Nonprofit Board Crisis

Nonprofit Founder Disapears

In this blog I frequently feature stories about nonprofit founders whose time it is to depart from their nonprofit.  I for one would not have ever thought about a founder who left before the nonprofit actually got off the ground.  Please read this Washington Post article and think about what you might advise these board members.

Nonprofit Fraud

Last week I talked about a Nonprofit World January/February 2012 article on fraud, specifically, what are the types of fraud.

Another item I found interesting in the same article was the "behavioral red flags of perpetrators". 

Here goes:

43% -- living beyond means (doesn't everyone)

36% -- financial difficulties (who isn't)

23% -- control issues, unwilling to share duties

22% -- unusually close association with vendors/customers

19% -- wheeler-dealer attitude

18% -- divorce/family problems

15% -- irritability, suspiciousness or deffensiveness

12% -- addiction problems

10% -- refusal to take vacations

I'm not listing the remaining 7 red flags which gives numbers that are less than 10%.  Funny thing: i'm thinking that "perpetrators" may well have more than one of these characteristics.  After-all, aren't these traits similar to lots of people at different times and don't necessarily lead to fraud?

Just the same, telling.

Nonprofit Reverses Decision: Internal Consequence

It was a little more than four hours ago I raised the "now what" question in the story about Susan G Komen and Planned Parenthood.  In that blog I was wondering alound about who if anyone at Komen would experience a consequence.

Lo and behold we learn from the Huffington Post that the Senior Vice President at Komen has resigned from what happened with the Planned Parenthood situation.  This is an interesting turn-of-events when we accept that boards have one employee who is usually the CEO.  Is the Senior Vice President taking the fall for the President or did the Senior VP have that much influence with both the CEO and the Board that it is right that she should be held accountable for the decision and subsequent damage that has been done to Komen?  Only insiders truly know, but this certainly challenges some of the premises about governance and board-exec accountability.

Nonprofit Reverses Decision

By now most of you are aware that Komen for the Cure has reversed its decision to end its grant relationship with Planned Parenthood. 

The governance question of the day: did the Komen board approve staff's recommendation to cut-off Planned Parenthood in the first place?  And assuming yes, how responsible does the Komen board "feel" for the result?  And, should the board take some action concerning its Exec who I believe is also a founder?  Or might it not take action, well, because.....

Nonprofit fiscal agents are always trustworthy. NOT!

Just when you, the struggling and early stage nonprofit board, thought you had found the solution for accountability and care of your resources in the form of a nonprofit "fiscal agent", news comes from the Nonprofit Quarterly that not all fiscal agents are up to snuff.

The International Humanities Center, fiscal agent for over 200 progressive nonprofits actually lost its member's money -- over a million dollars.

Subscribe to the Quarterly to get the lessons learned from this debacle.

Kudos to Rick Cohen for some fine chronicling, as usual.

Nonprofit sustainabililty planning and mergers

The following NY Times article offers some great insights about nonprofit sustainability planning (e.g. never depend on one source) and mergers.  The story focus supports my early-on contention that the business model (sustainability strategy) for nonprofit media was suspect.  This story also reminds us that nonprofits, like for-profits are subject to market demand issues and that the history of businesses in each sector often involves lots of earlier players and then some winnowing down driven by market forces.

Nonprofit Boards and Advocacy

Lest nonprofit board members forget, "defending" the rights and obligations of a nonprofit falls under their fiduciary responsibility as the public's caretakers of the nonprofit. 

Tim Delaney (National Council of Nonprofits), in the Huffington Post and in response to a city effort to "tax" nonprofits, provides a well thought-out set of strategic questions I believe nonprofit boards should be asking of any event or condition that threatens the success or capacity to achieve mission.

And of course, asking these questions is just the first step.

Nonprofit Fraud Prevention

From the Nonprofit World (January/February 2012) we learn there are seven types of fraud:

1. Accounts receivable fraud (divert cash from one bill and cover the shortage with receipts from another check or collect cash from accounts that were deemed to be noncollectable or written off)
2. Tampering with checks when a staff member changes the organization's check or steals a check issued to some other payee
3. Payroll schemes when an employee issues a check to someone who doesn't exist and then cashes the check
4. Theft of cash on hand when someone steals from petty cash
5. Expense reimbursement schemes when an employee inflates expenses or submits false expense claims
6. Skimming when an employee steals cash before it's recorded and no entry is ever made on the books
7. Alteration of cash receipts when someone is responsible for both collecting and depositing cash receipts, that employee can steal cash and destroy or alter the cash receipt documentation.

    The article reminds all that for fraud to be effective, there must be a cover-up.

 

 

Nonprofit Exec takes $2.5 million

'Tis the season it seems for the incidence of theft from nonprofits and not on a small scale.  The latest story from the New York Times has the director of a psychotherapy organization managing to steal $2.5 million.  The method: 80 wire transfers.

Good news? Uh, the board reported the finding to the police and are suing Chase Manhattan for, I imagine, allowing the wire transfers to be executed.

Based on the suit, I'm thinking, that maybe there was a policy in place that limited the potential for wire transfers of this level to happen.  The Times story did not indicate the length of the period overwhich the  80 transactions took place, but I'm guessing it was likley more than 30 days.  This estimate then raises the question about how this much money loss went undetected by someone in the organization (?board). 

Checks and balances are, at very minimum, reading the financial statements?

Nonprofit Board Advice

"Why Don't Board Members Do What They're Supposed to Do?" is the title of a January/February 2012 Nonprofit World article.

While it's unclear who exactly was solicited to participate in the survey and the number of reponses,  the survey questions are interesting.   Two are about motives: why do folks serve or say yes; why do they say no.  Two are about the organization's management and/or support of the board. 

So, what was learned?  It should come as no surprise that nonprofit board members want a personal connection to the mission.  It is also not surprising that the folks who do recruiting should pay attention to what a board member wants or needs if they join.

It perhaps is not surprising either that board members say that their time challenges are the biggest reason for saying "no" to joining.  And, while I can't tell if this is drawn from survey responses, members want the board meetings to be time sensitive.  I think this point important because it's not really spoken of in the literature but my experience indicates that this is indeed a real desire.

The survey also says that "communication is one of the greatest barriers to an effective board.  If they are not being heard or don't know what's expected they will question their involvement."  Again, a good lesson based on my own experience as a board member and governance consultant.

Finally, members "strongly believe that all board members should be accountable for their performance.  They're frustrated by non-performers".  I believe this but I think it would be good to pursue building more information about what exactly members think constitutes "non-performance".  This would provide a basis for building a standard all might mirror.

What this article has done is provide a good baseline for further study and documentation to support effective boards.