Nonprofit Board Crisis

Nonprofit Governance Revised #NonprofitBoards

What nonprofit executive hasn't at one time wrung their hands in desperation over their inability to get their board members:

• to show-up for board meetings (yes, one might argue that it was not their job but that of the board chair);
• give or get money; or
• just let them do their job and leave them alone? 

And are there not nonprofit board members who regularly ask "what good am I doing on this board" or "the executive is in control" and other moans of helplessness in addition to talking about the lack of reward for all their efforts?

Well if you are an executive or a board member with any of these sentiments, there's a new place for you to hang out and commiserate and proclaim that none of this has to be.  According to the Chronicle of Philanthropy, Nanoe or the National Association of Nonprofit Organizations and Executives (yes, there are other associations that may sound similar in name but believe me, they are not these folks), has come on the scene to free you from paradigms that presumably do little more than restrict the nonprofit executive.  Yes, you too can officially play the role you feel you have been playing all along - that is the role of the executive who "owns" their nonprofit, is its leader, gets all the funds, and manages the board.  And the board: just along for the ride needing no orientation or training and being paid for their time.

But wait! All the consultants and BoardSource and everyone in the "know" say this isn't possible and is maybe just plain wrong!  For sure, it's a different paradigm and one that has serious consequences for boards and possibly donors.  I would offer that it will likely be the donors who will be the judge as to whether the paradigm Nanoe is advocating is acceptable.  For certain, more donors see and hear about financials and outcomes from execs than boards.  But is this reality the reason to change the paradigm about who "owns" a nonprofit?  This is certainly a question boards might want to discuss in-depth.  And this is where I'm going to leave this conversation: nonprofit boards, what do you think?  

Here's the article.

NEWS AND ANALYSIS
MARCH 30, 2017

---

New Nonprofit Puts Money Over Mission and Ethics

By Timothy Sandoval

On the Facebook page of the National Association of Nonprofit Organizations & Executives — or Nanoe — you’ll find a picture of its five board members holding up checks they’ve received in front of a large room of people. The photo was taken at the group’s first conference in Columbia, S.C., earlier this month.

The checks are the board members’ payments for their services: They each get $1,000 a day for in-person meetings, plus travel reimbursement, and $300 an hour for board meetings held by phone.

The payments — Nanoe calls them "honorariums" — are rare among nonprofits: Less than 1 percent of organizations pay board members such a fee for service, and about 1 percent pay them a salary, according to BoardSource, a national organization that seeks to improve nonprofit governance.

But Nanoe doesn’t care about industry standards. Paying trustees is just one of the many taboos that Nanoe’s five board members want to bust up — and they make no apologies for it.

The messages Nanoe pushes online provide snapshots of its views.

A tweet from the organization says Nanoe "is for nonprofit executives who know money is more important than mission." A graphic online says "Ethics + Accountability = Failed Practices." Another tweet says "Training Board Members = Navel Gazing. No real benefit! Communities are not impacted by boards who require training."

One of the group's tweets says, "Training Board Members = Navel Gazing. No real benefit!"

Nanoe believes nonprofits should toss out the typical organizational structure that separates the nonprofit’s top administrator and the board of directors. Instead, it favors a "strong CEO," who focuses primarily on raising money, exerts much control over the organization, and also serves as the board chair.

Nonprofits have clung to their traditional structures to their detriment, says Jimmy LaRose, the group’s most outspoken board member, who has heavily promoted the organization on his website. They’ve emphasized ethics and accountability at the expense of growing their organizations, he says.

"It’s not that we don’t want ethics and accountability," Mr. LaRose says. "But you don’t want to design your best practices based on that as its cornerstone."

The group’s message is attractive to those who want to see nonprofits raise revenue more aggressively without fear of being criticized for spending too much on fundraising or administration.

Dan Pallotta, a well-known crusader against critics of nonprofits that spend a lot on overhead, was the keynote speaker at Nanoe’s conference. Efforts to reach Mr. Pallotta for comment were unsuccessful.

Eroding Trust

In Nanoe’s vision, if nonprofits pushed aside the old ways of thinking and focused more on growth, they’d be able to build "heroic missions of scale" and — in conjunction with the private and public sectors — work to eradicate the problems they want to solve.

The group has gained many detractors for its unorthodox beliefs. Critics say Nanoe is peddling questionable advice that would erode institutional oversight and trust. They also contend that it’s pushing a pie-in-the-sky vision of what nonprofits are capable of.

Nanoe has attracted about 800 members, according to Mr. LaRose, who have paid annual fees of $100 to $300, based on the benefits they receive. Almost 250 people also attended the group’s conference in early March, and many have signed up for the group’s new credential program for executives and fundraisers.

One of the ways the organization has raised its profile — and some eyebrows — is by sending emails to thousands of people at nonprofits and other organizations telling them they’ve been nominated to serve on Nanoe’s "board of governors" — an advisory group that’s separate from the paid board of directors. The governors are meant to review and critique new "guidelines" that Nanoe has drafted on how nonprofits should restructure their organizations.

Critics suspect the emails and other messages are just promotional stunts designed to give the appearance that people are being honored by their peers.

Mr. LaRose contends that most of the criticism is from "competitors" who are worried that a new organization is pushing fresh ideas and a new credentials program. He says that aside from the board’s honorariums, neither he nor anyone else on the board receive payments from the organization, and it has no paid staff members.

He says he didn’t expect the emails to elicit any negative reactions and insists that each nominee for the board of governors was "carefully selected" by three interns. Mr. LaRose says he personally reviewed the nominees along with Nanoe board member Kathleen Robinson and Charlotte Berry, a philanthropist and board member for the United Way Association of South Carolina.

“It's not that we don't want ethics and accountability. But you don't want to design your best practices based on that as its cornerstone.”

However, some recipients of the emails question the vetting process. One was sent to "[email protected]," an address for sending award nominations to the Association of Fundraising Professionals. (An official with AFP shared the email with The Chronicle.) Josh Hirsch, director of digital and membership services at the education and training organization Nonprofits First, says his group received similar emails aimed at nobody in particular.

Jim Anderson, a partner at GoalBusters Consulting, says he accepted a nomination on Tuesday using the name "Ethics Matter" and an email address he had just created. Almost immediately, he received an email presented as a news release announcing his appointment to the board of governors. "I wanted to see if they were testing any of this at all — and they didn’t," says Mr. Anderson, who shared with The Chronicle the confirmation email he received.

Three nonprofit employees who were listed as being on the board of governors on the group’s website say they had little interaction with Nanoe even though they initially accepted their nominations. One of them, Dana Serrata, executive director of Helping Hands of Vegas Valley, said in an email she would ask to be removed from the list of governors after The Chronicle told her she was included on it. Natalie Choate, director of media relations and partnerships at The Texas Tribune, said the same.

Mr. LaRose admits that Nanoe may have recorded some people’s contact information incorrectly when it sent its nominations. He says that people who accepted needed to sign a statement saying they had read up on their responsibilities and were committed to participating. He also says it "would have been impossible" to be selected as a governor if someone had used a phony name and email address, as Mr. Anderson says he had. Mr. LaRose says nominations have been closed since the end of 2016 and alleged the email Mr. Anderson sent The Chronicle was fabricated.

LaRose denied that the group was "spamming" people. "No one was hurt, no one was defrauded, there’s nothing nefarious here," he says. "All there is is good will — celebrating people who are integral to the nonprofit sector."

However, Mr. Hirsch says he doesn’t know of any business or nonprofit that would do anything similar if it wanted to be taken seriously, calling the emailing practices "beyond unethical."

Strong CEO

The group’s belief in a "strong-CEO" has also drawn many rebukes.

Nanoe says chief executives must understand that raising money is their most important responsibility. Mr. LaRose says Nanoe wants to "replace do-gooder executive directors" with "strong, entrepreneurial CEOs, who know how to go out there and get everything the nonprofit needs to succeed."

Mr. LaRose even suggests that some nonprofits should stop their programs temporarily to focus on fundraising: "With the nonprofits that we’re serving, they’ll say: ‘Jimmy, if we do what Nanoe is saying, we’ll have to stop serving kids.’ And you know what I say? I say, ‘Stop serving kids’ " — that is, until the organization boosts fundraising enough that they can serve many more children.

He says the choice won’t be that extreme for the vast majority of nonprofits, but each organization should determine how to boost its revenue in a way that least affects its services.

For the "strong CEO," however, there will be less tension over redirecting money from the people the nonprofit serves toward fundraising, he says. "It’s not that they don’t care or that they’re callous. They understand that they are called to go to scale and there’s only a few ways you can do it."

That kind of thinking is simplistic and dangerous, says Doug White, the former director of Columbia University’s Master of Science in Fundraising Management program.

Mr. White says he doesn’t think many organizations should shift money from programs to invest in fundraising. In the best cases, fundraising grows gradually and in tandem with programming, Mr. White says. "We can’t say this is an either-or situation," he says. "Charities need to raise money, there’s no doubt about that. But to capriciously say, ‘Hey we’ll just stop doing our mission while we do the fundraising’ is evidence of a mind-set that does not take into account the nuances of running a charity."

CEO and Board Chair

Nonprofit experts are also wary of Nanoe’s advice that chief executives should also serve as board chairs. They say that would make it difficult for boards to hold leaders accountable.

"You can’t monitor yourself," says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, who’s researched nonprofit boards. "It’s like a student grading their own exams."

Another flashpoint for critics has been Nanoe’s guidance on paying board members.

Nanoe’s message is simple: If organizations pay board members, they’ll get more committed and competent trustees. "We do not live in a socialist country," says Nanoe’s board chair Bishop Redfern II. "We live in a capitalist country. If you want the best that there is, you get the best that money can buy."

Anne Wallestad, president of BoardSource, disagrees. She says that while a lot of nonprofits struggle to find good board members, many trustees do great work without compensation. "If you’re asking the public for support, you want to have board members that are demonstrating their personal support of the organization by contributing to the organization rather than being compensated," she says.

True Believers

Despite the criticisms, Nanoe’s ideas have resonated with some.

"I’m a believer," says Larry Rubin, executive director of the Association for Adults With Developmental Disabilities, which provides social activities for special-needs adults in the Philadelphia area and has a budget of roughly $500,000. Mr. Rubin paid about $1,000 to attend Nanoe’s conference, including the attendance fee, airfare, hotel, and meals. His organization will reimburse him for most of that, he says, but he will pay for the rest out of his own pocket.

Mr. Rubin says before he attended Nanoe’s conference, he had pleaded with his board for help. He was getting worn out, he says, adding that he works 70 to 80 hours a week.

After the conference, he felt refreshed. He says he made important contacts, people he can discuss ideas with.

At his organization’s board meeting on March 15, he says he discussed what he learned — like thinking of donors as its "clients." He also hopes to add a new staff member this summer to handle program work while he focuses on fundraising and grant writing. He thinks his trustees are on board.

He says he hopes to use what he learned to triple his group’s fundraising within three years and turn the nonprofit into an organization that provides services nationally.

Concerns Mounting

Despite Nanoe’s agenda, experts say the public still expects nonprofits to keep fundraising expenses as modest as possible; groups that raise money aggressively have often faced scrutiny.

"Our sector depends on such a high level of trust between donors and policy makers and the nonprofits themselves that we don’t want to erode that with gimmicky ideas that are pitched out every once in a while," says Daniel Billingsley, vice president for external affairs for the Oklahoma Center for Nonprofits.

Ms. Wallestad, of BoardSource, says a weak board with an empowered executive might seem appealing to some nonprofit leaders who’d rather not have to deal with accountability. She can see why that message is gaining traction, but "that doesn’t mean it’s a good thing."

 

Send an e-mail to Timothy Sandoval.

Nonprofit Board Recruitment #NonprofitBoards

Here's a posting from my colleague Eugene Fram about what skills to look for or consider in recruiting nonprofit board members. I think there is merit in some of these ideas. 

 

What Makes A Great Nonprofit Board Member?  Some Unique Suggestions!!!

By: Eugene Fram

Viewers may question my taking time to develop this post when a Google search, using the above title, shows about 22 million listings recorded in 0.96 of second! The answer is that I located a board article with a few interesting insights, relating to for-profit boards, that also can be useful to the selection of nonprofit directors. * Following are some of the unusual ideas.

• Select For Job Background: Nonprofit boards do look for a diversity of backgrounds—physicians, attorneys, ministers, etc. But they also need to address more specific needs.   Example: One board I counseled decided it needed a director who has a marketing background, the nonprofit’s funding was significantly dependent on two major events for over 50% of its annual donations. Therefore probing the issue further, it was agreed to look for a marketing person who had event planning experiences. A marketer with an advertising background would not be as helpful as an event planner.
• Select By Focusing On The Business Model: The key to understanding the business model is the ability to understand the financial statements. Just recruiting an accountant does not fill the bill. While every director needs to be able to evaluate monthly or quarterly statements, there should be at least one person on the board who has a strong familiarity with fund accounting, the financial language of nonprofits
• Select The Growth Stage: Obviously, nonprofit startups need a group of directors who can assume responsibility for efforts that later will be taken over by paid staff. But every startup needs at least one visionary director who makes certain the nonprofit changes with milestones, usually marked by revenue and/or staff increases.   Otherwise progress is impeded or opportunities missed. Board agendas, in these situations, become loaded with operational issues and strategy opportunities are ignored.   Management and staff remain highly dependent on board approvals. Unfortunately, some CEOs like this arrangement because, when something goes wrong, they can claim: The board told me to do it.
• Select For Same/Similar Missions: Most board members work different areas from the nonprofit’s mission area. As a result, one or two directors should have backgrounds in allied fields. Example: A nonprofit dedicated to solving heart problems might have an executive director or development director from a cancer nonprofit serving as a aboard member.
• Select For Courage of Conviction—What’s Best for the Nonprofit: Directors who will consistently vote, in their judgements, what is best interests of the nonprofit and  its mission. I have observed too many who vote to get along with board colleagues, the board chair or CEO. 
  

Over decades of experiences as a nonprofit board member and consultant, I have encountered directors who have abandoned their convictions and have taken the easy road by.

1. Selecting board chairs on the bases on their personalities and personal appearance.
2. Engaging a weak local CEO to avoid moving expenses.
3. Acting as a “rubber-stamp” to avoid unpleasant board discussions.
4. Allowing a CEO to maintain the status quo instead of innovating.
5. Failing to react to small “red flag” situations generated by management or staff.  (http://www.huffingtonpost.com/eugene-fram/nonprofit-boardroom-eleph_b_6688392.html)

Nonprofit boards have difficulty in bringing about change when:

• Recruitment is continually constrained to friends, colleagues and relatives.
• Most on the board are not conversant with fund accounting.
• Organization and board processes are not in line with revenue and staff growth.
• Board and management fail to look well beyond their similar peers for new idea to serve clients.
• Board members continually fail to state their convictions and “go along to get along. “

* http://www.forbes.com/sites/bryanstolle/2014/06/19/what-makes-a-great-board-member-you-really-need-to-get-this-right/#226c1c5468aa

Nonprofit Board Not Accountable #NonprofitBoards

In my opinion it is reasonable to say that intertwining nonprofit governance with political agendas doesn't always work out well for the players.  There is plenty of evidence around the country where politicians have set up so-called independent nonprofits as pass-through vehicles for funds that often circle back into that politician's (or their relative's) pockets.  City councils would do well to just ensure that these vehicles are not allowable.  

The Mayor's Fund initiated by Mayor Nutter in Philadelphia may well have been another one of these vehicles with the best of intentions but from the Philadelphia Inquirer we learn that good intentions were at some point lost.  But while the lessons about politicians and nonprofit vehicles is not new, the Mayor's Fund helps highlight two more lessons.  First, when the lens of nonprofit board members do not get their seats based on a passion to mission, fiduciary decisions, those that would be made by others facing similar options, get clouded.  I would pose that the decisions made by the board of the Mayor's Fund represent this concept.  Next, a nonprofit's mission should clearly inform action.  The City Controller, like the IRS or other regulators, has applied this standard while determining if the Fund board has "done wrong".  All signs indicate the answer: yes, the board chose to be blind or chose to deviate from mission.

 

Controller: Nutter, ex-chairwoman of Mayor's Fund should pay back thousands

Nutter: Butkovitz 'desperately fabricating an issue'

                Updated: MARCH 29, 2017 — 8:42 PM EDT  by Claudia Vargas & David Gambacorta - Staff Writers

City Controller Alan Butkovitz is asking former Mayor Michael Nutter and former City Representative Desiree Peterkin Bell to pay back tens of thousands of dollars in expenditures as part of his latest audit of the troubled Mayor’s Fund for Philadelphia.

The audit revealed that the fund spent $134,000 on American Express credit cards over five months in 2015 without providing receipts or supporting documentation, and issued $32,000 in grants without the required board approval.

 

The controller recommended that the Mayor's Fund seek reimbursement for $241,000 in purchases by Peterkin Bell and others connected to the fund that "did not meet the mission of the non-profit," including $22,100 spent on a farewell party for Nutter at the end of his second term.  

 

"There was little, if any, indication from documents and from those who attended as to how this event benefited Philadelphians other than those who were in the mayor's inner circle," Butkovitz said during a news conference Wednesday.

In a statement emailed to the Inquirer and Daily News and later posted online Nutter said that Butkovitz is "desperately fabricating an issue where there is no real issue" and hadn't "directly sought an explanation from me or the individuals whose integrity his reports impugn."

"I have always taken fiscal management and accountability seriously, and these principals were the hallmark of my Administration," Nutter wrote. "The allegations by the City Controller are completely false and baseless."  

Peterkin Bell said in a statement: "This is getting tiring and very old. This narrative, these accusations are not true. We all know it's an election year, it's abundantly clear that it's not about the pursuit of facts, it's about managing perception in an election year." 

The review comes seven months after Butkovitz accused Peterkin Bell of treating the nonprofit's assets as a "slush fund" in a separate report. Peterkin Bell responded at the time by filing a defamation lawsuit against Butkovitz, which was later dismissed in Common Pleas Court.  

The Mayor’s Fund is a nonprofit run by city officials funded in large part through Philadelphia Marathon registration fees. The fund manages up to $10 million a year, money that is supposed to be spent on programs that support public safety, education, business and economic development, culture, and the creative economy.

Butkovitz said Wednesday that the fund had been used to circumvent the city's fiscal controls and procedures.

"You have this relationship between city government and a nonprofit which is dominated by board members who are subordinates of the mayor and it functions as a way of offline budgeting or of paying for expenses without either needing an appropriation from City Council or oversight by the city’s financial watchdogs.”

Butkovitz said his office has shared its review with the city's Board of Ethics, the District Attorney's Office, and the state Attorney General's Office.  

Other findings in the controller’s report include:

• The 2015 Tree Lighting Ceremony ran up a $72,921 tab -- five times the average cost of previous ceremonies. Peterkin Bell approved $45,000 in grants for the event, none of which were approved by the Mayor's Fund board. The controller's office found $15,100 worth of payments that could not be verified. Some invoices were written by people associated with the Mayor's Fund, rather than vendors.     

• One of the fund’s credit cards was used to pay for a "Purpose Not Position Dinner” event at the Hyatt Bellevue for 15 people hosted by Peterkin Bell. The event, titled after a slogan Peterkin Bell often uses on social media, cost $2,195.

• Out of five months of American Express credit card expenses, totaling $242,097, only $108,500 was properly accounted for.

• Of the $92,266 charged on two Wells Fargo Mastercards in 2015, less than $6,000 had proper documentation. 

Nutter wrote that he is "confident that all of these dollars were spent for allowable purposes, and of course, the proper receipts and record keeping should be available."

The fund's executive director, Ashley Del Bianco, who raised concerns about the fund to the controller’s office in January 2016 after Nutter and Peterkin Bell left office, issued a statement that read in part:

"The report’s findings and recommendations will be shared with Mayor’s Fund Board of Directors for their consideration.  ... Today’s report and recommendations provide critical guidance to the Fund in these ongoing efforts, and the Fund thanks the Controller for his continued attention to this." 

Mark Zecca, who worked as a city attorney for 20 years, said the fund served as a bookkeeping operation that collected money from the mayor's annual city fund-raiser under then-Mayor Ed Rendell in the 1990s. 

Zecca argued the fund should operate as a city entity, since most of its board is made up of city officials. That could mean facing City Council approval for budgetary matters and abiding by checks and balances set by the city treasurer and the controller's office. 

"When you avoid the general fund, you avoid transparency and democracy," Zecca said. "There should be no Mayor’s Fund off the books of the city treasury. It’s just a recipe for mischief."

The Kenney administration and the Mayor's Fund's current board have argued that the fund must exist as a separate nonprofit in order to receive and manage grants from charities that can't or don't want to give directly to the city. 

Butkovitz's review found evidence that some of Nutter's senior staff were worried about the optics of using the Mayor's Fund to pay for Nutter's January 2, 2016, farewell bash at the University of the Arts. 

An invitation was edited to emphasize that the event would also honor SERVE Philadelphia and PowerCorpsPHL, two programs that had received grants from the Mayor's Fund. "Apparently there is a lot of discussion going on now about the use of The Mayor's Fund," read an email among executive staffers, according to the controller's report. "SO, we made a few minor edits to the invite and have let [then-chief of staff Everett Gillison] review it."  

Gillison did not respond to a request for comment.

Rendell said official parties at the beginning and end of a mayor's term are typically paid for by the mayor's own political action committee, which was the case when a dinner was held in Rendell's honor when he left the Mayor's Office in 2000. 

"The Mayor's Fund is supposed to benefit the city of Philadelphia," he said. "It would be hard to argue that a going-away party for the mayor or anyone else benefits the interests of the city."

Rendell called the questionable spending a "minor transgression" that "should not detract from [Nutter's] significant record of having an ethical administration. But again, [the party] isn't in the mission of the fund."

The Inquirer previously reported that Peterkin Bell incurred $52,000 of unexplained charges with the fund’s money in 2015, a sum that covered 458 Uber rides, meals at fancy restaurants, and purchases at Macy's. The paper also discovered that her predecessor as fund chair, Melanie Johnson, was caught misspending fund money in 2012 and had to repay the city $733.

Butkovitz recommended strengthening board oversight and improving the fund’s credit card policy. He also called on the fund to eliminate a reserve account that had been used as discretionary spending for the City Representative's Office.

The Kenney administration has merged the reserve fund with the grants fund so that there is now one pool of money for grants.  The new administration has made some other changes to the fund since the controller’s August report.

Butkovitz’s review also suggests that nearly $100,000 in hotel and travel expenses made by the fund in 2015 might be in violation of city ethics laws that require city officials to disclose gifts received, including travel.

“A review of financial disclosure forms for the mayor, former chairwoman and former chief of staff found there were no accommodations paid with the Mayor’s Fund monies disclosed on their reports,” according to the report.

The accommodations included 25 hotel rooms on which the fund spent $52,000 in 2015 for various city employees and some of their relatives to stay at the Marriott across from City Hall when Pope Francis visited the city as part of the World Meeting of Families. The fund also paid out $44,665 for Nutter, Peterkin Bell, Gillison, and other cabinet members to travel and stay in Rome when they first tried to persuade the pope to visit Philadelphia. 

In his statement, Nutter accused Butkovitz of being "obsessed" with trips and hotel stays tied to the papal visit. "I am more troubled, however, by the Controller's persistent determination to 'litigate' this matter through press conferences," Nutter wrote. 

Butkovitz argued that if the trips and hotel stays were not official city business, they should have been disclosed as gifts, per city and state ethics laws.

"Just because it is not city money, does not mean it should be treated as a grab bag of cash with no oversight or accountability," he said.

 

 

Nonprofit Governance Culture #NonprofitBoards

As the misdeeds of the US Olympic Committee subsidiary US Gymnastics saga unfolds, the Committee's executive (sadly not its owner, a board representative) has stated In response to questions from members of the Senate Judiciary Committee about allegations of mishandled abuse complaints by USA Gymnastics, (not to mention USA Swimming, US Speedskating, USA Judo and USA Taekwondo) that a:

  a flawed culture, where the brand, the sport, and their (competitive) results are given a higher priority than the health and well-being of athletes" for leaving children at risk.  That is what we need to change.

Perhaps as one teeny positive, it was the USA Gymnastics board chair who released a statement where he, Paul Parilla

     also pledged support for Feinstein's legislation while pointing out the organization is conducting its own internal review of its child     protection policies.

    USA Gymnastics is appalled that anyone would exploit a young athlete or child in the manner alleged, and we offer our sincere and     heartfelt regrets and sympathies to any athlete who was harmed during his or her gymnastics career.

Of course culture is not an excuse for violating any individual and rules of law.  That the organization has a board that permits a culture that in-turn permits violating individuals means only that that board and that organization owes substantial debt to those who have been harmed and, after restitution, should be shut down.  

I would pose that the Olympic Committee governing body must do more than acknowledge "flawed culture" but it should rethink its structures even to the point it starts over.  I would begin with ensuring that the governing bodies of its subsidiaries not be filled with sports figures alone but with individuals from other sectors that clearly have standards and values that go beyond what has been demonstrated to drive sporting activities.  And, if the Olympic Committee won't take this step, then clearly the body that gives it its charter, the US Senate, must.

 

 

 

 

Nonprofit Board Theory of Change #NonprofitBoards

In the US nonprofit sector it's possible to have two nonprofits focused on the same subject but using different strategies to actually accomplish different results.  Each nonprofit's board uses a Theory of Change is what informs these differences.  The Theory of Change is a purposeful exercise for reaching or clarifying mission.  The Theory of Change also serves to guide staff, volunteers and donors to understand with which nonprofit to engage and support.  

The Theory of Change answers three questions: what is the problem to be solved (including who or what is the focus of the effort and what are the conditions that affect this focus); what approach will be most effective in addressing the problem; and, assuming success, what will be the result.

One example way less complicated of a description that is appropriate to the subject, of "competing" Theories of Change is Planned Parenthood and Birthright.  Both institutions believe women's health is important and both institutions understand and support values having to do with childbirth.  However, both institutions view the "problem" they seek to address differently AND view the strategies necessary to address the problem differently.  Their results, consequentially, sometimes differ.  Note though, facts may or may not fully inform the Theory of Change.  Values play an equally important role in defining the Theory of Change.  Values likely explain why two nonprofits can be engaged in the same field but have such radically different approaches.  

Nonprofit boards do well to revisit their Theory of Change at least when they are involved in strategic planning (every 3 or so years). The fundamental values discussed about the board's "world" will inform an understanding of the organization's problem-to-be-solved and subsequently inform intended strategies which in-turn, inform results.

This has been a really simplistic overview but hopefully one that stimulates board's considering the value of their Theory of Change and understanding the so-what as this relates to donors and volunteers.

Nonprofit Board Consent Agenda #NonprofitBoards

As I constantly hear from board members, their meetings are filled with reports and little discussion or action.  To the rescue: consent agendas.  Consent agendas!  According to BoardEffect:

The terms consent agenda and consent calendar are interchangeable terms. A consent agenda is a board meeting practice that groups routine business and reports into one agenda item. The consent agenda can be approved in one action, rather than filing motions on each item separately. Using a consent agenda can save boards anywhere from a few minutes to a half hour. A consent agenda moves routine items along quickly so that the board has time for discussing more important issues.

Consent agenda's are the good news but do not take away board member's fiduciary responsibility.  Being prudent, board members want to review the items on the consent agenda to ensure that items that should be discussed in depth are identified and placed on the regular agenda.

The following story shows just how important previewing the consent agenda can be.  Had one or more members of the nonprofit county fairgrounds not identified the proposed contract (which was "material" and really, in my opinion, called for board discussion and action), it's possible a lot of important revenue could have been lost.  This is a lesson for all.  Consent agendas play an important role in achieving efficiency but without a thorough review, they can lead to ineffectiveness.

The LA Times story also raises a couple of other governance questions.  For one: who constructs the board agenda?  I recommend this is a job for the board chair in consultation with staff, of course, as well as with committee chairs.  Second, if staff obfuscate information, should they still be employed?

Here's the LA Times story.

 

Fairgrounds balks at 5-year contract renewal for OC Marathon

 

Bradley Zint Contact Reporter

 

The Orange County Fair Board held off Thursday on renewing its rental contract with the OC Marathon, opting instead to more closely examine a deal that would have allowed the for-profit company an additional five years' use of the fair property in Costa Mesa.

In an 8-0 decision, with board member Barbara Bagneris absent, the board voted to approve only this year's marathon and expo, scheduled for May 5-7, but said it wasn't ready The originally proposed renewal was to cover this year through 2021.

The contract with OC Marathon LLC allows the Costa Mesa-based company rental use of the fairgrounds between May 3 and 8 for a minimum of $100,000. The fairgrounds, however, retains any revenue from food, beverage and parking generated during the event.

Some board members said they were upset that the contract — which was placed on the meeting agenda's consent calendar, where items are considered noncontroversial and require little discussion — wasn't sent to the board's Tenant Liaison Committee for review prior to Thursday.

"The only time I've heard about this is from staff today," said board member Stan Tkaczyk, who serves on the committee. "That speaks volumes of disappointment. That speaks to why we set up the Tenant Liaison Committee. It was to have board members involved."

He noted that other contracts, such as the one with the Orange County Market Place weekend swap meet, involved much discussion, yet the one with the OC Marathon didn't.

Tkaczyk and board member Ashleigh Aitken are expected to review the contract after the marathon.

Aitken, who said she's planning to run in the marathon, suggested that some of the money it raises go to children's education efforts at Centennial Farm and Heroes Hall, two of the fairgrounds' onsite facilities.

Several board members said they aren't necessarily against a long-term commitment and were complimentary of the event.

When asked about the OC Marathon's financial health, its chief executive officer, Gary Kutscher, told the board, without mentioning specifics, that "it's not as good as it was a couple of years ago."

He noted, however, that the kids' run is the largest such single-day run in the nation, attracting some 10,000 children alongside 15,000 parents.

Kutscher said his company wants to make sure the fairgrounds "remains the home of the OC Marathon and the kids' run. It's such a powerful event, and there's so many amazing stories."

Fair Board Chairman Nick Berardino said that when the marathon contract was last approved in 2011 to last through 2016, he felt like it was being "shoved down our throats." At the time, the vote was 5-3, with Berardino among the dissenters.

Berardino alerted the public during the October 2011 discussion that the OC Marathon had turned from a nonprofit whose original goal was to fight childhood obesity into a for-profit company.

There also was tension between Berardino, a union activist who was then the head of the Orange County Employees Assn., and his political rival Scott Baugh, who at the time was chairman of the Republican Party of Orange County and an owner of the OC Marathon company.

Though the OC Marathon is a limited-liability company, it maintains a separate nonprofit foundation, also based at its Costa Mesa office near John Wayne Airport.

According to a flier about the marathon's fundraising efforts, it has raised more than $4 million since 2004. In 2016, 21 charity partners raised $535,714 for their causes.

In addition to the OC Marathon Foundation, charity partners this year include the John Wayne Cancer Foundation, Orange County Bar Foundation and Susan G. Komen Orange County.

Fairgrounds Chief Executive Kathy Kramer said she wants to craft policies to prevent another apparent disconnect between contract negotiations and the Tenant Liaison Committee.

"We certainly don't want to be in this situation again," she said.

[email protected]

Twitter: @BradleyZint

Nonprofit Board Matters #NonprofitBoards

I found the following Irish Times article and just couldn't resist sharing.  First, interesting factoids.  In Ireland there is an estimated 19,317 nonprofits in Ireland employing 132,069 people. In 2014, the combined income of all nonprofit organisations was €9.59 billion (about 10.4 billion in US Dollars).  Clearly no where near the number of US nonprofits but quite sizable given the size of the country (4.6 million).

Equally interesting based on a survey with 175 nonprofit responses, "64% of the nonprofits plan to expand the scope of their services".  Hmm.

The article mostly focuses on investing and in that area, there's not so much going on.  I would think that might not compare with US nonprofits particularly when we know that colleges alone do an amazing job with their investments.

There was some data about boards learning they mostly meet more than four times a year and nearly 3/4 have more than 9 board members (not sure the significance of 9).  Oh, and they are less effective in the use of their committees.  I would pose that's likely because they haven't figured out that few standing committees have any success (except perhaps the Governance Committee).

So that's the nonprofit governance news from Ireland!

Half of Irish NGOs lack an investment policy

Report on €10bn sector, rocked by scandals, finds strong governance and plans to expand

about 7 hours ago Updated: about 2 hours ago

Ciarán Hancock

AIB CEO Bernard Byrne and Tánaiste Frances Fitzgerald at the launch of the AIB and Irish Life report, “Growth and Governance in the Nonprofit Sector”. Photograph: Shane O’Neill

 

More than half of nonprofit entities in Ireland operate without an investment policy while one in five achieve a zero rate of return in the current low interest rate environment.

These were two of the key findings in a report on the near-€10 billion nonprofit sector commissioned by AIB and Irish Life and launched last night by the Tánaiste Frances Fitzgerald.

Called Growth and Governance in the Nonprofit Sector, the report also found that 64 per cent of these entities planned to expand the scope of their services, 42 per cent intended to offer new products or services, a quarter intend to expand their missions, and 14 per cent planned to expand internationally.

Half of the organisations plan to use their cash resources to expand, with just 8 per cent expecting to use debt to finance their growth.

Low-risk investors

Perhaps not surprisingly, almost eight out of 10 respondents categorised themselves as low-risk investors. Of those with investment assets, 69 per cent ranked capital security as their top priority.

Some 42 per cent of respondents have cash holdings only despite the current low interest rates on offer. The average return achieved by those who replied to the survey was 3.5 per cent.

The report also cited a strong governance structure and culture within the sector, which has been rocked by various scandals in recent years. In 93 per cent of cases, the board meets more than four times a year, while 70 per cent of boards have more than nine members.

The research suggests that boards could be made effective through the greater use of committees. However, rotation rules should be examined to ensure that they do not compromise the boards’ ability to make long-term investment decisions.

Online responses

The data was compiled by PwC last year and was based on online responses from 175 nonprofit groups who provide a wide range of services such as education, healthcare and disability services.

The report included a case study involving the Salesians of Don Bosco, which provides care services to young people who can’t live

in the

 

Fr Paddy Hennessy, provincial economer with the congregation, said it had become increasingly challenging to fund its mission while providing for the growing number of retired Salesians.

“We now recognise that a charity is a business that is nonprofit and has to be run professionally,” he said. “We were afraid of being a business, now we recognise that it is a business. We have to balance this with the care of our members and our purpose.”

Investment approach

Commenting on the findings, AIB’s chief executive Bernard Byrne said: “With interest rates at historically low levels and forecast to remain so in the short to medium term, nonprofits are beginning to alter their investment approach in order to fund expansion plans. This has led to increased methods of portfolio diversification, which brings with it increased complexity and sophistication.”

Mr Byrne said more than 50 per cent of Irish nonprofits bank with AIB, and it provides investment advice to help them develop investment plans, with Irish Life providing its customers with a range of investment and savings products.

There are an estimated 19,317 nonprofits in Ireland employing 132,069 people. In 2014, the combined income of all nonprofit organisations was €9.59 billion.

Nonprofit Board Chair Not Spokesperson #NonprofitBoards

Of the 3-4 national papers I scan in the morning it was the LA Times that provided the following story about the Georgia Community Foundation that made a contribution to a white nationalist organization. As almost anyone in philanthropy knows, community foundations are the community pillars responsible for distributing earnings from their endowment to make a difference in their community.

Community foundations also have a unique position to accept donors' restricted gifts as a part of their portfolio and distribute earnings from these funds as the donor directs. Now today's conversation could ponder what type of policies would need to be in place to ensure that the Foundation avoids accepting restricted gifts that compete with its values (rarely hate-focused) and that would be a good conversation but for the moment I would like to raise perhaps an easier topic to address: the role of a nonprofit's volunteer board members, or at least the board chair, when "bad" press arrives.

If you have read any of my previous blogs, you know I believe that the board, as a nonprofit's owner, plays an important role in representing the organization publicly. This is not a however a common practice but one I believe would have positive results for the organization and its doors. In the case of the following story, I would have preferred to see the Board Chair or anther board member tell the story about the Foundation, it's values and what happened in what has a negative appearance for the Foundation. Understand, I would encourage the foundation to revisit its values and policies toward avoiding situations like this in the future but more importantly, the practice of engaging the board in telling the Foundation's story to the public should also be revisited. At minimum, the Exec is "paid" to tell the story, by the board "owns" the story.

Nonprofit Board As Team #NonprofitBoards

Nonprofit boards are a team-a group of people formed for a common purpose.  Team theory and research can provide helpful insight about increasing board effectiveness and efficiency.  And equally important, thinking about the board as team helps with understanding who is best to be at the "table".

In a WSJ article titled In Search of a Perfect Team at Work, the subject of what makes a successful team as well as what criteria to consider in putting teams together is examined.  

One finding from a behavioral scientist noted that what made a great team based on his research were: "Those in which people had the most tolerance for their teammates’ perspectives—and those in which people had the greatest diversity in personalities. Introverts and extroverts, for example, or improvisers and organizers."  

The same behavioral scientist further noted that: "We often have an intuitive understanding about what qualities make people click or clash in the workplace, but don’t follow up on that gut feeling in a systematic way. We don’t always make sure our assessments of people’s personalities are actually correct, and we don’t analyze what happens when we throw together people with certain traits.

Again, according to the article:

One of the biggest efforts to quantify what makes teams work together comes at Alphabet Inc.’s Google. Its People Operations department crunches data to answer questions such as whether a team’s productivity was correlated to how often its members socialized outside the office (not necessarily). Google also found that the best teams created a culture of “psychological safety,” meaning team members could share thoughts, ideas and concerns without fear of ridicule or punishment. 

In a separate workplace effort, a manager, seeking to improve team effectiveness through a better "matching" process found:

.....we put together people who were motivated by the same thing.  Are they motivated by safety and security, or are they trying to take risks? Are they seeking power?  There were no right or wrong answers, but it was most important that members of the group were motivated by the same values.  If you have different goals, you could be pulling in opposite directions,” he says.

Finally, the WSJ article noted from another study:

The nonprofit Human Dynamics Lab at the Massachusetts Institute of Technology In studying workplace teams that have tangible markers of success, such as sales teams, found that the most successful groups share some characteristics.  They are:

1) Each member of the team is engaged. That means everyone talks and listens in roughly equal measure and that they talk with everyone, not just a manager.

2) There are a diversity of ideas, and everyone is willing to consider new ideas. This can be measured through surveys, as well as the tone of voice people use.

3) Everyone is setting goals for a project.

“You need everyone exploring slightly different things, but going in the same direction,” Mr. Pentland says.

I pose that nonprofit Board Chairs, Governance Committees and CEO's would do well to incorporate their understanding of the research and literature on teams as a tool for increasing board effectiveness.

Nonprofit Board Failed Prudence Test of Duty of Care #NonprofitBoards

As described in the following USA Today article, USA Gymanstics (USAG) CEO resigned today following revelations that lots of young women were sexually abused by the team doctor.  The US Olympic Committee board called for the CEO's resignation "amid criticism of his handling (?lack of handling) of child sexual abuse allegations".  

“The Board believes this change in leadership will help USA Gymnastics face its current challenges and implement solutions to move the organization forward in promoting a safe environment for its athletes at all levels," said Paul Parilla, chairman of the USA Gymnastics board of directors, in a statement.

First, kudos for the Olympic Committee's action at least regarding the CEO who was on watch for this activity.  Kudos also that it was the board chair, the chief volunteer, who spoke representing the Committee. To me this shows that the Committee's "owners" see the failings and have called for action.

Perhaps less kudos should be handed the board of the USAG.  The USAG appeared to have few if any policies in place for the handling of such situations and equally did not appear to have in place a way to learn about what was going on - would prudence (the standard applied to how the fiduciary duty of care is applied) not have dictated otherwise?  It's not that society, over the recent and distant past hasn't seen situations that would have put any volunteer board member on notice that policies and procedures should be in place to protect the interests of their constituents (in this case, athletes).  So I pose that it is not singularly the CEO who should face consequences here.  It is the board as well - many if not all who I believe should resign and the Olympic Committee can work to recruit a more accountable and responsible - specifically, prudent board!

Here's the Indianapolis Star take on the story.

 

 

USA Gymnastics president Steve Penny resigns

Mark Alesia , Tim Evans and Marisa Kwiatkowski , IndyStarPublished 2:22 p.m. ET March 16, 2017 | Updated 1 hour ago

 

 

 

(Photo: Charlie Nye/IndyStar 2015 file photo)

188CONNECTTWEETLINKEDINCOMMENTEMAILMORE

USA Gymnastics president Steve Penny resigned Thursday, the Indianapolis-based organization announced.

The move came after the United States Olympic Committee board called for Penny to resign last week amid criticism of his handling of child sexual abuse allegations in the sport.

“The Board believes this change in leadership will help USA Gymnastics face its current challenges and implement solutions to move the organization forward in promoting a safe environment for its athletes at all levels," said Paul Parilla, chairman of the USA Gymnastics board of directors, in a statement.

Parilla will lead a national search for a new president and "guide the organization's operations and move forward the initiatives currently in progress to strengthen and refine its policies and procedures for handling sexual misconduct."

Penny, 53, has been personally responsible for handling sexual abuse complaints since becoming president in 2005, according to his sworn testimony in a Georgia lawsuit.

"We all care deeply about the safety of our athletes, which is fundamental to a rewarding experience at any level of gymnastics," Penny said in a statement released by USA Gymnastics. "It has been heartbreaking to learn of instances of abuse and it sickens me that young athletes would be exploited in such a manner.

“My decision to step aside as CEO is solely to support the best interests of USA Gymnastics at this time."

The USOC released a statement from board chairman Larry Probst: "Today's announcement will hopefully allow USA Gymnastics to shift its attention to the future with a secure environment for its athletes and continued success in competition.”

The scandal started last August after IndyStar reported that USA Gymnastics sometimes did not immediately report allegations of child sex abuse to authorities. IndyStar also reported that at least 368 gymnasts have made allegations of sexual abuse in the past 20 years.

California sexual abuse attorney John Manly, who is suing Penny and USA Gymnastics, said Penny's resignation is not the end of changes that are needed.

"The tacit culture of acceptance of child sex abuse was fostered not just by Mr Penny but many of the long term members of the Board," Manly said. "Make no mistake this resignation is the result of the brave women who publicly spoke out about their sexual assault at the hands of Dr Larry Nassar's abuse and the many other coaches who savaged children while USA Gymnastics looked the other way."

One of those women was Rachael Denhollander of Louisville, who came forward to IndyStar after the first story in its investigation. Denhollander said that years earlier she had been sexually abused by longtime USA Gymnastics doctor Larry Nassar. After Denhollander came forward, more than 80 others contacted law enforcement about Nassar. He has denied the allegations.

"While I am grateful to see this step, I am disheartened to see that there still has not been a recognition of the deep failures that allowed so many children to be abused while participating in USAG gymnastics," Denhollander said. "Many have pointed out the serious errors in how USAG has handled the question of sexual abuse for decades, but USAG still has not taken responsibility for, or even admitted, those failures and the serious ramifications they have had."

Nassar is in jail awaiting trial on state and federal charges involving child sexual abuse and possession of child pornography. He has denied the charges.

Dominique Moceanu, a 1996 Olympic gold medalist, called Penny’s resignation a step in the right direction. Last month, Moceanu became highest profile former gymnasts to publicly call for Penny’s departure.

“There still is a lot more work that needs to be done,” she said. “This is the first step of many that need to occur.”

Moceanu said the board needs to apologize to athletes and abuse victims, many of whom have never come forward because of a culture of fear within the sport.

“This is a chance to make an honest, fresh start,” she said. “The board has never really addressed the athletes and victims. They may not have been at fault, but they supported him for so long and the athletes deserve better.”

Women's sports advocate and attorney Nancy Hogshead-Makar, a three-time gold medalist in swimming, agreed to more need to be done to make gymnastics and other sports safe.

"The power of the coach and administrators must be checked," she said. "Athletes must able to assert boundaries and say no to all sorts of abuse without fear of retaliation."

USA Gymnastics has hired former prosecutor Deborah Daniels to review its policies and make recommendations for changes. The organization has also cited the opening of the U.S. Center for SafeSport as an example of progress being made on the issue of child sexual abuse in Olympic sports.

Penny grew the organization financially, and his tenure included success in women's international competition. That success helped Penny earn $628,000 in 2015, according to the most recent public tax documents.

But pressure has grown since USA Gymnastics admitted it had waited five weeks to report Nassar to the FBI while conducting an internal investigation. Congress also is involved. Sen. Dianne Feinstein, D-Calif., and 15 co-sponsors introduced a bill earlier this month requiring Olympic officials to immediately report suspected abuse. USA Gymnastics and Penny are also named as defendants in multiple lawsuits related to Nassar. Penny and the organization denied responsibility and emphasized they first reported Nassar.

Also Thursday, 20 more women joined a growing federal lawsuit against defendants that include USA Gymnastics, Penny, Michigan State University and Nassar.

It's the largest group to date to start or join a civil action in connection with sexual assault allegations against the former Michigan State doctor. It brings to 78 the number of women or girls suing the school and Nassar in federal court and a California state court. Five other lawsuits name Nassar and USA Gymnastics.

The group that filed Thursday includes a former Michigan State competitive cheerleader, a former ballerina, former youth gymnasts, former college athletes and women who say in court documents that they were teenage girls or sometimes younger when Nassar sexually assaulted them during multiple medical appointments on Michigan State's campus or at Twistars gymnastics club in Dimondale.