Nonprofit Board Crisis

Nonprofit Board's Job #NonprofitBoards

The following contribution to the Penobscot Bay Pilot offers what I believe to be some sound thinking about the role of the nonprofit board.  A shout out to the Penobscot Bay Pilot for even carrying material about nonprofit boards.  This coverage is not easily found.

The article author describes the typical role challenge of a nonprofit board as "not staying in its lane".  Fair enough description of one challenge faced by boards regarding what I would describe as "who is in charge".  And, the author does do a fine job of distinguishing between board and exec roles while I also believe there to be more that can be said.

I would note that one addition would be to distinguish about nonprofit board stages of development.  There are a large number of nonprofits who have tiny budgets and no paid staff.  These early stage nonprofit boards find themselves as the volunteer force AND the governing force with most of the attention paid to the former.  Their challenges as are their jobs distinct from boards who have staff.  Juvenile and Adolescent stage boards also have unique challenges with the governing job still evolving.  

A different way to frame a board's role though, given stages, might be to consider that fiduciary duties essentially come down to the board's role in considering risk and observing the laws as well as putting in place its own rule to inform ongoing and future decisions.  Simple but inclusive.

 

The biggest mistake a nonprofit board member can make? Not staying in their lane.

 

Diane Lebson, CFRE

Fri, 09/13/2024 - 11:45am

Throughout my career, I have had the privilege of working with nonprofit boards of all stripes and sizes. “Working boards.” “Fundraising boards.” “Governance boards.” “Advisory boards.” “Turnaround boards.” These terms are often bandied about without a consistent sense for what they mean. Don’t all nonprofit boards work? Fundraise? Govern? Advise? So why use these adjectives when describing the nature of the work that a particular nonprofit work does?

My sense is that board members use these terms as shorthand to distinguish what their role is in contrast to the role of the chief executive (or executive director). When the distinction between what board members do in comparison to the chief executive gets blurred, a nonprofit organization fails to live to its full potential at best and can drive itself (and staff) into the ground at worst.

Simply stated, a nonprofit board member’s role is to govern – and the chief executive’s role is to manage. BoardSource, the nonprofit sector’s leading voice on nonprofit governance, identifies the following list of responsibilities of nonprofit board members:

1. Determining the mission and purpose
2. Selecting the chief executive
3. Supporting and evaluating the chief executive
4. Ensuring effective planning
5. Monitoring and strengthening programs and services
6. Securing adequate financial resources
7. Protecting assets and providing proper financial oversight
8. Building a competent board
9. Ensuring legal and ethical integrity
10. Enhancing the organization’s public standing[1]

While no one could argue with this list of responsibilities, what’s appropriate for a board member to do (instead of the organization’s chief executive) can get confusing in practice. Here are three common challenges I have encountered in my work with nonprofits:

Challenge #1: Supporting the chief executive.

Ultimately, the only staff member that a nonprofit board “supervises” is its chief executive. While there may be other staff with whom board members have relationships and interact closely in their work, the chief executive is the only person in a nonprofit who manages staff. In practice, this means that no board member should be going directly to staff to ask them to do projects – the board member should be running those requests through the chief executive who is the staff’s supervisor. Doing anything else undercuts the chief executive’s authority and can create awkward dynamics in an organization. It can also create human resource challenges when wires get crossed.

Challenge #2: Ensuring effective planning.

Discerning who does what relative to planning can be tricky. Best practice suggests that the role of board members in planning is to help the organization articulate its priorities and allocate its resources towards the accomplishment of those priorities. Once a plan (including key performance indicators) has been finalized, board members should receive regular reports from the chief executive about how the organization’s programs and services are progressing. It is appropriate for a board member to ask questions about the organization’s progress – but it is not appropriate for a board member to be directly responsible for the execution of a nonprofit’s programs and services. Doing so would obfuscate the important role board members play in providing financial oversight and risk management, as it is impossible for someone to objectively oversee the work they do.

Challenge #3: Securing adequate financial resources.

Many board members do not relish their fundraising responsibilities for myriad reasons. They may fear rejection. They may fear establishing a quid pro quo expectation. Or they may fear not having the right skills to effectively ask someone for money. While these fears are legitimate, any board member who avoids fundraising is not living up to the full and reasonable expectations that an organization has of them. The way that each board member secures adequate financial resources may not look the same: some people may write checks. Others may introduce their friends and neighbors to their cause. Still others may feel completely comfortable asking strangers for money. It is incumbent for a nonprofit organization to help each board member determine how they will personally fulfill this critical responsibility. Each board member plays a role in fundraising, but not all of the roles are identical.

When board members perform their governance duties well and trust their chief executive to fulfill their management role, that nonprofit will be working most effectively accomplish their mission.

Nonprofit Board Treasurer Takes $100K

In Derby, CT the board treasurer of a local Italian American Club siphoned $100K out of the institution's coffers. While I don't think the use of the funds, for those interested, he lost more than half of the funds playing slots at an area casino and used the other half for internet pornography.   He accomplished his thefts over a five year period basically taking $20K a year.  The Judge says the thief should pay back as much as possible.  He also faces up to five years in prison.

It is of course great that the thief has been caught, will likely pay some of the money back and will likely serve some jail time, we should not be all celebratory. To some degree there was a huge fail on the part of the board which took the Treasurer for his word as to what was left in the budget or where the money went.  But really?  For a relatively small club, when a board thinks finances don't look right - it must step-in.

Doesn't look right, you say?  But maybe the reports looked just fine and the earnings were used to offset the deficits such that the board just didn't know.  Is this an ok situation?  I say no!  I say a finance committee (made up of more than one) should have played the role of third party and at least raised a flag to say something's not correct.  5 years is a long time.  And no audit (probably wasn't required).  And no one on the board or even the members, could have said something.  

Essentially, this saga is a boar fail - one that will hopefully produce accountability changes going forward.

CEO vs. Board Dissonance #NonprofitBoards

It is generally a fine practice for nonprofit boards to announce when a "beloved" executive retires.  At minimum, staff, funders, constituents, vendors and other stakeholders really do want to know when there's a change in leadership and what's next.  The board that makes a public statement effectively gets ahead of the crowd.  

But sometimes, getting ahead of the crowd, ESPECIALLY if the real story does not match the reality behind the announcement.  In the case of the National Museum of African American Music.  The board announced, with glowing warmth that it's exec was moving on.  The exec essentially said nothing.

But wouldn't you know it that there was another story which came out only after the now ex-exec announced he was suing the Museum for unpaid severance which while substantive, was due based on an agreement likely made upon their hiring.  But just after his announcement, the board released the following statement from the Nashville Business Journal:

"the museum raises a different money issue: the former CEO's "fiscal management practices during his tenure.""

Is there a lesson for all boards?

Governance Fail? #NonprofitBoards

The Gateway Church series of "fails" should leave folks like me who address nonprofit governance issues: what might have been done differently?  Plenty might be the answer. 

But megachurches like many mega-institutions are founder-driven, and in the case of Gateway, a family-run business, tend to have a great number of curtains that in effect limit what the volunteer leadership may know and understand at anyone time. 

This is not a viable excuse but it is a reality that a board can be used as a buffer to keep the constituents away from knowing anything or at least very much more than what they see and experience with their own eyes.  This was true for the Boy Scouts, not founder-led but certainly governed by a "closed-shop" of loyal men.  And also true for the Roman Catholic Church and countless other nonprofits with these experiences.  It appears that the curtains are so effective in hiding truths, it takes multiple years for truths to surface if every they do.  

I sincerely hope that eventually we all collectively can learn that these closed nonprofit governance systems do one one any good in the long run.  They must stop or we will continue to see these situations continue.

Here's a link to the Gateway megachurch story by CNN.  Bottom line, governance is all about accountability but if the only way for accountability to occur is through revelations by those who have been survivors, then we have to admit, this system is seriously broken and needs both a revamping and a rethinking of standards and enforcement action around those standards.  But really - do we have to go here?

 

Elemental Advice on Board/Staff Relationships #NonprofitBoards

The following opinion piece from the JewishInsider provides common sense advice on how to build the best prospects for strong and positive work that can manage in the best and worse of times.  I would offer that the advice comes down to two intertwined concepts: relational and transactional.  These two concepts essentially offer, and I would pose are true for board to staff, staff to staff, and, board to board, a foundational processes that relies on the relationship as a stepping stone to transactions and transactions that reflect a strong relationship/understanding between parties.  

READER RESPONDS

Mind the gap: Preventing a divide between boards and executives in times of crisis

By

Dena Farber Schoenfeld

August 20, 2024

Share

 

How can Jewish nonprofits brace for the next unanticipated challenge? By building strong shared leadership. 

It’s been four-plus tumultuous years for the Jewish nonprofit sector. Just as the Jewish communal workforce was beginning to adjust to the changes brought about by the COVID-19 pandemic, we now face an escalating war in Israel, a global rise in antisemitism and bitter political divisions as the 2024 election looms. Over and over, I have heard professional leaders and board leaders tell me that the most significant problems they’re facing aren’t the problems they would have predicted in the past. In a column last week in eJewishPhilanthropy, Barry Finestone summarized this state as VUCA: “volatility, uncertainty, complexity and ambiguity.” Leaders are struggling in ways they never imagined — sometimes girded by a strong partnership between board members and executive staff, and other times facing the crisis while also managing the needs or shortcomings of their counterparts.

At Leading Edge, we work to improve leadership, talent and culture across the Jewish nonprofit sector. In these last four years, we have seen countless shifts in how leaders responded to tumultuous times, but one leadership truth that I saw during the pandemic and am seeing again post-Oct. 7 is this: In organizations where shared leadership was strong before the crisis, organizations fare better during a crisis. When shared leadership wasn’t firmly grounded before the crisis, organizations struggled to weather the change and find their leadership posture. 

zenzen/Adobe Stock

Shared leadership is about fostering a culture of trust and respect where executives and board members work together as true partners. Here are four ideas to help executive and board leaders strengthen their shared leadership:

1. Improve communication between your board and your executives. Great shared board-executive leadership means actively working on improving your partnership. Through our ongoing work with boards, we consistently see that understanding the interpersonal nature of this partnership is as critical to success as establishing processes for the structural elements of the partnership.

When an organization’s board members and its executives learn more about one another — their collaboration and communication preferences, motivations, quirks, foibles and lives — it strengthens the foundation from which they work together, both in everyday challenges and significant crises.

Furthermore, while we often strive to keep feelings out of work, the reality is that everyone views and works through crises differently, professionally and personally. Conversations that produce a deeper understanding of our partners’ feelings and approaches in these situations not only deepen our level of human connection but also enable us to work more effectively.

Finally, when we communicate fully and honestly we learn each other’s strengths and limitations. We can only know when and how to stand by or step up for each other as needed in crises if we have a mutual understanding of these personal characteristics.

This kind of relationship building is particularly important for executives with limited board experience who find it stressful working with the board. When board members show their humanity, it facilitates attunement and fosters understanding.

2. Get explicit about who holds what responsibility. According to BoardSource, “[t]he chief executive’s role is focused on management and working with staff to implement programs and initiatives in support of the organization’s purpose. The board chair is responsible for governance and oversight, leading the board in evaluating the organization’s work from a macro-perspective and ensuring that the work advances the mission in an ethical and legal manner.”

Leading Edge data shows that not all boards and CEOs are aligned on the division of responsibility. If you don’t know your job, how can you stay focused when challenges pull you to unexpected and conflicting priorities?

There is great truth to the adage: “If you’ve met one board, then you’ve met one board.” Each organization needs something different from its board, and board history and culture varies significantly between organizations. Adding to the potential for confusion is the requirement of the board to act as the “boss” of the CEO while also serving as an advocate, mentor, assistant and so much more. These factors blur the lines between board and staff and underscore the importance of taking time to delineate roles and responsibilities to set up the partners for success.

The importance of shared leadership and the need for clear lines of responsibility was exemplified in the early days of the COVID-19 crisis. Boards and executive teams were forced to work in very different ways. Some were thrust into near-daily contact to make urgent decisions about financial management, physical safety, mental health — even ensuring the organization’s continued relevance. Others stopped speaking to one another as board business became too difficult for the otherwise overburdened professionals. In some cases, the board became a kind of emergency staff, while in other cases board members resigned from their positions. Every aspect of leadership was tested, and those who felt clear on what was required of them leaned into the immediate needs with strength (and, when the time was right, quickly returned to their own lanes). Those who didn’t have that clarity stumbled and in some cases still haven’t recovered.

Regularly reviewing roles and responsibilities, even at the risk of seeming repetitive or unnecessary, is key to ensuring great board-professional partnerships.

3. Stay focused on high-level strategy. It’s easy to get lost in the trees, but leaders need to keep their eyes on the forest. It is essential to put high-level strategy on board meeting agendas — and to keep it there! Use consent agendas to get minutiae out of the way and make space for meaningful discussion of the organization’s work and priorities. Tools like scenario planning enable you to check in regularly and return to them repeatedly to test their ongoing alignment with the organizational mission. 

During a crisis, strategy may be upended by how an organization is called upon to respond to the moment. The more fluent the board is in the organization’s work and priorities, the more quickly and efficiently they will come to a mutual understanding with executives of the necessary modifications to the strategy (and related funding).

4. Utilize Leading Edge’s new board guides and workshops. Building a great board-executive partnership is hard, so we’re trying to provide some resources to help at Leading Edge.

For example, we recently released Board Service Essentials: A Guide For Board Members and Board Leadership Essentials: A Guide For Board Chairs. These free guides are what they say on the tin — comprehensive outlines of how to be effective as a board member or a board chair, respectively. 

We are also offering a series of workshops for board members and board chairs in September. Any board member at a Jewish nonprofit is welcome. Finally, for professional leaders who work with boards, we are accepting applications through Aug. 27 for a new program for this winter and spring called The Leadership Lab: Collaborating with Your Board.

When I joined the Leading Edge team in 2020, just days before the COVID-19 shutdown began, I never could have imagined the major challenges that would affect our field over the subsequent years. In reflecting on that time — which we are still living through — I have seen and experienced that professional and board leaders who have stood together with relationships of trust, communication, and commitment to strategic thinking are best prepared to navigate challenges. Those leaders are at the helm of organizations that have come through the past half-decade with resilience, even more fortified and braced for whatever crisis collides with our field next.

Dena Farber Schoenfeld is the chief program officer at Leading Edge, an organization working to improve leadership, talent and culture in the Jewish nonprofit sector.

 

CEO & Board Values #NonprofitBoards

I regularly write that values are part and parcel of defining what is a nonprofit.  Values are defined by a board, often through a periodic review of a Theory of Change, often in-turn, conducted as part of strategic planning conducted every 3-5 years.

This weekend there was a story about a nonprofit exec who is being accused of calling a parking attendant racial slurs, more than once.  The exec denies the accusations.  The board has publicly stated that it stands behind the exec.  It's kind of a "he-said, she said" although there is documentation of the accusations.

Now, here's why this story merits mention.  It appears that the CEO calling an individual racial slurs would not be inconsistent with the organization's core values.  The organization in question states on its website that one of its programs is to invite conservative speakers to Yale and host "disinvitation dinners" where presenter whose speeches at other colleges have either been canceled or heckled by protesters.  This is consistent with its mission to promote "intellectual diversity and freedom of speech at Yale University".

So...one might conclude that a CEO who calls an individual racial slurs would not indeed be inconsistent with the organization's core values and defensible by the board/board members.  And no, I am not at all saying such behavior or values are acceptable nor saying that I know enough to know how much of the situation is fact (although I doubt an individual would go this far just to have a case).  

So, good that a board lives its values and that the CEO follows.  Not crazy about the values am I but the system that enables almost any group to create a nonprofit doesn't appear to impose limitations, like treating individuals with respect no matter....

Solves for Nonprofit Board Dysfunction #NonprofitBoards

 

The following SSIR article on dysfunctional nonprofit boards certainly bears a review and consideration.  I certainly concur with the author on many of his findings/experiences regarding dysfunctional boards.  

One take-away I have, and this may sound more like bolstering the role of governance consultants like me than anything else but I mean more than this, is that few boards that experience dysfunction are able to break through the dysfunction without outside help.  This is particularly true when there is an oppression by one individual or set of individuals over one or more other individuals.  This should not be surprising that solves really need an outside intervention but reluctance would not be surprising.  Anyway, do read on.

Spotting and Fixing Dysfunctional Nonprofit Boards

Micromanaging, rubber stamp, and Balkanized nonprofit boards of directors are more common than not, and turning them into high-functioning governing bodies requires being on the alert for six warning signs.

• Cite
 
• share
 
• comment
 
• print
 
• order reprints

By Alex Counts Oct. 5, 2020

 (Illustration by iStock/rudall30)

I have served on several nonprofit boards of directors and written two books about those and other leadership experiences. I've learned that building and sustaining high-functioning governing bodies is arduous, time-consuming work, but it's worth the effort. Run well, they can bolster an organization's revenues, provide access to influential figures, inspire confidence in stakeholders, help manage risks, improve leaders' performance, and contribute to the crafting of a compelling mission and strategy.

Sadly, many nonprofit boards miss out on these benefits and are more or less dysfunctional, based on a 2014 report by the Urban Institute and my three decades of work in the field. It's a topic that management literature has little to say about. People usually don’t like to draw attention to the fact that they were part of such a group. One of the rare case studies, “Should It Survive? Charles Dunlap and the National Legal Foundation,” focuses on an organization that no longer exists, which may have freed those involved to talk openly. 

To help fill the gap, I wrote in detail about an example of a weak board that I unsuccessfully tried to reform and from which I was ultimately forced to resign. That recounting complements this article in order to take on the challenging issue of board dysfunction. I've found that drawing on my personal experience is tricky—it can hurt important relationships if done carelessly—but necessary, given the dearth of information.

In my 30 years of experience, I have observed three main types of unsuccessful nonprofit governing bodies:         

• Rubber Stamp Board. This type of board approves whatever management proposes and often plays the role of cheerleader. These organizations tend to be run by charismatic chief executives who value their autonomy and assemble a board with the expectation that its members are compliant and mainly serve as “window dressing” to reassure external stakeholders. 
• Micromanaging Board. This board takes on key management functions in addition to its proper governing role. The staff becomes disempowered and often passive (or passive-aggressive) in the face of repeated intrusions into what they rightfully expect would be their areas of authority.
• Balkanized Board. These boards consist of people who are concerned about only one part of the organization—often the program they support financially. They typically avoid trying to see how all the pieces of an organization fit together, leaving that task solely to the chief executive. The fragmentation can be dangerous when an organization's revenues shrink and priorities must be reevaluated quickly and holistically.

Are you enjoying this article? Read more like this, plus SSIR's full archive of content, when you subscribe.

There are many variations of these three models, including hybrids. I once served on a board where a small subset of the group micromanaged the staff, while everyone else served as a rubber stamp. Organizations with strong brands or leaders can do reasonably well for a while working under one of these types. But once a crisis strikes, the accumulated rot begins to seriously hamper a nonprofit’s effectiveness.

I suspect many nonprofits with weak boards are now suffering in the mayhem wrought by the pandemic. One nonprofit leader recently told me that her governing body, which included many retirees and tended towards being a rubber stamp prior to COVID-19, had suddenly decided it wanted to appear to be “doing something” without much of an idea about how to genuinely contribute. As a result, many unnecessary meetings were held. She jokingly called it a case of a “bored board.”

Lack of diversity often compounds dysfunction. Homogeneity can lead to groupthink, myopia, and a board culture that alienates people who could otherwise help improve the organization. Ethnic, racial, and gender diversity are important. It is also healthy to have a heterogeneous governing body in terms of wealth, professions, work style, expertise, political ideology, location, and religious faith (or lack thereof). Including people directly impacted by the societal problem an organization seeks to address—such as having a current or former homeless person on the governing body of a shelter—is another powerful, though sometimes difficult, strategy to diversify and improve a board.

Once a board becomes dysfunctional, turning it around requires immense effort and patience. The usual remedies—self-evaluation, external review, a retreat, term limits, and recruitment of new members—are often ineffectual or lead to improvements that are difficult to sustain. It takes far more to get a rubber stamp board to assert itself, to persuade a micromanaging board to back off, or to inspire all members of a Balkanized board to care about the entire organization.

It's much easier to notice red flags early and nip problems in the bud. Here are a few examples of nascent board dysfunction and how to deal with them:

1. Misplaced Loyalty | Board members' first and highest loyalty must be to the organization and its mission. While this sounds obvious, it is not always the case. I once took part in a board retreat where, in the opening session, most members made expressions of loyalty to the founder and the executive director (ED) the centerpiece of their self-introductions. All I could think was: If their loyalty to these two individuals is greater than to the organization’s mission, God help us if those two things come into conflict at some point. (For example, if the founder or ED proposed a well-intentioned but highly risky idea.) Not surprisingly, this board devolved into chaos in a matter of days when two members were marginalized after asking hard questions about strategy, mission, and culture that the ED considered inappropriate. I am not suggesting that board members stop behaving sensitively or even deferentially to those who have labored to build an organization, often at great personal sacrifice, and also to those who recruited them. But once a board member becomes informed enough to have defensible positions on organizational matters, she has an obligation to advocate for her views on the nonprofit’s best interests, no matter whom they might offend. For example, a board I once served on had a single member abstain when it came time to vote on appointing a new ED. This led to some consternation and hand-wringing about disunity in the short term, but it prompted the chairperson to monitor the new ED closely for the first year based on the abstaining member’s concerns. This turned out to be a good thing—it ensured the board's help with gaps in the new leader’s experience and, early in his tenure, led to the hiring of a strong deputy with complementary skills.  

2. Usurping Management Functions | Board members who volunteer to work alongside professional staff can amplify a nonprofit's work and gain a deeper understanding of the organization. But when this devolves into them bossing the staff around, making decisions on the staff's behalf, and providing the board negative evaluations of employees based on potentially brief glimpses of their work, it can create a toxic environment and lead to team members becoming passive, secretive, or demoralized. Board members who are used to being decision makers and leaders in their regular jobs are especially prone to acting as if they are or should be in charge. I once ran an organization where the staff told me that they had two bosses—their direct supervisor and a board member who took an interest in their role. To avoid creating such confusion, board members need to understand that when they reach out to work with the staff, they are volunteers who happen to be board members rather than board members there to supervise anyone or order people around. Their role is to help, advise, and learn. There should also be limits on what directors can tell the board about what they learn while volunteering.

3. Unexamined Performance | If you serve on a board and have no idea how others view your participation, and have no means of giving feedback about the prevailing culture, expect trouble. Undiscussed differences in opinion between board members can gestate into deep resentments that trigger a crisis or drive people away. Preventing this requires regular feedback and candid communication. One way this can be done is to form a small group composed of the board chairperson, the CEO, the general counsel, and the chair of the governance committee, or some other person with the requisite stature and judgment. The group should meet every six to 12 months to assess each director’s performance and then assign a representative to provide the feedback. As I argue in my book Changing the World Without Losing Your Mind, following this approach diligently can obviate the need to impose term limits. Board members who are perceived as retaining their seats without contributing much effort or value are told as much; as a result, they usually raise their level of involvement or step down, regardless of how long they have been serving.

4. Stifled Dissent | Minority views and skepticism should be welcomed around the board table, with all members encouraged to speak their minds and vote their consciences, even if this creates tension. Passionate debate and non-unanimous votes are a signal of a strong, not weak, governing body. Groups with members who argue like they are right but listen like they are wrong tend, in my experience, to make the best decisions. They also minimize the risk of driving away useful and critical dissent. I have seen board leaders commend naysayers for their thought-provoking comments, thus encouraging everyone in the group to engage in critical thinking about organizational matters without fear of harsh judgments or reprisals. When boards are encouraged to pay close attention and express skepticism as appropriate, those preparing proposals that require approval of the governing body are apt to prepare assiduously before seeking a green light to move forward. I have also been on boards where asking hard questions about program effectiveness, financial management, organizational theories of change, and CEO performance is met with disapproval, silence, or even marginalization. As a result, such organizations are prone to approving half-baked budgets and strategies, and are less equipped to respond to problems.

5. Tolerating Misbehavior | More than once I have observed people behave unprofessionally and even unethically around a nonprofit board table in ways that I doubt those same people would ever do in a business setting. I have seen directors berate staff members for lacking detailed answers to their questions, ignore or minimize obvious conflicts of interest (such as companies owned by directors doing business with the organization), disregard people's novel solutions because acknowledging them would highlight a problem that the group wanted to ignore, and change the subject during a formal meeting instead of making a crucial decision.

In extreme cases, such poor behaviors can lead to widespread dissension, mass or forced resignations, and other unpleasantness. Confronting these situations is challenging, but turning a blind eye only normalizes and reinforces unprofessional actions. I once met with a former board chairperson and major donor to discuss his many comments about the performance of the mostly minority staff members, who viewed his statements as harshly critical. Our conversation was uncomfortable, especially because this person had been a mentor and benefactor of mine for years, but it caused him to change his ways to some degree.

6. Accepting Balkanization | Board members can bolster organizations by overseeing parts of them in which they have special interest or expertise, but they should not ignore the rest of what the nonprofit does. If they do, they may advocate only for their pet projects or disparage other undertakings that appear to compete for attention or resources. Serving on a governing body—unlike being a donor or volunteer—demands the embrace of all parts of an organization, an approach that cannot be left to just the executive director. Otherwise, the board will devolve into competing camps that disrupt organizational cohesion and a rational setting of priorities. In fact, board members should be prepared to argue against their favored programs if they don't make strategic sense so as to avoid turning an organization into a collection of projects.

Healthy boards of directors can magnify mission-driven organizations' positive impact on social progress, but they are more of an exception than a norm. Given the multiple crises facing our world—from COVID-19 to climate change—this must change to help achieve the solutions we need. It's more important than ever that every governing body regularly assesses its performance, goes outside its comfort zones, embodies professional standards, and puts the success of an organization as a whole above anything else.

When Chief Execs Fail #NonprofitBoards

I believe that when nonprofit CEOs fail, the board has failed at two times.  First, I believe that it is on the board to decide what is the culture, specifically, values, that should inform a CEO's actions (along of course with the mission and a strategic direction).  Failing that, it is the board that must act when the CEO fails either regarding values, mission and/or program.  

Clearly, the Columbia University Board of Trustees failed along with President Shafik who either "didn't get the memo" or chose to go down a path that wasn't reflective of history or other practical ways to address campus unrest OR the board's direction.  Obviously it's hard for me to know the "facts" from the inside but from the outside, all a fail with I believe the board bearing equal responsibility with the now former President.  Yes, board members should also resign.

Here's the story from The Hill.

 

Education

 

Columbia University President Minouche Shafik resigns 

by Yash Roy - 08/14/24 8:39 PM ET

SharePost

 

 

 

 

After a little over one year in office, Columbia University President Minouche Shafik has resigned, according to a message Shafik sent to the Columbia community. 

“I write with sadness to tell you that I am stepping down as president of Columbia University effective August 14, 2024,” Shafik wrote in a message to the Columbia community. “It has also been a period of turmoil where it has been difficult to overcome divergent views across our community. This period has taken a considerable toll on my family, as it has for others in our community.” 

In an email minutes after Shafik’s message, Co-Chairs of the Columbia Board of Trustees David Greenwald and Claire Shipman thanked Shafik for her service and said that they “regretfully accept” her resignation and named Katrina Armstrong, the Dean of Columbia’s College of Physicians and Surgeons, as the interim president. 

“I am deeply honored to be called to serve as Interim President of our beloved institution,” Armstrong wrote in her own message to the university. “Challenging times present both the opportunity and the responsibility for serious leadership to emerge from every group and individual within a community. This is such a time at Columbia. 

“As I step into this role, I am acutely aware of the trials the University has faced over the past year. We should neither understate their significance, nor allow them to define who we are and what we will become,” she continued.

Shafik had been caught in the middle of controversy related to antisemitism on campus after Hamas’s attack on Israel on October 7 and protests on campus related to the conflict as well as her decision to call in the New York Police Department to clear encampments on Columbia’s campus in the spring. 

More than 100 people were arrested on Columbia’s campus during NYPD’s sweep, which came after protestors occupied buildings on the campus.

Tensions have been rising on the campus since the beginning of August, with three Columbia deans stepping down last week for messages that contained antisemitic tropes.

On August 8, protestors vandalized the home of Chief Operating Officer Cas Holloway with antisemitic phrases and Nazi Swastikas, according to NBC.

On August 1, House Education Committee Chair Virginia Foxx also threatened the university with subpoenas if it failed to provide information and documents related to an investigation her committee started in February into the university’s response to antisemitism on Campus. 

“During Shafik’s presidency, a disturbing wave of antisemitic harassment, discrimination, and disorder engulfed Columbia university’s campus,” Foxx wrote in response to the resignation. “Every student has the right to a safe learning environment. Period. Yet, flagrant violations of the law and the university rules went unpunished.”

 

Pro-Palestine organizers had also signaled that they plan on resuming encampments and other protests once school resumes, Columbia’s Students for Justice in Palestine celebrated the announcement. 

“After months of chanting “Minouche Shafik you can’t hide” she finally got the memo,” the group wrote. “To be clear, any future president who does not pay heed to the Columbia student body’s overwhelming demand for divestment will end up exactly as President Shafik did.” 

House Speaker Mike Johnson (R-La.) and other House Republicans also visited Columbia’s campus in April to denounce Shafik and Columbia for failing to protect Jewish students on campus during the encampments. During that April 24 visit, Johnson had called on Shafik to resign. 

“THREE DOWN, so many to go,” House Republican Conference leader Rep. Elise Stefanik (R-N.Y.), who has dedicated much of the last year to investigating university presidents for their conduct in the wake of pro-Palestine protests, posted on X. “Columbia University’s President Minouche Shafik’s failed presidency was untenable and that is was only a matter of time before her forced resignation.” 

Stefanik appeared to reference University of Pennsylvania President Liz Magill and Harvard President Claudine Gay, who both resigned during this academic year in the post. 

Both Gay and Magill testified before the House Committee on Education and the Workforce in December and faced heavy criticism for not committing to discipline students who called for the genocide of Jewish people. 

Magill resigned soon after that hearing, and Gay resigned in early January following allegations that she plagiarized in her scholarship. 

Shafik was not at that hearing because she was attending COP28. 

Shafik did testify before Congress in April about her university’s response to antisemitism, where House members questioned her for not effectively dealing with protestors on campus who made Jewish students feel unsafe. 

During the April 17 hearing, Shafik also revealed that several faculty members were under investigation for comments they had made about Israeli or Jewish students, including Katherine Franke, who was denounced for a comment during a January interview where it seemed as though she was saying Columbia should not allow people who have served in the Israeli Defense Forces on campus. 

Franke has said that was not her intent and she responded to Shafik’s resignation by saying “capitulating to the bullies didn’t work out well for her.” 

“President Minouche Shafik threw me under the bus when she testified before Congress, but I’m still an employee of Columbia University, she’s not. Turns out that capitulating to the bullies didn’t work out well for her.  It never does,” Franke wrote. 

Protestors began occupying one of Columbia’s main outdoor spaces hours before Shafik appeared before Congress on April 17. The next day, Shafik authorized the New York Police Department to sweep the “Gaza Solidarity Encampment.” NYPD arrested over 100 protestors during that action. 

On April 30, after pro-Palestine protestors started another encampment and occupied buildings on campus including Hamilton Hall, the site of a student occupation during the Vietnam War, Shafik brought NYPD back to campus, leading to the arrests of more than 100 people. Police used stun grenades during that action. 

She also faced criticism from Jewish students and organizations for allowing the encampments, which were protesting Israel’s war in Gaza, to stand for days before they were removed. Jewish students reported intimidation and antisemitic actions from protestors present at the encampment.

The University Senate for the Faculty of Arts and Science approved a vote of no confidence in Shafik in May. Of the university’s 4,600 full-time faculty members, only 900 participated in the vote, with 65 percent voting no confidence. 

Updated at 11:06 p.m. EST.

Tags Columbia University Elise Stefanik Mike Johnson

If It "Smells" Fishy #NonprofitBoards

Kudos to the Voice of San Diego for its investigating the "fishy smelling" arrangements managed by New Alternatives.  New Alternatives is a nonprofit that is intended to serve foster kids in the San Diego and Orange Counties.  New Alternatives has a "sister" organization in Montana (anyone's guess) that serves essentially as an operating foundation.  New Alternatives appears to be taking some of its unexpended funds and putting these in its sister organization.  Fishy smelling yes although not because building an endowment is a bad idea.  Endowments are really good ideas for weathering bad or slow income times. 

But wait, there's more.  The ED serves both organizations and receives pay from both.  And the board, well that's a whole other kettle of fish (get the theme?).  The board are all good friends of the ED which isn't unusual but it's unclear about the "why" they are on the board - that is, what value they bring given their apparent disconnect to foster care.  Even the few words from the treasurer reinforce something amiss.

Well, this is good and deeply disconcerting reading.  I trust this will move the California and Montana AG's to have some conversations.  

 

Posted inInvestigations

A San Diego Foster Care Charity Is Funneling Millions Into a Foundation to Pay Its CEO

New Alternatives was set up in 1978 as a nonprofit to provide foster care services to San Diego and Orange Counties. It’s been stocking millions of dollars into a Montana nonprofit that does very little since 2015.

by Will HuntsberryAugust 13, 2024

• Click to share on Twitter (Opens in new window)
• Click to share on Facebook (Opens in new window)
• Click to print (Opens in new window)

Illustration by Adriana Heldiz for Voice of San Diego

Sign up for The Morning Report with all your must-read news for the day.

---

Next to the Clark Fork River in Missoula, Montana, sits an office building where a multi-million-dollar foster care charity called MAC Foundation lists its address — only there are no traces of MAC to be seen.

MAC was created by New Alternatives, a San Diego foster care charity that receives a large majority of its funding from taxpayers. Since 2015, New Alternatives has pumped millions of dollars into MAC. The money, for the most part, just sits there. MAC had $20.6 million in 2022, according to tax returns reviewed by Voice of San Diego. 

Aside from funding one study, the only thing MAC has ever done is pay New Alternatives’ CEO Michael Bruich. Bruich is listed as MAC’s CFO. The money he gets from MAC is on top of his regular, New Alternatives’ salary.

Federal, state and local governments send tens of millions of dollars a year to New Alternatives, so it can provide care for some of the region’s most vulnerable young people. New Alternatives also privately fundraises a small amount of money. But New Alternatives doesn’t spend everything it brings in. What it doesn’t spend, it sends to MAC.

The financial setup is not illegal, but it is unusual for a charity.

The makeup of New Alternatives’ and MAC’s boards is also unusual: Both boards are made up of a majority of people with personal connections to Bruich.

Reshae Cuevas lived in a New Alternatives facility as a foster child — and had a very positive experience. She later went on to work for New Alternatives and had a much worse time.

“It doesn’t make me angry. It makes me disappointed,” said Cuevas. “I had a good experience as a kid. It was my safe space. But I don’t have anything to compare it to as a child. As a staff member I was wondering where the money was.”

Cuevas said the facilities she worked in were, in her view, understaffed. She also said children frequently needed new beds or new furniture. New Alternatives was always taking the “cheap route,” she said.

“To hear there’s $20 million just sitting there… it’s like looking up to someone you idolize as a hero and then finding out who they really are,” Cuevas said.

New Alternatives — through its lawyer John Clifford — denied that New Alternatives takes the cheap route in providing services.

“We are pleased to know that the youth had a good experience while under the care of New Alternatives,” Clifford wrote in an email. “New Alternatives has clean program audits, so without details, I can only assume that this person’s assessment was not shared by the auditors.”

Clifford said New Alternatives created MAC without using taxpayer dollars.

“The assets infused in [MAC] came from non-taxpayer funds accrued by New Alternatives’ private fundraising, investment and prudent financial operations management over 40 years,” Clifford wrote.

New Alternatives, however, receives a small fraction of its money from private fundraising and investments. As New Alternatives’ own audits note, it received 98 percent or more of its funding from the county of San Diego and county of Orange each year between 2016 and 2022. (Clifford said the auditor’s report from 2021 was incorrect.)

In total, New Alternatives received $2.8 million from fundraising and investments between 2015 and 2022. During that same time, it transferred $19.8 million to MAC.

New Alternatives did, however, have roughly $23 million in cash on hand at the end of 2014, just before it began funding MAC. But by 2022 that cash on hand had grown to roughly $32 million.

“If they’re cheaping out on the services they’re providing as a way to accumulate funds and transfer them to this other organization. That’s not good,” said Laurie Styron, the CEO of CharityWatch, a charity watchdog group. “If the money is being taken from taxpayers to help foster kids, the money should be used to help foster kids.”

New Alternatives gets the majority of its money from San Diego County. Supervisor Joel Anderson, when shown Voice’s findings, referred them to the offices of the county administrator and District Attorney.

Supervisor Terra Lawson-Remer also referred the findings to the county administrator’s office.

Clifford wrote that there is nothing unusual about MAC.

“Practically all large, complex nonprofit organizations form foundations to provide for the protection of assets and the prudent management of those assets for the long-term support of charitable programs,” he wrote. “The leaders want to build a strong endowment to sustain grant-making over time. Spending money in the early years becomes detrimental to long-term viability.”

All charities, like New Alternatives and MAC, are overseen by a board of directors. It is best practice for boards to be made up of a diverse group of independent people to ensure the charity is serving the public good – rather than an individual’s private interests.

Usually, board members have a strong connection to the community where the charity operates or to the industry in which the charity operates. Most of New Alternatives’ board have neither, according to its most recent tax returns.

The common characteristic of most people on New Alternatives’ board is that they have a personal connection to Bruich, the CEO.

Thomas Winn, Gary Gillis and Thomas Joyce, who serve on New Alternatives’ board, all played on Harvard University’s football team with Bruich in the 1970s. None of them live in Southern California. Gillis lives in Massachusetts and is a partner in a multimedia production company, according to his Linkedin profile. Winn is a major developer in Sacramento. Joyce worked on Wall Street and lives in Connecticut.

Cheryl Spinweber is Bruich’s wife — and also a board member. Spinweber graduated from Harvard Medical School and is a specialist in sleep medicine, who has worked with the Navy.

Janis Stoklosa was an air safety investigator, who also worked at NASA. She also attended Harvard in the 1970s and visited Spinweber, while Spinweber was working for the Navy, according to a publicly-available visitor log from 1984. 

Marc Chasman is a housing developer in Irvine. He worked with Winn at a development company called Lennar Homes, according to available public records.

None of the New Alternatives board members could be reached for comment.

Clifford wrote that the board members have “high qualifications” for serving on New Alternatives’ board.

“It is a dedicated, selfless, intelligent board that believes in ensuring foster children are not left behind. They perform their governance duties in an exceptional manner without compensation and ensure that New Alternatives meets or exceeds all contractual and regulatory obligations, including conflict of interest and compensation practices,” Clifford wrote.

MAC’s board is made up of some of the same people, including Chasman, Joyce, Winn and Stoklosa. The only person not on New Alternatives’ board is a woman named Elizabeth Kaleva, who practices law in Missoula. Kaleva incorporated MAC in 2014 and described the foundation as an “offshoot” of New Alternatives.

She said she is “sort of” a board member and also treasurer of MAC.

“I’m probably not someone who is the best person to talk to about [MAC’s work,]” she said. MAC “theoretically [does] grants and provides resources for kids who are in the system.”

The office building MAC lists as its address in Missoula, Montana. / Photo by Skylar Rispens for Voice of San Diego

She said MAC is based in Montana, because New Alternatives has a connection to her husband Joel Kaleva. Joel Kaleva is also a lawyer, who previously represented New Alternatives, Kaleva said. MAC lists its address in the same building as a law firm, where Joel Kaleva previously worked.

Kaleva said she believed her husband was also on MAC’s board. But Joel Kaleva never served as a board member for MAC between its founding and 2022, the tax returns show.

He also does not currently serve on MAC’s board, Clifford wrote.

“It’s basically a nonprofit board, there’s a million people on the board,” Kaleva said.

Clifford declined to provide board meeting minutes for New Alternatives or MAC.

MAC’s board, he wrote, meets once a year or when necessary. New Alternatives’ board meets quarterly or as necessary, he wrote.

Bruich’s salary at New Alternatives was $407,500 in 2022, according to the organization’s tax returns.

He and his wife own a house, less than two blocks away from Windansea Beach in La Jolla, valued at $5.2 million by Zillow.

Aside from Bruich’s regular salary from New Alternatives, MAC has paid him an additional $365,000 since its inception. The money it pays him each year has ranged from $35,000 to $95,000. The year it paid Bruich the most money was also the year that New Alternatives made its largest contribution to MAC.

MAC also pays investment management fees to the people who manage its money.

On just one occasion, MAC did something other than pay Bruich.

San Diego County had agreed to fund a study on the effectiveness of San Pasqual Academy, a school for foster kids run by New Alternatives.

“New Alternatives came to the county, offering to cover half of [of the cost of] the study,” Clifford wrote.

UC Davis was set to do the study.

Both the county and UC Davis contracted specifically with New Alternatives for the study to be performed — not MAC, according to county officials and documents obtained by Voice.

MAC did shell out roughly $889,000 for the study — but it’s not clear why MAC needed to be a part of the transaction. New Alternatives initially gave MAC the money. MAC was now spending the money on New Alternatives’ behalf.

Funding studies on foster care is an important part of MAC’s mission, Clifford wrote.

“MAC Foundation paid UC Davis the first half of New Alternatives’ portion as part of the agreement as the study falls squarely within the mission of the MAC Foundation,” he wrote.

Carolyn Griesemer is an attorney who has worked with foster youth in San Diego County for years. She is currently managing director at foster charity called Just in Time for Foster Youth.

“When any non-profit accepts government funding, it takes on the crucial responsibility to manage and steward those resources wisely for the benefit of those they are meant to serve. Foster youth, with their complex needs, deserve to fully benefit from every resource available to them,” she wrote. “If New Alternatives redirected funds for some purpose other than what was intended, it would seem to be a betrayal, not only to the vulnerable youth who relied on their support but also to the taxpayers who entrusted their money to meet those critical needs.”

Skylar Rispens, a freelance reporter in Montana, contributed to this report.

Playing The Game #NonprofitBoards

Independent Board? nope! Exec who also has a full-time job with the city? Yes!  Questionable everything else?  Yup!

The following story does have one scratching their heads over how everything was able to become so.  Oh, and one itsy-bitsy part of the story that begins the variety of questions.  The city-exec says because the nonprofit has annual "income" of less than $50K, it doesn't have to file an annual 990.  Not exactly!  The nonprofit has to at least file an annual "post" card that reports it is alive and well.  And that's just the beginning.  Consider this your summer novel.

 

How is Myrtle Beach getting $4.9 million? There’s a complex web of LLCs and a nonprofit

Elizabeth Brewer

August 12, 2024 at 5:00 AM

 

How exactly do the tax breaks work for Myrtle Beach’s new $22.3 million dollar theater?

The answer is a complex map of LLCs and a nonprofit run by said local government. The arrangement is seemingly the first of its type in South Carolina, but calls into question the lack of transparency and leaves questions about the complicated financial maneuvers.

Myrtle Beach’s Chief Financial Officer Michelle Shumpert said the city had to work with the decades-old nonprofit Myrtle Beach Downtown Redevelopment Corporation to create other companies to get federal and state tax credits that are expected to total approximately $4.9 million, if not more.

However, the city is not simply working with a nonprofit; the city created the nonprofit, and high-ranking city employees comprise the board of directors.

The city-run nonprofit does not file a 990 form because its expenses are allegedly under $50,000 annually, according to Shumpert. She said the nonprofit does not have any paid staff.

Shumpert said she manages the nonprofit. She is already on the city payroll. Shumpert said the work she does for the DRC is as a volunteer and is not paid for by the City of Myrtle Beach for that work.

The DRC’s annual financial statements are included in the city’s annual comprehensive financial report, which is on the city’s website. Shumpert said they’re audited and published publicly every year.

The board of the DRC nonprofit organization manages a chain of LLCs.

“DRC is the manager, and I am the manager of the manager,” she said.

Nonprofitaccountingbasics.org states that nonprofits should have independence and that “board members should act independently and avoid conflicts of interest that could compromise their ability to act in the organization’s best interests.”

As far as conflicts of interests, the organizations that guides accounting and nonprofit management also states, “Board members, particularly those in leadership positions, should disclose any potential conflicts of interest and recuse themselves from decision-making processes when conflicts arise.”

The DRC’s board members are mostly city employees, including Myrtle Beach City Manager Jonathan “Fox” Simons, Shumpert as the treasurer, and Assistant City Manager Brian Tucker. Two additional members include Jacob Smith and Jenny Halstead.

Jacob Smith is an attorney and a real estate developer with ownership of an ocean-front resort, according to his bio; he did not return The Sun News’ request for comment on Aug. 2, and his voicemail inbox was full on Friday. He’s also on the board of directors for the Myrtle Beach Chamber of Commerce and the Myrtle Beach Downtown Alliance, a separate nonprofit funded by the City of Myrtle Beach to nearly $2 million and tasked with revitalizing downtown.

Halstead, who is the executive director of eMYRge which operates the HTC Aspire Center in a city-owned building downtown said she only recently joined the board in the past couple of months after starting in her role at the HTC in March 2024, and has attended one board meeting in June since.

“I think being apart of eMYRge and being in support of the downtown redevelopment project, I know that they felt that I was a good fit just being so closely linked, and just being apart of that project, it made sense for them to have a presence like mine on the board,” she said over the phone on Friday.

Since joining the DRC as a board member, Halstead said she’s seen the organization’s bylaws and that they’re available to view through the city. She said she’s not a member of any other nonprofit boards in Myrtle Beach, so she did not sign any conflict of interest forms. But, she is the executive director of a nonprofit that does business with the city.

When asked if the theater’s financing was discussed at the June board meeting, she said the minutes are still being finalized.

“I think those minutes would have to be reviewed, I know those minutes are made public,” Halstead said.

How did the city get involved with running a nonprofit and forming LLCs?

According to Myrtle Beach Public Information Officer Meredith Denari, this maneuvering was all part of a collective goal to help revitalize downtown.

“I think it’s important to note. . . that these buildings could’ve sat empty and idle for longer, but that we did step in and we found an innovative way to turn them around for the benefit of the taxpayer and for families, and all Myrtle Beach residents, visitors,” she said.

The whole process began more than five years ago, when the DRC nonprofit purchased all three buildings that will make up the new theater downtown on Dec. 31, 2018, according to Denari.

“Because of the desire to preserve that historic architecture and preserve some of the histories of towns, state and federal governments offer credits,” Shumpert said. “The state of South Carolina offers state historical credits and abandoned building credits.”

She added that the DRC wasn’t created just for this project, but has been around for more than two decades.

As a local municipality, the City of Myrtle Beach cannot be a corporation.

That’s where the decades-old nonprofit downtown redevelopment organization and two brand new LLCs come in.

The State Historic Rehabilitation Tax Credit in South Carolina is meant for taxpayers, according to the South Carolina Department of Archives and History.

 

By structuring the theater project like this, the City of Myrtle Beach is attempting to use a nonprofit they founded, run by volunteers from the city and closely aligned board members, to create two taxable LLCs that will help them qualify for the state and federal tax credits.

Based on her knowledge, Shumpert said Myrtle Beach is the first municipality in the state to arrange tax credits like this one.

“As a government, we don’t pay taxes, so can’t take advantage of the credits,” she said. “A credit goes directly against your tax liability…and this is where the syndication comes in, and partnering with private companies. There are people out there who want those tax credits.”

 

 

An organization chart describing the structure on a PowerPoint slide presented to the City Council on their May 28, 2024 meeting.

In order to do that and take advantage of those credits, Shumpert said folks will buy the credits from them through a process called syndication.

Through the DRC owned MB Theater Manager LLC, which also owns the MB Theater Owner LLC. One of the LLCs subleases the building to the city.

The City of Myrtle Beach is effectively covering the construction loan payments through the cost of their sublease via a subleasing agreement approved by city council earlier this summer.

By organizing the finances of the new theater this way, Shumpert said the city should get at least $4.9 million off of that initial $22.3 million in loans since the LLC can accept the state and federal tax credits.

Shumpert defended the practice by claiming the goal of benefiting the public is achieved.

“You would have to be a member of a corporation for any sort of a tax credit to benefit directly,” she said. “Utilizing this syndication to capture the revenue from the credits and offset the cost to the public is achieving the goal that both the federal and the state governments wanted it to achieve.”

Shumpert also points out the city is using a “tool” that is not technically available to them.

“So while we as a government might not be able to directly utilize that tool that they government has provided, we are able to, through this process” she said.

Where is the money now?

The first installment of that credit, equaling approximately $80,000, was paid when the LLC closed the initial deal. Shumpert said the next installment of a much larger sum will come after they receive their certificate of occupancy.

At this point, the rough breakdown of what the tax credit totals will look like is $700,000 in state historical credits for the former Helen Mates Dress Shop Building, $3.5 million in the state abandoned building tax credit for all three buildings and $1 million in federal historical tax credits for the Helen Mates building, according to numbers provided by Shumpert.

Governance and transparency of the city-run nonprofit and LLCs

According to documents from the city, the ground lease for accounting purposes will transfer ownership of those buildings to the MB Theater Owner LLC.

The primary owner of that new company, with over 98% control, is listed as “Federal Tax Credit Investor Entity.”

The city-produced slides about the financing do not clearly state who is in charge of that entity.

The other owners are the equity partners that will be responsible for using the state and federal tax credits and pay the city back for them, Shumpert explained.

The MB Theater Owner LLC took out the $22.3 million loan from Pinnacle Financial Partners. That LLC is responsible for the construction of the project and the loan.

How does a newly formed LLC owned by a nonprofit with no assets qualify and qualify for a $22.3 million loan? Who signs off on all of that?

Shumpert said it’s the manager, who’s the DRC, so it goes back to them.

“So while the owner has the bulk of the ownership interest, the manager is the one who runs it,” she said. “That’s all important because the DRC makes a ground lease to the theater owner. So for tax purposes, for accounting purposes, the ground lease that’s 50 years is a central ownership.”

How is CCU involved in the downtown theater?

From there, Coastal Carolina University in Conway will sublease the theater from the city and operate the day-to-day operations once it’s completed.

“The city is involved because after this is done and we get the construction done, the theater owner subleases the property to the City of Myrtle Beach, and then we’re gonna sublease it to CCU,” Shumpert said.

The theater is set to be completed in the summer of 2026 and has not been formally named yet.

Once completed, the city will rent the theater to CCU, and the university will oversee the building’s operations.

According to financial records reviewed by The Sun News, the university is not contributing to any of the construction costs.