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Dear Nonprofiteer, Should I face the music, or dance?

December 16, 2011

Dear Nonprofiteer,

If you could stand one more letter asking about Boards of non-profit arts organizations — or even point me in the right direction — I’d be very grateful!  I’ve been the school director for a small non-profit music organization for several months. The organization has two parts — there are performance choirs and then there’s the school.

But maybe it would be more accurate to say that there are two organizations, because I’ve been told that the school is “technically” for profit, meaning that only the performance choirs can receive grant money.  I’m not sure why, or even if, this is so, though I understand that we make more money charging for music lessons than we do sending out the performance choirs, whose members are paid a pittance that nonetheless exceeds the amount companies and civic organizations are willing to pay for being entertained by them.

The main problem: the performance-choir conductor is also Artistic Director of the entire organization, AND is Chair of the Board of Directors.  He is paid $20,000 a year for what’s supposed to be a 12-hour-a-week job, but in fact he doesn’t work nearly that much.  He lives a couple of hours away, so he only comes in once a week to rehearse, and not even that during the summer (or the Christmas holidays, or the Easter holidays, or St. Swithens’ Day!).  And whenever he can he schedules performances near his home rather than near the school, which means we’re not really serving our community.

Meanwhile, I work full-time (theoretically 40 hours a week but actually closer to 90, what with teaching as well as administrative work).  This huge job pays me $34,000 with no benefits.  The Board sees itself as my “BOSS” and reminds me of that often. In addition to the Chair, the Board members are 1.) one of the school’s teachers, who’s also the Board treasurer; 2.) a member of one of the performance choirs who writes the grant applications; 3.) the mother of a former student, who is paid to be secretary; 4.) the mother of a current student, who is paid to be DIrector of Development; 5.) another one of our teachers; and 6.) a lawyer who takes voice lessons from the treasurer.  In other words, NOBODY is without connections to the school and thus a personal agenda.

The school went downhill financially during my predecessor’s tenure, to the point where we’ll probably have to give up half of our space.  But when I say I need help with fundraising, I get, “Sallie Jo managed it.”   I’m expected to do everything Sallie Jo did but with more “Board oversight,” which means micromanagement and no actual help.  That’s not their role, apparently—their role is being my superiors, scrutinizing me, complaining to each other about me, and occasionally sending me a condescending note giving me reprimands and further orders.

As a seasoned professional who is keeping the place together single-handedly, I consider these missives insulting at best. But there is no one I can appeal to. Do you have any suggestions? Advice? Articles you could point me to? (Templates of letters of resignation?)   I’m near the end of my rope.  Signed,

Hanging on By a Thread

Dear Hanging:

This is like one of those children’s puzzles, “Can you spot what’s wrong with this picture?”  There are so many things wrong that even the youngest child can detect some of the problems, while others are so subtle that older children will be challenged.  Or, in other words: what a mess!

Once you’ve said that the Artistic Director is the chair of the Board, you’ve already described an organization in trouble.  One function of an arts Board is, indeed, to support the vision of the Artistic Director, but the other is to counter-balance that vision with business acumen and an awareness of what a nonprofit arts organization owes the community.  Even if every single member of the Board weren’t compromised in the way you’ve described, the organization itself would be hopelessly compromised by having a single person leading both the Board and the staff.

If the Board were independent, the fact that you and the Artistic Director both report directly to it would provide a healthy balance: he would say “I want to do blah-blah-blah” and you would say “blah-blah-blah costs three times as much money as we’ve raised in any year in the history of the organization” and the Board would weigh these competing points of view and make a decision.  In those circumstances, it would be a good thing that the Board knows it’s your boss—that would mean the Board knew that you and the Artistic Director were co-equals reporting to a common authority rather than an inferior (you) reporting to a superior (him).

But with a Board that’s essentially an extension of the Artistic Director’s personality, you have the worst of both worlds: multiple superiors and no equal colleagues.  No wonder you’re feeling besieged and insulted: you were hired with the title of a director and the status of a secretary.

That’s what the salary situation means: they’ll pay you less than half (on a per-hour basis) of what the Artistic Director makes, because he has more than twice your power.  The fact that you’re also earning less than the singing lawyer’s administrative assistant is just icing on the cake.

And now we get into the subtle stuff: what, exactly, is this nonsense about the school’s being “technically” for profit?  It either is, or it isn’t; it either files a Form 990 informational return with the IRS, or pays taxes on its profits like any other business.  It’s hardly unusual for an arts organization to run a school whose earnings help sustain the actual performances: most likely that’s the real function of the School of the American Ballet.  It’s a prestige training program for the New York City Ballet, and as a result it’s also a cash cow for the company.  But the Nonprofiteer strongly doubts there’s any ambiguity in the status of either the ballet company or the school, whether they’re independent or intertwined.  All the hair goes up on the back of her neck when she hears the word “technically;” in the nonprofit sector it almost always means some corner is being cut that shouldn’t be.

So let’s review: you’re overworked and underpaid in an organization where your input is ignored but your grunt labor is expected and taken for granted.  This may also be an organization with a dodgy relationship to the laws of your state concerning nonprofits and community benefit, and the laws of the United States concerning nonprofits and taxation.  Given all this—surprise!  You’re having a terrible time.

The Nonprofiteer ran a small nonprofit herself—a choir, as it happens—back before the glaciers melted.  It was a complete debacle, though it did provide one of the world’s fastest educations in nonprofit management.  It took her nine months to realize that she was on a dead-end path, and to quit.  She urges you to be more expeditious.

It’s a terrible economy and no doubt you want to work in the music world that you love.  But you’d be better off working as a temp and looking for a job with a functional school or music group than staying where you are and having your spirit ground down by fighting against impossible odds.

The Nonprofiteer’s advice: give two weeks’ notice and start the New Year off fresh.  As for templates of resignation letters, the simplest are the best.  Justifiably angry as you are, don’t burn any bridges.  Just write, “Ladies and Gentlemen: I’m sorry that I will be unable to continue as the director of [Name] School.  My last day will be [date].  Thank you for having given me the opportunity to work with you.  Sincerely, [you].”  If you just can’t stand the thought of writing something so polite, write a letter that expresses how you really feel—and then put it under the chestnuts and roast away.

Submit your letter today, and you’ll have yourself a merry little Christmas.  You deserve no less.

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Posted in Arts Organizations, Boards of Directors, Conflict of Interest, Executive Directors, Management Advice Day tip, Nonprofit management, Nonprofits--General, Personnel Issues | Leave a Comment »

How not to handle succession in the arts

November 17, 2011

There could be worse ways to handle succession planning than the one chosen by the Miami City Ballet, but it would be hard to think of one. The Board of Directors, concerned that the ballet company would collapse when its famous artistic director Edward Villella retired, decided to test its own theory by forcing him out before he was ready to leave. Some Board members blame the outcome on Mr. Villella, who apparently refused to greet several of them at the company’s gala; but it’s hard to blame him when one of them called a meeting with him for the purpose of handing him a book on succession planning.

The Times article reaches for the classic suits-versus-artists narrative, saying that Villella’s ouster reflected the Board’s determination to place business stability above artistic product; but that’s unfair. The Board is responsible for the continued health of the company, and a failure to consider new leadership when the current leader is 75 would be a dereliction of duty. But what we’ve got here is failure to communicate.

As Chicago’s Victory Gardens Theatre Board learned back in 2000, you don’t call in the company’s artistic engine and hand him his walking papers–or even the sort of broad hint contained in the gift of a book about succession planning. You’re talking to someone about his life’s work and his passion, and you can’t talk to him as if he were a CEO who had been recompensed all these years in cash and expected to be recompensed the same way in retirement. An artistic director who is compelled to retire–and yes, indeed, some of them need to be–has to be offered a form of compensation congruent with what he’s been receiving up until now, something involving artistic control–even if it’s only the control inherent in leading the search for his own successor.

And even if the artistic director’s retirement creates the opportunity for the Board to step into its proper role of leadership–say, supervising the managing director instead of having the artistic director do so–that’s an opportunity to be pursued once the new artistic director begins. From the Board’s standpoint, having the managing and artistic directors report co-equally is a way to lighten the artistic director’s load while assuring that the Board itself receives comprehensive information. But from the standpoint of the incumbent artistic director, it’s a slap in the face, and suggests that the Board wants to interpose a business person (and a businessperson’s veto) between the artist and his vision.

Of course the Board IS the boss of the company, including the artistic director. But the most effective bosses wear their power lightly, in cooperation rather than conflict with the artists they mean to be serving. By this measure, the Board of the Miami City Ballet just fell on its face.

A word to wise arts Boards everywhere.

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Posted in Arts Organizations, Boards of Directors, Coverage of nonprofits, Executive Directors, Management Advice Day tip, Nonprofit management, Nonprofits--General, Personnel Issues, Succession planning | Leave a Comment »

The Joyce Foundation, the Independent Sector and the facts

November 2, 2011

Ellen Alberding’s interview with the Chicago Tribune in advance of the Independent Sector‘s meeting in Chicago earlier this week pressed nearly every one of the Nonprofiteer’s buttons.  Ms. Alberding, head of the Joyce Foundation, described the Foundation’s approach to what even she characterizes as a perfect storm of increased need and reduced resources in the nonprofit sector:

We do what any good business person would do when faced with reduced resources. We have become very focused on first maintaining support of our core grantees. Foundations are required to spend a minimum amount — 5 percent of our assets. On occasion, we will overspend that in order to keep our grantees whole.

In other words, business as usual.  Most likely the Joyce Foundation’s governing documents prevent its Board from spending its assets down to zero, but there’s no reason why the Foundation shouldn’t use more than the statutory minimum 5% of its $800 million in assets to sustain the work it exists to support.  Foundations are NOT businesses; they exist to give their money away, and only in some vague theoretical sense is an institution with $800 million facing constraints preventing it from giving away more than $40 million.

If Joyce gave only 6% instead, that would be another $8 million available to nonprofits in its areas of concern—a not-insubstantial 20% increase.   What is stopping the Foundation from doing this, other than a misguided sense that preserving its capital is more important than doing its job?

And then the cherry on the sundae:

It’s the position of the Independent Sector that a cap [on charitable deductions] will reduce charitable contributions across the board and diminish support for nonprofit organizations. I believe it’s the administration’s view that the 28 percent cap might have some impact, but it wouldn’t have a dire impact. (But) I think we have to listen to the organizations themselves, who feel otherwise.

In other words, notwithstanding reality, the prejudices of self-interested parties will dictate the organization’s behavior.    Their minds are made up—don’t confuse them with the facts.  But as President of the organization, doesn’t it behoove Ms. Alberding to make sure her members don’t make their decisions based on fantasy?

Grrrr.

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Posted in Boards of Directors, Conflict of Interest, Coverage of nonprofits, Finances, Foundation Hall of Shame/Stupid Foundation Tricks, Fundraising, Investment, Mission, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Relations with funders | Leave a Comment »

The power of thanks

October 28, 2011

So here’s something the Nonprofiteer heard yesterday: if an agency’s response to every initial donation is to have a Board member pick up the phone and call the donor to thank him/her, the likelihood of a second donation increases by something like 80%.

What’s terrific about that (other than the obvious, donor retention) is that picking up the phone is often the biggest hurdle Board members need to clear to become effective fundraisers.  So if they get used to picking up the phone in a completely non-threatening situation–when their only task is to say, “Hi, I’m a volunteer Board member of agency X and I just wanted to thank you for your gift–we really appreciate your support”–you’re halfway (well, maybe one-third-way) to getting them to pick up the phone and ask their friends to come to a benefit event or a fundraising lunch.

Sounds like the ultimate low-cost high-yield endeavor.  Has anyone tried it?  Is it as good as it sounds?

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Posted in Benefit events, Boards of Directors, Fundraising, Management Advice Day tip, Nonprofit management, Nonprofits--General, Personnel Issues, Private Philanthropy, Relations with funders, Volunteers/Volunteerism | 3 Comments »

Dear Nonprofiteer, Victory on points?

April 22, 2011

Dear Nonprofiteer,

I recently saw an offer to serve on a non-profit board where there was a monetary donation requirement each year, but the amount could be substituted by service or other activities through the scale pasted below. Here’s the way they phrased it:

To ensure active participation, members earn points for financial contributions and volunteer service. We ask that a contribution of $250 be made in order to remain as an Associate Board member. You can, however, combine a cash donation of $100 with your fundraising and volunteer efforts by earning these points:

Sample Opportunities to Earn Points
Opportunity Points
Additional cash contribution of $50 50
Plan a Board Social or Fundraising Event 50
Serve in a leadership role 50
Secure $100 event sponsorship 15*
Represent [agency] at a public fair or presentation 15*
Sell a ticket to a fundraiser 10*

I was wondering, is this a common practice? I’m actually thinking about recommending it for another board where I’ve been asked to donate money.

Signed, Victor on Points or Technical Knock-Out?

Dear Knock-Out:

The Nonprofiteer knows that some larger organizations use this point system, but for smaller organizations she thinks the record-keeping and arguments about “what counts” are more trouble than they’re worth.  Obviously it depends on the size of the required contribution, but in general everyone on a Board should be expected to give AND participate, and in roughly equal measure.

This is expressed in a number of different formulations: Board members offer the three Ws (Work, Wealth and Wisdom) or are expected to provide the three Gs (Give, Get and Govern). Whichever initials you use, the point is the same: Board membership is not an either-or proposition but a yes-and one. The best way to assure fulfillment of these expectations is to adopt a clear statement of them for Board members, and go over that statement with every Board recruit. “Every Board member is expected to make a $500 contribution, and buy a ticket to the annual gala, and attend monthly Board meetings, and serve on a committee . . .”. That way, no one agrees to join the Board who isn’t prepared to do all those things.

People are fond of making exceptions to this in two cases: for Board members perceived to be significantly poorer than the rest of the group, and for those perceived to be significantly wealthier or better-connected than the rest.

In the first case, the Nonprofiteer’s advice is: don’t count the money in other people’s pockets. Poor people are more generous than rich people generally, and thus are often less upset by minimum Board gifts than their wealthier counterparts. If a rich Board member can just write a $500 check while a poorer one has to ask 10 friends for $50, well, that’s just another example of ways in which poor people have to work harder than rich people. And, as $500 per year is less than $10 per week, most working people—regardless of their assets—can afford it.

In the second case: if someone tells you s/he’s too busy to actually do anything but s/he’ll be glad to be on your Board, remember this motto: if they can’t do the time, they can’t do the crime. Someone willing only to lend his/her name and write a check should be placed on an Advisory Board (create one if you have to, or dub the person a “Special Advisor” and put him/her on the stationery), not on the Board of Directors. If you do put such a person on the Board proper, s/he will have all the legal responsibilities of Board members without being there to discharge them—a recipe for disaster and hard feelings, should the agency be socked with a bill for unpaid withholding taxes or a lawsuit from an injured client.

In short: the Board is a governance institution, and governance includes assuring that the agency has the resources it needs to fulfill its mission You shouldn’t have to negotiate with your governors about their tasks, which is what a point system suggests. Rather, they should be the ones setting their own goals and meeting them, and attracting others who will do the same.

And that’s the final reason not to use this point system: no one wants to serve on a Board of lazy people. Your group is more attractive to prospects if everyone’s revved up and ready to go on every possible front. You can find such people, provided you don’t declare defeat and stop looking.

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Posted in Benefit events, Boards of Directors, Finances, Fundraising, Management Advice Day tip, Nonprofit management, Nonprofits--General, Personnel Issues, Private Philanthropy, Volunteers/Volunteerism | Leave a Comment »

Everything old is new again; and nonprofits should stay that way

April 21, 2011

So a couple of weeks ago the Nonprofiteer received a press release announcing “Redefining [of] the Nonprofit Model.”  Doubtless you’re all familiar with the genre: a group of business people get together and decide that the nonprofit sector hasn’t cured cancer or ended poverty because people in the nonprofit sector are stupid and lazy, and that an infusion of good old hard-headed American for-profit business practices will compensate for that.  Voila: instant Great Society!

This particular redefinition was truly revolutionary:

One hundred advisors, including many of Silicon Valley’s elite, are coming together to disrupt the nonprofit space. . . . [They] have committed to one full year of serving on the board of a nonprofit. . . . [and] attending monthly salons where they will discuss the specific pain points of their assigned nonprofits and attempt to find solutions as a team. . . . [This] is part of a larger movement . . . to make the non-profit world more efficient. . . .  “This is just the start of how [we] will disrupt the nonprofit sector and create new, innovative ways for business leaders to contribute . . . . Before [this], there was no easy path for nonprofits to find experienced leaders to help them at a board management level. A board role is not just about fundraising, but includes developing growth plans, operational efficiency, cause marketing, customer relationship management, event planning, and much more.”. . . . In order to maximize results, [the group] carefully matches advisors to nonprofits based on their skills, interests and a nonprofit’s needs.

So let’s review: a bunch of business people are going to sit on nonprofit Boards of Directors!  And then periodically those business people will get together and talk about how to be better Board members!   As Board members, they will not only fundraise but contribute their skills!  They’ll join Boards based on their interest in the nonprofit’s mission!  And they’ll seek ways to improve the whole sector!

The accumulation of these radical notions caused the Nonprofiteer to swoon;  but the one idea that really had her down for the count was that the entire purpose of the endeavor was to “disrupt the nonprofit space.”  Because really, what nonprofits trying to serve their clients need most of all is disruption of their management to supplement the disruption of funding they face constantly, disruption of their staff produced by those funding crises, and disruption of their ability to operate smoothly or secure resources when their message is being drowned out by a constant drumbeat of demands for “reinvention.”

The Nonprofiteer understands that in the tech world, “disrupt” is a positive word, suggesting the kind of change-the-world ethic that fueled Microsoft and Facebook.  But she urges everyone to notice that when those disruptive entrepreneurs Bill Gates and Mark Zuckerberg moved into the nonprofit sector, what they did was to find nonprofits doing good work and give them lots of money to do more of it.  If the disruptive “advisers” of the press release would just do the same thing, there would be less “news” but a healthier nonprofit sector.

As she fanned herself back to consciousness, the Nonprofiteer was struck once more.  In this case, the weapon was yet another article about hybrid corporate forms designed to enable nonprofits to earn their own revenue and stop “begging.”  Whether the discussion purports to be about L3Cs or public benefit corporations or Triple Bottom Lines, the argument is always the same: nonprofits should just get with the capitalist program, identify lucrative markets and earn their keep like every other good red-blooded American.

This approach ignores the fact that nonprofits’ markets usually consist of clients who are not profitable to serve—because if they were profitable to serve, the for-profit sector would be serving them.  The better a nonprofit is at finding and serving its market, the poorer it will be, because though for-profit clients are a profit center, nonprofit clients are a cost center.

Fine, say the hybrid-benefit-earn-your-own-revenue people: so start a profitable business and funnel its profits into the charity.  But this notion of a two-headed agency is, like most similar creatures, a monster.  If nonprofits expend their limited energy on creating market-based revenue streams, they’ll be diverted from their mission-based activities.  Either the marketing strategy succeeds, in which case the profit-generating people gain the power within the organization and mission falls to a sad second; or the marketing strategy fails, in which case it has consumed significant resources that should have gone to serving clients.

There are, of course, institutions for which running a business can be part and parcel of mission, for instance, job-training centers.  But for mental health agencies, arts organizations, group homes, rape crisis hotlines and most of the other charities which do the important work in our society, running a business is a dangerous distraction.

What if, instead of spending time telling nonprofits how they should operate differently, business people re-examined their own operating principles?  What if every business set aside 25% of its profits for investing not in the business itself but in the wider community?

In other words, instead of asking why a charity can’t be more like a business, let’s start asking why businesses don’t operate more like charities.  Businesses receive all sorts of public services and protections, from the enforcement of contracts in the law courts to well-maintained roads along which to distribute their products.  Why shouldn’t they be expected to contribute to the public good in return?

Most business people would say, “But our primary duty is to our shareholders, not to the public good” (and those over-influenced by Ayn Rand and the University of Chicago economics department would say “Our SOLE duty is to our shareholders, the public be damned”).  Right: and the primary (or SOLE) duty of charities is to their/our clients.  Anything that takes nonprofits away from that activity is perforce improper.

What’s the point of this thought experiment, in which charities chide businesses instead of the other way around?  Simply to demonstrate how much business advice to charities is sheer nonsense.  To presume that the voluntary sector doesn’t make a profit because it hasn’t thought about how to do so is to fundamentally misconceive its role in the wider economy.

Besides, what nonprofits need isn’t more advice: it’s more money. When business people are ready to provide that—when they’re ready to serve on Boards not as agents of disruption but as securers of resources; when they’re ready to advocate for a tax system which will underwrite the necessary work done by the voluntary sector—well, THAT will be the time for a press release.

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Posted in Advocacy, Boards of Directors, Coverage of nonprofits, Current Affairs, Earned income, Finances, Marketing, Mission, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Poverty, Private Philanthropy, Social enterprise, Technology, Volunteers/Volunteerism | 9 Comments »

Ownership and its Discontents

February 16, 2011

Many years ago the Nonprofiteer lived briefly in a cooperative apartment building, which looks like a condominium building but differs from it in a fundamental way. In a cooperative, owners don’t own their units: they just have long-term leases. What they own instead is stock in the landlord—a corporation whose sole asset is the building.

Being landlords, coop boards act like landlords: they determine who may move into the building, and what sort of alterations may be made to the units, and even how much heat any individual owner receives. As a result, coop owners are deeply involved, monitoring Board actions closely because those actions may intrude significantly on their lives. At the same time, they’re favorably disposed to any regulation promising to maintain or enhance the value of their units. They’re prepared to accept considerable restrictions on their own freedom of action for the privilege of restraining others’ freedom of action. The entire system is like living in the United Nations—for better and worse.

This came to the Nonprofiteer’s mind because in the past week she’s facilitated two Board meetings at which people have threatened to quit. (Perhaps this suggests she should alter her style of facilitation, but she prefers to think that she’s just making people face the hard questions.) At the first meeting, a Board member confronted for the first time with a clear statement that he was expected to make a personal financial contribution announced, “If I don’t get credit for using my corporate connections, I quit!” At the second, the Executive Director responded to a consensus that individual counseling was outside the agency’s mission by saying, “If you’re telling me I can’t listen to people’s problems and try to solve them, I quit!”

If people threaten to quit while talking about difficult issues like money and mission, what does that mean? It’s obviously necessary to press on the most sensitive spot, the issue that needs to be resolved before anything else can be accomplished; but is “I quit!” (whether acted upon or not) the only possible response?

People who serve on nonprofit Boards do so out of passion for the agency’s cause, and what they get in return for their commitment of time and energy and money and belief is a sense that they own the agency. When an “owner’s” understanding of the agency is challenged or contradicted, naturally it feels as if his/her property is being stolen. “I quit!” means “I’ll throw this in the trash before I let you take it from me.”

It’s good that Board members consider themselves owners of the agency, but bad that so many of them misunderstand the nature of that ownership. They don’t own their own little condominium understanding of the agency’s mission or its means of achieving it. Rather, they co-own the agency with the rest of the Board, and it’s the whole Board that owns the understanding of mission and means.

This often makes Board membership difficult for people who are natural leaders. They’re accustomed to acting without consultation, or with the kind of consultation that acknowledges their superior knowledge and/or power. But on a nonprofit Board, those who act without consultation risk either distorting the mission to match their private vision or provoking the adoption of significant restrictions on everyone’s freedom of action to prevent that distortion from taking place. Neither is a good outcome.

The ideal circumstance is for all the owners to realize that they’re members of a cooperative group whose sole asset is the institution, and that securing that asset’s well-being is the task they all face together. When that’s clear, disputes about what the institution is or does or deserves from its Board members can be negotiated among all the owners, and no one says “I quit!”

Now, how to get there?

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Posted in Boards of Directors, Executive Directors, Mission, Nonprofit management, Nonprofits--General, Private Philanthropy, Social Service Agencies, Strategic Planning (and the tactical kind, too) | 4 Comments »

Dear Nonprofiteer, For whose benefit, exactly?

February 9, 2011

Dear Nonprofiteer,

I have an ethical dilemma that I need help sorting out. I’m really bothered by this and I want to know 1. if I am seeing this from the wrong perspective and 2. what you would advise doing.

I am a wardrobe stylist and I make custom dress shirts & suits. Fairly often, when approached, I donate gift certificates for custom shirts to silent auctions, which raise a nice amount of money for fund-raising organizations.

Here is the issue: In the Fall of 2009, I donated a gift certificate to a well-known organization that runs after-school and extra-curricular programs for children. I was told that the gift certificate was for the silent auction that coincided with an annual fund-raising event. Obviously, I was told proceeds from this event & auction would go to support the local children’s organization.

Last week, I got a call from the former President of the Board of Directors of this organization. He was really excited to finally have his custom shirts made. The organization had given a gift certificate to him while he was on the board, as a thank you gift for his service.

I was a little fuzzy on the gift certificate details, had completely forgotten that I had donated a certificate to the auction, and couldn’t remember anyone buying a gift certificate as a gift…but went the next day to fit him and thought it would all be clear once I saw the certificate.

I only realized at the end of the 60 minute appointment that HIS gift certificate was the one I had DONATED to raise money for THE KIDS and the facility. It apparently was not auctioned off at all, but was given to a Board member as a gift! (Now, it might not have had any bidders in the auction, but this is sort of unlikely, has never happened yet.)

So now I am out-of-pocket, a lot, for a board member’s gift, as opposed to the organization buying something for him (which is tax-deductible for them!) This is a $700 retail value gift. I feel deceived—this money was for kids, not the board president.

Thoughts? Advice? I’ve heard both sides. Someone from non-profit told me I was stuck, that it was perfectly legal & someone else said that I am not accountable to fulfill this certificate.

I would really appreciate your experience/thoughts on this matter.

Signed, Tailor-Made

Dear Tailor:

1) You are not seeing this from the wrong perspective.
2) But it’s hard to know what to do.

There’s no question about it: if you donated a gift certificate to be auctioned off for the benefit of the agency, you wuz robbed if instead it was used instead as a personal gift to an agency Board member. Nonprofit Board members aren’t supposed to be compensated for their services, though they may be recognized: I would argue that a $700 gift starts to sound more like the former than the latter. (I’m presuming the agency knows the value of the certificate.)

You’re not actually stuck: no one can make you make these shirts, and neither agency nor Board member would be likely to sue you to secure them (or equivalent reimbursement). But you have a business reputation to protect, and so the question is which will cost the least to you: telling the Board member you can’t honor the certificate because it’s not being redeemed according to its terms, or telling the agency you want to be reimbursed for their misuse of your gift.

It’s a matter of strategy: if the Board member is likely to become a regular customer, you’d rather not piss him off by refusing to honor the certificate. (Obviously you can only guess about that, but you’re a savvy person: your guess is probably correct.) If you’re likely never to see him again, then say you CAN’T (not you won’t) honor the certificate because its terms called for it to be auctioned, not given away. If he protests that no such “terms” appear on the face of the certificate, explain that those were your arrangements with the agency, and advise him to return to the agency and explain that its gift is unredeemable. You can say or merely imply that what the agency did was exactly like passing counterfeit money: giving him something valueless while pretending it was valuable. Smile when you say all this, but say it and repeat it as often as necessary to get the guy out of your shop.

If, however, he’s a likely future customer, then your only choice is to go to the agency and tell them what you’ve told the Nonprofiteer: that you were told the certificate was to be auctioned off for the benefit of the agency and it wasn’t; that you were willing to donate to the agency but not to its individual Board members; and that you’d like to be reimbursed for the $700 value of your misused gift. If you want to sound lawyerly (which is all the Nonprofiteer got out of her three years in law school), say that you won’t take the $700 out of the hide of the Board member because he’s an innocent “holder in due course,” that is, someone who was given something worthless while believing in good faith that it had worth. Do all this in person with the Executive Director, and then (unless s/he hands you $700 on the spot) reiterate it in a letter to the entire Board.

Getting the $700 out of the agency won’t be easy: they know you’re as unlikely to sue them as they are to sue you. But if they fail to cooperate, do two things: include in the aforementioned letter a statement that you will never donate goods, services or money to the agency again; and include an express or implied intention to make the agency’s misdeed public. You can say, “and I intend to post this on my Facebook page,” or “and I intend to tell alll my business colleagues to do likewise [withhold support] or “I intend to mention this to my friend the New York Times reporter;” or you can simply say, “I know the agency’s reputation for uprightness and am sure you would not wish to have it stained by any accidental misuse of a donation,” and let them infer that the stain on its reputation will come from you.

If the agency offers you refund of half the price or more, take it and walk away. If not, make the shirts for the Board member and do them so brilliantly that he’ll be on your doorstep demanding more–for which you can overcharge him with a clear conscience.

What a shame you’ve had this experience–it seems to validate the old saying, “No good deed goes unpunished.” But plenty of other charities will use your gift correctly, so please try not to be embittered.

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Posted in Benefit events, Boards of Directors, Charity scandals, Fundraising, Nonprofit management, Nonprofits--General, Private Philanthropy, Relations with funders, Social Service Agencies | 10 Comments »

A delicate balance

January 27, 2011

If fundraising is concentric circles, as consultants often say (you ask your friends and then their friends and then their friends’ friends), then it seems to make the most sense to start asking right in the bosom of the family: from your staff and volunteers.  Indeed, this is what most nonprofit executives think of when they hear the phrase “Charity begins at home”!

But staff and volunteers are in quite different positions with respect to your organization, and so they can’t be treated alike in terms of asking for money.

Often agencies are afraid to ask their volunteers for money on the grounds that they’re already getting the volunteers’ time, and it would be greedy to ask for more.  But in fact no one is in a better position to appreciate the value of the work you do, or the scarcity of resources under which you labor, than a volunteer.  Further, though not all volunteers are privileged, they are at least people who have leisure time to donate, which suggests they’re not grindingly poor.  If your volunteers show up at the office with a cup of Starbuck’s in hand, consider what that represents: 1 Venti/day@$2.50 x 5 days/week x 52 weeks/year = $650.  So they’re probably spending more on coffee than you’d think of mentioning in an initial ask.

Will any volunteers take umbrage at being asked to give money as well as time?  Sure; a certain percentage of the population finds discussion of money distasteful and crude, and such people may well be represented in your volunteer corps.  But you’re not any poorer for asking them, and there’s very little reason to think they’d stop volunteering at an activity they enjoy because you asked them a question to which the answer was “no.”

Don’t extend this blithe attitude, though, to asking your volunteers to ask for money.  Direct-service volunteers are apt to be offended if they’re asked to do other kinds of volunteer work, such as fundraising, because the request suggests that they’re not already working hard enough.  You understand the difference between time and money, and your need for both; your volunteers are equally sophisticated.  So ask them for money, not for more time.

Staff members are a different issue.  People who work in nonprofit agencies are already donating enormous sums to the agency, in the form of foregone income–-the money they could be making working in the for-profit sector.  In this sense they are almost certainly the top donors to the agencies at which they work.

The Nonprofiteer took a nonprofit executive job for half the salary she had been earning as a practicing lawyer—a not inconsiderable sacrifice, though one she was glad to make.  But when members of the Board suggested that she also write a check to the agency, her attitude was, “The very second the Board gives $25,000 a year to the agency–-collectively, let alone individually!—it will have the right to come back and ask for something more than the $25,000 worth of lost wages I’m already giving.”

To be fair, hers is a minority view.  Many agencies regard staff donations as some sort of measure of staff commitment to the agency.   But staff members indicate commitment every day through the work they do, the salaries they accept, the health insurance they lack.  At some agencies they even demonstrate their commitment by working overtime for which they don’t get paid—and by not ratting out their employers to the U.S. Department of Labor or the state agency charged with regulating wages, hours and working conditions.  The fact that our agencies do socially valuable work doesn’t entitle us to exploit our laborers, though of course for many years nonprofits have survived their lack of financial capital by consuming human capital instead.

So don’t ask your staff for money, and do ask your volunteers.  Maybe they’ll donate enough to make it possible for you to offer the staff health insurance, or paid sick leave, or even a raise.

Well, one can dream, anyway.

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Posted in Boards of Directors, Executive Directors, Fundraising, Management Advice Day tip, Nonprofit management, Nonprofits--General, Personnel Issues, Private Philanthropy, Relations with funders, Social Service Agencies, Volunteers/Volunteerism | 7 Comments »

Dear Nonprofiteer, There’s trouble in the pulpit: Can I get a witness?

December 20, 2010

Dear Nonprofiteer,

I’m dealing with a non-profit corporation, a church as a matter of fact, that is for all practical purposes a for-profit business masquerading as a non-profit.  The board is not independent—it is made up of the leader, her family and various of her hangers-on.

It would be easy to just walk away from this situation—it is so tempting!  However, taking the easy way out to let the organization fail on its own isn’t necessarily the way to minimize the harm the organization will likely do along the way while doing this masquerade.

Do you know of any tests that can be applied to non-profits, especially churches, that can expose cases where they are for-profits masquerading as non-profits?  If you have any other advice or guidance I would be glad to receive it.

Signed, Clean and Pure

Dear Clean and Pure,

There are all sorts of phony nonprofits.  There are “Astroturf” nonprofits, subsidiaries of for-profit corporations purporting to be grassroots efforts to educate the public on issues of financial import to the corporations.  There are what I’d call “lunch bucket” nonprofits, which exist to accept Congressional earmarks whose benefits actually flow primarily to for-profits.  And then there are flat-out scam nonprofits, which exist to provide tax-shielded income to their founders rather than the public benefit for which the tax shield is a quid pro quo.

The good news is, the IRS discourages out-and-out scams by requiring 501c3 groups to raise one-third of their income from public donations.  Though it seems peculiar on the face of it to identify charities by their income rather than their outflow, the theory seems to be that raising money is such hard work, no one would be willing to do it just for the purpose of stealing.  It’s easier to sell something, anything, and then steal from the earned revenue.  So that’s one of the many reasons that agencies which support themselves entirely by earned revenue are presumptively for-profits (and therefore taxpayers).

State Attorneys General also keep track of the scams, requiring agencies to specify a public or charitable purpose (which is sometimes broader than the IRS’s definition of a nonprofit, sometimes narrower) in order to qualify for tax-favored treatment.  (At the state level, this includes exemption from property and sales taxes, among others.)

There are hard and fast IRS rules about when a presumably public charity needs to be re-classified as a private foundation, but that represents a decision about which kind of nonprofit we’re dealing with, not the “phony nonprofit” scenario you’ve described.  Further details about those decisions and other IRS rules of thumb are available on the very clear and comprehensive IRS Website (no, really!) on the subject.  The decisions and guidelines often refer to  something soporific like “reclassification of exempt organizations,” but they are full of traps for the unwary nonprofit as well as disincentives for the dishonest one.

The bad news is, neither Federal nor state regulations are very often enforced against churches.  The First Amendment protects free exercise of religion and prohibits the government from becoming “excessively entangled” with religious organizations.  “Excessive entanglement,” according to the courts, includes most tax regulation, for if the government has the power to insist on an audit, what faith institution would be safe from government oppression?

This is all very well, except for situations like the one you’ve described.  Occasionally someone will petition the state Attorney General or the IRS to reclassify a “church” as a non-church to capture the kind of self-dealing you’re talking about.  But that would be very occasionally, which is why Jim and Tammy Faye Bakker and their ilk have managed to get so wealthy under cover of the cloth before crashing and burning for more venial (but juicier) sins.

The only thing you can do to keep yourself clean is to walk away.  If you’d like to notify your state’s Attorney General and/or Secretary of State that you believe this agency is not actually a church, you may do so.  But bear in mind that the burden of proof will be on you, and the mere fact that the pastor and her brood and buddies govern without membership input and  seem to be well-paid will not be enough.  Many churches are governed without membership input except in an advisory capacity (consider parishes of the Catholic Church, or affiliated congregations of the Lutheran Church, in which the diocese or the synod rules and the congregation obeys).  And many ministries are a family business: think Billy Graham and his son.

So though the Nonprofiteer wrinkles her nose in distaste at the situation you’re describing, she thinks you have no recourse but to walk away.  If you’re right, and the agency will crash and burn without your intervention, so much the better.  This would demonstrate the wisdom of the Bible saying, “All things come to him who wait.”

Sorry.

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Posted in Boards of Directors, Charitable Choice/Church-State Separation, Charity scandals, Earned income, Finances, Fundraising, Mission, Nonprofit management, Nonprofits--General, Religion, Volunteers/Volunteerism | Leave a Comment »

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