Nonprofit Board Crisis

Nonprofit Trustees Fail

I regularly receive emails from nonprofit board members who can't seemingly break the "code" to get the officers of their board to behave differently.  In most cases the issue relates to bad process, leaders who are intransigent, and other highly irritating, controlling and unproductive behaviors.  But sometimes an email cites incidents that may actually be illegal (e.g. theft).  What to do?

Well, as evidence indicates with this nonprofit created by upstate New York prison guards, you go outside the organization to those who may have legal authority.  And, yes, misdeeds were found but labeled as not illegal but the consequence: a nonprofit that has closed its doors.  

The moral of the story: when the leadership won't change its behavior, the only recourse may indeed be to go to higher authorities.  For more on the story, go here.

Nonprofits and IRS

At times, at least in the media, there appears to be a love/hate relationship between "some" nonprofits and the IRS.  Well, the IRS has the aim to improve it's side of the equation with newly proposed regulations that will help clarify the eligibility of the ever controversial social welfare organizations for 501(c)4 status.  If interested you can go here for the proposed rules.

Meanwhile, nonprofit staff and possibly their boards might be interested in being regularly updates with what's going-on at the IRS regarding nonprofits.  There's a no-cost e-newsletter to subscribe to at this address.  And, for all the basics about being nonprofit, try this link.

I would proposed that the IRS does go out of its way to support citizen's desire to pursue nonprofit interests.  Information is a great starting point.

 

Nonprofit Boards Not Litigious When Harmed

According to the Washington Post, nonprofit (boards) tend not to seek prosecution when they (the nonprofits) are victims of theft or other wrongdoings against them  Yes, they do go after the money they lost but they effectively tend not to seek public accountability.  Apparently such failing on the part of these nonprofits puts other nonprofits at risk as there is then no public record of an individual's wrongdoing.  

As I have been stating over these past few months, I believe that nonprofits should subscribe to a "new do harm" value.  On the one hand, nonprofits (particularly nonprofit boards) seeking restitution and not public accountability does take-on a do no harm position which should be applauded.  At the same time, it appears that the risk of harm to another nonprofit is introduced.  Which is the greater good: not turning the other cheek or possibly, albeit indirectly, putting other nonprofits at risk?  

At the very least, I would offer that nonprofit boards should definitely have a conversation about their position regarding "what next" when facing such a dilemna.  Setting policy now would at least ensure the debate is held apart from the heated moment.  Finally, nonprofit board members might want to recall that the standard (test) for fulfillment of the duty of care (one of the 3 fiduciary duties of a board and its members) is to ask the question: what have/would others facing a similar situation do.  

Nonprofit Mergers and Acquisitions

Not enough resources?  Can't get to scale?  Sounds like a for-profit problem but alas, this one is shared by any organization trying to achieve mission.

Mergers and acquisitions are a fair possibility, albeit often thought of with some wariness by nonprofit boards and execs alike but hey: these are tough times AND your nonprofit is likely not the only one of its kind with a rare mission.  So, a merger or even an acquisition with and/or of a like-minded group should be thought of as a real opportunity.

There are a number of folks who have thought about this for nonprofit boards and today, Deloitte can be added to the fray with this document: Five Ways Nonprofits can use Growth and Unlock Value.  

If you are a nonprofit board member -- you are one of the five ways -- start thinking aobut this, please......

Nonprofit Board Committee Chairs

Does a nonprofit board committee chair only have responsibility and no authority?  I'm thinking a board committee chair's responsibilities include being clear about what the board has asked of the committee; scheduling and facilitating meetings; and supporting getting and keeping members.  Authority?  Can a committee chair sanction or even "fire" a difficult member>  Can a committee chair make agenda items that haven't been authorized by the board?  

Hmm -- all responsibility and no authority.  Makes one wonder why a board member would take-on the assignment -- unless of course it's a committee of one. 

Nonprofit Claim

Walgreens has a television commercial that promotes some of its innovations.  Why exactly consumers would care about these innovations is not precisely clear to me but just the same as a history buff I pay attention and learned that one of these innovations or claims is that Walgreens had the first nonprofit pharmacy dedicated to the "troops".  

I went searching for validation of this claim, of course just to learn more, and according to Walgreens' website, in 1943, 

 The company opened a nonprofit 6,000-foot drugstore in the Pentagon. All the profits from the  store went to the Pentagon Post Restaurant Council, which supervised food service in the complex. The store operated into the 1980s.

So, it appears that the claim has some validity.  What appears to be a social venture, not specifically benefitting Walgreens, was indeed developed serving a fairly defined "troops".  More interesting to me would be to learn who governed this nonprofit. And how did the governors ensure that there were sufficient profits to satisfy the needs of the Council?  And hoow big were the needs of the Council?  And, wasn't the Council a nonprofit so would the Walgreens be in fact a subsidiary of the Council?  Ah, more questions than answers......

Nonprofit Sustainability

Why do some nonprofits fails to be sustainabile?  The answers range: mission, market/demand, management, board.  When these are all in sync, sustainability is more likely.  When any of these variables are askew, sustainability is difficult at best.

Take for instance, the National Mustard Museum.  Yup, you read it correctly.  There is a National Mustard Museum and it's housed in Middletown, Wisconsin (you might not have heard of Middletown either).  Well, the Wall Street Journal, just by talking about it, has certainly raised the profile of the museum where in my opinion, based on the article, all the variables above appear to have contributed to what may be an unsustainable institution.  The location among other market characteristics challenges demand.  The pricing/fund raising strategy appears to have been built around one donor who is out of money.  And the board? no talk of that.  

Can the museum be salvaged?  You be the judge.

Nonprofit Board Diversity

Can a board of all white folks be a truly group to ensure that its nonprofit is culturally sensitive and responsive to its constituency when that constituency is not white?  

This is the question partially answered by a group in Lawrence, MA that is proactively setting out to people its nonprofit boards with individuals who not, well, all white.  The program seeks to recruit individuals from various cultures and prepare them for board service while simultaneously training the nonprofits who would receive these folks to be responsive, in the board environment, to folks who have different cultures than they do.

Now, why weren't these boards seeking folks from different cultures in the first place?  

And, equally important, I am hoping that teaching governance, how to be an effective nonprofit board member, that is, is not limited to those who are not all white.  Lack of understanding of how to be an effective nonprofit board member is a pervasive problem not singular to any one type of nonprofit.

See the Chronicle for the full story.

Nonprofit Theft

There's been quite a hum following the Washington Post story about its area's nonprofit financial thefts.  But here's one lens and a response that should gives nonprofit boards another way to look at the issues of fiduciary oversight. 

Nonprofit Values

Nonprofit values, that is, what the nonprofit board determines are the philosophical beliefs and guidelines which inform the practices and policies of its personnel matter.  For Catholic hospitals for instance, values matter, a lot as is noted in a Philly.com article where concerns have been voiced over a Catholic hospital's position on all things abortion specific.

I must say that while my values may differ from those of the hospital board, that institution has the right and responsibility to determine its values.  It also has the responsibility to ensure that its employees, donors and patients understand these values and can make their choices respectively.  Key here is that the hospital board sat down and determined what its values would be and I am confident, it understood the consequences its decision about values would have on its prospective constituents.  

Values matter as does transparency about these values.