Nonprofit Board Crisis

Nonprofit Board Diversity Matters

Is your board thinking about diversity issues for itself (yes, you should)?  The following article does a good job about talking about nonprofit board diversity, why it matters, and, what steps might be taken to pursue this goal.

Yes, board diversity matters.

 

Recruiting fair aims to connect minorities, area nonprofit boards By Frederick Melo [email protected] POSTED:   07/27/2015 12:01:00 AM CDT UPDATED:   07/27/2015 09:33:42 PM CDT   Jun-Li Wang (Courtesy of Jun-Li Wang)   After moving to Minnesota more than a decade ago, community organizer Jun-Li Wang found herself in high demand to serve on the boards of Twin Cities nonprofits and civic groups. At first, she was flattered. Then the requests became overwhelming. She realized that being a civic-minded, college-educated woman of color willing to sit through monthly programming and budget meetings made her a rare commodity in a sector starved for diversity. "In some cases, it was apparently because I was the only person of color that they know, which is troubling," said Wang, 42, of St. Paul. Wang is confident more racial and ethnic minorities would step forward to hold leadership positions if they were asked. But she's discovered that even those who serve on nonprofit boards heavily involved in service to minority communities lack friends of color they can tap. On Aug. 3, Wang and a group of 16 like-minded volunteers will gather at Hamline University in St. Paul for the first recruitment fair aimed at connecting racial and ethnic minorities to nonprofit boards. Her initiative, dubbed "Board Repair," launched about a year ago with the goal of drawing new blood to established agencies and supporting members of color once they hold a board seat. "Everyone we talk to, whether people of color or organizations seeking to diversify their boards, thinks this is needed," said Wang, who sits on the St. Advertisement Paul Planning Commission and serves as vice president of the board for Urban Boat Builders, a St. Paul-based nonprofit organization that teaches youth work skills. In the past month, 120 organizations have signed up to participate in the recruitment fair, and there will be almost as many people of color. Wang has received assistance in outreach or event staffing from such organizations as the Charities Review Council, GiveMN, the Minnesota Council of Nonprofits and the Minnesota Council on Foundations, among others. Eager for a broader range of perspectives and experiences more reflective of the communities they serve, some area foundations have already made it a point to seek out diversity on their boards. At the St. Paul-based Bush Foundation, at least six of the 14 board members are people of color. The foundation funds community efforts in Minnesota, the Dakotas and the 23 American Indian nations within the region. "Our board very much looks like the geography we're planted in," said Bush Foundation Community Network Vice President Duchesne Drew. On the board of Minnesota Philanthropy Partners -- which governs the St. Paul Foundation and Minnesota Community Foundation -- six of 18 members identify as people of color. And six of the 12 members of the board of the F.R. Bigelow Foundation are minorities. On the Mardag Foundation board, two of the four nonfamily members are people of color.   DIVERSE COMMUNITIES Even in cities like St. Paul, where 40 percent of the population is composed of racial or ethnic minorities, many nonprofits have struggled to add people of color to their leadership. The boards of the city's 17 neighborhood planning councils are about 20 percent diverse, according to interviews with their directors. Some neighborhood and municipal boards, such as the city's Heritage Preservation Commission, which is influential in planning and construction within historic districts, have no members of color. "No one has comprehensive stats on board diversity," said Wang, "but I and pretty much everyone I know in the nonprofit sector has seen firsthand that this is an issue." For neighborhood councils, the lack of board members of color makes it hard to get information out to ethnic communities and draw residents to community meetings -- a potential stumbling point for taxpayer-funded organizations bearing the mission of representing the city at the block level. Some civic leaders have noted, however, that even though St. Paul is 40 percent minority, a high number of that percentage is children. The number of adults with the skills and time to devote to service on a board is far lower. Others say the region's achievement gap -- the difference in educational attainment between whites and nonwhites -- also holds back representation, but Wang disagrees. The state is home to roughly 75 four-year colleges, most of them within the metro area, and they've drawn talented young people from across the world. The U.S. Census' American Community Survey shows that 43 percent of Asian-Americans in Minnesota age 25 or older hold at least a bachelor's degree. While the figure is lower for degree-holding Latinos and blacks, it still exceeds 15 percent -- which is at or above the national average.   LEARNING THE SYSTEM Some civic boards have drawn diverse applicants as a result of the type of work they do. The city's Human Rights and Equal Economic Opportunity Commission, for example, reviews minority hiring goals in city contracts and performs outreach to women- and minority-owned vendors and contractors. Thirteen of the board's 21 members, or 62 percent, are racial minorities. Christopher Yang, 25, of Woodbury, joined the board of the St. Paul-based Center for Hmong Arts and Talent in November 2013, his first foray into a leadership position of that kind. The opportunity came up through a dinner conversation with the board chair, a personal friend. "It's a little overwhelming at first when you're new to the system," said Yang, who sat on the board of an Asian student group at the University of Minnesota-Duluth. "This is a little different, with an actual organization, with hundreds of thousands of dollars you have to be accountable for. "The very first few meetings, I was kind of learning the system," he added. "It really allowed me to learn about my community ... and how to better the community, especially with the arts. It's been very empowering." Frederick Melo can be reached at 651-228-2172. Follow him attwitter.com/FrederickMelo.

Nonprofit Board Policy and Strategy Matters

Pennsylvania's Governor has advised the state's nonprofits which have contracts with the State that they may soon be in a position where, if they want to continue to provide services, they may have to either borrow money or dip into their reserves.

The Governor's edict serves to remind boards that in the exercise of their fiduciary duty of care includes policy and planning decisions around debt and/or the use of reserves (reducing assets).  Boards in a state like Pennsylvania, and really, nonprofit in any state who have made the decision to rely on achieving mission by serving as state contractors have effectively made policy and plans that creates a certain reliance on one source of funds that in turn can create a challenge in times like this.  

I'm of course not saying that other sources of funding don't also present challenges but more importantly that state contracts should, for nonprofit boards, be just one of the strategies used to achieve mission.  Also, with such a strategy, a board must ensure that they have considered contingency plans like borrowing money or creating reserves to address occasions like those being experienced in PA.  

Bottom line, experiences like the one being tentatively faced by Pennsylvania's nonprofits are a good time to bring boards back to their tables to revisiting their sustainability strategies.

 

Wolf acknowledges service providers may have to borrow money

 

MARC LEVY, THE ASSOCIATED PRESS

POSTED: Friday, July 24, 2015, 4:10 PM

HARRISBURG, Pa. (AP) - Gov. Tom Wolf acknowledged Friday that nonprofit social services providers may have to borrow money during the state budget stalemate, but he said they should share his broader goal of doing the right thing for Pennsylvania.

Spending on social services is not a major point of contention between the Democratic governor and the Republican-controlled Legislature in their 3-week-old stalemate. However, billions of dollars that would otherwise flow to counties and nonprofit groups that provide a range of social services, including child protective services and addiction and mental health counseling, are expected to be held up in a wider dispute over Wolf's priorities.

Wolf said he understands the concern over social services agencies having to foot the bill to borrow money while they wait for the state to reimburse them.

"Apparently, if they are forced to borrow money, the cost is not reimbursable in many cases by the state, so that is something that would not be good," he said in an interview on KQV-AM radio in Pittsburgh.

 

Wolf said he is doing everything he can to find ways to protect social services agencies from being harmed by a longer impasse, although he did not specify what, if anything, his administration is doing or could do.

"I want to make sure that the disruption is as little as possible, so I'll continue to work on that," Wolf said. "But ... in the long run, all of us, including the social services agencies, have a vested interest in making sure we do the right thing for Pennsylvania and that's what I'm focused on."

Negotiations between Wolf and Republican lawmakers were at a standstill Friday.

County and social service agency officials say a continuing impasse is sure to impact their services, in particular by creating service delays and longer waiting lists.

"These are people who are in crisis who are not getting services," said Samantha Balbier, executive director of the Greater Pittsburgh Nonprofit Partnership.

In 2009, many social service agencies laid off employees, borrowed money or shut down during a budget impasse that lasted into October under then-Gov. Ed Rendell.

The last payments to social services providers went out earlier in July, meaning that the first missed payment would be in August if the impasse continues, according to officials from the Pittsburgh-based Forbes Funds, a group that supports the nonprofit sector.

Through Wednesday, $312 million in payments had been held up because of the impasse, according to the Wolf administration. The majority of that money, $218 million, is payments to counties for human services programs.

A low-interest loan program arranged by The Forbes Funds through Bridgeway Capital has received five applications, with more being filled out, said Matt Zieger, vice president of The Forbes Funds.

Still, nonprofits will get hit with a "double whammy" of having to pay borrowing costs - or losing interest on reserves they spend - and then climbing out of a hole created by the missed payments, Balbier said.

It otherwise will be challenging for nonprofits to get a bank loan, Balbier and Zieger said.

"It's very difficult to convince a bank to lend you money if your funding has been frozen," Balbier said. "And the interest rate you would get on that loan is exorbitant because it's very high risk."

Read more at http://www.philly.com/philly/news/politics/20150724_ap_1c51dd9e54004e2e954923f2c73855ab.html#eo8o3s3wR14WGAuX.99

Nonprofit Board Loses $100,000

What exactly should a nonprofit board do when it learns that its trusted Treasurer has redirected some of its funds?

Below is the Washington Post story about the theft experienced by the Talbot Watermen Association.  The Treasurer helped herself to the nonprofit's funds and members of the organization called the cops.  Presuming that the nonprofit has liability insurance, much of their loss should be recovered.  

The good news.  Below the Washington Post article is what the Association shared with its members.  On the Association Website the item is simply titled "Talbot Watermen Association Official Statement.  Clicking-on this title gets one to the statement.  Fair enough. 

Good step: once financial theft is learned or even perceived: call the cops!  Next step, fix the systems and policies that enabled the theft.  Finally, talk to your constituents.  Kudos to the Association for moving forward in what I believe to be correct actions.

EASTON, Md. — Maryland State Police have charged the former treasurer of a Talbot County nonprofit with stealing from the organization.

Forty-year-old Lisa N. Gowe of Neavitt was charged Thursday with theft scheme, $100,000 plus.

Troopers say in January, members of the Talbot Watermen’s Association contacted state police and alleged that Gowe, then the group’s treasurer and event organizer, depleted the association’s bank accounts.

Investigators say bank records show that Gowe wrote numerous checks written, made withdrawals, debits and electronic money transfers that were not authorized.

Police say Gowe used the money for herself and not the Watermen’s Association. Washington Post

 

Talbot Watermen Association, Inc. Official Statement (Website)

POSTED ON JULY 25, 2015

As most of you are now aware, our past treasurer Lisa Gowe has been arrested for embezzling money from our Association. As a Watermen Community and a Association, we have pulled together and will overcome this setback. This is our official statement :

Lisa Gowe’s criminal charges are the result of an investigation by the Maryland State Police. The investigation was requested by our Association when we discovered discrepancies between information provided between Ms. Gowe and information provided by the bank. We were shocked and disheartened to learn that our once trusted treasurer was, in fact, untrustworthy. Since learning the details of the apparent embezzlement, we have consulted with attorneys and accountants, and have instituted new financial controls and oversight. We are saddened by our prior treasurer’s actions, for her family, for our members, and for our supporters throughout the community. We have asked the State’s Attorney to seek restitution as a component of the criminal process.

Nonprofit Boards Have One Employee

Nonprofit boards have one employee - the CEO or Executive Director or Superintendent (yes, 2 if there are co-directors).  And, while there are nonprofit boards who act as though they are the bosses of every employee, they would be incorrect and/or at least, not fully understanding their role and responsibilities.

Meanwhile it is with great interest that one newly hired administrator in Philadelphia received a really negative public screening while the one individual responsible for that hiring was kind-of ignored.  This kind of media does nothing to support the fact that it is really up to the Board to call to question a CEO's hiring decisions and that question should not be about the hiring per se but about the CEO's performance results that may well have become changed as a result of the hiring.  This is to say, if the recruitment of a specific administrator turns out to be a bad decision, the consequence rests on the one who did the hiring, in this case, the Superintendent.  

The following is the Philadelphia Inquirer story and certainly should serve as a great lesson for boards: if you are unsatisfied with the results, be sure to stay in your role and hold your CEO responsible.

New school administrator has past controversies

REGINA MEDINA, DAILY NEWS STAFF WRITER [email protected], 215-854-5985

POSTED: Friday, July 24, 2015, 12:16 AM

 

image: http://media.philly.com/designimages/partnerIcon-DailyNews-2014.jpg

 

ERIC BECOATS was very dedicated to his administrator job in Charlotte, N.C.

He was also equally committed to his consulting business, Queen Educational Planning LLC, whose client was the Little Rock School District in Arkansas. Once Charlotte-Mecklenburg Schools officials found he made at least 17 calls from district phones to Little Rock, he was censured and suspended for a day.

Becoats, now a newly hired top school district administrator in Philadelphia, has resigned from two previous jobs, including Charlotte, following accounts of his alleged misuse of public resources, the Daily News has learned.

Becoats, who has a business and financial-planning background, was forced to resign after a series of missteps that included underestimating the rainy day fund by $15 million and using a public school bus to ferret around friends and loved ones. 

District officials, however, stood behind Becoats yesterday, saying in a statement that he was fully vetted and brings a "deep skills set" to Philadelphia.

School Reform Commission president Marjorie Neff was on vacation yesterday and unavailable for comment. Becoats was also unavailable, officials said.

But one Durham community activist, who butted heads with him during his tenure, warned:

"All I can say to Philadelphia is good luck and keep your eyes on the process," said parent activist Rodrigo Dorfman, a multimedia producer. "There's obviously a pattern and you can expect more, unless he had a come-to-Jesus moment."

Background

Becoats will earn $150,000 as the district's new assistant superintendent for the Turnaround Network, an office newly created by Superintendent William Hite to improve low-performing schools.

He came to the district from Chicago, where he was interim executive director at Distinctive Schools, a nonprofit that assists charter schools serving underserved children.

The Lincoln University graduate stepped down in December 2013 as superintendent of Durham Public Schools in North Carolina. Nearly a decade earlier, in March 2004, he resigned from Charlotte-Mecklenburg Schools as assistant superintendent for Planning and Development.

When he left Durham, Becoats was in the middle of a contract that paid him $223,048.56 annually, according to Durham schools spokeswoman Chrissy Deal, and his term was expected to end in June 2016.

He walked away with a $298,074.54 severance package, according to a resignation agreement with the Durham Board of Education.

Decisions questioned

Among Becoats' financial missteps in Durham, according to media reports and documents and minutes from Durham public schools, he was found to have:

*  Used a Durham school bus and driver in June 2013 to shepherd his family and friends to private events around the Durham area, including a stop at the upscale mall, The Streets of Southpoint.

*  Racked up $21,000 in credit-card bills over 12 months, mostly for out-of-state travel to professional conferences. The board suspended the credit card.

*  Underestimated Durham school's unassigned fund budget by $15 million - an error that was discovered in an audit days before his resignation.

Becoats worked from 1997 to 2004 for Charlotte-Mecklenburg Schools, where he left as an assistant superintendent for Planning and Development earning $91,800 a year.

Charlotte-Mecklenburg officials reprimanded Becoats for violating district policies regarding his personal business, Queen Educational Planning, according to several media reports.

An internal investigation found that Becoats used Charlotte-Mecklenburg phones, computers, email and documents, the Charlotte Observer reported July 2003. Officials suspended him one day without pay, docked him a day of leave and told him to repay $3,625, the paper reported.

Newspaper editorials in the Durham area called for his resignation and by Dec. 31, Becoats was out.

In an email to the Daily News, Chanice Savage, a spokeswoman for the Philadelphia school district, said, "We made the decision to hire Eric after fully vetting his candidacy, which we do with all executive hires.

"Our vetting process includes reviewing candidates' background and work history information, conducting interviews, and contacting references," the statement read. "Eric brings a deep skill set and experience to his role and we are excited to have Eric join the team."

Repercussions

After a review by Durham lawyers regarding the bus outing in June 2013, the board issued a public statement a month later calling it "an inappropriate action," but stated that Becoats had not "intended to violate school policy."

Becoats had asked to be billed for the bus use and did pay it, but the investigation found his payment didn't cover the full invoice amount, the statement said. He later paid the full amount.

The statement also included Becoats' comments: "After the use of the activity bus on the contracted dates, I was informed of the local and state policy. I apologize for my mistake."

He was issued a letter of reprimand by the board.

The media reported in late August, however, that Becoats had been made aware of the bus usage policy by a district lawyer in 2011. At the time, the lawyer had been advising the board about bus usage in another matter, The Herald-Sun in Durham reported.

The credit-card bills' tally was uncovered by a local TV station. Becoats was authorized to use the school-issued credit card for professional conferences but with the prior approval of the school board chair. He reimbursed the district for about $580 to cover some of the expenses.

Becoats appeared to have lofty tastes and bought from minibars, purchased flowers for employees, and took limousines from the airport, according to receipts provided by Durham schools.

Becoats' report to the board claiming the "rainy day" fund had only $4 million appeared to anger and embarrass the members.

"The Board of Education depends on the superintendent to present an accurate accounting of what our true financial status is," board chairwoman Heidi Carter said in 2013, according to a report in The News & Observer of Raleigh. "I feel foolish having gone in front of the county and pleaded poverty, when that doesn't appear to be the actual case now."

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Nonprofit Board Duty of Loyalty

 

A person who serves on a nonprofit board has fiduciary responsibility for that organization.  Fiduciary responsibility has three duties: care, loyalty and obedience.  As cited by many sources, the duty of loyalty essentially means that an individual board member cannot put their personal gain over the interests of the organization.  In practical terms, a board member must, in all matters, ensure they have no conflict of interest.

Because the opportunity to discuss the duty of loyalty tends not to very often rise-up in the public media so it is noteworthy that this topic that has become the focus of whether the current Chairman of Temple University's Board of Trustees.  As the Washington Post article below outlines, Patrick currently serves as the Board Chairman.  Attorney O'Connor also represent Bill Cosby and it is in this capacity that the question of the duty of loyalty is addressed.  

I am not clear that representing Mr. Cosby and remaining Chair of the Board is an actual conflict.  Nonprofit board members do indeed conduct business with each other and these transactions are not inherently considered conflicts of interest.  As a matter of course, these opportunities may serve as the added value to serving as a board member.  So, I'm not seeing the conflict or failure of the duty of loyalty but...

Meanwhile, I'd like to highlight what I believe are more substantive governance issues I gleaned from this article.  The first is that Mr. Cosby served as a Trustee (with the same three duties of care, loyalty and obedience) for 32 years and only attended one meeting.  What, no attendance requirements?  Even if there was only one meeting a year, that's 31 missed meetings.  Is this good governance?  Maybe Mr. Cosby wasn't a "full" Trustee - that is, there are other non-fiduciary seats, but really, 1 meeting in 32 years.

That of course raises the next issue: membership of 32 years.  Temple U. has no term limits?  And yes, I understand, Mr. Cosby brought a lot of benefit to the University through his name and actions but does he need to be a trustee to do the same?  There are not others who could also bring equal benefit by having a seat at the table?

Finally, the Chair has served as Chair since 2009 - 6 years.  Back to the question of board term limits and now officer term limits.  I'm confident that there are equally smart and dedicated Temple U. grads who could serve as Chair.  I'm not understanding the need to limit the chair position to one individual for this many years.  

Cosby’s embattled lawyer remains chair of Temple trustees

By Geoff Mulvihill and Maryclaire Dale | AP July 23 at 1:31 AM

PHILADELPHIA — Bill Cosby, once the very public pride of Temple University, parted ways with the school last year amid allegations that he had drugged and sexually assaulted women. Now that his own words show behavior that was at least unsavory, his lawyer is feeling heat for continuing to serve as the chairman of the university’s board of trustees.

In deposition testimony taken a decade ago and made public this month, Cosby acknowledged giving quaaludes to women with whom he wanted to have sex — adding evidence that his lawyer, Patrick O’Connor, knew that Cosby had behaved in a way that could reflect badly on the university.

The president of the university’s faculty union is calling for O’Connor, currently chairman of the trustees, to step down, but university officials are standing behind O’Connor. A half dozen trustees contacted by The Associated Press wouldn’t comment on the situation, though one, Joseph W. Marshall 3rd, expressed “full support” for O’Connor. Experts are split on whether O’Connor’s work for Cosby constituted a clear conflict of interest.

“In my experience, the highest standards of ethical behavior and the best interest of Temple have always guided the chairman’s leadership and relationship to the university,” Temple President Neil Theobald said in a statement this week.

Temple is a public university with a history of helping underprivileged students from Philadelphia — such as Cosby — do better in life.

 Cosby was the public face of the school for decades. He was a student there in the 1960s, left school to find fame as a comedian and actor and later returned to earn his degree.

Temple was always the academic home for the celebrity who championed education. He became a Temple trustee in 1982. According to a review of minutes, he attended just one board meeting over the next 32 years, but he was an active booster who wore Temple shirts on his 1980s his sitcom “The Cosby Show.”

He stepped down from the trustees board in December as public pressure grew when more than two dozen women came forward accusing him of drugging and sexually assaulting them. He didn’t give his customary graduation speech this year.

The first public accusations came more than a decade ago from Andrea Constand, a Temple employee who sued Cosby and later settled for undisclosed terms.

This month, testimony from Cosby’s depositions in that case has been made public. In his sworn statements made in 2005 and 2006, he said that in the 1970s, he had prescriptions for quaaludes, a powerful sedative that was later banned in the U.S., and gave them to women with whom he wanted to have sex. He has denied giving the drug to anyone without their knowledge and says he has not raped anyone.

Cosby has not been charged with any crimes, though he is the subject of a recent criminal investigation in California and a pending civil lawsuit in Massachusetts.

O’Connor rose from a working-class family in Wilkes-Barre, Pennsylvania, to become one of the first partners at what’s now known as Cozen O’Connor, a law firm that ranks among Philadelphia’s largest. O’Connor served on the Temple board from 1971 to 1984 and returned in 2001. He has been the chairman since 2009.

 Jerry Reisman, a Garden City, New York, lawyer who has experience in the duties of nonprofit boards, said there’s no doubt that O’Connor should have resigned from Temple’s board when he began to represent Cosby in the Constand lawsuit.

“O’Connor failed,” Reisman said. “It was an error in judgment on his part. It was a conflict, and he should have represented it as a conflict.”

Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said it’s not an easy call that O’Connor should step down.

Under Temple’s policies, trustees are supposed to notify the university of potential conflicts. By contrast, lawyers are duty-bound to their clients to keep their secrets.

O’Connor has not responded to telephone and email messages from The Associated Press, but he told The Philadelphia Inquirer this week that he did not have a conflict working for Cosby.

The university said in a statement that O’Connor’s work for Cosby “was disclosed and vetted.” The university said O’Connor’s work for Cosby was finished after the settlement with Constand in 2006, though it resumed this year when the AP sued to unseal records from the case.

Nonprofit Board Recruitment "Best Practice"

What is a "best practice"?

Well, according to the National Council of Nonprofits:

While there is no single definition of a “best practices” for each and every nonprofit organization, there are well-recognized legal, ethical, and accountability practices that are expected of well-run and accountable charitable nonprofits. Specific legal obligations vary state by state, but many state associations of nonprofits promote “best practices” - whether described as "guiding practices," "principles and practices,"  or "standards" - to encourage legal, ethical, accountable, and transparent practices by all charitable nonprofits and boards of directors. Recognizing and adopting these practices not only benefits individual charitable nonprofits, but also donors, and ultimately the individuals and communities that charitable nonprofits serve. 

I generally accept this offering AND want to suggest that "best practices" are principles and practices that have been demonstrated through research as effective.

In a press-release from Heifer International announcing the joining of the Fair Trade USA board (I think of both these nonprofits in a relatively positive way so this blog is not specifically about these groups):

Consistent with best practice in nonprofit governance, Fair Trade USA recruits its Board Members from a range of diverse constituencies, including producers, philanthropists, business leaders, entrepreneurs and activists.

Later in the release is also the following:

In addition to Fair Trade USA, Ferrari sits on the Boards of several other organizations that work to alleviate global poverty, including:  The Small Enterprise Assistance Fund, an investment management group that offers business and financial support to enterprises in emerging markets; InterAction, an alliance of 180 NGOs united in their commitment to care for the world’s poor; Global Impact, a partnership-based organization that provides advice and administrative assistance to the world’s most vulnerable people; and Ben and Jerry’s, an ardent supporter of social and environmental justice.

And finally:

The specialized knowledge of our Board Members is essential for furthering our mission,” said Paul Rice, President & CEO of Fair Trade USA.

So what's my quibble you might ask?  First, I am not aware of by whom or when the pursuit of diverse constituencies, particularly in the categories cited by the press release.  I am very aware and fundamentally believe that diversity on a nonprofit board can positively matter transactionally and relationally in terms of how a board functions as a team and particularly, the types of decisions it makes.  But I again, and even after doing a bit of research, cannot attest that there is an agreement by any of those who determine what indeed is a best practice, that what has been cited is, a best practice. Alternatively, what has been cited could be considered an appropriate and beneficial practice for specific types of organizations, but a universally accepted best practice: I'm not thinking so.

Meanwhile, as impressive as the new Fair Trade USA board member is, I must wonder aloud about just how many boards one full time working CEO can sit on AND be effective.  Now admittedly, the boards cited as credentials for this CEO do appear to be just extensions of the CEO job so maybe that's better for both the CEO and the respective boards (in terms of time, money, knowledge) but a good practice of sitting on multiple boards, I don't think there's much research to indicate this is so.

Finally, Fair Trade President notes that "specialized knowledge" of board members is essential and maybe that's true but I would caution that specialized knowledge can be as much an inclusive gauge as exclusive measure for recruiting nonprofit board members.  For instance, while a professional board may be efficient, it is not always guaranteed that they bring the voice of those being served.

So, best practices?

 

Nonprofit Board Selection

What follows is one practitioner's take on the origin and nature of nonprofits and more central to the piece, what an individual seeking to take-on a board role to fulfill personal community goals might look for in a nonprofit.  There is some fodder here worth considering noting that this I believe this content to be a jumping-off point for the many elements to be included when considering board work.  

While the writer focuses on "due diligence" in the selection of the potentially 'perfect fit" I would pose there to be a number of "personal" questions an individual might also include including: when are meetings held; what are the expectations beyond meeting attendance; do I have to get and give and at what level; and most importantly, what will I get if I serve?

 

Guest Commentary: Understanding your obligations to your community

By John Arigoni

POSTED:   07/20/2015 02:09:15 PM MDTADD A COMMENT| UPDATED:   ABOUT 17 HOURS AGO

For much of my adult life, I have made a personal commitment to improve our community. Through many years of work running a major nonprofit organization and also serving on several nonprofit boards, I have a unique perspective about how anyone who wants to "give back" can navigate the important process of seeking out the right opportunity. Board service can be life changing or a tedious experience depending on how you go about it.

In the United States, not-for-profits were started in the early to mid-1800s to help the disabled, the hospitalized, the needy and children. This approach was an outgrowth of the Elizabethan Poor Laws of 1601, which required the aristocracy to serve the "deserving poor." Wealthy families founded and ran these organizations and became known from then until now as charities.

What started as an obligation of the few to provide resources to build a stronger and more civil society has now become the shared responsibility of us all. Today, nonprofits are complex organizations led by paid professionals in concert with board members who have fiduciary responsibility. Board members ultimately must defend the agency's practices, accomplishments, and failures. The best boards function cohesively, with a spirit of shared goals and interests.

Finding an organization that mimics your interests and passion is important. Do your homework and ask others for advice. You can to turn to family, friends and co-workers for information about the causes they believe in and if appropriate, join them in driving an organization's vision forward.

 

Another way is to explore board positions is via the Web. Organizations like Metro Volunteers often post board positions for nonprofits.Spend time researching the mission and activities of an organization. The best nonprofits are those that embrace transparency. Other than sensitive employee data or certain donor information, you should be able to learn all about programs, strategic plans, impact metrics, and most importantly finances.

Once you narrow your search, contact the organization and determine their process for selection and requirements for contributions. Nonprofits need specific kinds of expertise to supplement the work of staff. This is a two-way street. A great way to start is to volunteer your time to assist the organization as a precursor to formal board service. There is no better way to understand culture and program delivery than to roll up your sleeves and pitch in.

If you find the right fit for both you and the organization, it is important to review its bylaws, recent audits, budgets, cash position and insurance; especially directors and officers liability coverage that are important in protecting board members and the overall organization. Colorado law requires board members to follow various regulations in good faith. Principles & Practices for Nonprofit Excellence in Colorado published by the Colorado Nonprofit Association outlines important topics including board governance, advocacy and fundraising.

If this all seems a little complex, good. Our community deserves well-managed nonprofits governed by committed, caring board members. Explore your personal passions, understand your obligations and do your part to create a better community for us all.

John Arigoni recently retired as the CEO of the Boys & Girls Clubs of Metro Denver, is a nonprofit consultant and currently serves on three nonprofit boards including the Colorado Nonprofit Association.

Nonprofit Ownership

It is a generally accepted principal that a nonprofit's board of directors is at minimum the "surrogate" owner.  At maximum it is understood that a nonprofit board's fiduciary responsibility (duties of care, loyalty and obedience) impose on a board the legal responsibilities akin to ownership.

That said, it is a bit amusing if not disconcerting to see what's going-on over at the Newman's Own foundation.  As noted below in the New York Post article, there's trouble brewing over at the foundation and the trouble appears to be centered around Newman family members and the long-term executive of the foundation.  At least one of Newman's daughters is stating that the absence of the family in Foundation affairs goes against their dad's wishes.  The executive in-turn essentially states that if Paul Newman wanted the situation any other way, he would have made it so.

It is certainly refreshing to see individuals who desperately want to be involved in philanthropy.  Were I the exec, this situation can be easily resolved by rotating in and off family members to ensure their voices and memories are "heard".  And, after all, the current Exec is pretty old so he needs to be thinking about succession planning and getting family members engaged could be part of that plan.

 

Paul Newman’s family at odds with Newman’s Own honcho

By Carlos Greer

July 8, 2015 | 9:32pm

Paul Newman’s daughter Susan has slammed the exec her father left in charge of his famed food company and foundation, Newman’s Own.

“I will not be muzzled any longer,” she declares in Vanity Fair’s August issue about Robert Forrester, Newman’s longtime friend and adviser who took charge of Newman’s Own after the star’s death, in 2008.

“Some family members may be angry at me for speaking out, but I feel like the Newman family has been taken hostage by Bob Forrester,” she further told Mark Seal.

The bitter battle stems in part from a dispute over Newman’s will, which was amended a dozen times. Susan, who has four sisters, claims, “I was told each daughter would inherit a million dollars . . . and my father would set up foundations for each of us . . . funded with up to $30 million or more per daughter.”

She also claims the sisters were to serve on Newman’s Own board. But, “We had the rug pulled out from under us.”

Forrester counters: “Paul never thought of Newman’s Own as a family enterprise . . . At one time, he was giving some thought to having one daughter on each board serving a time-limited term, but ultimately decided against doing so.” And, “Everything we are doing today is in line with Paul’s way of doing things.”

Newman’s widow, Joanne Woodward, did not comment for the story.

Nonprofit Board Micromanaging

My esteemed colleague Dr. Eugene Fram recently posted on his blog the subject of nonprofit boards micromanaging as they are wanton to do when they wear two hats -- that of the director who is responsible providing fiduciary and strategic direction via policy, planning and evaluation and in an organization's earlier stages of development, that of volunteer staff, planning and implementing the details of programming and managing. 

I most certainly agree with Dr. Fram that nonprofit boards do indeed tend to micromanage when wearing the two hats.  I have long noted this reality and would like to add some nuance to Dr. Fram's overview.  First, I believe that nonprofit boards go through four stages of development: infancy, juvenile, adolescence and maturity.  In the infancy stage, a board does well, after meeting its basic compliance obligations, to do little more than provide the services and manage these services.  This effort gets tiring to board members though and at this point or because a grantmaker "bought into" what the board was focused on, the board finds someone they can pay - someone mostly to do the "stuff" they don't want to do.  

Usually though, in this juvenile stage of development, the board doesn't give up its implementation role and that still dominates their meetings.  At some point though, the staff person says "hey, what did you hire me to do" and the tussle between who does what and when begins and the board enters their adolescence stage - a stage that can go on quite a while because this stage is pretty much focused on power sharing.  But, once these issues get resolved, often helped by more money, the board begins to step away from implementing and begins to focus on policy, planning and evaluation and enters the maturity stage.  And, yes, the board, given the event and personalities, can be driven back into any of the earlier stages.  And the cycle begins anew.

So, I'm in general agreement with Dr. Fram but I believe there to be more to "it" when thinking about exactly what role the board should be playing and when.

Here's the copy from Dr. Fram's blog:

 

Can A Board Member Ever Wear Two Hats?

Jul 19, 2015

Although this is not a good idea for nonprofit organizations, it is not an unusual occurrence, especially among start-ups, for-profit & NFPs. A director in a start-up nonprofit will need to assume some staff responsibilities as a volunteer. But he/s will need to organizationally report to the CEO. In the event the position ceases to be a volunteer one,i.e.,the person wearing the two hats is compensated for the staff work. he/s should resign the board position. With two hats, a director would be in conflict-of-interest on important matters like salaries. Although some state statutes specifically forbids a director to hold multiple roles, enforcement of the statues is haphazard, especially among smaller nonprofits that are short of people to carry out staff functions.

For example, Director Z has an accounting skill and wants to utilize it to help the nonprofit. The CEO agrees to utilize his services for a defined time period with the director working as a volunteer employee.

This distinction is easy to understand if described in terms of a Boy Scout leader who also serves as a board member on a Boy Scout regional council. As scoutmaster interacting with the boys, he/s follows scouting guidelines and directives provided by the organization’s professionals. As a council director, she/h helps to set policy for the Boy Scout movement in that geographic area. Because these Scouting roles are so well developed over such a long time period, they are well understood within and outside the movement.

In states that allow board members to be compensated, several guidelines must be considered. Should the level be at the market rate or lower? Many professional market rates are well outside of nonprofit budget guides. How and when might conflict of interest arise? How is confidentiality and transparency handled?

Of greatest concern to the board is that the volunteer’s compensation no higher than local market ones for the position. If higher, that would legally make it an “excess benefit” and be subject to the provisions of the Intermediate Sanctions Act. When an Act violation occurs, the IRS might levy personal liability taxes on persons who sought and/or approved the excess benefit. This can happen in a wide variety of cases ranging from excess salary levels to a volunteer or donor buying a property from the nonprofit at below market levels.

The Long Term Use of Multiple Roles

A greater danger to the nonprofit organization is when a two hat policy is kept in place long after the nonprofit leaves the start-up stage. It then becomes a mature organization with full-time staff employees. One nonprofit board I recently observed voted to change its policy on the number of fund raising events to hold annually,and they decided to try a new format. The board quickly made the policy decision and then promptly went into discussions of policy implementation, giving specific directions on how to implement. This latter discussion took about one hour and really provided an example of the board micromanaging the process, not over viewing results when completed. Micromanaging seems to run in the DNA of nonprofits but never should be used by the directors beyond the start-up stage. However it frequently is!

Summary
When directors try to assume multiple roles in a mature nonprofit, they can leave themselves open to IRS financial liabilities and cripple the effectiveness of the organization.

 

Nonprofit CEO Complaints

Generally, when I ask nonprofit CEOs about their boards there are two types of answers: polite and complaining.  Usually both types of answers are given by each CEO I encounter.  So, it should come as no surprise when an accounting firm asks 100 nonprofit CEOs about their boards, the responses are less than positive.  It's kind-of just the way it is as CEOs only have so much control over their boards and boards have such wide--ranges of experiences and are in various stages of development and face, depending on their sector, wide-ranging experiences and challenges.  

The results from the Marks Paneth accounting firm survey of 103 nonprofit CEOs generally in the "big" nonprofit category should not come as a surprise to anyone who has been to more than two nonprofit board meetings.  Yes! Nonprofit boards are often challenged by understanding an organization's finances.  And yes, nonprofit board members should have better training.

Thank you for making a mountain out of a molehill.  The real need here is not to "document" (100 respondents does not document in my opinion) but to provide the answers for effective training and support.  This would be a survey.

I do however need to congratulate this firm: they are definitely fine marketers.

Nonprofit Executives Say Board Members Are Too Removed From Some of Their Key Responsibilities, According to Survey Findings Directors Are Often Light on Performance Monitoring, Strategic Input and Making Good Connections for the Organization, Executives Say in Marks Paneth National Survey

BY MARKETWIRED . ARTICLE RATING: Select rating Give it 1/5 Give it 2/5 Give it 3/5 Give it 4/5 Give it 5/5 JULY 15, 2015 10:30 AM EDT       NEW YORK, NY -- (Marketwired) -- 07/15/15 --Nonprofit executives recognize their board members' passion for the mission but say directors are removed from some of their key governance responsibilities. Those are among the findings of Nonprofit Pulse, a national survey of nonprofit leaders byaccounting firm Marks Paneth. On the plus side, 73% of nonprofit executives say their boards "have a passion for the mission," and most (61%) say their boards are engaged but don't micromanage. Further, most (57%) say directors "closely monitor financial expenditures" and have "strong attendance" at meetings (54%). But when it comes to some specific and sometimes mission-critical activities, board members fall short in the eyes of many nonprofit executives, according to the survey findings. (It included over 100 executives at nonprofits with annual budgets between $10 million and $100 million -- namely Presidents, Executive Directors, CEOs, CFOs, Board Chairs, Treasurers, Development Directors and Vice Presidents.) Relatively small percentages of nonprofit leaders say directors do the following "very well": Only 15% say the board "closely monitors dashboard performance compared to peer organizations". Only 28% say board members are highly strategic in providing guidance. Only 29% say the board connects the organization to external sources. Only 47% say board members lend their professional expertise to the board. Only 45% say the board closely monitors investments. CIO, CTO & Developer Resources In addition, half of nonprofit executives say board members follow the overall performance of the organization but fail to look into specific programs. "It's probably not an overstatement to say nonprofit leaders love their boards. However, these executives have suggested they would benefit from deeper or more thoughtful board involvement in key areas of governance and strategy," saysMichael McNee, CPA, Partner-in-Charge of the Nonprofit and Government Services Group at Marks Paneth. "One solution to get more productive involvement from boards is member training. But our survey suggests that director availability and cost present significant obstacles," says McNee. The majority of leaders say directors' limited time is a roadblock to training, and 48% say cost is a deterrent. To receive a copy of the Nonprofit Pulse and/or to speak with a leader from Marks Paneth's Nonprofit and Government Services Group, please contact Katarina Wenk-Bodenmiller of Sommerfield Communications at (212) 255-8386 or [email protected]. Methodology The Nonprofit Pulse: A Leadership Study from Marks Paneth represents the findings of a survey of nonprofit leaders in the United States. The 103 professionals participating in the research include Board Chairs, Presidents, Executive Directors, Chief Executive Officers, Chief Financial Officers, Treasurers, Chief Operating Officers, Development Directors, Vice Presidents and Board members and are with organizations with annual budgets between $10 million and $100 million. The research employed self-administered questionnaires completed online by respondents. The national list of professionals surveyed was compiled by Marks Paneth LLP, the research sponsor, and by Michaels Opinion Research. Interviews were completed during the period of November 12 to December 31, 2014. About Marks Paneth LLP Marks Paneth LLP is an accounting firm with more than 550 people, including over 70 partners and principals. The firm provides public and private businesses with a full range of auditing, accounting, tax, consulting, trade remediation and valuation services as well as litigation and corporate financial advisory services to domestic and international clients. The firm also specializes in providing tax advisory and consulting for high-net-worth individuals and their families, as well as a wide range of services for international, real estate, hospitality, media, entertainment, nonprofit and government services clients. The firm has a strong track record supporting emerging growth companies, entrepreneurs, business owners and investors as they navigate the business life cycle. The firm's subsidiary, Tailored Technologies, LLC, provides information technology consulting services. In addition, its membership in Morison International, a leading international association for independent business advisers, financial consulting and accounting firms, facilitates service delivery to clients throughout the United States and around the world. Marks Paneth, whose origins date back to 1907, is the 35th largest accounting firm in the nation and the 9th largest in the mid-Atlantic region. In addition, readers of the New York Law Journal rank Marks Paneth as one of the area's top three forensic accounting firms for the fifth year in a row. Its headquarters are in New York City. Additional offices are in Washington, DC, New Jersey, Long Island, Westchester and the Cayman Islands. For more information, please visit www.markspaneth.com.