Nonprofit Board Crisis

Nonprofits can make a profit

I often get told: nonprofits can't make a profit.  I reply: that's not legally correct.  Nonprofits can indeed make a profit from their activities but they must put their profits back into mission.  What is correct: the board members can't financially gain from the profits of a nonprofit.  Joyfully, the public must always be the winner.

Here's a good example of a nonprofit that is literally, profiting.

Nonprofit Board and Faith-Based Values

A Chicago Tribune article about the Chicago religious order of Jesuits which "consciously concealed the crimes of convicted sex offender Donald McGuire for more than 40 years as the prominent Roman Catholic priest continued to sexually abuse dozens of children around the globee" should serve as a reminder that "faith-based" values do not exempt an organization from being culpable for doing harm.  If anything, such values, in my opinion should reinforce a commitment to do no harm.  The Jesuits did not learn this lesson and have had to pay, in cash at minimum.  Should the board of the Order been more responsible and have they learned their lesson?  Let's hope so and let's hope so for every nonprofit board. 

Nonprofits To Be Regulated To Do What They Should

I can guess the "why" by New York lawmakers to overhaul the state's oversight of its charities and other nonprofits (although I think they have it backward -- the lawmakers should be the ones being overseen given recent history).  But, some of the oversight to be given is not new and is what is supposed to be the case (from the Wall Street Journal):

        One bill would require that charity boards actively oversee financial audits, require full disclosure of any insider dealing and prohibit any nonprofit employee from chairing its board.

        Another would require nonprofit boards review chief executive pay to determine if it's justified.

Really?

Nonprofit CEOs: The Buck Stops Here?

Serious troubles have been brewing at the IRS, Veterans Affairs, State Department and who knows where else.  Just how responsible is the President for what he  happens at all his agencies?  Does his responsibility end with the people he places in charge of these and all the other agencies his Office oversees?  And if the answer is "yes", then what happens when these people fail to perform their duties with at the minimum, not embarassing the President?

It's clear that all the misdeeds going on in these and other Federal departments are embarassing to the President, at the very least.  At the very most: they are bad government.  Who is responsible for fixing the situation?  The President of course in "partnership" or shared leadership with the Congress.  Mr. President, now's a good time to step up and pay some serious attention to your "house".  You know as most do: overtly bad management is not very tolerable for very long.

Nonprofit History

As the US Congress sorts out the IRS messiness with 501(c)4s, the Wall Street Journal has done us all the favor of trying to better understand the history behind these types of nonprofits.  Even if you are not particularly a history buff, the Journal's analysis provides a bit of an understanding of what is now proving a distraction for a bunch of folks who appear more willing to be distracted than get the necessary work of the People done.  Have a good weekend.

PS -- the more I think about the actions taken by the IRS, the more I am thinking that the only wrong is that the Agency didn't do similar "screening" of the left-of-center although it's not evident they didn't.  The real lesson: enforcement is at best difficult especially when there are so many who don't want to be regulated or limited in pursuing their goals.

Nonprofits: Crime of Choice

A NY State Senator, currently facing charges for soliciting bucks as bribes and trumping travel expenses is now being charged with diverting state money to a nonprofit which essentially served as a sort-of personal piggy-bank.  The more interesting part of this NY Times story is the rest of the story which cites:  "pilfering from nonprofit agencies is the crime of choice for corrupt New York lawmakers."  The story highlights another recent action by another state lawmaker.

What we have here I believe are two BIG questions.  My same-old: where the heck is the board (although I'm guessing we know the answer).  The second: it shouldn't be that hard to take away the ease of State lawmaker's access to diverting funds to pet nonprofits.  Rocket-science this is not.

But, back to the board question: are there really that many "friends of lawmakers" so willing to be complicit with their friend to turn their heads away when their nonprofit is being pillaged?  And then, wouldn't such complicity make these folks equally responsible for misdeeds and subsequently, should they to not be held accountable for the misuse of funds?  This of course would be another answer to the problem: hold these board members accountable -- just as they would be were they stealing from their own businesses which is the standard they should be held to.  NY AG, perhaps it's time to step in and use these "victim" boards as examples to stem the tide of legislators seeing nonprofits as their personal piggy-banks.

Nonprofit Tax Exempt Status cont.

Ruth Marcus in the Washington Post today says that the real scandal with the IRS' targeting right of center nonprofits is that the IRS hasn't been doing its job monitoring all 501(c)4s and letting them get away with huge violations.  Anecdotally this may indeed be the case but I for one certainly don't have enough evidence to support this claim. 

Meanwhile, another area where one might question the IRS' effectiveness: churches -- really big ones in particular -- you know those corporate (and yes, perhaps the Roman Catholic Church should be included) who do all kinds of things political and pay really huge salaries to the chief ministers and if not in cash, certainly in life style. 

Ah, but perhaps this, not unlike the 501(c)4 situation is more of a public policy question, not the question as much about a governmental agency not functioning very well.  And the public policy question: who should be tax-exempt and for what purposes and with what restrictions.  Perhaps it is time to re-open this can of worms.

P.S. Nonprofit boards -- maybe now's the time to start adding these questions to your agenda and forming an opinion and a strategy for what to say to your legislators.

Nonprofits Get Special Review

Well, I knew the IRS was stepping up its scrutiny on nonprofits but selectively targeting the right-of-center groups?  And to what end one wonders.

Well, the embarassment to the IRS is just really getting going but is there something this McCarthy-era type enforcement should be raising for nonprofit Boards?

Seems to me like maybe not so much doing something different but more like performing fiduciary duties the way they should be performed is a fine way to proceed.  Right or Left or Center (Theory of Change and Values), every nonprofit board and board member is responsible for ensuring their work is consistent with the laws but most importantly, pursuing mission.  Being results focused; getting quantiative and qualitative information on a periodic basis; following by-laws and ensuring that work is not counter to local, state and federal laws; ensuring no conflicts of interests by members...pursuing mission.  At least if and when some errant part of the "system" goes awry, there's will be nothing to be found.

Nonprofit Governance: Why Values Matter

Pretty much one of the first activities I propose in a strategic planning process and a visit to the nonprofit's Theory of Change, Mission and Values.  Board members generally say OK to doing a Theory of Change (target audience and "problem to be solved"; preferred intervention; expected results) exercise and mission but also say: we have to do values too?

As a reinforcement to the importance of an organization's values, take a look at this New York Times article where the whole story (mergers where the Roman Catholic Church is the dominant "winner" is rooted in values.  Clearly, in this case example, different values would produce a whole different outcome. 

Nonprofits: Changing One Person at a Time; Not the World

When a nonprofit board sits down to ask "what have we accomplished" how often is it that the answer is "we have changed individuals but our community remains pretty much the same". 

This conclusion is the story now being reflected upon in Africa where much "charity" aid has been given but so little has changed.  I would offer that this story may be no different in many American cities and states as well where maybe the lives of individuals have been changed (and this is good) but so many more lives remain unchanged.  For instance, in Connecticut where as part of the team developing a report on Poverty, we learned that poverty over the past ten years has grown significantly in pretty much every one of Connecticut's 169 towns and cities.  The good work of the Community Action Agencies (CAP) serving every one of these towns has indeed had a favorable impact on many residents and likely played a primary part in keeping poverty at a level lower than it would have been without the CAPs.  But still, the results are facts: poverty has risen.

For one framing for nonprofit boards to consider about what to do different, check-out this Christian Science Monitor article.