Nonprofit Board Crisis

Nonprofits and Two Lessons in What Good Governance Should Be

Jeremy Nowak, president of the Philadelphia-based Reinvestment Fund, the chairman of the boards of the Mastery Charter Schools Foundation and Alex's Lemonade Stand, the vice chairman of the Philadelphia Federal Reserve Bank, and a member of the board of the Pennsylvania Housing Finance Agency, offered in philly.com some lessons about the components of good governance while describing bad governance as demonstrated in the actions of the Philadelphia Housing Authority and Delaware River Port Authority.

Mr. Nowak offered that "the substance of governance is social engagement and personal character" and that "It's the trustees' job to know that all is not well." and, finally that "reviewing the CEO's performance is one of the most important governance functions in every organization."

While I absolutely agree with Mr. Nowak on these principles.  Boards and board members are challenged not only by their environments but by their level of skill and knowledge.  I believe we need to find a more effective means of educating folks about how to live their governance correctly and also on to hold all accountable.  I would propose that between the IRS, State Regulators and maybe D&O insurance providers, we could find a solution to the challenges that ails public and nonprofit governance.

Nonprofits and Lobbying

Mixing church and state is one of those core no-no's that goes back to the founding of the country.  Although how thorough the division is up for debate, as some believe we mix the two quite a bit, right down to what's on our coins.  However, even if limited, the value of the separation is easier to see if you first look to what happens when church and state are synonymous as they are in quite a few places around the world.

That said, according to the Wall Street Journal, "some church pastors are seeking to give candidates they favor a boost at the polls, even if it means violating tax laws."

My opinion aligns with Robert Boston, "a spokesman for a group opposing politicking in the pulpit, Americans United for Separation of Church and State, said he wouldn’t care if pastors advocated for certain candidates if they gave up their tax-free status.  They want all the benefits of the tax-exempt status with none of the burdens."

American Idol Philanthropy

A ranting moment over Pepsi's insistence (among other corporate so-called do-gooders) to distribute its donations through a process of community voting -- the Pepsi Refresh Project.

I'm all for democracy (well, ok, I prefer democratic socialist) but that said, the public tends to vote first for what "feels" good and then for what may make sense and then maybe, with added due dilligence.  With all due respect to the variety of nonprofits which received awards in the Gulf round, this is not optimal philanthropy -- not necessarily even thoughtful philanthropy.

What about outcomes and results and due diligence?  Where are these factors in the allocations of what are truly scarce resources?  Nope, this is just not good philanthropy.  Good public relations?  Absolutely!  Good philanthropy?  Nope! 

Nonprofit Merger-Acquisition Smooth

Mergers and acquisitions frequently scare away nonprofit folks.  Loss of mission, identity and control by one of the parties are generally cited as reasons.  Financial bottom line, a reasonable motivator, is not usually the first best reason to get mergers or acquisitions of nonprofits going.

Today we see an acquisition of two nonprofits where the rationale is mission-driven and bottom-line driven and has the potential of being a win-win for the institutions and the customers. 

Navy Federal Credit Union is taking over USA Federal.  Navy Federal Credit Union is currently the largest Credit Union in the country.  It primarily serves those who are or were in the Armed Forces as well as their families (how I got to be a member).  USA Federal is a credit union in trouble financially, having suffered significantly from a failed economy, particularly in California.

The Washington Post describes what took place: "The deal between the two nonprofit organizations involved no shareholders, no stocks and no exchange of money. Both boards approved the merger, with federal regulators having the final say. Navy Federal assumes the assets and debts of USA Federal."

Let's hope that Navy Federal can address the failed market issues successfully and provide a positive example of nonprofit takeovers.

Nonprofit Board Meeting Minutes and Board Secretary

One might argue that there are many more interesting topics to chat about in the world of nonprofit governance than board minutes and the role of the board secretary.  But, I got excited when I found this LA Times Q&A on just this subject, as I currently have the position of board secretary of a nonprofit.

So please, take a moment and take a look.  The value of both is, I believe, correctly trumpeted.

Nonprofit vs. For-profit Schools

I have occasionally raised the question about what makes some nonprofit institutions charitable, and therefore tax-exempt.

A recent NY Times article regarding the uptick in the number of for-profit schools provides some good insight into the differences between nonprofit and for-profit schools.

Parents may be hard-pressed to see much difference between for-profit and nonprofit independent schools. Both cost a lot, both depend on the children of wealthy people to attend, both pay their headmasters large salaries.

But nonprofit schools enjoy generous tax advantages, including low-cost benefit packages, property-tax exemptions and grant eligibility. They also must bridge the gap between tuition revenue and the expense of running the institution with donations, no surprise to parents who face frequent solicitations for pricey galas and the ever-needy annual fund. For-profit schools pay taxes but generally refrain from soliciting parents, instead securing money from investors who hope to make money later, if the school is sold or the company that owns it goes public.

Good description I would say.

The Times article did have one point I'd like to quibble with.  The Times stated:

....for-profit schools are practically the only significant primary and secondary institutions to have started up in the last decade, and may represent the future of private-school growth.

I could be in error but Charter Schools have been an important change in the primary and secondary educational market.  And, they are private nonprofits.

Nonprofit Founder Issues: Lessons for everyone

Larry Jones, Feed the Children's founder and exec for 30 years was fired from what essentially was the family business a year ago. 

Why?  Here's a sample of the reasons cited by the San Francisco Chronicle.

The charity fired Jones in November 2009 after learning he secretly had "bugging" devices installed in executives' offices. Its board claims he also accepted tens of thousands of dollars in kickbacks from charity vendors, operated the organization with little or no oversight and misspent charity funds, including giving him and his wife secret raises.

Of course, Mr. Jones has not accepted his fate, is suing the board and has made known his issues publicly, hence the press' interest.

I regularly work in my own consulting practice with nonprofit Boards that have a reason to believe it's time to move on from their exec.  My job is to identify the facts and provide the board with data that allows them to be certain of their options.  One thing we have learned though: even if the facts aren't so clear, when a board loses trust and confidence in its exec, it's really, really hard to get that back and ensure a future relationship.

I applaud the Feed the Children board.  From what I can tell, they had some pretty solid reasons for moving their exec out.  And unlike many nonprofits where founder-execs in particular have major influence over the board, this board acted and continues to act for the welfare of the organization's mission.

Mr. Jones is not so honorable, perhaps reiterating why the Feed board may have made a good decision.  In many ways, this is like the biblical story of Solomon who, when presented with two women claiming rights over a child, ordered the child split in two.  The woman who truly loved the child offered to give the child to the other woman to preserve its life.  This is another lesson for Mr. Jones and all nonprofit boards that chose to protect the organization's future over a relationship with the founder who is no longer acting in the best interest of the nonprofit.

Nonprofit Changes Rules

The US Roman Catholic Church in New York (the Diocese) is going to change the rules of how it relates to the schools under its purview.  Once upon a time, local parishes had the responsibility to finance their schools.  And the Diocese would help with some cash.  If the school closed, the parish would get the proceeds if it sold.

Now, the Diocese plans to fold all the schools under the Diocese and in exchange, "pass the plate" and have all good catholics pay for the schools -- following selective closing to winnow the total number.

My question: is this best governance?  Reduce the number and share the cost -- this is good governing.  But what about mission?  Yes, a lot of the catholic schools don't really serve catholics anymore and that was one of the points of these schools.  On the other hand, these schools are supposed to enable folks to have a quality education where one might have been less possible. 

Strikes me though that in the reduction of the number of schools, neither of these goals is achieved but a third goal is introduced and achievable -- getting the Diocese off the hook and saving money.

See the NY Times for more detail about the plan.

Nonprofits don't just need money-at least not all

The Christian Science Monitor took a moment to remind us that not all nonprofits live on cash donations alone.  And, we the donors have lots of assets that may have just as much value as cash.

Check-out this list.  Interesting though -- the two things I do not see on the list are cars and houses.  And yes, houses.  You can donate your house which can then be auctioned to the highest bidder. 

Social Innovation Fund reveals all

According to the New York Times, the Social Innovation Fund, a $50MM federal grant program, is trying to comply with the many (?) who were irate over the Fund's lack of transparency in sharing information about who recieived grants, and how awardees were chosen.

Ok, now what?  Or is the better question: so what?