Saturday, May 23, 2009
Layoffs Should Be Last Resort for Nonprofits
By Larry Ladd, Grant Thornton LLP
While layoffs seem to be the preferred solution to control costs in the traditional business sector, layoffs in the nonprofit sector tend to have a deep and long-term impact on the viability of the organization and the services it provides to members and constituents. At its basic core, nonprofits are dependent on a cadre of good people interacting with other people to meet their needs. Laying off people sends a negative message that people are not important in the equation, and could result in a ripple effect that further reduces income sources.
We are counseling nonprofits to use layoffs as a last resort and instead, completely reconsider any non-salary expenditure decisions. Start by instituting incentives for cost savings and cash conservation. For example, cut back on travel expenses and operational expenditures. This seems to have been embraced by many organizations. Just consider industry data that shows that attendance at trade show meetings is off by 1/3 over previous years.
If more cuts are required, institute salary freezes, leave vacant positions unfilled, make benefit cuts, or perhaps use furloughs so that the head count can be maintained. People would rather be working and drawing a salary, even a reduced one, than be unemployed. Tough decisions are better understood within your organization in a time of financial difficulty. Use objective criteria focusing on the best interests of the mission.
The one initiative we counsel against is across-the-board employee cuts, which will likely reduce the quality of every program or service. Particularly in tough times, your organization needs to maintain or enhance the quality of its most mission-critical or strategically critical programs. Keep in mind that across-the-board cuts are politically the most palatable, but strategically, the most damaging.
When they are made, most cost reductions have a tendency to bounce back when the budget starts growing again. The real challenge is to make permanent cuts, i.e., ones that reduce work tasks so that existing staff can handle the newly defined workload. For example, if five people handle a department’s work load and one person is let go, don’t ask the remaining four to do the same tasks the same way. Re-engineer the tasks to create efficiencies, or automate some tasks to reduce labor-intensive activities. In my experience, permanent cost reductions actually improve morale and allow for funding new programs or services when the economy gets better.
It may seem counter intuitive to suggest that eliminating an employee can improve morale, but in many cases, the first people to be let go aren’t terminated just to save money, but there are deeper issues involved. Usually, the first cuts are directed against employees who have demonstrated an ongoing lack of productivity or contributions to a team. When that person leaves, those left behind suddenly find that they are getting more done more quickly and efficiently.
While most nonprofits are feeling the pain of a down economy, nonprofits currently hit the hardest are those that are endowment dependent (museums, universities, etc.) and human services organizations (foundations, government programs, etc,). Capital giving, especially large donations by big givers, is significantly down.
I wish I could predict when nonprofits will see their financials improve, but funding and the economy are interdependent. When the stock market goes up, endowments go up. When GDP improves, the government can restore some funding.
No matter what happens with the economy, nonprofits need to remember that people make the difference.
Larry Ladd serves as a business advisor to Grant Thornton LLPs’ not-for-profit clients and provides his professional expertise to the firm’s not-for-profit practice. Before joining Grant Thornton, Mr. Ladd had served in academic administration for a number of leading colleges and universities. You can reach Mr. Ladd at: firstname.lastname@example.org
What followed was a difficult conversation that ultimately sparked a big idea. I told him we didn’t participate in this kind of school fundraiser because we didn’t really need these things and they were generally overpriced junk. We would simply prefer to make a donation.
My son scowled “All of the other kids are going to get prizes and I won’t!” I explained to him that we know a lot of parents who felt like we did and he was not likely to be the only one left out. My six year old son sat quietly for a minute and then asked, “Dad, if so many people don’t like this, then why don’t they change it?” In that moment, I realized that fundraising had not changed since I was a kid and it was high time we tried to do something about it.
I set out to interview all the people I could think of who are touched by this kind of product fundraising and look for opportunities to improve the experience. We found hundreds of parents, teachers, PTA presidents, and customers who were fed up with fundraising but felt compelled to buy things to support the people and causes they care about. That seemed to be the key. We decided we might not be able to get rid of product fundraising altogether, but we could make it more about the people and the causes we all care about.
Introducing... A Part of Something Big, an inspired fundraising company, founded by parents with the simple idea of fixing each of the things we didn’t like about our children’s product fundraisers. We sell only products that make a difference in our communities and our world. Our soaps are made by women in a substance abuse recovery program outside Chicago. Our coffee is from co-ops around the world who farm without destroying the forest. Our chocolate is spectacular and comes from the worlds only co-op owned chocolate company which has revolutionized a rural township in Ghana. We sell products which support fair-trade, micro-finance, social-development and environmental stewardship initiatives. We surround the program with educational activities and lesson plans to start the conversation in our schools and churches about the choices we make every time we spend a dollar. We believe that the value of a product is also a measure of the values it represents; and the stories of the people who create them are part of the pleasure.
In 2008, we piloted our program in six schools and are actively signing up schools for the fall of 2009. Our biggest challenge right now is finding PTA leaders who will seize the opportunity to do something bold, something that matters. Everyone we talk to tells us that they love what we are doing – but we need people to take the next step and sign up their school or civic organization. Our entire concept is based on putting your money where your mouth is and we need our fans out there to do the same thing! Fundraising is a necessary evil in most of our lives and few of us like it. But it doesn’t have to be a system based on guilt or an office quid-pro-quo. Like any endeavor we choose to be a part of, fundraising can be something we are really proud of if we choose to make it that way.
A Part of Something Big as a company will live or die on the backs of courageous moms and dads who decide to lead their schools, non-profits and communities along to a different future. It will take vision for them to imagine what fundraising can represent. It will take courage to be the person who says “Follow me” and we can raise the money we need and make a difference in our world at the same time. It will take perseverance to bring a concerned parent group along; nervous about the risk of switching the devil they know for the chance at something better. If you believe this idea is worth preserving, we are here to serve you and your community. Sign up today and be A Part of Something Big.
Contact Richard at http://www.partofsomethingbig.com
Wednesday, May 20, 2009
Live Blogging for Nonprofits
by Erik Evans
Public Relations and Web Information, Sons of Norway
If last year’s election cycle taught non-profits nothing else, we learned that live blogging from an event is of great interest to the public at large. Whether it was on the campaign trail, at the RNC/DNC or even from the inauguration ceremony, people loved reading real-time accounts of an event they were unable to attend. The same can be said of an association or non-profit’s members.
For many of these two groups we often hear member comments about their regret in not being able to attend large events because they lived too far away, the cost of attendance were too high, etc. A good way to overcome this challenge is by taking a note from what we saw from the campaign trail and began blogging live from the events you host or sponsor.
For example, if you are hosting or sponsoring a big event, turn your blog into THE resource for up-to-date information about the event, which helps build excitement amongst your members/audience who were already planning to attend. Then, during the event, make live posts with real-time updates about what's happening at the event, issues being discussed, interviews of VIP's and post photos from social events.
It's an exciting challenge, but a challenge nonetheless. You'll learn quickly that if you are going to do this, you're often expected to be in more than one place at a time. For that reason alone, it’s best to try and plan out your days ahead of time and learn as much as you can about what’s going on when. Also, trying to carry a camera, laptop, assorted cables, etc. proved to be difficult and sometimes a hindrance as well.
In the end, though, it can be well worth the effort because of three important results you may see. First, it keeps non-attending members engaged in the event by making them feel like they were part of the experience. Second, by showing them all the fun and excitement they missed, you are showing that attendance is worth the travel and cost of attendance. Essentially, you are increasing the chances that these folks will attend in the future. Last of all, you have probably exposed a whole new group of people, those who read the blog but aren't members, to your organization in action. This kind of exposure can be very helpful in recruiting new members.This is especially true when you work with the event planners to get into places/meet VIP's that most attendees can’t, then blog about it. It’s like giving your readers a proverbial backstage pass, which engages and entices them to participate in the future.
Also, I've learned that blogging live from events can stretch your current sponsorship budget even further. You see, blogging about an event you sponsor can be just as valuable to the planners as a cash contribution because it can lend weight and added credibility. The best part is that the cost is minimal on your part and it’s something you should probably be doing anyhow.
In the end blogs can serve a lot of purposes, all of which help strengthen a non-profit and increase interaction with its members.
To learn more about live-blogging, or using other forms of social media as a resource, contact Erik Evans at email@example.com.
Why bother about the nonprofit and philanthropic infrastructure, especially now while many nonprofits and foundations writhe in financial freefall due to the plunging economy? That’s exactly why infrastructure matters. When the infrastructure functions, it strengthens the sector, bolsters its advocacy, increases its accountability, and expands its reach and support of nonprofits across the country.
The core finding of this study, funded by the C.S. Mott Foundation, concerns the question of reach. The current system of financing the infrastructure—including foundation funding—tends to favor organizations that support and represent the larger nonprofits of the sector. The infrastructure groups that serve the thousands of smaller and mid-sized nonprofits that constitute the overwhelming bulk of the sector (remember, 85.7% of nonprofits filing 990s and 93.6% of all nonprofits have annual revenues of less than $1,000,000) have been consistently underfunded.
In crises like this one, as in the responses of New York nonprofits after 9/11 and Gulf Coast nonprofits after Hurricanes Katrina and Rita, nonprofits that were well networked were able to identify and distribute resources faster on behalf of their constituents than those that were unconnected. They were also able to find many effective points of collaboration with other organizations to ensure that clients were served on the most holistic and effective basis possible.
Components of a solid national infrastructure already exist to aid local nonprofits in this historic pinch but infrastructure funding is unbalanced and has not been approached systematically. The result is that the national infrastructure does not have the consistent reach that it should to the many corners of the sector (rural areas, the south, marginalized communities) even while some infrastructure organizations representing the elite of the sector build significant reserves.
Specific findings from the study include these:
Funding has been heavily concentrated in a limited number of individual institutions rather than in a comprehensive distributed system of infrastructure. Over the past five years, 104 national infrastructure organizations received foundation grants adding up to more than $1 million. The top ten of these received more than half of the total, although some portion of the funding of the top ten includes pass-through technical assistance and regranting funding they administer on behalf of selected foundations.
There has been a relative lack of foundation support to the national networks serving and representing small to mid-sized nonprofits in the U.S. on the state and local levels. This severely limits the reach and potential for learning and innovation in the sector.
Relationships and personal politics are perceived by many infrastructure groups as a better indicator of who receives funding than mission, reach or work product.
Intense competition and lack of cooperation among some infrastructure groups is cited as having retarded progress in a few key areas; although there are signs of promising collaborative efforts that merit attention and support.
Foundations can and should rethink their funding priorities to make a difference in rebalancing the national infrastructure to better serve a broader array of nonprofit organizations. The NPQ infrastructure report offered the following recommendations for foundation action, which will occur only if the nonprofit sector advocates for a different foundation approach to the infrastructure.
Invest in the national networks of state associations and nonprofit capacity builders whose members are widespread, serving nonprofits of all types and sizes on a state and local basis. As the excellent work of the National Council of Nonprofits demonstrates, these networks are critically important now, perhaps more than ever, as watchdogs of state and federal policies and programs and guiding nonprofits to carry out nonprofit roles in the national economic recovery.
Invest in advocating for federal government support of the large nonprofit databases to feed a future of good research. There is general agreement that the development of these databases such as Guidestar and the Urban Institute’s National Center for Charitable Statistics has been one of the most valuable accomplishments of the infrastructure, but they cost a great deal to establish and maintain and there are concerns about their accessibility as some move toward charging fees. Government generates and makes available huge amounts of data for other industries and sectors; it is time to make government funding of this component of the national infrastructure a national nonprofit advocacy priority.
Invest in a national agenda of research that has practical use to nonprofits. While all research need not be completely utilitarian, there is an acute need for a venue that dedicates itself to the promotion, “translation” and broad dissemination of research that responds directly to practitioner concerns.
There are many “missing in action” foundations on the national infrastructure scene, and local state associations, management support organizations, loan funds and other elements of infrastructure desperately need local philanthropic subsidy to serve the full range of local nonprofits. Considering the marked concentration of current infrastructure funding among a relatively few foundations, major funders of the national infrastructure would be wise to champion a “good citizenship” code of ethics among philanthropy that urges support of these necessary connectors and resource banks.
Sunday, May 17, 2009
by Bunnie Riedel, Host of Nonprofit Conversation
The latest news is that the economy has “bottomed out.” But as I recently said, nonprofit fiscal health will lag some twelve to eighteen months behind the for-profit sector. So even if tons of new jobs were created tomorrow and the economy had a complete turn-around in the next twelve months, nonprofits will still be feeling the pain for at least the next two years.
What does that mean for you? It means you have to be as sharp and entrepreneurial as you can be because you are in hot competition for membership and donor money. You must make sure that you provide value to your members and donors and if you’re already providing value, you must make sure you communicate that value.
Take a long, hard look at your organization. What are your members and donors getting out of giving you money?
Everywhere I look there are lots of sales. Business understands that shoppers are seeking the greatest value return on their purchases. What I might have spent $10 on a year ago, I now want that same product for $7 (or even less), I am seeking bargains. Is your organization a “bargain”? Will I, as a member or donor, feel like I am really getting my money’s worth?
Let’s look at overhead. What percentage of your budget is spent on creating products or services or programs that meet the needs of the members/donors? Have you looked at your rating on Charity Navigator recently? Is your organization listed on Guidestar or with the Better Business Bureau? And if so, what information is available on those websites? Is it good or is it less than stellar? If your organization is too top heavy, meaning too much of your income is being spent on non-programmatic expenses, it’s time to do some trimming.
People are very savvy these days and certainly electronically connected, and they are looking for value. I would even urge you to hire a consultant to assess your organization with fresh eyes. And if you haven’t Googled your organization lately, I urge you to do so; you should always see how your organization comes up and who is saying what about you and your organization. Googling every week or so can save you a lot of aggravation and certainly make sure your members/donors (and potential members/donors) have a good impression of the organization.
What do your members/donors want in exchange for their money? Networking? Training? Discounts? Good will? To help others? To build something? A cause they believe in? If you think of your members/donors as shoppers and your services as products you are selling, it will be easier to look at your services and assign value to them. And if you can’t, if there is no value, then perhaps it’s time to get rid of those valueless services. When is the last time you surveyed your members/donors and asked them what they want? It’s called “market research” when for- profits do it, maybe it’s time for you to do some market research. I recommend you consider conducting in-person focus groups with your members/donors so you can really get a feel for what they think is important.
So let’s say that your non-programmatic expenses are in line and you know exactly what your member/donors want and you have created the ultimate value and your services are really a bargain. Now what? It does no good to have fabulous services and programs if nobody knows about it. For-profits advertise constantly “We are the best! You have to shop here! You can’t miss out on this terrific product! You can’t get this kind of value anywhere else!” However, one of the line items most ignored by nonprofits is the marketing budget. These days you can do so much marketing for free on the internet, and you certainly can be constantly marketing how fabulous you are to members/donors. Here’s a few tips:
- Facebook (get your members/donors to become your fans)
- Twitter (get your members/donors to follow you)
- Blogs (yes, have a blog and spend some time getting others to blog about you)
- Digg (write articles and Digg them)
- Pitchengine (I love those guys! Free social media releases!)
- Ezine articles (put your blog out there as an expert article)
- Your story (write about your organization)
- Constant Contact (go green, save trees and deliver newsletters)
- Direct Mail
- Public Service Announcements and videos (spend a couple of bucks on a quick video to post on your website and Youtube, etc.)
Wait! Did she say “direct mail?” Yes. While it’s great to go green and do everything electronically, there’s still nothing like that direct mail appeal. As I said in a previous post on writing membership renewal letters, the beauty is that your members/donors can add your appeal to their bill box, so it gets paid just like every other obligation.
Everything in the above paragraphs is really dependent on your members/donors, their demographics and their technical savvy. If you have a constituency that is not “wired” you will still need to employ the old fashioned methods, which is perfectly fine although may cost you more.
At the next Board meeting have this discussion: How do we give value to our members/donors? By constantly striving to give value you can beat out your competition for dollars and make sure that when the economy does finally recover, your organization will still be standing.
Calling Nonprofit Executives, Board Members and Consultants! Want to write for Nonprofit Conversation? Email Bunnie at info at riedelcommunications dot com. Pitch your idea! I'm all ears!
Contact Bunnie at info at riedelcommunications dot com
Thursday, May 14, 2009
Cleaning Up Toxic Boards
by Margie Morris, President, Morris Ink
Every agency or organization with any level of credibility has expectations of its board of directors and clearly stated policies to explain them. Confidentiality, attendance, voting methodology, conflict of interest, ethics, open meetings stipulations, diversity – a broad spectrum of guidelines to ensure a transparent infrastructure and decision-making. But even the most fervent rules and regs can’t ensure that board members act like grown-ups. And when they don’t, it creates trouble for other directors, the agency represented, and ultimately those served by the agency. Sometimes even the community.
The most toxic situations often occur when more conversations about the agency or its staff take place outside of meetings than when sitting at the board table. Watch for red flags: Small clusters left in the parking lot long after the group has adjourned, furtive e-mails or phone calls circulating surreptitiously, offsite gatherings when board business is discussed with any willing participant. If not addressed in an appropriate manner, talking about people (or things) instead of talking to people (about things) becomes almost a kind of entertainment. It creates its own energy and keeps boards from doing the sometimes hard work of resolving challenges.
It’s a problem that can permeate the culture of an organization, and often begins because well-intentioned executive staff short circuit communications for purposes of efficiency. (And those not so well-intentioned may advocate brevity so there is little time for questions, review or discussion.) It can be exacerbated by board members who, for whatever reason, agree to play the game rather than taking a stand to redirect unproductive activity. Changing course can be as simple and non-threatening as taking ownership of a request for additional information or requesting that a discussion take place so that all can hear.
To prevent the problem from occurring, re-evaluate the board’s MOO from time to time. Conduct a self-assessment. Talk openly with the staff executive about what’s working and what’s not. Structure board meetings so that directors are not just given the opportunity, but invited to participate. Hopefully, every member of the board was selected through a strategic process that helps ensure optimal functioning of the agency. So utilize the strengths for which each director was “hired” in the first place. And for heaven’s sakes, have term limits and share leadership through short-term task forces and other avenues of involvement.
To achieve greater participation, be sure the climate allows for thoughtful disagreement. Construct committees so that their work is meaningful and recommendations include board input. No rubber stamping. Give information in an efficient and user-friendly format, but give it. Asking volunteers to peruse 10 pages of financials five minutes before a vote is not good business. Of course, neither is subjecting board members to monthly information packets that weigh 15 pounds, even if they get it a month in advance.
Consider the multiple of three. One staff person always begins his brief presentation of information at board meetings by stating, “There are three things you’ll want to consider carefully about this issue.” And then he names them. Another executive staff member periodically asks her board members to prioritize which three items in the board packet are most useful. Three is a magically manageable number.
Finally, include courage on your list of prerequisites for potential new board members. The courage to disagree. The courage to change direction. The courage to know and follow the rules of the agency and also those that come with being a mature and responsible leader. Amazingly it usually only takes one person to turn a potential problem around. Noticing is the first step.
You can contact Marjie at firstname.lastname@example.org
Wednesday, May 13, 2009
Weathering the Economic Storm
By Angela Newman
Board Chair, Nashville RBI
Nashville RBI is Nashville’s chapter of Reviving Baseball in the Inner cities, an MLB sponsored organization. 2008, was one of the best in the 12 years of Nashville RBI’s history. The best in many ways; active board member participation, numerous media articles printed, large financial donations, a golf tournament with the most participants and sponsors, and a well attended wine tasting event with incredible auction items. By comparison, with the first quarter of 2009 and our 13th annual golf tournament just ahead of us, we are seeing fewer volunteers on the golf committee, fewer sponsors for the event, and fewer teams signing up to play.
We were hoping 2009 would bring the funds to lease a building near a ballpark to provide a place for inner city kids to not only play baseball when in season, but to do their homework after school and keep them off the streets and out of trouble. We hoped to have speakers from the Nashville community come in on a monthly basis and share their knowledge, their careers and speak on topics such as being successful in life. The goal is to have these prominent leaders encourage kids to not only focus on a career but develop as responsible and respectable citizens.
Fortunately our individual donors have been very generous this year and it is still too early too tell if we will be affected later in the year if the economy does not improve. Where we are seeing an impact on our donations is in the largest fundraiser we have each year, the RBI Golf Classic. Our corporate sponsor contributions for the event are 25% of last year’s and attendance to date is substantially less although we are still several weeks away from the event so I am hopeful.
Clearly the state of the current economy is impacting our non-profit. We have had to make some changes in running the organization as well as to the golf classic due to the downturn of the economy. We continue to keep an eye on things very closely to ensure our purpose of existence is not affected. As with any non-profit right now, cutting back on some expenses, putting lower priority projects on hold temporarily and looking at creative ways to accomplish our needs including thinking outside of the box are ways in which we hope to weather the economic storm.
Some simple but needed changes we have made for 2009 are:
The dinner following the golf classic will be scaled down from years past.
More emphasis is being placed on getting $1000 sponsors for the event and filling up golf teams and less emphasis placed on large corporate sponsors.
Creative selling tactics to place teams; phone a thon’s to successful businesses in the area asking for their support by registering a team in the event and/or asking for auction item donations.
The desire to lease a building to house children after school will not take place this year. Instead the board came up with an alternate way to still work toward achieving our goal of educating kids. We will look at partnering with the City of Nashville to use the community centers around the city free of charge for our monthly educational programs.
We are looking at a program that would provide RBI with additional and different funds in addition to the traditional fundraisers and local businesses to support the organization.
Emphasis on grassroots efforts and quantity of donors with smaller contributions as opposed to larger donations by fewer people and organizations.
If your non-profit organization is facing similar changes to your revenue due to the economic downturn, brainstorm at your next board meeting to find creative ways to weather the economic storm.
Angela Newman, CEO of Pink Ladders (www.pinkladders.com) currently holds a leadership position in the healthcare industry where she has over 20 years experience. She also volunteers for Nashville RBI (www.NashvilleRBI.com) as Board Chair. She is an avid baseball fan (NY Yankees) and makes her charitable organization a priority in her life. She also holds a Master’s Degree in Business Administration.
Angela can be contacted at email@example.com
Monday, May 11, 2009
Ten Things Non-Profit Boards Should Think About (Soon)
by Stephen L. Tatum, Partner, Cantey Hanger
Most members of non-profit boards are unaware of the potential for personal liability that became apparent in the recent case of Verret v. U.S.A., 542 F. Supp. 2d 526 (E.D. Tex. 2008) affirmed by the U.S. Court of Appeals for the Fifth Circuit on February 26, 2009. The lower court opinion gave a very detailed account of the reasons why the board chairman of a non-profit hospital was held personally liable for payroll taxes the hospital owed but did not pay. It also provides some good ideas for at least minimizing the risks of board members being personally responsible for a potentially large bill from the IRS.
Review Your Bylaws
Most non-profits’ bylaws were likely derived from a form that provides that the Board has ultimate and final responsibility for the operation of the organization, or words of similar meaning. That wording should be changed to place the responsibility for daily operations on the paid staff, rather than volunteer board members, who are not present on a day to day basis and who therefore lack the capability, much less the competence, to manage the operations of an ongoing business. Boards are there for strategic oversight, not day-to-day management. The designation of the Board as the “final authority” should not be unlimited.
Maintain a Bright Line Between Board and Staff Responsibilities
Verret was a paid consultant of the hospital in addition to being its Board Chairman. Those types of relationships can only serve to blur the boundary between those only responsible for strategic oversight and those responsible for day-to-day operations. Because the tax code has a very broad view regarding “responsible persons” for the purpose of imposing liability for unpaid tax obligations, volunteer Boards should be careful to draw a bright line between themselves and the employees of the organization regarding areas of responsibility.
The Board Should Not Involve Itself in Financial Transactions Between the Organization and Anyone
One reason why Verret was held liable for the hospital’s unpaid payroll taxes was that “the Board” itself secured a loan to purchase certain equipment in order to meet the demand of a physician who threatened to move his practice to another hospital. Such direct involvement in an organization’s business affairs can lead to “responsible person” designation under the tax code and should be avoided. Approval of what an employee does is still risky but in some cases necessary.
Individual Board Members Should Avoid Getting Too Involved in Day to Day Operations
Verret apparently spent part of almost every day at the hospital he chaired. That should be avoided. Even if those visits did not involve actually conducting hospital business, their frequency blurred the distinction between strategic and operational, as did the frequency (daily) of their phone conversations. When there is something important to discuss, discuss it. When there isn’t, give your cell phones a rest.
Unless Required To Do So, Don’t Sign Tax Returns
Another reason why Verret was found to be responsible is that he signed the hospital’s IRS Form 990 for two years as “Chairman.” He also took the initiative to contact a management company and discuss a plan to get the delinquent payroll taxes paid. As for the former, while Board chairs are required by law to sign or attest to the accuracy of financial statements, they are not required to sign tax forms and that should be avoided. As for taking the initiative to try to determine how to make up the tax delinquency, making Verret pay for doing what any dedicated Board chair might do when the CFO had failed twice to make the payments, is just a hazard of the office. Hopefully that one fact, by itself, is not enough to support a claim by the IRS.
Do Not Get Signatory Authority on Company Checking Accounts
Verret could and did sign hospital checks for various things. That is a bad idea for a number of reasons, including the appearance of responsibility for day to day operations. If asked, just say “no.”
Avoid Authority to Hire and Fire
The District Court explained that there was no evidence that the Board lacked the authority to hire and fire employees by noting that the board chose not to terminate the recalcitrant executive director who had twice failed to pay the taxes at issue. Most boards of stand-alone businesses have the authority to hire and fire at least the Chief Executive Officer of the organization. That is as far as that authority should reach. If you are on a board of an organization that is part of a system of like organizations, consider a structure where the authority to hire and fire employees specifically and explicitly rests with the system and not the individual boards.
Do Not Take Yes For an Answer
If you have direct oversight responsibility, exercise it carefully. If that oversight responsibility involves ensuring that something has been done, verbal assurances, as Verret learned, are not enough to satisfy the Board’s duty of care. Ask for tangible proof up to and including cancelled checks.
Forgiveness Is A Sin
If the Board becomes aware of a failure to follow the law, make tax payments or any other business malfeasance, the Board must consider termination of the responsible employee as the first alternative. Based on the reasoning in Verret, Boards apparently get one free pass from being found reckless or grossly negligent in their oversight of employees. If, after an act inconsistent with law or organization policy, the employee is permitted to remain with the company and is not adequately supervised regarding his or her past and potential for future transgressions, a second instance of malfeasance will likely result in a finding of recklessness on the part of the board. As Verret discovered, that can lead to all kinds of problems. When deciding how to discipline an employee, consider whether the continued risk of responsibility for a second bad act is worth keeping the employee on the payroll.
Make Sure You Are Compliant
Non-profit status is granted by the United States Government for a price, i.e., compliance with all of the statutory and regulatory requirements that the Tax Code and regulations impose. For example, non-profit hospitals are required to provide a certain amount of charity care in exchange for not having to pay an income tax. Foundations are required to give a certain percentage of their worth to charitable or philanthropic causes each year. The Federal Government is paying closer attention to compliance than it has for quite some time. Make sure to determine whether your organization is meeting the government’s mark, or suffer the potential loss of your tax exempt status.
This necessarily brief discussion is meant to make board members aware of things they should look out for and things they should and should not do to try and avoid personal liability. It is not exhaustive, and if in doubt, consult an expert.
Stephen L. Tatum is a partner with Cantey Hanger L.L.P. He can be reached at (817) 877-2829 or by email at firstname.lastname@example.org.
Wednesday, May 6, 2009
by Debra BenAvram, CEO, American Society for Parenteral and Enteral Nutrition
A Strong Mission and Direction
Orientation and Coaching
These five steps all seem pretty logical, but they can easily get lost in crunch time. By staying focused on them, though, helps ensure that organizations continue to move forward with their respective missions - today and well into the future.
Sunday, May 3, 2009
By Wayne R. Pinnell, CPA
Haskell & White LLP
Chairman, Board of Directors
Ladera Ranch, Calif.
Membership on a nonprofit board of directors can be a rewarding experience for individuals who have the both the desire to serve, and a passion for the work that the nonprofit organization is doing within the community. Yet, with nonprofit board membership comes great responsibility, which most often requires the board member to commit not only their time, but also their financial resources, to benefit the nonprofit organization.
As Chairman of the Board for Laura’s House (http://www.laurashouse.org/), a nonprofit organization whose mission is to change the social beliefs, attitudes and behaviors that perpetuate domestic violence while creating a safe space in which to empower individuals and families affected by abuse, part of my responsibility is to help recruit new board members. I am also there to ensure that current board members remain committed to our organization’s mission and purpose, and continue to support our organization through whatever means they can.
The current economic climate has made the job of recruiting and retaining board members somewhat challenging. Personal finances, as well as the ability for board members to meet the various “give or get” goals set by a nonprofit organization’s board of directors, have been impacted. For example, board members who once relied on their employer or their business to supplement or meet their entire financial commitment to the nonprofit may no longer be able to do so, and may determine that they can no longer individually meet the minimum financial requirements of board membership.
Yet despite this reality, I would encourage the board of directors to avoid downplaying or overlooking that member’s contributions and service in other areas, such as volunteering with the organization or serving as a community advocate. A financial reversal of fortune often can be temporary, and if the board member remains committed and enthusiastic about serving the organization, the board of directors should make every effort to work with that individual to ensure their continued involvement. Likewise, the board member may very well be able to draw other folks to the organization as volunteers, donors and or future board members.
In the event that your board of directors finds it must replace individuals who have left the board for any reason, including financial hardship, or if a board expansion is in the works, there are key factors that should be taken into consideration when it comes to recruiting and retaining board members.
First of all, remember that the recruiting process is an opportunity not only for you to get to know the prospective board member, but for them to get to know you as well. Do not assume that because they show up for the interview, that they want the job. Make sure that they understand the mission of the organization, and that it aligns with their personal values. Determine how they want to serve your organization. Do not assume that a marketing professional will want to help market the organization or that an accountant will want to help with finances. Nobody wants to be pigeon-holed and this is a sure-fire way to burn out what could be a great board member.
Another important element to evaluate when recruiting prospective board members is personal motivation. After the prospect has learned more about your organization, are they still committed, or simply looking for an opportunity to “network” or build their own business? If it is the latter, you are in trouble because the board member will only stick around long enough to get what it is they want, and will not likely contribute to the long-term success of your organization.
Once the board member joins the organization, make sure that they are put in a position where they are allowed to thrive. Do not set them up for failure. If the board member is tasked with a project for which they simply do not have the talent or skillset, find something more appropriate for them to do. In the long run, they will be much happier and successful in their service to your organization. Also, make sure that they are acknowledged for their service in a way that does not embarrass them, or make them feel slighted. Keep in mind that some board members love the huge fanfare and recognition, while others prefer to remain “unsung heroes” through quiet recognition.
Finally, encourage periodic feedback from the members of the board as to their level of participation and ongoing enthusiasm, evaluation of the organization’s goals and the progress toward those goals, and the member’s interests in participation in other areas. A little bit of self-evaluation and reflection may be all that is needed to boost a member’s participation – or have them realize it is time for them to make their seat available for someone else.
For more information on Laura’s House, visit http://www.laurashouse.org/.
Friday, May 1, 2009
Now more than ever, nonprofits need friends. Unfortunately, most do not know or understand the strategic ways in which they could obtain them.
Some of these new friends belong to multiple networks, have several email accounts and have lived in several states before the age of 35. These virtual friends are ripe for the picking and they are multi-taskers – the perfect new friend to have for the longevity of your organization.
You want these new friends in your fold. You will benefit from them today by cultivating new avenues of fundraising, developing a service minded volunteer core and as future potential leaders for your board.
Educating Your Friends
Mobilizing Current Friends
You should also mobilize your friends as advocates. When you know your funding is on the chopping block – use these educated friends to mobilize on your behalf. When your organization asks for continued support from the county or state – letters or emails from hundreds of your friends speaks volumes.
Acknowledging Your Friends
Offer your friends lifetime memberships at discounted rates, give them a special bumper sticker acknowledging that there are a ‘friend’ (see the AMIGO campaign from the Latin American Coalition in Charlotte, NC http://www.latinamericancoalition.org) and keep a printed running list of your ‘friends’ in the same way that you acknowledge your new donors. Show your friends that you value their time as much as you do their donation.
Remember, friendraising is a strategic process and much more involved than this blog article, but it is a necessity. And in hard times like this – it’s good to have friends.
jenifer daniels – jenifer daniels is the "friendraiser" – a nonprofit management consultant based in Charlotte, NC. She specializes in community relations, grassroots advocacy, trainings and workshops and signature events. To find out more about her – visit her site http://www.jeniferdaniels.com/ or tweet with her at http://www.twitter.com/thefriendraiser