Nonprofit Board Crisis

Task Force Establishes 2 Boards: Really? #NonprofitBoards

The San Diego-area Regional Taskforce on the Homeless is splitting up it's group of advisors/partners to create a nonprofit that will have a governing body to address fiduciary duties and another body that will, advise.  If just paying attention to language, it's important to remember that there is really only one fiduciary body for a nonprofit and that body is typically referred to as a board.  There can only be one with the fiduciary duties.  That this groups is expected to "attract more funding" for me is a maybe - the other group could likely serve the same purpose.  But the duties of care, loyalty and obedience will serve mission perfectly.

Here's the San Diego Times article.

Homeless Task Force Now Has New Board Structure

POSTED BY DEBBIE L. SKLAR ON DECEMBER 29, 2020 IN POLITICS | 109 VIEWS

A homeless person in Coronado. Photo by Chris StoneThe San Diego-area Regional Taskforce on the Homeless will now have two boards to guide its decision-making and attract more funding to the region, the organization announced Tuesday.

The RTFH’s board of directors was separated into an advisory board that will guide policy matters, and a nonprofit board that will focus on finances, according to the organization.

The advisory board will continue to meet with elected officials, service providers and civic leaders. Along with fiscal oversight and attracting more funding sources, the nonprofit board will focus on putting money where it’s most needed, according to the RTFH.

Tamera Kohler, the task force CEO, said the decision to shift to two boards was “based in good governance.”

The RTFH is considered the authority and lead coordinator to prevent, alleviate and ultimately end homelessness in the San Diego region. The RTFH also oversees distribution of funding throughout the San Diego region from numerous sources, including the state’s Homeless Housing, Assistance and Prevention Grant Program.

 

Historically, the RTFH board of directors has included 31 members, with an elected official as chair. It also has included other elected officials, business and civic leaders, homeless service providers and those with homeless experience. That board, also known as the Continuum of Care, will remain intact and offer advice on various initiatives and service coordination throughout the region.

–City News Service

Changing Board Behavior requires Leadership and a commitment to culture shift #NonprofitBoards

I fully agree with Dr. Fram's descriptions of "boardroom elephants" in the following submission.  The actions and "be sures" may require cultural shifts within the board and there lays the answer to many of the "be sures" offered by Dr. Fram.  Yes, these are sound advice and yes these practices would have positive outcomes BUT each board needs a leader to recognize the challenges and a commitment to changing the culture and sometimes policies/practices the board has adopted over the years.  And that action requires commitment and patience.  A good 2021 resolution - yes?

 

 

NONPROFIT BOARDROOM ELEPHANTS AND THE ‘NICE GUY’ SYNDROME: AN EVERGREEN BOARD PROBLEM?

Nonprofit Boardroom Elephants and the ‘Nice Guy’ Syndrome: An Evergreen Board Problem?

By: Eugene Fram    Free Digital Image

Reposting a Viewer Favorite–Best Holiday Wishes to All My Subscribers

At coffee a friend serving on a nonprofit board reported plans to resign from the board shortly. His complaints centered on the board’s unwillingness to take critical actions necessary to help the organization grow.

In specific, the board failed to take any action to remove a board member who wasn’t attending meetings, but he refused to resign. His three-year term had another 18 months to go, and the board had a bylaws obligation to summarily remove him from the board. However, a majority of directors decided such action would hurt the board member’s feelings. They were unwittingly accepting the “nice-guy” approach in place of taking professional action.

In another instance the board refused to sue a local contractor who did not perform as agreed. The “elephant” was that the board didn’t think that legally challenging a local person was appropriate, an issue raised by an influential director. However, nobody informed the group that in being “nice guys,” they could become legally liable, if somebody became injured as a result of their inaction.

Over the years, I have observed many boards with elephants around that have caused significant problems to a nonprofit organization. Some include:

• Selecting a board chair on the basis of personal appearance and personality instead of managerial and organizational competence. Be certain to vet the experience and potential of candidates carefully. Beside working background (accounting, marketing, human resources, etc.), seek harder to define characteristics such as leadership, critical thinking ability, and position flexibility.

• Failure to delegate sufficient managerial responsibility to the CEO because the board has enjoyed micromanagement activities for decades. To make a change, make certain new directors recognize the problem, and they eventually are willing to take action to alleviate the problem. Example: One board refused to share its latest strategic plan with it newly appointed ED.

• Engaging a weak local CEO because the board wanted to avoid moving expenses. Be certain that local candidates are vetted as carefully as others and that costs of relocation are not the prime reason for their selection.

• Be certain that the board is not “rubber-stamping” proposals of a strong director or CEO. Where major failures occur, be certain that the board or outside counsel determines the causes by conducting a postmortem analysis.

* Retaining an ED who is only focusing on the status quo and “minding the store.” The internal accounting systems, human resources and results are all more than adequate. But they are far below what can be done for clients if current and/or potential resources were creatively employed.

* A substantial portion of the board is not reasonably familiar with fund accounting or able to recognize financial “red flags.” Example: One CFO kept delaying the submission of an accounting accounts aging report for over a year. He was carrying as substantial number of noncollectable accounts as an asset. It required the nonprofit to hire high-priced forensic accountants to straighten out the mess. The CEO & CFO were fired, but the board that was also to be blamed for being “nice guys,” and it remained in place. If the organization has gone bankrupt, I would guess that the secretary-of-state would have summarily removed part or all of the board, a reputation loss for all. The board has an obligation to assure stakeholders that the CFO’s knowledge is up to date and to make certain the CEO takes action on obvious “red flags”.

* Inadequate vetting processes that take directors’ time, especially in relation to family and friends of current directors. Example: Accepting a single reference check, such as comments from the candidate’s spouse. This actually happened, and the nominations committee made light of the action.

What can be done about the elephant in the boardroom?

Unfortunately, there is no silver bullet to use, no pun intended! These types of circumstances seem to be in the DNA of volunteers who traditionally avoid any form of conflict, which will impinge upon their personal time or cause conflict with other directors. A cultural change is required to recruit board members who understand director responsibilities, or are willing to learn about them on the job. This an important interview question to pose to candidates because it highlights the importance of good governance as a contribution. I have seen a wide variety of directors, such as ministers and medical personnel, successfully meet the challenges related to this type of the board learning. Most importantly, never underestimate the power of culture when major changes are being considered.

In the meantime, don’t be afraid to ask naive question which forces all to question assumptions, as in Why are we doing the particular thing? Have we really thought it through and considered other possibilities?

Directors need to have passion for the organization’s mission. However, they also need to have the prudence to help the nonprofit board perform with professionalism.

Nonprofit Boards OK Competition? #NonprofitBoards

While I can't explain why the first reporting on this matter came from the British press, the story is an American one when essentially failure breeds unfair competition and the need by the Boy Scouts to attempt to poach from the Girl Scouts - one now shameful organization trying to diminish an organization with a very successful and proven track record. 

Yes, the Boy Scouts are at it again attempting to rise from the ashes of years of child abuse and accepting leaders without screening or standards.  But of course the question, once again, is how much did the Board, the volunteer leadership know?  We do know that the leadership has known about the sexual abuse for multiple years.  But is it not probable that the Board sanctioned the paid leadership's strategy to try to attract girls (and not always in a straightforward messaging way) from the very organization that has proven it can best serve these young women?  This is a big strategy essentially requiring redirection and new policies - lots of new policies I would think given the history of the Boy Scouts and their ability to implement policies that may or may not be in place.  

Anyway, something continues to be rotten in boy scout land.  The BSA Board should apologize to the GSA and ask what they can do to be helpful and then reverse the policies that has allowed this poaching and tell leadership to do better about serving the youth they are meant to serve - it's in the mission!  BSA Board: Do Better!

Here's the BBC article that stimulated this tirade of mine.

Rich Christian Evangelists #NonprofitBoards

John the Baptist, according to biblical lore, was an itinerant preacher/evangelist who was chosen to start the ball rolling in recognizing Jesus Christ as the guy some were waiting for to lead the Jews into salvation.  John the Baptist, again according to biblical lore, was anything but a rich man and while popular, did not appear to attract the monied folks of the times.  This of course contrasts with a MSN story that highlights the world's current richest evangelical "Christian" pastors.

Now, on the one hand I would like to be appalled recognizing that these folks have effectively preyed (not prayed) off their many followers who have made them rich.  But on the other hand and not unlike the common complaints about nonprofit execs who make pretty healthy, not proportionate to their employees or other nonprofit execs salaries, these folks don't really call the shots in the end.  It's their believers/followers who decide to make their gifts (tithing 10+% of their salaries) in exchange for a number of benefits, mostly intangible but some intangible.  It is they, like donors everywhere who basically determine worth and value.  Sure, these donors and followers would like to make similar salaries but they are satisfied with sharing their much more reduced wealth to see these evangelists make what they do.

Wrong?  Duped?  Perhaps but choice is there.  And maybe, in the end, as we have seen countless numbers of times, these evangelists may fall to where maybe they should be once those who have given no longer value the benefits they have received.  In the meantime, we can tell the stories and believe that maybe folks will change their minds about what they perceive to be their benefits.  As, there are many more mouths to be fed, folks to be sheltered, and lives to be supported than these few so-called leaders.  But isn't this equally true for the capitalists running the major companies and government that affects our daily lives?

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Nonprofit Board Conflict of Interest #NonprofitBoards

Conflict of interest or just good business?  Here's a paragraph I found in a CSQ Magazine article offering advice to C-suite philanthropists:

When you join a board, make a conscious effort to get to know your fellow board members. You should be encouraged to have a relationship with both the organization and other board members.  Professionally, you can benefit greatly from your board relationships. These are individuals who share an interest in the same areas and can be reliable and valuable connections for you beyond your shared board service.

Furthermore, many business deals are born in the conference rooms of nonprofits. But if you benefit financially from a deal you make because of a connection made through a nonprofit, it’s best practice (and good karma) to donate a portion of the proceeds to that organization.

Serving on a nonprofit board can be one of the most rewarding and invigorating things you do. The power to make meaningful change in people’s lives is truly inspiring. It’s only right to approach these opportunities as strategically as you would any other major venture.

I suppose the question of conflict is specific to intentionality.  If a business person joins a nonprofit board, knowing who are the members and what their possibilities are for business opportunities and then, over time is able to milk those opportunities, does it hurt the nonprofit?  Perhaps not overtly although one might question what the opportunistic member is doing to support the nonprofit and fulfill their fiduciary duties.  And precisely what are those business deals that are born in the conference room?  I can't say I know for sure but maybe I just haven't sat in enough board rooms filled with business people looking for deals.  Something irritates me on this advice - if you have additional thoughts - please share.

Financial Red Flags for Nonprofit Boards #NonprofitBoards

 

Here's an interesting list of financial-specific "red flags" that I believe to be helpful for nonprofit board members to keep at their fingers - could even be put in the board manual.  The list is part of an article published in the Tallahassee Democrat.

Finally, watch for these red flags that indicate possible financial problems:

• Continued losses year after year
• Late payroll or sales tax deposits 
• Management saying things are better than what financial statements reflect
• Concentrations from one grantor/contributor
• High turnover in the accounting department
• Board is unable to speak to the CFO and all conversations must go through the executive director
• Accounts payables grow each month
• Financial statements from an Excel spreadsheet and not the accounting software package
• Delayed audit reports
• Last-minute financial information provided the day of a board meeting
• Line(s) of credit tapped out
• Continual debt restructuring
• Credit cards not paid off each month
• Board asks questions and responses are vague (or none are given)
• Board members assume the treasurer has everything under control
• CPA has the same findings year after year and issues never seem to get corrected
• Bank statement shows a negative balance
• Lack of working capital
• Receivables show as 90 days past due

Nonpofits: The Tax Man Cometh #NonprofitBoards

I've covered the subject of nonprofits being taxed over many years.  When cities face financially difficult times, the subject re-enters the sphere even more so as the scramble to generate more town funds is thought to be necessary by tax collectors and their bosses.  There are of course activities and spaces where nonprofits must pay taxes.  UBIT (unrelated Business Income Taxes is a favorite federal tax (when a business a nonprofit is operating is non-mission specific or at least can't be proven to be mission related).  State sales tax is generally applied to goods and services purchased by individuals no matter the mission.  And then there is property tax - a more sticky issue.  Parking lots for instance or spaces in a building that generate non-mission specific income.  And of course, as hospitals and universities know, there are workarounds often that look like something called a PILOT - payments in lieu of taxes - a negotiated price instead of what otherwise might be a really big tax bill all based on the idea that the non-cash benefits to a town are greater than the value of collecting taxes at full value.

All this to say that if the towns are hungry for income, nonprofits appear as appealing prospective sources.  This to raise the flag to boards: caveat emptor.  Make sure you are aware of what is being discussed and be sure to be ready with a platform that emphasizes mission.  Taxation is a board matter!

Just to reinforce my point: check-out this Herald-Tribune commentary.

Harry T. Barnes, Englewood

Why is Selby target of tax appraiser?

I understand the importance of a solid tax base to keep up city services, but let's not give a body blow to our cultural institutions!

Why on earth would our tax appraiser, Bill Furst, go after institutions such as Selby Gardens? Many have gift shops, cafes and events that diversify their revenue stream to support the mission of bringing arts and culture to our community through research, science and education.

Tell Furst that Selby Gardens is recognized as an affiliate of the Smithsonian Institute, a powerful testimonial to its work as a cultural institution. 

Selby proposed a resolution using calculations similar to what the property appraiser used at Mote Marine, but Furst wants to treat Selby differently. Why? 

What is Furst's real mission in treating Selby differently than other nonprofit organizations? 

Will he tax Ringling Museum, Van Wezel and places of worship at 100%, since they have events and dinners at their facilities?  

Do not allow this body blow to the many cultural institutions struggling to make it financially in the face of the pandemic. Tell Furst to follow the state rule for taxing nonprofits. 

Arts and culture are essential to the continuing development of a vibrant, creative community.

Tainted or Just Illegal? #NonprofitBoards

If you haven't thought much about the subject, cannabis (aka weed) is a BOOMING business in now quite a number of states.  The states have made cannabis sales legal.  The federal government has not.  That sales are illegal according to the feds (and we know who they are) ALSO means that it is illegal for nonprofits to accept profits from those selling cannabis.  And there lies 1/2 of the dilemma recognizing that even if receipt of profits were legal, there are quite a number of nonprofits who must wrestle with a mission versus source of money challenge (you know: drug addiction etc).  So what to do?  As always - I tend to go to the "only thing wrong with tainted money is their 'taint enough of it" framing.  And what about all those folks who take money from the drug companies or the Sadlers or the military industrial complex....  Will your not taking money slow them down?

For a very interesting story about Colorado and the dilemma on the side of the distributors and their desire to give, check out this article from the Denver bizjounals.

Shoulds, Coulds, Woulds: What Nonprofit Boards Are Told They Should Do! #NonprofitBoards

In the world of hot buttons that irritate me (and yes, there are far too many) but in this case, about nonprofit boards, the expectation or demand that a primary responsibility and even duty that boards are about raising money is for me a construct created by nonprofit executives and foundations (who want nonprofit boards to bring in more money to either benefit the foundation in the long run or offset dependency on the foundation - both meritorious goals in themselves but likely should be uncoupled from expectations of boards).

The folks who regularly contribute to the Tallahassee Democrat, regular spreaders of the commonly held beliefs about boards recently had this to say:

Another responsibility of a board of directors is to ensure adequate resources. Without the money necessary to fund operations and services, a nonprofit, no matter its mission or leadership, will not succeed. 

Fundraising must start at the top with board members understanding their role and being willing to make a personal contribution. I am a big believer in 100% board giving. This sets the tone for a successful fundraising program and enables board leaders to preface each ask by saying “join me” in supporting the organization. 100% giving is often required by funders to be eligible to apply for grant funding.

Savvy individual donors will also ask about this so it is always best when the organization can answer yes to this question. I recommend the board giving expectation be a personally meaningful gift. Kelly prefers a specific minimum like $1,000 a year. In that case, I recommend a give and get approach which includes a personal gift from the board member in any amount along with gifts they raise. Whichever approach you choose, the outcome is the same: 100% giving. 

It is vital for board members to review and adopt an annual written fundraising plan.

Staff are responsible for drafting the plan which is reviewed by the Executive Director and forwarded to the board for their review and input. It can also be vetted by a board development committee. Prior to approval, I recommend the board Chair engage all members in a conversation about the goals, strategies, and timelines. This collaboration helps to produce a fundraising plan that everyone has ownership of rather than just the staff. 

 The board should monitor and nurture these relationships and anticipate changes in leadership which can impact funding priorities.

Boards are also responsible for planning for the long-term funding needs of the organization. After an organization is established and been running successfully, the board should consider establishing an operating reserve for unexpected expenses, losses, or cash flow shortages.

The board is responsible for helping to raise funds to grow the endowment and invest the funds. Endowments build over time with the addition of legacy gifts by individual donors or by the board itself which can designate unrestricted dollars to the fund.

Board members are ideal ambassadors for the organization and can be key to building long term relationships with donors who may consider this type of gift.   

OK - MAYBE ONLY AFTER THE BOARD HAS DECIDED FUNDRAISING IS THEIR RESPONSIBILITY!  YES, THEY HAVE THE CHOICE TO MAKE AND MUST MAKE IT WHILE DETERMINING HOW BEST TO ACT ON THEIR FIDUCIARY DUTY OF CARE!  Fundraising is not implicitly or inherently implied in the duty of care nor is it inherently a part of the job description unless the board decides so.  Do I believe there to be consequences if the board decides fundraising has nothing to do with them?  Perhaps abut the same perhaps if the board does not opt to hire an exec who is an accomplished fundraiser.  Do I believe board members should understand and authorize the fundraising plan? Absolutely!  Do I believe that board members who can Would Want to Make a Contribution?  Absolutely!  And do I believe that board members who themselves accompany staff on fundraising calls or do so themselves can likely have a positive impact?  Again, Absolutely.  But are boards required, simply by their title, to get and give?  Not - this is a commitment individually and collectively agreed upon - and this is the way it should be.  This is the way good things can happen.

 

 

Nonprofit Realities 2020 #NonprofitBoards

For your "amusement" from the Human Services Council in NYC:

https://www.youtube.com/watch?v=uq_2PHZQf8M&feature=youtu.be&mc_cid=8026cbc4d8&mc_eid=faac3b0dc6