Nonprofit Board Crisis

Nonprofit Mission and Money

Sometimes, if not often, the answer to the problem is just money.  

At least that's what is suggested by the recent purchase by Ms. Emily Vanderbilt Wade who, via a foundation set-up for this purpose, acquired 4000 acres of virgin land.  Interestingly, the previous owner was another foundation who wants to use the money from the sale to pursue its own mission at a higher level.  With this level of a cash infusion, one would indeed expect good outcomes.

Wall Street Journal By CANDACE TAYLOR

Updated March 13, 2015 12:49 a.m. ET

Emily “Paddy” Vanderbilt Wade has paid just over $22 million to purchase roughly 4,000 acres in Thomasville, Ga., that includes the Big Woods, a large tract of old-growth forest.

The property is a portion of the Greenwood quail-hunting plantation, which was the longtime home of the late John Hay Whitney, former U.S. ambassador to Britain and owner of the New York Herald Tribune, and his late wife, Betsey Cushing Whitney. The plantation, which had been in Mr. Whitney’s family since 1899, was listed several years ago.

According to co-listing agent Jon Kohler of Jon Kohler & Associates, the property didn’t have a formal asking price. “It’s hard to value something like that,” he said.

Ms. Wade and her family created a nonprofit, the Greenwood Research Foundation, to purchase and manage the land. She said she plans to put a conservation easement on the parcel, which will be used for research on the ecology of longleaf yellow pine forests. She owns the nearby Arcadia Plantation, which contains the Wade Tract Preserve, a 200-acre swath of old-growth forest that was conserved by her late husband, Jeptha H. Wade, in 1979 for research purposes.The plantation’s main house, built in the 1840s, and surrounding 235 acres are still on the market, but Mrs. Wade’s purchase includes seven tenant houses and a horse barn. The tenant houses were built in the late 1800s and early 1900s to house plantation employees, said Erica Hanway of Plantation Marketing Group, who listed the property along with Mr. Kohler and Erica Kohler of Jon Kohler & Associates.

The seller was the Greentree Foundation, a Whitney family philanthropic organization.Richard Schaffer, president of the Greentree Foundation, said the group decided to sell Greenwood to focus on its core mission of advancing peace, human rights and cooperation among nations. Mr. Schaffer said the foundation wanted to ensure that it found the right buyer. “Mrs. Wade was an absolutely ideal buyer,” he added, due to her “lifelong commitment to conservation.”

Nonprofit Boards and Trained Managers

It feels a bit late in the game to me but the Roman Catholic Church in New York has decided that its clergy may not actually be the best people to manage day-to-day operations.  I would pose that this aha moment is one that might be reflected upon in many nonprofit sectors.  Consider all the passionate, charismatic and often skilled providers (social workers, artists, housing providers etc) who find themselves now leading what has become organizations.  But, they haven't been equipped with the skills (and really likely shouldn't be expected) to know all the infrastructural dimensions that gird what it takes to get program out the door.   

Is it really reasonable of a board to hire gifted talent but with limited management and administrative experience to administer?  Well, as reviewed in the WSJ article below, maybe not.  Kudos for finally figuring this out.

Wall Street Journal by MELANIE GRAYCE WEST

     March 10, 2015 4:48 p.m. ET

A member of the Catholic clergy, in many ways, is part shepherd, part jack-of-all-trades. A day can swing from administering rites to haggling with a city agency over a bingo license.

In an effort to ease day-to-day administrative tasks, which are likely to grow more burdensome as parishes consolidate and pastors tend to larger flocks, the Archdiocese of New York is launching a program that will give laypeople formal training in church management.

The two-year online program, to be announced Wednesday, is in partnership with Villanova University’s Center for Church Management and Business Ethics. The archdiocese aims to enroll 50 people, who would earn a master of science in church management on graduation.

Tuition will be subsidized by the archdiocese and individual parishes hoping to hire a newly trained manager.

The decision to train church managers comes as the archdiocese, which reaches from Staten Island to Saugerties, N.Y., has been reorganizing some 100 parishes, resulting in at least 55 new ones and dozens that will be closed. Archdiocese officials have said the moves are necessary to better serve all Catholics, including those who have moved into nearby suburbs, and to meet other educational and charitable needs.

Cardinal Timothy Dolan, the archbishop of New York, has previously said that through the process of realignment he wishes to liberate his clergy to do more pastoral work, not “be into replacing boilers and leaky roofs in 150-year-old parishes that are one-third filled on Sundays.”

Church officials hope that trained business managers, in addition to tending to the facilities, can bolster programming and other services to attract and retain parishioners.

“If the parish is going well, the pastor has support,” said William Whiston, chief financial officer of the Archdiocese of New York. “It reduces the pressure of the archdiocese to help the pastor and the parish to operate.”

Villanova began offering masters degrees in church management in 2008 and graduates fewer than 20 students annually. The curriculum covers financial reporting, fundraising, human resources, civil and church law, and strategic planning. Some coursework, like accounting practices, has been tailored to the needs of the Archdiocese of New York.

Archdiocese officials believe that potential students will likely, though not exclusively, come from a pool of current church volunteers interested in a second career. The expectation is that once graduated, the church managers will return to work for an archdiocese parish, though no job is guaranteed.

The Diocese of Camden in New Jersey has had a similar, though smaller, arrangement with Villanova to train church managers. Michael Brough, a director at the National Leadership Roundtable on Church Management, a Catholic nonprofit organization, said most dioceses in the U.S. have in recent years employed some kind of training program to groom church managers, though few if any have instituted a program as big or formal as the one proposed by the Archdiocese of New York.

The Rev. Gerald E. Murray of Holy Family Catholic Church in Midtown serves about 320 parishioners, but he estimates spending a quarter of his time on administrative tasks. A trained church manager could free him to focus more on sermons and study, he said, but whether parishes could afford a manager is another matter.

“I do spend a lot of time talking to contractors and repairmen,” he said. “I wish I didn’t have to do this. It would be nice to have someone delegated with those responsibilities.”

Write to Melanie Grayce West at [email protected]

Nonprofit Governance When the Going Gets Tough

There can come a time for a nonprofit that going it alone is just not possible.  Options like closing the whole operation down, finding a partner that will carry the "best" of what's left, or selling-out to another organization that will build over or up are possibilities.  

Towards this end, the Mercy Suburban Hospital in Pennsylvania has just been bought by a for-profit California organization.  The corporation already owns two other hospitals in the area.  I'm guessing these were once nonprofits as well.  

As the article below suggests, the former nonprofit hospital was just not keeping-up.  I would pose the decision to sell was good governance on the part of the nonprofit's board.  The mission, to ensure there is health care available to the community will continue (perhaps not exactly as was originally desired) but continue nonetheless.  And, an extra bonus will occur.  When a nonprofit is purchased by a for-profit, usually one of the settlement agreements is to create what is called a "conversion" foundation where some cash is put into a new nonprofit who's job it will be to make grants or at least invest in the community's health.  Given the state of the hospital before its sale, such a conversion foundation will provide better prospects that the founding legacy will continue.

The community should be appreciative that the nonprofit hospital board understood it was time to move-on and that it is leaving behind resources that can at least provide some opportunity.

Nonprofit governance can be really hard.

Mercy Suburban Hospital sold to Prime Healthcare

 

Mercy Health System has agreed to sell Mercy Suburban Hospital in Montgomery County to Prime Healthcare Services Inc., a California-based for-profit company that owns Roxborough Memorial Hospital in Philadelphia and Lower Bucks Hospital in Bristol Township.

Mercy, part of one of the nation's largest tax-exempt health systems, Trinity Health, of Livonia, Mich., and Prime did not disclose the value of the deal, announced Monday.

Trinity said the 126-bed hospital in East Norriton lost $5.4 million on $54.6 million in revenue in the six months ended Dec. 31.

An expert in health-care finance who is familiar with Prime estimated that the Ontario, Calif., company would value a place like Mercy Suburban at 25 percent to 40 percent of annual revenue.

That would equal about $25 million to $40 million, said Joshua A. Nemzoff, president of Nemzoff & Co., in New Hope, a mergers and acquisitions adviser to nonprofit health-care organizations.

Mercy Suburban has 680 employees.

Prime officials could not be reached for comment on the deal, which requires regulatory approval and is expected to close in four to six months.

Prime has agreed to invest $30 million in Mercy Suburban in the five years after completion of the deal, the organizations said in a joint statement.

A lack of investment at the facility has been evident for some time, said Bill Cruice, executive director of the Pennsylvania Association of Staff Nurses and Allied Professionals, a union that represents 155 nurses there.

"They have not been nearly as aggressive in recruiting physicians or maintaining capital plant and capital equipment for four years now," Cruice said. "We've been concerned about that for some time."

Trinity, and before that Catholic Healthcare East, which merged with Trinity in 2013, has sold or has agreed to sell five of its financially weakest hospitals in recent years.

Mercy Suburban is Trinity's third deal with Prime.

As part of the deal with Prime, Mercy Suburban will lose its Catholic identity and change its name. Prime has agreed to maintain charity care that is "no less favorable" than the current policy.

Mercy Suburban was founded in 1944 as Riverview Hospital in Norristown and moved to its current site in 1972.

 

---

[email protected]

215-854-4651 @InqBrubaker

 

Nonprofit Governance Matters

What follows is another one of those painful articles about nonprofit executive salaries that the media loves to focus on.  And once again the media has missed two points.

First, the boards of these schools make the decision about how much pay should be to represent the value they put on recruiting and retaining the "best" individual to lead on the day-to-day.  Next, the focus on salaries fails to focus on what is really important: results.  If the media insists on discussing the subject of salaries, include in the discussion, results.  Only then will salary rates have true meaning. 

 

D.C. charter school executive salaries vary widely, Post analysis shows

 

Washington Post By Emma Brown and Michael Alison Chandler February 23 

 

Two of the District’s charter school leaders earned about as much as or more than D.C. Schools Chancellor Kaya Henderson in 2013, though she runs a city school system that, with 45,000 students, is much larger than either of their organization

A Washington Post analysis of federal tax forms shows that the District’s five dozen charter school leaders earned total compensation ranging from just less than $90,000 to more than $350,000 in 2013. The Post analysis shows that leaders of some charter schools are paid no more than principals at traditional public schools, while others are earning much higher salaries to lead one school, or a handful of schools, that serve just hundreds of students.

D.C. taxpayers send more than $600 million to fund the city’s charter schools each year, but there is far less information available about how that money is spent than the tax dollars that flow to the traditional public school system.

Even higher salaries have been concealed because some of the charter schools — which are required by law to be nonprofit — used for-profit management companies to supervise their operations. Company executive salaries do not show up on schools’ tax filings and are often impossible for charter school regulators — and the public — to track.

For example, the highest-paid employee at Community Academy Public Charter School in 2013 was Head of Schools Brenda Bethea, whose total compensation was $146,772, according to the school’s tax filings with the Internal Revenue Service. But the highest-paid person running Community Academy’s network of five schools in 2013 was chief executive Kent Amos, who earned $1.3 million that year from a private management company, according to tax filings read into the D.C. Superior Court record by Judge Neal E. Kravitz. That figure became public only after the D.C. attorney general filed a lawsuit.

Salaries of top-paid leaders at charter schools.

As charter schools have grown in the District and nationwide, so have concerns about the lack of transparency in their budgets and their financial arrangements with management companies. Nearly 3 million children are enrolled in more than 6,700 U.S. charter schools, an estimated jump of 14 percent over last school year.

In 2011-2012, about 22 percent of charter school students across the country were enrolled in schools operated by for-profit management companies, according to a National Education Policy Center report.

Budgets for traditional public school systems are debated in public by elected officials, and traditional schools, like any government agency, are required to disclose detailed information about how they spend their tax dollars. They also must disclose employee salaries.

“We’re used to a system where taxpayer dollars fund public schools, and there’s a great deal of transparency in terms of how much everyone makes, including teachers and top administrators,” said Kevin Welner, director of the National Education Policy Center at the University of Colorado at Boulder. “We’ve moved to a system where the taxpayer money still goes out, but we don’t have any of the accountability and transparency that we’ve come to expect.”

In some parts of the country, lawmakers are beginning to question whether salaries for charter school leaders need regulating, arguing that pay for charter leaders has grown unreasonably high at some schools.

In New York, for example, Eva Moskowitz, the chief executive of the nonprofit Success Academy network. which runs more than 20 charter schools, earns $578,420 in total compensation, according to tax filings. A state lawmaker has proposed a law that would cap charter-leader salary at $199,000. A bill in New Jersey, where there is a cap on salaries for traditional school super­intendents, would apply that cap to charter school leaders.

Nina Rees, president of the National Alliance for Public Charter Schools, says she supports efforts to make dealings with private management companies more transparent, but she does not think lawmakers should place a cap on salaries. “Offering a competitive salary will broaden the pool of applicants,” she said.

 Like traditional public schools, charter schools are publicly funded with taxpayer dollars. Unlike traditional public schools, charter schools are independent nonprofit organizations that are not required to disclose what they pay their employees. The exception is when charter employees earn more than $100,000; their compensation must be disclosed on forms that schools submit to the IRS.

nically superintendents of small school districts; the District’s 61 charter school leaders oversee 112 individual charter schools throughout the city. Most earn far less than Henderson, who receives a salary of $275,000, plus health, retirement and other benefits to run the D.C. Public Schools, a system with more than 45,000 children enrolled at more than 100 schools.

Henderson declined to comment on charter leaders’ salaries.

The Post’s analysis of data from the 2013 tax year, the most recent year available, shows that of the 38 charter schools that don’t have a management organization or other related entity, 21 are led by individuals whose total compensation is less than $132,148, the average salary of a D.C. Public School principal this year. (The job responsibilities of a charter school executive vary and often aren’t the same as those a principal might have, but each is seen as a key leader of his or her school.)

In many cases, there is a relationship between the size of the school and the compensation for that school’s executive.

Olivia Smith, for example, earned $89,367, one of the lowest total compensations in the city, but she also led one of the smallest schools: Bridges, with 143 students and total income of $3.8 million. “I am in it for a cause I believe in, not to be wealthy,” Smith said, adding that the school has since grown and she has gotten a raise.

Donald Hense earned a salary of $269,659 and a total compensation package of $356,000 as chief executive of Friendship, one of the city’s largest networks of charter schools, which served more than 3,800 students in 2013 and had a budget of more than $73 million.

Friendship’s board of trustees worked with a consultant to look at comparable salaries and set a “a high mark” for compensation for Hense because of his experience and the complexity of the job, said Gregory Prince, the board’s vice chairman.

“I would argue that Don Hense is an educator, real estate developer, investment banker and bond market specialist,” Prince said.

Nonprofit Change

There are times in an organization's life when the only way change can only happen is when their leadership must go.  Such is the case for the for-profit Standard Chartered which saw its CEO and Chairman and a couple of board members all leave their ship this week.  The focus: direction and outcomes (performance).

But how often do you see performance the motivator to have both paid and volunteer leadership resign?  While admittedly nonprofit board members in particular come to the table moved by their passion, rarely have I seen that passion acknowledge, own failure, and take action because the nonprofit's direction and/or results have been incorrect or not good enough.  Why is this? 

Do nonprofit board members not really believe their role shapes or affects direction or outcomes?  Are setting policy, strategic planning, and, evaluation and, hiring the paid leadership not viewed as significant enough activities for board members to believe they have an impact on direction and outcomes?  If this is true, and I'm thinking it may well be, it is clear why board members and the chair in particular would never be in the position to resign over inadequate outcomes.

Below is the WSJ article on what's happening at Standard Chartered.  Nonprofit board members: take note.

LONDON— Standard Chartered PLC said Thursday that Chief Executive Peter Sands will step down in June and be replaced by former J.P. Morgan Chase & Co. executive Bill Winters, following a protracted campaign by shareholders and some executives who had grown frustrated with the bank’s leadership.

The shake-up was far-reaching. The London-based, Asia-focused lender also said Chairman John Peace will step down in 2016 and that three longtime board members were also resigning. They will be replaced by two new independent directors.

While pressure has been building for months on Messrs. Peace and Sands, the magnitude of the changes surprised analysts and some bank executives. Investors greeted the move, sending Standard Chartered’s shares up more than 5%.

The changes introduce the possibility of a strategic or financial overhaul at the emerging-markets bank. Some analysts said they expect Mr. Winters to take steps to boost the bank’s capital buffers by selling new shares, a move that Mr. Sands has long resisted even as investors have questioned the adequacy of the bank’s capital levels. Another possibility is accelerating Standard Chartered’s retreat from some far-flung locales where it lacks much heft.

Mr. Sands, who for months said he wasn’t leaving, said it was “the right moment” to hand over the reins to Mr. Winters.

“I am delighted that a banker of Bill’s caliber will be leading the group through the next phase of development,” he said.

The shake-up was far-reaching. The London-based, Asia-focused lender also said Chairman John Peace will step down in 2016 and that three longtime board members were also resigning. They will be replaced by two new independent directors.

While pressure has been building for months on Messrs. Peace and Sands, the magnitude of the changes surprised analysts and some bank executives. Investors greeted the move, sending Standard Chartered’s shares up more than 5%.

The changes introduce the possibility of a strategic or financial overhaul at the emerging-markets bank. Some analysts said they expect Mr. Winters to take steps to boost the bank’s capital buffers by selling new shares, a move that Mr. Sands has long resisted even as investors have questioned the adequacy of the bank’s capital levels. Another possibility is accelerating Standard Chartered’s retreat from some far-flung locales where it lacks much heft.

Mr. Sands, who for months said he wasn’t leaving, said it was “the right moment” to hand over the reins to Mr. Winters.

“I am delighted that a banker of Bill’s caliber will be leading the group through the next phase of development,” he said.