Saturday, August 21, 2004

Two BIG worries for nonprofits

There are two significant concerns for the not-for-profit sector on my mind today. The first has been building for some time, the second has popped up over just the past two months. I think these are things that we in the sector need to pay attention to, and right quick. They both have the capacity to significantly change the way our sector works, and not for the better.

Fundraising Boards
The issue here is the increasing prevalence of fund raising, not just as an important job for a board of directors, but the primary job for the board. If you have ever come to any of my training, or read any of my books, you know I am a big supporter of boards being involved in fund raising. They should be part of any giving campaign, go with staff for corporate or foundation grant interviews, and should give funds themselves (not necessarily equal amounts, but something) each year. So boards being involved in fund-raising is not my issue.

What is a concern is that more and more boards spend more and more of their time doing nothing but fund-raising, and as a result, many organizations are recruiting fund raising board members, rather than board members who have the broad skulked needed to provide good management oversight. When the primary skill of all (or even most) of the board members is fund raising (or worse, just a fat wallet), who is watching the rest of the organization? A board is supposed to provide a check and balance on the employees. To do that well, the board must have a lot of skills, such as financial acumen, community organizing, planning, managing, etc.

Should your organization have board members who like to ask people for money? Sure. But they need more skills than just that. If you need donated funds that badly, develop a fund-raising or development commit who is made up solely of people who are skilled at getting donations, running special events, etc. But don't make that the primary function of the board.

A publication from Boardsource
Training focused on boards as fundraiser
A good (old) article on research in this area

My overarching concern here is for good management of not-for-profit resources. This takes skilled and dedicated staff and skilled and dedicated volunteers to accomplish. If the checks and balances that are built into the system are ignored, oversight is lost, and bad things will happen.

And, bad things HAVE happened, which leads me to my second concern.

Legislative and Regulatory Changes for Not-for-profits
Bad things have happened in our sector. United Way of the National Capital Area, for example, was a highly visible, very ugly organizational screwup. Dozens of family foundations have pushed the limits and, in a number of cases, simply abused the intent of the not-for-profit law and regulation. As a result, lawmakers, both at the federal level and in many states, are coming up with solutions, some interesting, a few pretty good, and some outright ridiculous. Finally, the Sarbanes-Oxley Act, intended to prevent for-profit corporate abuse (think Enron) is being interpreted widely as having implications for not-for-profits throughout the U.S.

A White Paper on the implications of Sarbanes Oxley from BoardSource and Independant Sector.
The U. S. Senate Finance Committee's Staff recommendations on reform of charitable regulation.
A Response to the Senate Finance Committee Staff Recommendations from BoardSource.

You need to pay attention to this. While many of the Senate's ideas are good ones that pursue tax shelter abusers, many will affect all charitable organizations in very bad ways.

Some of the federal staff suggestions include:

-a five year-recertification of all not-for-profits,
-a limit on the number of board members any charity can have,
-a federal list of board duties
-federally based accreditation of all charities

Political observation: Did I miss something or is this not a Republican (less regulation/less government) administration.?

Irony observation: Most of the large family "foundation"/tax shelters that the government is going after are from large wealty families, but in order to fix that very specific problem, the Senate is going after everyone.

Again: this matters. It matters for your organization and your ability to do good mission. Check these out, and ask your state and national trade associations about what is going on in your state and in your particular area of work.


DebPGHS said...

This broad-brush response to organizations and individuals that didn't "play by the rules" is rooted in the fundamental shift in social/ethical accountability standards during the past 35+ years. No longer is a typical student held responsible for doing his/her best work, and competition is not valued for fear of hurting the self-esteem of others less able. Excellence is no longer encouraged, and group-think is preferred over individual achievements and top-notch decision-making. When a group decision goes bad, who gets the blame? Even bad behavior by clergy is explained by external factors that supposedly limited their ability to maintain appropriate self-discipline to avoid hurting children. No longer did someone break the dish; it got broken -- and no one is responsible. A few unethical doctors provided unnecessary care or medical supplies to boost revenues of a medical practice, and instead of sanctioning the offenders, we got managed care. Now all health care providers must be scrutinized by bean counters to make sure nobody is cheating the 3rd party payers of medical expenses. A few accounting firms violated the standards of the American Society of Independent CPA'S, and now accountants have limited liability shared with their clients who collaborate in deceptive practices. A few corporations such as Enron cheated their employees and shareholders (in collusion with the above referenced accountants), and the whole corporate world now has to kill millions of trees reporting information to show they are honest. A few family foundations paid out more in salaries than they contributed to charity, and the rest of the non-profits who are truly "public charities" are in jeopardy of being over-regulated by provisions of Sarbanes-Oxley so they may have to spend an inordinate amount of resources proving they are not dishonest. This broad-brush approach started in the 1960's with those who thought we should get rid of "the establishment." Since then, those who held this philosophy have taken over our institutions of education and government, and now social anarchy is the "norm." Our public policies have supported dysfunctional families, protection of the rights of violent criminals over the rights of decent law-abiding citizens (i.e. the ACLU'S defense of the "right" of pedophiles to post information on the internet on methods to entice young children for abduction), and our freedom has been compromised as our fears are realized in daily encounters with the offspring of such an unhealthy outlook on social values. Common sense is rare and society has stopped practicing the "golden rule." The ultra-conservative, religious right is a strong reaction to this social shift, and it appears to be gaining momentum. We need more level-headed, clear-thinking individuals who still live by the lessons taught in the home, church and school up until about the late 1960's, early 1970's to get involved, speak up and fulfill their social obligation to make a difference whenever and wherever they can each and every day. This takes courage and commitment; we owe it to ourselves, to our families and to society as a whole to promote healthy social values before there is nobody left who remembers the fundamentals.

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