Nonprofit Board Crisis

Nonprofits as the 3rd Stool Leg #Nonprofit Boards

While I intend to sit on the sidelines throughout the pending year-long political intrigue, there are moments that I believe I must take advantage of as these moments also address nonprofit matters.  

The following Governing Magazine article titled the "Real Purpose of Government" does a great job of reminding us about the purpose of government and also the purpose of business.  In doing so, the purpose of nonprofits is equally clearer (to fill the gap between the two).  Of course if you do not agree on the first two definitions you may have some difficulty in understanding the subsequent purpose of the nonprofit sector but I believe the author has got this understanding correct.  

In summary, business is about capitalism whose interest, in my opinion, is about itself.  Government is about saving folks from the harm of self-interest.  And nonprofits, albeit often driven by self-interest, also has a higher benefit that fills the void between the two sectors.  I suppose only those who don't agree that self-interest can often do more harm, at least to a larger part of the public, will not agree with the paradigm.  This is not really for me to argue but more importantly  strive to understand and support what makes the nonprofit sector, and particularly those who volunteer as the "owners" of the many nonprofit entities, effective.

The Real Purpose of Government: At its heart its about saving capitalism from itself.

Government in a democracy is essentially a conservative institution. It is responsible for creating and sustaining markets, enforcing contracts, protecting private property, and producing systems of education and infrastructure that allow commerce to function efficiently.

The current conventional wisdom that liberals are pro-government and conservatives are anti- is frequently traced to President Ronald Reagan’s often-invoked notion that government is the problem, not the solution. But when you read Reagan’s first inaugural address, delivered in 1981 in the middle of a crushing recession, what he actually said was this: “In this present crisis, government is not the solution to our problem; government is the problem.” This was not a blanket condemnation of government, but a reaction to a specific situation in which the federal government seemed particularly ineffective. Reagan went on to say that “it’s not my intention to do away with government. It is rather to make it work.”

Near the end of his speech, Reagan invoked the first Republican president, Abraham Lincoln. Lincoln had his own clear and, I think, conservative ideas of government. He wrote that government should do the things that individuals could not do for themselves, including “maintaining roads, bridges and the like” and dealing with “noncompliance with contracts.”

Lincoln’s lawyer-like invocation of the evils of contract noncompliance hints at a theme that Governing columnist Alex Marshall has made explicit in his most recent book. In The Surprising Design of Market Economies, Marshall demonstrates that free markets are created by, and cannot exist without, governments. Governments, he writes, create the legal framework trading requires, provide police and courts to enforce laws and contracts, and build the “commons” -- roads, bridges, ports and other facilities necessary for commerce.

The relationship of government to markets is an ongoing one that requires continual intervention from government to maintain order and stability. This is because markets are inherently disruptive. The term “creative destruction,” used by Joseph Schumpeter in his 1942 book Capitalism, Socialism and Democracy, describes “the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” Schumpeter thought that the creative-destructive processes inherent in capitalism would eventually lead to its destruction. The fact that this has not occurred -- or at least not yet -- is the result of government’s continuing ability to intervene, moderating the disruptive impacts of the ever-changing market economy.

Schumpeter misunderstood the effectiveness with which the political process -- often as the result of clashes provoked by liberals -- could preserve government’s essentially conservative functions. In 1932, in the terrible crisis of the Great Depression, the leading progressive of his time, Huey Long of Louisiana, argued on the Senate floor that his was “no campaign to soak the rich; it is a campaign to save the rich.” He was essentially working to prevent the collapse of capitalism. Is there a more conservative idea than that?

 

Mark Funkhouser  |  Publisher

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[email protected]  |  @governing

 

Nonprofit Transparency #Nonprofit Boards

How much and to whom does it matter that a nonprofit be transparent about the source of its money and the influence donors have on its work?

Well, if you are the Global Energy balance Network (www.gebn.org) your credibility is based in part on your transparency.  The Network's credibility is currently being called to question by the media who in its own research found that the Network has received at least one fairly large grant from Coca-Cola. 

The media has suggested that Coca-Cola has been using its philanthropic money to "buy" positive reports about the influence of its products, particularly on obesity.  This is of course the classic "tainted money" question whereby it's recognized that the more support a nonprofit (or any entity or individual for that matter)  receives from one or more donors, the more that nonprofit may indeed be beholden to that source.  And for sure, in a world where resources are not distributed evenly (aka USA), the trade-off for getting mission accomplished must often be weighed.

So I went to the Global Energy Balance Network's site and also Guidestar to look at a 990 to see just how much influence $1.5 million has purchased and perhaps because the organization is too recently formed or for some other reasons (like less transparency) could not find information on the organization's finances.  Yes, the website does state that it has support from Coca-Cola.  And yes, there's actually an email contact to direct questions.  But, no, no more detailed information.  Obfuscation?  Not so sure.

So - credibility and transparency do go together and likely contribute pretty significantly to how much others want to get involved.  And yes, perhaps the Global Energy Balance Network may not stand the test of time given the media and its choice of donors.  A series of lessons for others to consider I suggest.

 

CANDICE CHOI, THE ASSOCIATED PRESS

POSTED: Tuesday, November 24, 2015, 3:05 AM

NEW YORK (AP) - A nonprofit founded to combat obesity says the $1.5 million it received from Coke doesn't influence its work.

But emails obtained by The Associated Press show the company was instrumental in shaping the Global Energy Balance Network. Coke helped pick the group's leaders, edited its mission statement and suggested content for its website.

When contacted by the AP, Coca-Cola Co. CEO Muhtar Kent said in a statement that the company was not as transparent about its involvement with the group as it should have been.

Coke told the AP it has accepted the retirement of its chief health and science officer, Rhona Applebaum, who initially managed the relationship with the group.

Read more at http://www.philly.com/philly/business/20151124_ap_6f7b03ad02544893899b3270bdfdfa1b.html#mEOIUhCJTcdtbjKY.99

Nonprofit Boards Being Fearless #Nonprofit Boards

 

The following is excerpted from Jean Case's treatise on "being fearless".  I concur.  What do you think?

If we are privileged to serve in board roles then we need to be bold enough to ask the hard questions and challenge the organizations we are there to support. In this period of great disruption and change, it is imperative that boards don’t just focus on the current operations, but also keep an eye toward the future — and make room for the necessary strategic conversations about the future.

How can these ideas be put into practice? Here are three specific suggestions:

• Ask your CEO to highlight “threats and opportunities” as a routine part of board sessions, not just report out on current operations. On this point, remember that often everything is fine until it is not, so relying just on current operating activities without an eye on the broader landscape can represent its own “head in the sand” risk.

• Make sure someone at the table is routinely asking, “How is the landscape around us changing, and are we adapting fast enough to meet these challenges and leverage new opportunities?” If you don’t have board members asking these questions already, you can “assign” this role to a given board member or members to ensure that the requisite conversation takes place. This “designated hitter” approach (often via a lead director) offers a safe and effective method to put on the table what some board members are really thinking or questioning, but often don’t feel comfortable to be the first to put forth. By openly “assigning” this role at the start of dialogue, a CEO can get the “unspoken” issues on the table.

• Ask the CEO what she/he needs to ensure that the organization’s future can be ensured, and strengthened. As a board, be prepared to listen carefully to the answer to this question. All too often budgets are prepared under the assumption of what the board expects. What the board really needs to know is what the CEO really thinks the right path forward should be — not what the CEO thinks the board wants to hear, or might readily approve.

By formally inviting an all-cards-on-the-table conversation, board members can be candid and honest in providing feedback, without worrying that their suggestions or critiques might be viewed as unsupportive. This kind of dialogue can help build trust and a sense that “we are all in this together,” which can go a long way to furthering the goals of the board and the organization.

Nonprofit Governance: Training Matters

In my experience, folks who serve on nonprofit boards face one, among a variety, of really big challenges: thinking like an "owner" when they have no reference points aka experience.  I believe this is particularly true when discussing finances.  A budget of even $100,000 is pretty unusual for most individuals.  Yes, there are likely a lot of folks who might make this amount of money annually but how many of those serving on a board have the experience to budget that amount for someone else?  Likely those with small-to-medium business management experience but how many others?  

None of this reality is meant to disparage the make-up of those who serve as board members but rather to state, all the more reason for really good orientations and ongoing training about lots of the stuff that makes-up what it means to be a nonprofit organization.  And with this we lead into today's Wall Street Journal which is about asset management and fiduciary care AND how policy change can made by newbie board members may not be grounded in history or experience and do more harm than good.  

Please do get past the reference at the beginning of the article that describes a small nonprofit portfolio being one that has less than $100 million.  For sure, in my experience, few do.  But the rest of the article, particularly the last couple of paragraphs provides for what is in my opinion, very wise advice.  Training matters as does policy and experience.

Voices: Small Nonprofits Need Help Setting Prudent Financial Strategies

Advisers have an important role to play in helping shape policies on investing and spending, this adviser says

 

Nov. 20, 2015 9:36 a.m. ET

 

Jennifer Ellison is a principal of San Francisco-based wealth manager Bingham, Osborn & Scarborough LLC and manages the firm’s Redwood City, Calif., office. Voices is an occasional feature of edited excerpts in which wealth managers address issues of interest to the advisory community.

Nonprofit organizations, especially smaller ones that oversee an endowment or funds totaling less than $100 million, tend to be collections of people who care about their cause but may not have the investment experience or budgetary expertise needed to run a small nonprofit. Advisers to these organizations have a duty to educate these people and help them reach a consensus on an investment strategy that will sustain their cause.

The first step is developing and refining an investment policy statement that addresses the organization’s purpose and return expectations and the maximum allowable distributions to the cause. It is also important that the IPS include language about market volatility, which is an area where boards often run into problems.

When the market goes through a period of volatility, major donors may call the board worried about continuing their support. Board members who don’t have any financial expertise might panic, and if the IPS doesn’t address the issue of volatility before it occurs, then the board will be left scrambling.

Help the organization understand what sustainable spending is, and develop a strategy that supports that. Look at how much fundraising they’re doing, how much they have in fixed operating expenses, and decide how much can go toward their cause. The adviser’s job is to address long-term return objectives, and help people understand what kind of investment products are out there, what products are realistic for them, and what kind of risk they are willing to take on or need to take on to meet their goals.

Board turnover can make a big difference in spending philosophies and understanding risk. Taking the time to fully think through investment strategy and craft an investment policy statement helps prevent new board members from making drastic changes to a portfolio based on things like market trends—one of the worst things they could do. By institutionalizing a financial philosophy, an organization can avoid changing philosophies every time there’s a transition on the board.

Teach board members and investment-committee members to check their personal ideas about investment at the door. They may make financial decisions in their personal lives that don’t match up with the needs of a nonprofit. You have to help them understand that they are playing a fiduciary role in the organization. The more we can get the board to focus on financial issues and what’s best for the institution, rather than their personal feelings, the more service we do these organizations.

Nonprofit Board: Where Is It? #Nonprofit Boards

When a nonprofit files bankruptcy there are clear indications that all is not working well.  The following nonprofit is working its way out of bankruptcy. The following Philadelphia Inquirer article is all about conflict of interest and interestingly not the board's conflict but the nonprofit attorney's conflict.  The prospective exec is the girlfriend of the nonprofit's attorney.

But it strikes me that the real story should be about the board and what it did or didn't do to get into this situation AND more importantly, who will be on the board to ensure none of this happens again.  

Bankruptcy's to the tune of $60 million in debt, don't happen overnight. I'm hoping the bankruptcy judge will be giving some clear messages to the board that it must get its act together.

 

Please Touch Museum gets OK to hire adviser

 

CHRIS MONDICS, INQUIRER STAFF WRITER

LAST UPDATED: Wednesday, November 18, 2015, 1:08 AM
POSTED: Tuesday, November 17, 2015, 1:24 PM

 

 A consultant - who is also the girlfriend of the lead bankruptcy lawyer for the Please Touch Museum - has been hired as a strategy adviser to the museum and will take over as its CEO when it comes out of bankruptcy.

In a court filing at the end of October, Lawrence McMichael, of the Dilworth Paxson firm, said Patricia Wellenbach and the museum would not move forward with the plan until "the impact of the potential hiring on my disinterestedness has been resolved."

The museum announced at a news conference Monday that an anonymous donor had pledged $3.25 million to its fund-raising effort, and that Wellenbach would eventually takeover as CEO.

 

Earlier, in a court filing on Friday, the Office of the United States Trustee in Philadelphia, which oversees bankruptcies, said it had no problem with Wellenbach's hiring, so long as Dilworth does not charge for any legal services related to her employment.

The museum, widely known for its interactive displays aimed at children, filed for bankruptcy protection on Sept. 11, citing $60 million in debts that it could not repay. Under the bankruptcy plan, the museum will repay its creditors $11 million, more, it said, than if there had been an adversarial proceeding.

Wellenbach has a long history in the nonprofit sector. Before joining the Please Touch Museum, she was CEO of the Green Tree School & Services, which provides education and therapeutic support to children with autism and other disorders. She also has been a management consultant, and her clients have included the Philadelphia Orchestra, Thomas Jefferson University Hospital, and other institutions.

In his filing with federal district court in Philadelphia, McMichael said Wellenbach had consulted for the board of the museum from 2007 through 2012 on various strategy issues and had performed the work on a pro bono basis. In 2012, she signed a contract to develop a three-year strategic plan over a six-month period, for a fee of $25,000.

McMichael, who once represented The Inquirer's parent company in bankruptcy, said in an interview that he had played no role in the hiring of Wellenbach.

McMichael paints a portrait in his filing of a thoroughly modern, financially independent couple, and suggests that he would not gain financially from her hiring.

"She is my girlfriend and although we share a residence, we do not share income and do not share expenses other than those directly related to the residence (mortgage payment, taxes, and condo fees)," he wrote.

The filing said the current CEO, Lynn McMaster, plans to step down as CEO sometime next year. Wellenbach would take over as CEO after the museum comes out of bankruptcy.

Wellenbach first began negotiations with the museum about possible employment in June, but in August, Dilworth Paxon advised the museum that if it hired Wellenbach in an executive position, the firm would have to withdraw as the museum's counsel.

Several weeks later, the museum resumed employment negotiations with Wellenbach, this time with the idea that she would work in a nonexecutive role during the bankruptcy, but possibly take over as CEO once the museum came out of bankruptcy, curing any potential conflict, McMichael said.

McMichael said that Wellenbach started work at the museum Nov. 2.

[email protected]

215-854-5957 @cmondics

Read more at http://www.philly.com/philly/business/20151118_Please_Touch_Museum_gets_OK_to_hire_adviser_dating_its_bankruptcy_lawyer.html#SZIOLgYtvXgkL75U.99

Nonprofit Board Oversight #Nonprofit Boards

When the "big boys" want to settle board/executive issues, it appears that they are willing to dig-into their pockets and put-out some dough to resolve these issues.  At least that's my take-away from the situation at Carnegie Hall.  You may remember that the previous board chair accused the current executive director of at minimum making it difficult for the chair (and the board) to fully know and understand the organization's finances.  The chair also held that there was some conflict of issues issues having to do with one of the organization's big awards programs.

Well, the new chair and board decided to call for legal help and conduct an investigation and yesterday the board announced the investigation found no wrong-doing and they, the board, would back the exec 100%. No foul no harm.  Hooray for the board and the exec?  Hooray too for the law firm - do you think they were pro bono and no corporate finances were affected in the resolving of these issues? And, will the previous chair, and all his friends, continue to be a financial supporter of the organization?

Here' the Wall Street Journal article.

 

Carnegie Hall Board Backs Director After Outside Review of Alleged Mismanagement

Clive Gillinson didn’t prevent the board from exercising proper oversight, Carnegie officials said Monday

By 

JENNIFER SMITH

Updated Nov. 16, 2015 8:36 p.m. ET

2 COMMENTS

An outside review of allegations of mismanagement at Carnegie Hall has concluded that while its executive and artistic director, Clive Gillinson, clashed with the hall’s former chairman, financier Ronald O. Perelman, Mr. Gillinson didn’t prevent the board of trustees from exercising proper oversight, Carnegie officials said Monday.

A subcommittee of the Carnegie Hall board hired a team of lawyers to conduct the review. The move followed accusations raised earlier this year by Mr. Perelman, who succeeded philanthropist and former Citigroup Inc. leader Sanford I. Weill as chairman in February.

“As a result of these findings, Carnegie Hall’s Executive Committee on behalf of the Board of Trustees is satisfied that Mr. Gillinson complied with his professional responsibilities,” the hall said in a statement. “Mr. Gillinson continues to have their full support.”

A spokeswoman for Mr. Perelman said Monday that the hall’s statement didn’t encompass the full scope of the findings.

“We are pleased that the lawyer tapped by Carnegie Hall concluded that Ronald O. Perelman raised legitimate issues,” she said. “However, it is unfortunate that Carnegie Hall’s leadership seems to have reverted to a familiar pattern of self-protection when it comes to transparency, governance issues and related-party transactions.”

A Carnegie Hall spokeswoman declined to comment.

Mr. Perelman said in a September letter to Carnegie Hall trustees that he had encountered “a troubling lack of transparency and openness in the way Clive Gillinson was interacting with me and the Board.”

In the letter Mr. Perelman, who stepped down from the chairman post last month, cited difficulties obtaining information about the hall’s financial performance.

He also raised concerns about Mr. Gillinson’s handling of the Warner Music Prize in light of a recently passed New York law regarding conflicts of interest and related-party transactions in nonprofit organizations. The award was created with support from the family foundation of Warner Music Group owner Len Blavatnik, who serves on Carnegie Hall’s board.

Attorneys with the law firm O’Melveny & Myers LLP reviewed the allegations. Their findings were presented to members of Carnegie Hall’s executive committee Monday morning, according to a person familiar with the matter.

Carnegie Hall officials said “although there was a serious breakdown in the working relationship between Mr. Gillinson and Mr. Perelman, there is no evidence to support allegations that Mr. Gillinson sought to undermine Mr. Perelman’s or the board’s oversight responsibilities, or that his staff’s actions impeded the proper governance of Carnegie Hall.”

Howard Heiss, the lawyer who led the review, said Mr. Perelman had a legitimate right to request the financial information—which he ultimately received—and that his questions about related-party transactions were also reasonable.

“We are not faulting Mr. Perelman for raising those issues,” Mr. Heiss said, adding “we have now reviewed and concluded that neither of these issues, nor any of the others he raised, stemmed from Mr. Gillinson attempting to undermine the board or Mr. Perelman.”

Mr. Gillinson, in a statement issued through a Carnegie Hall spokeswoman, said he was “very pleased” with the conclusions.

“I have given my heart and soul to Carnegie Hall for the past ten years,” he said. “And as we look forward to our 125th Anniversary and beyond, I intend to continue to do all I can to ensure that Carnegie Hall remains the premier music institution in the world.”

Write to Jennifer Smith at [email protected]

Nonprofit Board Matters #Nonprofit Boards

"While he believes Tinicum was ahead of its time in focusing on Buddhist practices such as mindfulness, "we weren't quite so visionary about governance" 

So goes the reflection of one of the founders of a private nonprofit 28 year old school supported more than half by the eldest Heinz fortune heir.  The problem: the heir has decided to not fund the school any longer and the school has no "real" board nor experience with raising money.  The future of the school is in the hands of the parents and possibly alumni who must now organize, pull together an active board and raise money - not once but forever for the future of the school.  If student outcomes are as great as indicated in the article, I think there should be plenty of opportunities.  But the work that must be done in the meantime is very much like starting over.

Here's the Philadelphia Inquirer article.

KATHY BOCCELLA, INQUIRER STAFF WRITER

LAST UPDATED: Saturday, November 14, 2015, 11:06 PM
POSTED: Saturday, November 14, 2015, 11:51 AM

 

In 1997, a reclusive heir to the billionaire fortune of his late father showed up in rural Bucks County with an offbeat idea - using Buddhist practices such as mindfulness and martial arts to reach at-risk youths failed by conventional schools.

For 18 years, H. John Heinz IV, the oldest son of the late Pennsylvania senator, funded the school now known as Tinicum Art and Science on a rustic campus off a country road in Ottsville. Parents say the school - the only one its kind in the East - transformed their once-lost youngsters with its warm and caring teachers, small, inclusive community, and serene atmosphere.

"When he started at Tinicum, the world just opened back up for him," said Ilene Young, whose son has Asperger's syndrome and is now in college after graduating from Tinicum three years ago.

That's why parents were stunned to learn in September that the private school with just 28 students will be closing at the end of the school year after Heinz announced he was pulling his financial support.

 

Amid their surprise, the Tinicum boosters also learned a belated lesson about the risks of having the fate of their beloved school almost completely in the hands of an iconoclastic multimillionaire evidently more at home forging medieval armor in his blacksmithing shop than in a boardroom.

Now Tinicum leaders and parents are scrambling to keep the school's mission alive with hopes of a new school, with a new name and a broader purpose.

Heinz, 48, whose father was killed in the 1991 crash of a helicopter and plane over Merion Elementary School in Lower Merion Township, did not respond to interview requests.

"We've only heard, 'Keep the school open,' " said Penny Ettinger of Newtown, whose 19-year-old daughter, now attending Delaware Valley University, told her Tinicum had "turned my life around" and urged her to fight to keep her alma mater alive in some capacity.

Ettinger is working with a committee of parents, administrators, teachers, and a student representative to develop a business plan that would rely more on foundation grants and referrals from public schools than on one deep-pocketed donor.

Accompanied by virtually no publicity or fanfare, the announcement of the impending death of the only Buddhism-based high school on the East Coast mirrored its life. Principal Peter Ryan granted a brief phone interview, but school officials said they would not allow a reporter to visit.

That may reflect the secretive nature of Heinz, who never has agreed to a interview and has avoided the limelight save for a flurry of articles in 2004 when his stepfather, now-Secretary of State John Kerry, was the Democratic nominee for president.

According to those articles, the heir to the Pittsburgh-based family's ketchup fortune had shunned any conventional career to indulge his unusual passions. These included blacksmithing, using medieval techniques to forge swords, battle helmets, and other objects, often while wearing a workmen's kilt known as a "utilikilt." Heinz was also said to be taken with reenactments of Native American battles, as well as Zen Buddhist spirituality.

He is a devoted practitioner of Shim Gum Do, the Korean martial art and spiritual practice, which is taught at the school.

The Boston College alumnus lives on an 138-acre estate in Upper Black Eddy near the Delaware River, reportedly with his nutritionist wife and daughter. The GPS-thwarting location is remote and pristine, with a cluster of farm buildings and an elegant stone house set at the end of a narrow, winding road that cuts through sumptuous woodlands.

Along with a couple of college classmates - Ryan and assistant principal Stephanie Kenney - Heinz launched the small school that was initially known as the Tinicum Xin Jian Dao Residency. At first, according to a letter on the school's website, the project consisted of an experimental four-bed farmhouse residence for at-risk youths who would practice mindfulness, martial arts, and better nutrition. The school was to last 10 years.

Instead, it lasted beyond its expectancy, adjusted, and expanded its focus. It changed its name to Tinicum Art and Science in 2000 and bolstered its liberal arts curriculum; moved to its current low, green building by a meadow in 2002; and became a day school. For at least a time, Heinz was listed as the headmaster.

Full tuition is $28,000 a year, although most students receive financial aid. Operating costs run about $1 million a year, and Heinz funded whatever wasn't covered by tuition and other donations. In the three school years ending with 2013-14, the most recent for which tax returns were available, the school's annual budgets ranged from about $850,000 to $940,000, with Heinz putting up more than half of the money.

The nonaccredited school is registered as religious affiliated by the Department of Education. One of the issues arising now will be securing grants from foundations that do not fund faith-based schools, Ryan said.

While he believes Tinicum was ahead of its time in focusing on Buddhist practices such as mindfulness, "we weren't quite so visionary about governance," he admitted.

Today, students are a mix of "gifted artists, intellectuals, writers, math kids who were moldering in a corner somewhere," and others with moderate to severe difficulties, such as dyslexia and autism, Ryan said. "A marvelous group of kids."

They participate in daily meditation sessions, tend the community garden, train in the martial-arts dojo, eat lunch together, take classes, and end the day with a gratefulness practice.

He wouldn't say much about the school's main benefactor or why he was leaving, except that he "wanted to move on. Everybody's got lives."

Supporters vow that the new school will be more ambitious, with more students and a mix of funding sources, but would aim for the same sense of serenity.

"If you go and visit the place, something comes over you - they have created this feeling of calm and peace," Young said. "It's wonderful. You don't want to leave."

No one is quite sure what the post-Heinz school will look like, but supporters are determined that at the very least, more people will know it exists.

Heinz, whose direct involvement in Tinicum is said to have shrunk in recent years, did attend a packed meeting on the closure this fall. Parents told him how grateful they were for his support throughout the years.

For many, it was the first time they had ever seen him.

[email protected]

610-313-8232 @Kathy_Boccella

Read more at http://www.philly.com/philly/education/20151115_Reclusive_Heinz_heir_s_Buddhist_school_to_close.html#7ji1IC3ukxmj4DQY.99

Nonprofit Boards Too Scared #Nonprofit Boards

Do you remember the 60's bumper sticker: It will be a great day when the schools get all the money they need and the Air Force has to hold a bake sale to buy a new bomber?  Well this article suggests that's exactly what the folks in Charlotte are doing - holding bake sales (not literally) to raise money for pretty big-ticket items. 

The following Charlotte Observer article not only challenges the methods Charlotte nonprofit boards are using to raise funds, but calls board members "too scared" more willing instead to do "back door" fundraising then ask directly.

Sadly in my opinion, this article starts with the core premise that asking for money is indeed the job of board members.  I pose that the answer is maybe it is but certainly not if that's not what members agreed to when they came on board.  This must be the conversation in order to have the expectation.  Are there consequences for not having board members ask for money?  Certainly.  But we also know there are a number of ways to finance a nonprofit and we also know there are some equally important roles for board members in addition to asking for money.

I would suggest that boards first must clarify why they are at the table - for what purpose and then they can get to the methods.  I'm not sure that telling board members they are just too scared to ask for money is a true enough assumption.  But this is certainly a conversation starter.

Charlotte nonprofits too scared to ask for money

Libraries are wonderfully deserving of financial support. But they shouldn’t have to throw a great gala to get it. John D. Simmons [email protected]

BY CHRIS MCLEOD

Charlotte is the second-largest financial center in the country, so presumably we know something about money. We’re also home to Myers Park Presbyterian, Myers Park United Methodist and Christ Episcopal, among the largest congregations in their denominations, with budgets north of $5 million. And Elevation and Forest Hills Church, two of the fastest growing megachurches and Billy Graham Evangelical Association also call Charlotte home. Shalom Park, a nationally unique campus, is home to 14 nonprofits and two synagogues.

When I moved to Charlotte 12 years ago, this juxtaposition of big banks and big churches intrigued me. I was confident that I’d discover Charlotte was home to some of the nation’s most well-funded nonprofits. What I discovered surprised me.

Rather than a banking community that brought its penchant for capacity building to its nonprofits, I discovered a nonprofit community haunted by a narrative of scarcity and a shallow understanding of fundraising. We love to build shiny new buildings, but our nonprofits are starved for operating capital. Despite the community’s pressing needs, the majority of nonprofit boards would rather cut costs than raise money.

The reality is most of our board members find fundraising, well, somewhat distasteful. Many of our community leaders pretend to know very little about raising money, preferring to let Hugh McColl and Michael Marsicano do all the asking.

In Charlotte, we prefer to host galas to fund our low-income health clinic and homeless shelter and sell raffle tickets to support our public libraries rather than ask a donor face-to-face for a major gift to support the program costs and staff that make it possible. Given our financial institutions’ focus on efficiency and managing costs, one would think our board members would embrace the face to face major gift ask, since it is the most efficient and cost-effective fundraising strategy.

Our lack of fundraising leadership is forcing the hand of our nonprofits to adopt these desperate fundraising strategies. This trend of “lifestyle philanthropy” is not benign. If we are not careful, Charlotte will end up like many communities in Florida, where donors’ loyalty follows nonprofits hosting the most spectacular galas with little regard for the nonprofits’ mission. Today, nonprofits are training our donor community to give this way, with little appreciation that this is a losing game. While nonprofit leaders proudly announce their galas’ gross receipts, few understand that the actual net gain is dramatically less, often less than half of the gross receipts.

If we presume this “preference” is learned, we can hope that by providing opportunities for community leaders to learn the most efficient and cost-effective strategy for raising charitable capital, we can reverse this trend. If Charlotte is to respond to the incredible opportunities and challenges, we need to identify and teach the next generation of leaders how to raise money.

In 2016, Women’s Impact Fund and the Institute for Philanthropic Leadership will host educational programs that focus on fundraising leadership for board members.

The desire to make a difference is universal, regardless of one’s faith tradition. Fundraising is about inviting people to make a difference. What makes me hopeful about Charlotte is that it is a community of passionate people who dream big dreams and want to make a difference. Those who are going to make the greatest difference are those willing to learn how to invite others to make a difference.

Come join us. We can’t let Hugh and Michael have all the fun.

Chris McLeod is president of Giving Matters, Inc. chris@givingmatters

Read more here: http://www.charlotteobserver.com/opinion/op-ed/article44802438.html#storylink=cpy

 

Nonprofit vs For-Profit #Nonprofit Boards

Many years ago YMCA fitness centers were deemed to be more about profit than about YMCA nonprofit mission.  This ruling is consistent with a number of similar rulings particularly for Universities (housing that is not core to academics) and Museums (gift stores and even items that are not singularly about mission). However, nonprofit hospitals for the most part have avoided the for-profit labels often citing their "free" or low cost services ans the way their monies ensure that mission is pursued.  

This thin line between what is for-profit and non-profit in the hospital world may take a shift with a recent ruling in Philadelphia where all the non non-profit health care services have been segmented from the nonprofit health care services.  

In my opinion, this should just be the beginning of acknowledging how little of nonprofit hospitals are really nonprofit.  It's all about accountability and accountability in terms of recognizing a valid nonprofit contribution and otherwise makes a difference to the lives of those who live in the service community and must scrape their pennies to afford a hospital room when needed.  It's time.

Here's the NJ Spotlight article on this topic.

 

DEAL STRIPS MORRISTOWN MEDICAL CENTER OF SOME OF ITS TAX-EXEMPT STATUS

ANDREW KITCHENMAN | NOVEMBER 12, 2015

Atlantic Health agrees to pay property taxes on 24 percent of Morristown Medical Center

Yesterday’s settlement of Morristown’s long-running property-tax battle with Morristown Medical Center is already drawing attention, hardly surprising given that it follows a judge’s decision that could affect nonprofit hospitals coast to coast.

Under the terms of the agreement, medical center owner Atlantic Health System will pay the town $15.5 million, including $10 million upfront. That part of the settlement covers the years 2006 to 2015 and includes $5.5 million in penalties and interest that will be paid over the next five years.

But what has really grabbed the attention of healthcare and tax experts, legislators, hospital executives, and municipal officials is this: Morristown Medical Center has agreed to pay taxes on 24 percent of its currently untaxed property. The portions that will be taxed include: space leased to private doctors, restaurants, and shops; spaces used by private doctors to deliver emergency services, as well as radiology, anesthesiology, and pathology; and hospital garages.

Ironically, and possibly to the relief of some observers, the agreement left untouched much of the hospital that would have been taxed if the decision by Judge of the Tax Court Vito Bianco were to be followed.

Bianco ruled in June that Morristown Medical Center had so intermingled its nonprofit and for-profit services and finances that it could no longer qualify for a tax exemption under state law.

If Bianco’s approach were to be applied across New Jersey, it would mean many millions of dollars in additional property tax revenue to municipalities -- and costs to hospitals. The bond-rating firm Moody’s has said the ruling was positive for the credit of municipalities that could gain tax revenue, and negative for the credit of New Jersey’s nonprofit hospitals and other not-for-profit organizations if they lose their property-tax-exempt status.

State legislators have expressed an interest in passing laws that, in words of Senate President Stephen M. Sweeney (D-Cumberland, Gloucester, and Salem) and Sen. Robert W. Singer (R-Monmouth and Ocean), would require hospitals to pay their “fair share.”

Municipal government advocate Mike Cerra said the settlement will be closely read across the state.

Cerra said most towns are in a “wait-and-see mode” on whether to start taxing their nonprofit hospitals. He is the New Jersey State League of Municipalities’ assistant executive director.

“This seems to be a good settlement for Morristown and both parties are happy,” Cerra said. He added that he’s unsure if a similar approach could be applied statewide, since each municipality-and-hospital relationship is unique.

Cerra expects the Legislature to attempt to address the issue, if not this year, then in the legislative session that starts in January.

“Both sides are entering into this cautiously and reflectively before proceeding,” he said. New Jersey Hospital Association CEO and President Betsy Ryan said her organization was pleased with the agreement.

“We do expect this issue to now move on to the legislative arena, and we look forward to being part of that dialogue with lawmakers” and Gov. Chris Christie, Ryan said.

David B. Wolfe, a property-tax lawyer who’s been watching the Morristown case, said that until there’s a change in state law, the Bianco ruling would be most important for towns that are considering their next step.

With the new tax year beginning on January 1, Wolfe expects some towns to act.

“I think it is likely that you will see … either assessors revoking exemptions and making the properties taxable … or you may see municipalities filing appeals,” of hospitals’ tax-exempt status in tax court, like Morristown, Wolfe said.

That’s why hospitals will be eager to see a new law.

Healthcare-industry consultant Matthew D’Oria said hospital executives will be looking closely at what portions of their facilities are similar to those to be taxed in Morristown.

Hospital executives “should assess what this settlement says and do an inventory of their facility and campus -- and begin to set aside reserves in the future to potentially cover” taxes, said D’Oria, a former state deputy health commissioner.

Morristown Mayor Timothy Dougherty and Atlantic Health System President and CEO Brian A. Gragnolati both praised the agreement in a statement.

Dougherty said it “provides a guaranteed revenue stream that allows the town to undertake plans for the future with confidence.”

He added that both sides wanted to avoid more litigation, and credited Gragnolati with bringing a fresh perspective and collaborative approach after he was hired to lead Atlantic Health System in March.

Gragnolati also said the hospital would be increasing its health-and-wellness programs in the community.

“The community and the hospital are interdependent,” he said. “We both gain.”

Nonprofit Board Distractions #Nonprofit Boards

Results - this is what great leadership is about be it paid/CEO or volunteer/Board.  But there can come times when leadership must change in spite of significant results.  

We learn this from a glimpse at what recently occurred over at the University of Illinois where the director of Intercollegiate Athletics (effectively a CEO of a pretty substantial division) has been removed "without cause".  According to the Chicago Tribune, the Interim Chancellor identified that the Division:

    has achieved much under Mike’s leadership, including recording three of the four highest annual     fundraising totals in DIA history, raising the overall GPA of student-athletes, securing the largest ever     corporate naming gift at a college athletic facility, and, most recently, sweeping Big Ten conference     championship titles in all four spring men’s sports.

The departing director stated that his "continued presence may create an ongoing distraction for our students, coaches and staff".

 In my practice I have regularly been in the position where I can easily, as can the board, document great results but as in every position, relationship/behaviors matter as much and sometimes more than the transactions.  Even the best results may not be enough to reduce whatever actions or behaviors may have negatively effected the levels of trust essential to maintaining the relationship.  I acknowledge these to be very challenging for the paid staff and volunteer leadership but not addressing and resolving these tensions, which could include adding behavioral expectations to the list of expected results (so as to re-position the trust level) while recognizing, lost trust is not easily regained.