prepared to accept the fair responsibility to pay property taxes.  Nonprofit Boards -- pay attention!  And for tax assessors, if you think there's a taxing opportunity, understand mission and document well what you think should be taxed.  Doing your homework will reduce the embarrassment and possible job loss you will surely face for failing to do so.  Remember that nonprofits, for the most part anyway, have loyal and often vociferous constituents who aren't afraid to act for the benefit of their nonprofits.

Nonprofit Branding Matters

Nonprofits are frequently advised to turn to the for-profit sector to learn how to be better "businesses".

Some nonprofits identified in a Wall Street Journal article have taken one particular business practice seriously: vigorously defend your brand.

It turns out that raising money is a primary motivator for ensuring the sacrosanct nature of a name brand for some nonprofits.  Komen For the Cure was a central part of the story as it works hard to ensure its name or versions of its name is not used by others.  After all -- the folks at Komen were first on the scene with a clever enough name that really appeals both as a definer of its work and a fundraising tool and why on earth would they want to give that up easily?

But, I'm not convinced that vigorously guarding a brand is one of the lessons nonprofits should adopt from the for-profit sector.  First and foremost, there is something inherently nonprofit about sharing so all can win: more donors can come to the many tables and more folks can be served.  Next, and equally important, there's a lot of need and one "brand" does not really satisfy all, be it donors or those in need -- hence, lots of options.

Nonprofit Boards: Observations

I am currently reading Money for Nothing by John Gillespie and David Zweig and couldn't wait 'till the end to share some of my learning. Published at the beginning of 2010, this book, based on lots of cases and interviews, sets out to identify and understand why corporate boards are the way they are. 

Now, I recognize that the boards that run for-profits are in some ways, different than those that oversee nonprofits.  Two big differences: members are generally unpaid and, members are generally passionate about the mission.  The focus on mission is one of the primary motives for why I have spent 30 years singularly working with nonprofit boards.

But, the distinctions between for-profit and nonprofit boards thins after these two characteristics.  Here's some lines I have taken from the very early part of the Money for Nothing.  See how much you find or believe to match your experience.

Board members are selected from the same gene pool.  They are a relatively narrow, elite group with homogeneous backgrounds, values and world views.  Boards lack diversity not just in terms of gender, ethnic origin, and age, but, more important, in their members' range of relevant experiences, in the personalities, and in how they perceive and deal with business issues.

Being on a board is a part-time job.  Frequently, board members lack the time to be sufficiently committed to their duties, especially if their own "company" or the one on whose board they sit develops a crisis.

The very role of the board is increasingly contradictory.  Directors are asked to provide a long-term strategic view while they are caught up in details and processes that leave insufficient time for vision.  They are supposed to independently monitor executives while also providing them with knowledgeable advice, counsel, and connections.

The go-along-to-get-along culture of boards is usually very ingrained, and all the check-the-box reform efforts do little to change it.  Collegiality and passivity are the norm; directors who ask tough questions or vote against management proposals are often ignored, passed over, and cut out.  And of course, as human beings, directors are no less prone than the rest of us to the biases, emotions, and behavioral psychology that affect people under stress making decisions in groups.

Nonprofit Board Bucks the Evidence And Refuses To Make Change

In my consulting practice I regularly get an email or call from a nonprofit board member or a manager asking what to do about their board who they believe is failing the nonprofit.  My usual first advice: don't go this alone -- find other board members who agree.

But what happens when it's just not possible to find others to get on your side? -- other members don't want to have an unpleasant experience with their "friends" or things just aren't bad enough or, maybe worse, members just don't see a problem -- however, conditions really are bad... 

Under the category: you know something may not be right in your nonprofit, one nonprofit board member I know, after lots of frustration trying to get the board to "see", went to the local press.  Not only did the press highlight the situation, they went into great and what I would call, embarrassing detail about what was going on in the nonprofit.  Here's the article.

Now, can such news actually affect the board's behavior?  That remains to be seen but such press would certainly get my attention and at very minimum, will get the attention of funders.  This is not always a good ending for the board.