Nonprofit Board Crisis

Nonprofits not Nonprofit?

Yes, you read the question correctly: nonprofits not nonprofit?  And yes, this Christian Science Monitor blogger is asking, might Congress take away nonprofit status because of the bad behavior of nonprofits?

The blogger raises two cases in particular which threaten the future of the nonprofit sector. 

In the first case, the blogger challenges the use of for-profit subsidiaries and other revenue generating activities as hiding behind the nonprofit skirts.  Phooey!  First, this nonprofit is engaged in activities that are within its core business and/or satisfy the specific needs of its customers while generating revenues and offsetting the dependency on philanthropy (noting, philanthropy and the public are really not dependable).

In the second case, I agree, hiding behind a nonprofit status for political purposes is horrendous and such behaviors should be left to the big corporations and politicians.  But, it's true, a micro-group of nonprofits are pursuing this strategy. 

So, IRS and Congress, you want it to stop, go after these groups while recognizing there's few enough to pursue and they do not represent the efforts of the vast majority of nonprofits!

 

Nonprofit CEO Salaries and the Correct Response

For a number of reasons, donors get excited about the topic of nonprofit CEO salaries.  I have and continue to argue that evaluating a nonprofit CEO's salaries should begin with understanding the results and then understanding the complexities of a given nonprofit and then, maybe, considering the comparatives, not just between nonprofits but with for-profits as well (the jobs are equally challenging and many nonprofits are equally complex if not even more complex.

Imagine my excitement when I read the following Slate magazine response to the very question about CEO salaries of two very large and complex and results-focused nonprofits.  Thank you Patty and Sandy -- you stand-out in your understanding of nonprofits!

Nonprofit for Personal Gain

Just to soften the blow for New York nonprofit council members, take a look at this Illinois Mayor's nonprofit who's board is comprised of family and friends.  See New York, you're not the only place where government power is used for personal benefit (hum, not the only place.....isn't this an understatement?)  Check out this Chicago Tribune story.

Nonprofits Cannot Just Benefit Friends and Family

No, a nonprofit cannot just benefit friends and family.  That's one lesson we can take away from the conclusion of the trial that has convicted a New York City Councilman of diverting more than $1 million dollars to nonprofits he controlled and staffed with friends and family.

Another lesson: the City Council itself is not very good at regulating and monitoring its funds -- pretty bad governance that this activity went on unchecked for seven years.

Two fine lessons.  You can view the Wall Street Journal story here.

Nonprofit Values Affect Outcomes

Whenever I am engaged in a strategic planning process I like to begin with a Theory of Change exercise (this after determining the organization's strategic issues and the nature of the process).  In this exercise the first step is to discuss what the board and the staff "believe" that drives them to want to engage.

I am convinced that what the leadership of an organizaiton "believes" or better put, values, matters in getting to the desired outcomes.  Hence the importance of the exercise.  I believe values shape or at least inform all other decisions.

Recently a blog reader forwarded me this link to an article titled: The 10 best nonprofits to work for. I encourage you to check-it out.   My take-away from the article: values, set by the leadership (paid and volunteer) really do matter in terms of outcomes.

Nonprofit Self-Financing Business Strategy

What are you going to do when the old fashioned "write another proposal" approach to financing your projects is just not getting you anywhere?  Well, if you are Water.org, you start your own venture fund.

I'm not sure this isn't just an approach building on what nonprofits have been doing traditionally in the form of endowments but the idea that your board might have a lot of wealthy friends who are politically correct and can frame their thinking aobut philanthropic endeavors the way they do their own businesses is really about tapping into the markets you know best. 

The good news -- it does seem to be working.  I might suggest however that this might also be the time to revisit the traditional approaches, not grants per se but large gifts put aside as an endowment.  Why?  Because I propose that someday, unless some of the venture money is being saved, the day will come when the old ways need to return.

Check-out the story in the San Francisco Gate.

Nonprofit Governance and Penn State

I was thinking there wasn't a whole lot more to say about the Penn State stuff (well, there's plenty more but I wasn't going to say it) but then I saw this Detroit News article talking about the resignation of the Chair of the Board.  This has slipped my attention and I was merily thinking that the Board was looking pretty good not having been party to the whole affair and having acted fairly responsively fulfilling their duty of care to the University.

Ah, but apparently the story isn't over and while the Chair rightfully chose to resign as he apparently had been told of this issue not that long ago (so at least it wasn't years) and chose to not share it with the rest of the board. 

From this article we are also enlightened with some what I would label less positive features of the Penn State Board regarding composition, structure, term lengths and possibly the conduct of business.  Before elaborating I must admit not knowing if the Penn State Governing body isn't similar to other similar prestigous schools. If this is indeed the case, perhaps it's time for the Association of Governing Boards to get to work and looking at an overhaul to what govering a college and university is all about.

Meanwhile, some of the Penn State Board practices include: the Chair was beginning his 5th third-year term AND had been employed as Treasurer for the past 12 years.  And, from the Investigator's report we also see the Chair described as "portrayed a disengaged board that handed too much responsibility to the  university president and failed to investigate deeply enough once it became  aware of a grand jury probe.

The article goes on to tell more so if you want lessons in questionable governance which I fear may not be isolated, read on.

Nonprofit Governance and Child Sex Abuse

Joe Paterno's statue has been removed and a $60 million fine levied Penn State by the NCAA.  Meanwhile, in Philadelphia, Monignor Lynn has been convicted of child endagerment for failing to take steps that might have prevented a priest (he was responsible for parish assignments and investigaged claims of misconduct and permitted the priest to continue his job) from sexually assaulting a 10-year-old altar boy.

These cases and consequences should serve as a strong reminders that governance means being responsible stewards -- be it organizational resources or constituents.  Both of these institutions, their respective overseers and their policies failed to protect the interests of those the institutions sought to serve in addition to those providing the services.  While I believe it's usually the nonprofit sector that acts ahead of the public sector, in these cases, the public sector is stepping-up and saying "if you won't we will". 

Nonprofit boards and managers, be aware!  Are their policies in place to ensure the best interests of your constituents or any who will be affected by your institution?  And, are there processes in place to address failures of the policies? 

Nonprofits Must Prove Tax-worthiness

For the moment, Obamacare does not solve all the health care access issues.  So, it is not surprising that the stalwarts involvoved in nonprofit accountability must continue to do their part to ensure that nonprofits are truly nonprofit.  Thus enters Senator Grassley (a Republican) and Senator Marcus (a Democrat) who are working on health care reform and, according to Slate Magazine, have buried inside their policy options, some recommendations on nonprofit hospitals.

As I understand Slate's interpretation of these options, nonprofit hospitals will be called upon to be, well, nonprofit, making their services far more accessible, particularly for those without resources.  Good news for those without but perhaps, according to Slate, not perfect. 

Do check-out the article.  I must admit though, I'm all for the this effort, despite the downsides.

Nonprofit Board Clear on Values

Over the years I've pointed out my issues with the Boy Scouts of America -- I believe it's a para-military training organization; anti-gay (being blind to science....); well...you get the picture.

This week the Boy Scouts reinforced that gays were not welcome.  

While putting all my "stuff" out there I think on the very plus side it's important to note that, right or wrong, the scouting organization deserves credit for conducting an exercise that I believe is critical for every nonprofit board to conduct, perhaps as part of their strategic planning.  One step in strategic planning can involve the review of the organization's theory of change and as a part of understanding what the organization believes about its constituents and environment, it can review the core philosophical guideposts that inform all other decisions.

So, as much as I may not understand how any group which has fully studied the subject could reach this conclusion, kudos go to the BSA for having at least examined core beliefs.