Nonprofit Board Crisis

Nonprofit Board as Target

When consumers have issues with the behavior of a publicly held corporation it is not uncommon these days to form a coalition and target the corporation's shareholders.  But what happens when consumers have issues with a nonprofit?  In my experience, very little.  Maybe one or two folks will appeal to the senior staff, if they can identify who that is but often that's just about as far as it goes.

So why shouldn't consumers or folks who have issues with the behavior of a nonprofit turn their ire toward that nonprofit's board?  After-all, it's the board that actually has the final say.  It's the board that establishes the mission and values.  It's the board that approves the organization's policies.  So, I'm thinking, if folks have real issues with the Boy Scouts USA, for instance, organize and present to the board.  If there are issues with college policies that do not ensure the safety of women students, go to the trustees.  Remember the 60s and sit-ins?  I can't say if that's a good strategy in today's environment but do you remember the impact this action had?  

Frankly, I think it's time to be more active in holding miscreant nonprofit boards accountable for the behaviors of their nonporofits!  Let's get organized and call for responsibility!

Nonprofit Legals

A group in Philadelphia now has $1500 less to spend for mission.

According to the Philadelphia Inquirer, 

The Philadelphia School Partnership, a nonprofit that promotes school-choice policies, will pay a $1,500 fine to the city Board of Ethics for failing to register and report as a lobbying group in 2012 and early 2013, according to a settlement signed Wednesday.  Executive Director Mark Gleason and Managing Director Michael Wang should have registered as lobbyists for work they did in early 2013, the settlement said, and the nonprofit failed to file lobbying expenditure reports in 2012 and 2013.

If you were the board of the Partnership, what would you do as you think about the failing of the staff and you consider the future?

 

Nonprofit Board Duty of Obedience

A nonprofit board's fiduciary duty of obedience binds it individually and collectively to take actions that stay true to and further the organization's mission.  As long as an organization's founder remains connected and active in a nonprofit, it's pretty easy for a board to fulfill its duty of obedience.  It's after the founder's departure that the going can sometimes be pretty choppy.

Pete Seeger, the iconic folk singer, community activist and founder of Hudson River Sloop Clearwater died this past January.  His death left a challenge for the nonprofit's board noting that while not the executive director, his vision and hands-on direction guided the board and organization from its founding through to his death.  

I'm sure in part as a communication strategy that the organization continues to sail on, a story in the Wall Street Journal provides information about the newly appointed executive.  The new director, Peter Gross, is described primarily as having decades worth of experience in both the corporate and nonprofit worlds.  He is further described as having a deep passion for the environment amd specifically: "Mr Gross developed a love for hiking, kayaking and canoeing. The Hudson River also played an important role in his life. He got married at the Hudson River Maritime Museum near the bank of the river and named his golden retriever Hudson.  (Says he): "I've had a personal identification with this river for a long, long time." 

Equally important though is a quote from the board chair: "Part of the challenge for Mr. Gross is to appeal to Clearwater's diverse set of supporters, who often have different priorities, said Anne Osborn, Clearwater's chairwoman. Some are interested in the group's annual music festival or its child-education programs. Others are focused on fighting pollution in the river.....What you need in an executive director is someone who can embrace all these constituencies to get them to work together," Ms. Osborn said.

The article does not describe how or if the board prepared for Mr. Seeger's succession.  He was 94 so one might have thought some preparation might have been done.  But whatever work the board did do in anticipation of the loss of its founder, it does appear, that decisions for going forward and keeping alive the founder's vision are certainly consistent and intentional supporting the board's fulfillment of its duty of obedience.

Nonprofit Governance is Passion

This year is the 150th anniversary of what was once known as the Girls Club of America and is now called Girls Inc.  The story of Girls Inc involved seven women, the founding board, who shared a passion and a commitment to get the job done.  I pose that this is what governance is all about.  

Here's the story from the Christian Science Monitor:

In 1864, with the Civil War in its fourth year and Union troops wearing Waterbury Button Company buttons on their uniforms, seven society women in Waterbury decided it was high time to help the young women in their midst. And so on Jan. 15 the founders inked their names in what is now a sepia-toned notebook.

The founders envisioned a school where young women would learn how to keep a home together with some basic education in writing, reading, and mathematics. Primarily it was akin to a finishing school for young working women, Maglio says.

That approach lasted into the 1950s. But as the sexual revolution and women’s rights movements arrived, and the organization realized it needed to shift its focus – and quickly.  “We’re about having our girls feel confident with what success is – and it can be different things for different girls,” Maglio says.

Kudos to those who have keep the founders' dreams alive!  

Nonprofit Board Matters

I have heard some people tout filling a nonprofit board seat as a resume builder.  You know, it shows you know something about some topic and/or have volunteered and/or have connections or access to a specific set of folks and/or you maybe want to hone some skills or broaden your knowledge about a specific topic to again, build your resume.  All of this may be true although not, in my opinion, great or common motives for joining a board.  No, the primary reason for joining a board should be passion for the mission.

A New York Times story about New York's Speaker of the Assembly and what may have been an inappropriate use of political power vis-a-vi a nonprofit demonstrates how board service may do all of the above and might include passion for mission BUT can also link someone who has served to histories and experiences and people, for better or worse.

Specifically, the subject of the article, the NY Speaker, has suggested that the story is one which focuses on an individual with the same name - a case of mistaken identity.  But the article's author points out that mistaken identity is unlikely given that many of the board members were actually closely associated to the Speaker.  I suppose it's possible that the same members could have been associated with the individual identified by the Speaker but the list suggests otherwise.  

Had the lawyer from Minneapolis been the group’s counsel through the early 1980s, he would have made acquaintances with some of Speaker Silver’s closest and longest allies. The board members listed on United Jewish Council’s stationery during those years included Speaker Silver’s rabbi, Yitzchok Singer of Bialystoker Synagogue; the board president was Harold Jacob, one of the speaker’s closest associates (his wife, Esther, has been an employee of Mr. Silver’s Assembly office since 1978). Together, Mr. Silver, Mr. Jacob and Rabbi Singer were the co-founders of a nonprofit housing partnershipbetween United Jewish Council and Bialystoker to build apartments for seniors.

Judy Rapfogel, the assemblyman’s chief of staff and an employee of his office since 1977, also served on the group’s board. Her husband, William E. Rapfogel, who was a longtime associate of Mr. Silver’s and worked with him to fight housing plans for the empty swath of land, pleaded guilty in April to stealing over $1 million from the Metropolitan Council on Jewish Poverty.

So the lesson: the good news about nonprofit board service is that this is not forgotten.  But the same can be said on the other side -- nonprofit board service is remembered and sometimes that's not always a good thing.

Nonprofit Governance: Whistleblowing

Nonprofits boards should take note of the conversations going on over at the Agency for International Development where employees have, up to this date, signed confidentiality agreements that "barred employees from making disparaging remarks about the company to “funding agencies” or “officials of any government.” reports the Washington Post.

So what's the issue and why should boards be concerned?  The issue is that a policy that counters employee whistleblowing is illegal and boards can be held accountable for this failing.  The following from the Council on Nonprofits should help think about this subject.

Whistleblower Protection Policies

When Congress enacted the Sarbanes-Oxley Act, following the scandalous behavior of corporate America, it included two provisions that also apply to nonprofits. Federal law prohibits all corporations, including nonprofits, from retaliating against employees who “blow the whistle” on their employer’s accounting practices. Additionally, over 45 different states have enacted laws to protect whistleblowers from retaliation at the workplace. Consequently, having a good internal process for addressing complaints including a whistleblower protection/anti-retaliation policy can help your organization protect itself from the risk of violating state and federal laws that afford protections to whistleblowers, and can help ensure that if there is a problem it will be investigated and fixed.

Even organizations that do not have paid staff should also put a whistleblower protection policy in place to encourage people to bring their concerns forward without fear of retaliation. Organizations that encourage complaints by having an “open door” policy and have a standard of “no retaliation” for raising concerns are considered more transparent. These organizations will be in a better position to address all concerns, whether they are about fraudulent accounting practices, unsafe conditions, or alleged discrimination.

Do We Need a Whistleblower or Anti-retaliation Policy?

Yes. Your nonprofit is practicing sound governance and exercising prudent risk management if you have a written policy. Your organization will only be in a position to correct a situation if it becomes aware of the problem. That is why having a policy that encourages people to report their concerns without fear of retaliation is so critical to good governance. Plus, federal and state laws prohibit employers from retaliating against employees who file complaints. Claims for retaliation are one of the most prevalent causes of actions against employers (including nonprofits) today.

The IRS views whistleblower policies as helpful because:

“A whistleblower policy encourages staff and volunteers to come forward with credible information on illegal practices or violations of adopted policies of the organization, specifies that the organization will protect the individual from retaliation, and identifies those staff or board members or outside parties to whom such information can be reported.”

Source: Instructions to the Form 990, page 20

Here are some starting points to help your nonprofit design an appropriate whistleblower policy. But be sure to research your state’s law on protections for whistleblowers, as the details of an appropriate policy will differ state-to-state.

• Start with a sample policy such as this one provided by the American Institute of Certified Public Accountants
• Review a Sample Whistleblower Protection Policy from the Council of Nonprofits.
• Review this memo for guidance on whistleblower policies and a sample whistleblower policy from the Public Counsel Law Center.

- See more at: http://www.councilofnonprofits.org/resources/resources-topic/boards-governance/whistleblower-protection-policies#sthash.Bb1YyltG.dpuf

Nonprofit Board Policy

A nonprofit board's fiduciary duty of care gets implemented in a number of ways often synthesized into three roles: policy, planning and evaluation.  The Washington Post story about the 911 Museum gift shop reminds us that making policy can be a complicated task for nonprofit boards often requiring the balancing of a number of competing issues.  For the museum as with most nonprofits the issues often include the variables of money in concert with mission.  And then there is consumer demand.

Over at the 911 Museum the questions range from whether there should even be a gift shop to what can a gift shop contain that fully reflects and respects mission while providing what the museum's patrons seek to take away.  As stated by a Holocost Museum representative (for the report): “It’s just when it turned into souvenir kinds of things, the people who make these decisions on the board and the staffs have to have special antenna and sensitivities for what is appropriate and tasteful.”  And at the Firestore, the exec there cites: “You try to offer something that will appeal to the sensitivities of a broad range of people,” Freedman said. “There’s no way to decide one way or another what’s right and what’s wrong.”

Boards must create policy that supports mission to the fullest extent possible.  It's not an easy task.  There of course is the golden marketing rule that states: an organization's task (in generating revenue) is to understand what its customers want and value and satisfy these needs while recognizing that it cannot satisfy all needs.

Nonprofit Board Failed

When the US Justice Department says to your nonprofit board: " the one-man staff of Philadelphia Safety Net, repeatedly gave himself raises without board approval." you know you must be doing something wrong.

But this is indeed what the Justice Department said to the Philadelphia-based Safety Net which was undergoing an audit from having received its funds through its Congressman's earmark.  Turns out that the organization, staffed by one individual who was a former staff member to the Congressman received an annual salary of $364K.  The audit concluded saying that it found that "62 percent of Safety Net's spending of federal funds was unallowable, unsupported, or unreasonable".  In addition, the executive was cited as having "used some of the public funds for his own expenses", the audit said. It said he did not repay Safety Net for $2,218 in personal spending in 2009, including paying off $393 in parking tickets, a $286 hotel room, and cash withdrawals totaling $1,149. The audit also said Jones used $1,171 in state funds in 2008 to pay for clothing and restaurant bills."

However, from an outcomes perspective, the organization appears to have had an impact taking more than 3500 guns off the street (the program was all about buying back guns).

So, failed board? I would offer there was barely any board, at least providing oversight.  But how much does it matter if goals were met?

To review the article, take a look here. 

Nonprofit Governing By Government

The final two paragraphs from a Friday Wall Street Journal article summarizes my question about a soon-to-be charityStrong organization in the State of New York focused on nonprofit governance and the new Nonprofit Revitalization Law of 2013.

To be sure, consultants abound for board training and many trade groups serving nonprofits exist, in part, to provide guidance. Matchmaking between nonprofits and would-be board members is still largely the province of civic organizations or community or corporate-based foundations.

Yet there is no statewide platform that supports volunteer leaders of nonprofits. Board members might be chief executives and leaders in their field, but may never have been trained in issues such as endowments, lobbying, charitable fundraising and political activity, said Jason Lilien, the former chief of the charities bureau in the attorney general's office and a partner in the New York office of Zuckerman Spaeder. He also serves on board of charitySTRONG.

I recognize that it is indeed in the state and federal government's purview to provide oversight and accountability of nonprofits. But, deciding it, the state, should lead instructing how nonprofits should implement the laws?  Gives me pause.

 

 

 

 

Nonprofit Fiduciary Lessons

According to the Washington Post, a deal has been sealed that will make the Corcoran Gallery a part of GWU and the National Gallery.  

This going-out-of-business evolution was not simple involving what I imagine was lots and lots of hours of due dilligence and negotiation.  The details, while not all reported in the Post are pretty complicated from a fiduciary standpoint -- all about assets and what is responsible use and who can do what when.  In the end, some of what was the Corcoran remains -- its art collection and components of its school.  The Corcoran itself, as an institution, will continue with a yet to be determined mission but as a former shell of itself.  The legacy, in the arts world appears to be important and so glasses should be raised that a civil and apparent approach to preservation has been reached.  But it's all very complicated, again, especially the disposition and transfer of the assets and what remains unknown -- how the Corcoran's mission - its school, will actually be preserved.  I for one do wonder why the Board didn't just sell the art work and reconfigure the school to make it more sustainable -- or do this and make a joint agreement with GWU to reduce duplicative costs but preserve its approach.  These are facts that can only be answered from inside the board room.  

Meanwhile, the agreement between the three entities must be approved in the courts.  The article does a good job of explaining the whys and wherefores particularly when one remembers that deals like this must involve a review of all donor restricted assets to ensure that the intentions are not violated.  Thankfully so, I might add.