Nonprofit Board Crisis

Nonprofit Succession Planning

Succession planning is a big topic among today's nonprofit execs and boards.  Succession planning is not a topic eagerly embraced by execs in particular.  Afterall, when we talk about succession plans we are addressing a an individual having to put aside their passion and livelyhood.  And while nonprofits are technically owned by a nonprofit board, I recognize that for many execs, there would be no nonprofit if not for that exec.

The story in the Christian Science Monitor, albeit focused more on a classic "family" empire, does well to illustrate what can happen when succession plans are not developed.  A word to all boards: don't let this happen to you.

By the way, the literature indicates that there are three types of succession plans: exec planned departure; emergency succession plan; and, leadership development succession planning.   Best advice to date is that all three plans should be completed while recognizing that at minimum, an emergency succession plan (e.g. the exec gets hit by a bus) should be in place. 

And, while I'm on the topic, succession planning is not specific to the nonprofit's paid leader but to the volunteer leader as well.  If we consider that the average board member serves two three-year terms, then identifying the next board chair should be possible from any of the three pools of candidates that take office (assuming 1/3 rotation).

Nonprofit Board Duties of Loyalty and Obedience

A nonprofit board's duties of loyalty and obedience essentially focus on the concept of faithfullness -- to mission and organization.  Behaviors that exhibit failure of faithfullness are not always clear to the eye but include conflicts of interest where personal gain is at stake (kind-of the meaning of conflict of interest) and equally important, speaking without authority (the board's) outside of the board.  And yes, there is also the test of whether the board, acting as one voice, has deviated from the organization's mission.

So in the "you will know it if you see it" veign, check-out this conflict going on at the Gay Pride Agenda and chronicled in the Chelsea Now/Gay City News over the firing of the executive.  Note, this is not a story about gays and lesbians.  This is a story about nonprofit governance and firing an executive director and what happens after. 

The question for you: are all board members fulfilling their duty of loyalty and/or obedience?

Nonprofit Board Missing In Oversight

GIving the frequency with which this occurs among nonprofits versus busineses, this check-and-balance concept must be really challenging.  Again we see, as reported in the Wall Street Journal, another individual with clearly too much access and little or no checks-and-balances, has managed to steal, over three years, $75,000. 

So what could and should a board do to prevent this stuff from happening?  The simple answer is: act prudently.  What would you do if this was actually your business?  That's the question each nonprofit board member should ask themselves.  No, you don't need to see the ledger, certainly not every day or month or quarter.  But if you don't have an auditor, it would pay to conduct a review once a year.  Certainly stuff like this shouldn't go on for three years.  And what about some simple policies and procedures while we are at it.

Come-on folks, this is not the toughest part of being a nonprofit board.

Nonprofit Board Didn't Know But Should They?

Just how much should a nonprofit board that suspects no wrongdoing probe into what appear to be ordinary expenses?  That's question number one.  Question number two: once a board learns from its annual audit that "things are not right" and not just for one manager but many managers, what action should it take.

I believe the answer to question number two is simple -- it's time to at least replace the number one exec.

But to answer question number one, more thought is required.  Let's say a board receives and conscientiously reviews the income & expense statement and balance sheet monthly or bi-monthly or quarterly (all reasonable options).  Let's say there's even a finance committee that does the same ahead of board meetings.  The statements all balance and line items look to be within their budgets.  Seems prudent enough (the standard for expected behavior).

Should there be deeper and wider probing and wouldn't such probing begin to look more like micro-managing?  That's kind-of my opinion and to be honest, I'd probably be willing to wait until the annual audit to find-out that all is not copesetic, assuming my organization has liability insurance. 

The story that launched this topic can be found in the Boston Herald.

Thanks Claire.

Nonprofit Fraud: Whose Head Should Roll?

Did you hear the story about this mega-job agency where 15 employees falsified job placement records?  If not, check out the New York Times article on SEEDCO which told the story in-depth. 

My questions: have all the heads rolled that should and where was the board and, look for a whistleblower suit in the near future.

Nonprofit PILOT

I periodically (actually, just recently) raise the issue of PILOTs (payments in lieu of taxes).  PILOTS are typically paid by Universities and Hospitals who have humongous tracts of lands and buildings that are not on the municipal tax roll because, well, they are tax exempt.  Meanwhile, municipalities everywhere are turning over every rock they can to find new sources of revenue and clearly if a tax exempt organization is using its property in a non-tax exempt way or could pay a PILOT, then action will be taken.  Or so you would think.

But the New York Post story suggests that maybe all that appears tax exempt is not.  Amusing perhaps but not really good for the true tax exempts.  And maybe this is a good time to remind nonprofit boards that if there was ever an occasion to be letting the community know about your outcomes and the contributions and impact you have on the community, this is it.

Nonprofit Board Brave or Crazy?

So, you're the CEO and it's been three months after your maternity leave ended and the board just did a Donald Trump: You're Fired!

That's the story in the Burbank Leader.  The board, after an 18 month investigation by a consulting group just like me (although I can usually get something like this done in six months) told their exec of 4 years and employee of 12 years she's out-of-here and they need someone with a different skill set.

Brave or crazy board?  You be the judge.

Nonprofits on the Federal Dole: New Regs Coming

If your nonprofit receives or wants to receive Federal grants, you want to be aware of HUGE changes about to happen in the way grants are given and administered.  But, it's not too late to comment on the proposed changes.  If you want to know more, you can turn to what the Grantsmanship Center has prepared.  Here's the info:

Feds Launch Major Reform of Grants Policy
On February 28, 2012, the United States Office of Management and Budget (OMB) announced the beginning of one of the most comprehensive reforms of federal grants policy in the last four decades.

In response, The Grantsmanship Center has produced two new articles on this historic initiative. These articles (see below) are free for the benefit and use of public and nonprofit organizations. They're intended to keep you informed, provide useful resources, and help you spread the word to those who should be aware of the proposed reforms.

Background

The OMB announcement, "Reform of Federal Policies Relating to Grants and Cooperative Agreements; Cost Principles and Administrative Requirements (Including Single Audit Act)," was issued as an Advanced Notice of Proposal Guidance (ANPG) in the Federal Register.

The OMB has collaborated with executive branch agencies; state, local, and tribal governments; and other key stakeholders to develop a series of reform ideas that focus on grant administration, auditing policy, and cost administration. The intent of the reforms is to "to strengthen the oversight of Federal grant dollars by aligning existing administrative requirements to better address ongoing and emerging risks to program outcomes and integrity. The reform effort further seeks to increase efficiency and effectiveness of grant programs by eliminating unnecessary and duplicative requirements."

The period for public comment on the proposed reforms will end at 5 p.m. Eastern Standard Time on March 29, 2012.

A Pair of Free Resources for the Reform-Minded
To receive The Grantsmanship Center's free articles on this historic initiative, simply click on the links below:

1. OMB & Federal Awarding Agencies Kick Off New Global Grant Reform Initiative Focusing on Grant Administration, Auditing Policy & Cost Administration [PDF: 358KB]
2. What Might a Unified Guidance Document on Grant Administration Look Like? [PDF: 321KB]

Both articles were written by Henry Flood, The Grantsmanship Center's Senior Advisor for Grant Administration. Henry is a leading expert on federal grants policy and has published more than 50 articles on grants and grant administration.

Nonprofit Boards Gain From Graduate Students?

In an ever-continuing effort to be supportive of area nonprofits (rather than pay a PILOT), MBA programs are seating their students as board members. 

According to the Chicago Times, "In the past decade, a growing number of M.B.A. students have joined nonprofit boards of directors as graduate business schools across the country have launched board fellows programs. While the programs provide students a chance to hone their leadership and business skills, they also allow nonprofits to gain the insight of talented students who want to contribute their management expertise."

Hm..another program that provides more benefits to the students and maybe the MBA program.  For nonprofits....caveat emptor!

Nonprofits and Corporate Sponsorships

The current Chapter 11 filing by Kodak should serve as a strong reminder to nonprofits making sponsorships deals with corporations.   As you know, corporate sponsorships normally come in the form of cash donations to a nonprofit in return for the nonprofit promoting the corporation or its product while leading its clients to believe that the corporation cares.

Anyway, Kodak has some pretty interesting corporate sponsorship commitments that it is now trying to get out of (based on the theory that the sponsorhip does or does not help the corporation in future sales).  Included among these commitments are the Kodak Theatre in Hollywood and the PGA (golf).

A word to nonprofit boards and staff: all that glitters is not gold...