Archive for the ‘Charity scandals’ Category
October 26, 2010
England’s Financial Times reports concern that cuts in government grants to charities will impair the charities’ ability to provide services, and particularly to pick up the slack produced by cuts in direct government services. The Nonprofiteer wonders what this is doing in the newspaper, as it falls into the category of Dog Bites Man.
Defenders of the cuts argue that they’ll provide incentive for government-dependent charities to raise money from the private sector and individuals. While the Nonprofiteer yields to no one in her insistence that charities become less dependent on grants of any kind and spend more time asking for money from individuals, she also knows that this defense is crap—at best irresponsible, at worst deliberately false.
No one can realistically suggest that charities which have essentially been created by the government to provide services it funds (probably for the purpose of evading unions) can somehow instantly replace 95% of their operating budgets with contributions of a pound or ten, or even a hundred. It takes time to develop individual donors, and surely no one would seriously suggest that charities have neglected this task for lack of “incentive,” because government grants keep them in the lap of luxury. There’s never enough money, as a result of which there’s also never enough time to raise money if you’re also going to serve your clients.
So which is it, Mr. Cameron? Do you want charities spending their time providing services that your government now won’t, or do you want them spending their time raising money to provide those services? “Both” is not a realistic answer.
Conservative governments should really have the courage of their convictions. If you’re going to cut public services, then say to the public, “We’re not going to provide these services.” It’s just dishonest to say, “We’re not going to provide them, but don’t worry, someone else is,” when no one else has anything like the resources necessary.
Apply as appropriate to the American situation.
Tags:Advocacy, charity, donors, Fundraising, government, government funding, government grants, grantmaking, grants, International, nonprofit, Nonprofit management, nonprofits, not for profit, philanthropy, politics, Poverty, Private Philanthropy, recession, social services
Posted in Advocacy, Campaign finance, Charity scandals, Coverage of nonprofits, Finances, Fundraising, Government grants, Nonprofit management, Nonprofits--General, Poverty, Private Philanthropy, Public private partnerships, Social Service Agencies | Leave a Comment »
May 21, 2010
Dear Nonprofiteer,
The quick and dirty is this: a local AIDS charity has an ED who facilitates a hostile environment. She fires people and then back-fills their employee record with negative things. She makes her assistant accompany her on personal errands, such as to the fertility specialist. The entire executive team has turned over in less than two years, many of us leaving with no job lined up or taking a pay cut of $20-30,000 per year. She gives “presents” to herself and her favorite staff, mall gift cards, in excess of $500. She takes herself and co-workers out for dinner at a $100/head steak house because “we are working so we deserve it.”
In winter 2009, the Board conducted an investigation, wherein one Board member was in collusion with the ED and told her all of the items that were being investigated and in essence helped her to side-step the issues. The majority of the Board resigned, so as not to be tied up with her, with the expectation that her contract would be terminated in Feb 2010. However, the new Board president, her buddy who helped her through the investigation, has asked her to write up her own contract extension. The only reason we haven’t gone to the IRS is because the clients will pay the price.
The federal grant monies are allocated and spent correctly. She seems, however, to use the private donor funds much like they are her personal discretionary spending. The Board took away her use of the company credit card a year ago. One more issue is the fact that she has been promoted within the ranks to the ED position, and has had a personal bankruptcy that is not disclosed to anyone on the Board; she told me because I was the CFO (quit for ethical reasons) and the company was denied for a corporate credit line because of her personal credit history.
Her statement when she took the reins in Feb 2008 puts it best: “I am the CEO of my own company.” Unfortunately, it is my belief that she has fiduciary responsibility to the taxpayers and donors, a responsibility of which she seems oblivious.
Signed, Escaped From Alligators But Still Up to My Ass in Concerns
Dear Escaped:
The only exception to the rule that employees shouldn’t talk to the Board is when there’s evidence of mis-, mal- or nonfeasance on the part of the Executive Director. What you’ve described seems to include all three: interfering with personnel records, helping herself to unaccounted-for petty (and maybe more than petty) cash, and collusion with one Board member to evade the legitimate concerns of the rest. So even if you were still an employee, the Nonprofiteer would recommend that you draft a fact-intensive letter and send it to every member of the Board of Directors, outlining what you know to be true about the Executive Director’s mismanagement and suggesting that it may endanger the agency’s nonprofit status under state or Federal law.
Make sure the letter contains ONLY what you KNOW to be true; talking about other people’s misbehavior is defamatory if it’s false. Err on the side of leaving out anything you heard from someone else and didn’t witness yourself. Also err on the side of maintaining confidentiality from your days as CFO, which is to say, don’t announce the Executive Director’s personal bankruptcy. If you think it necessary, merely report on the agency’s inability to secure credit and suggest that the Board look into the source of this difficulty.
There’s no question that a nonprofit’s Executive Director–just like its Board members–owes a duty to the agency that precludes her using it as her personal piggy-bank, or even her personal source of doing good. People who find nonprofit governance restrictions too confining are welcome to take their chances in the for-profit marketplace; they’re not permitted to transfer the perks of sole proprietorship to the nonprofit arena.
As for “being the CEO of my own company,” that’s all very well; but any for-profit company with stockholders has a Board of Directors authorized–indeed, required–to keep the CEO under control. It may authorize expense accounts (even $100 steak dinners) but it’s also obliged to keep track of where the money is coming from and where it’s going.
For these purposes, there’s absolutely no difference between Federal funding and funding from private donors–it’s all accepted in trust (as it were) for the agency. Presumably some of that private-donor funding comes from members of the Board, and in your letter advising the Board of the Executive Director’s wicked wicked ways you may want to emphasize that. “I know your own generosity goes a long way toward supporting this agency, so you wouldn’t want to have your money wasted or spent on items that don’t benefit our clients.” You probably also want to emphasize that the agency’s reputation is being jeopardized by the behavior you describe, because eventually murder [i.e. financial shenanigans] will out.
Once you’ve done that, you’ve done all you can. (You’d actually done all you could by quitting, but this is the one extra mile you can go without becoming an officious intermeddler.) The IRS has bigger fish to fry, though your state’s Secretary of State or Attorney General may not. But as you’ve noted, the important thing is to restore the agency to its duties to clients, and that’s better accomplished by sounding a clarion call to the Board than by ratting the group out to the cops.
Tags:Board of Directors, Boards of Directors, charity, Conflict of Interest, credit, donors, Executive Director, Executive Directors, Fundraising, governance, grants, Health care, human resources, IRS, Management Advice Day tip, Mission, nonprofit, Nonprofit management, nonprofits, not for profit, personnel, social services
Posted in Boards of Directors, Charity scandals, Disease charities, Finances, Fundraising, Health care, Mission, Nonprofit management, Nonprofits--General, Personnel Issues, Social Service Agencies | 5 Comments »
January 11, 2010
The Nonprofiteer comes roaring out of seclusion to point out that big-bank donations to charity, and/or big banks’ making donations to charity mandatory among their employees, are NOT substitutes for big banks’ and bankers’ payment of a fair share of their earnings in taxes that support the operation of the United States government. (You’re welcome to translate “fair share” as “the 90-plus percent banker-bonus tax recently enacted in the United Kingdom.”)
While the Nonprofiteer is as enthusiastic as anyone about the work of the nonprofit sector–all of its work, whether advocacy or arts or higher education or social services–she hardly thinks that donations to the Metropolitan Opera and Harvard should be considered an appropriate alternative to making tax funds available for health care or schools or housing or child care–or even the military.
Taxation is the expenditure of our common funds on common purposes. Expenditure of private funds on private purposes–however worthy–is something else entirely, and the latter can’t be offered in trade for the former.
If the big banks want to dampen public outrage over the enormous bonuses they’re paying, they should take the simple step of not paying them. And, as they seem unlikely to do anything that sensible or decent, public criticism should be made law in the form of taxes and regulations to recapture the windfall profits the banks made with public money.
Charities are real entities with real work to do. We shouldn’t be treated as fig leaves for the worst excesses of capitalism.
And the Nonprofiteer certainly hopes we don’t hear from self-appointed sector spokespeople hastening to tug their forelocks and say “What a swell idea! Thank you, thank you, Goldman Sachs!” It’s not just the public at large: even nonprofits are better off with a government suitably supported by taxes than with a temporary infusion of tax-free guilt money.
Tags:Advocacy, bank bonuses, bankers, banks, charity, donations, Fundraising, Health care, Higher education, Mission, nonprofit, Nonprofit management, not for profit, philanthropy, Poverty, Private Philanthropy, Relations with funders, taxation, windfall profits
Posted in Advocacy, Charity scandals, corporate giving, Coverage of nonprofits, Current Affairs, Finances, Fundraising, Health care, Higher education, Mission, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Poverty, Private Philanthropy, Relations with funders, Social Service Agencies | 2 Comments »
September 10, 2009
Dear Nonprofiteer:
For the last year I have been hovering near the Board of a small startup nonprofit I respect. I started as a donor, and I think I was about to be invited into the boardroom. Now our dealings are stalled, if not worse, and I don’t know what to do.
I learned about the organization two years ago from an old, somewhat close friend who had been doing some consulting work for it. I’d agreed with her when she spoke excitedly about its activities.
Now she has been fired, or she’s quit; I can’t tell. All ties severed. She’s playing the cool professional in a shtick I find irksome: “Let’s just say it was mutual consent and I wish them all the best.” Okay, I said, but do you have confidence in the leadership? Is there anything I need to know? “Look, I’d rather not talk about it,” she said.
For its part, the organization (I mean its current ED and the board chair) hasn’t been in contact with me lately the way it had been. It’s the summer, I tell myself; they’ll get back in gear soon. But maybe I too have been fired.
I still respect the outfit–what I know of it, its mission and accomplishments. And I don’t think my friend will mind if I stay involved. What does the correct semi-outsider do in these circumstances?
Signed, One Foot In
Dear Foot:
When a consultant mutters about mutual decisions and best wishes, the translation is ‘AVOID! AVOID! COMPLETE DISASTER AHEAD!” If the organization has decided to let you alone, count it as one of your blessings.
Less glibly: the most likely reason a consultant would leave a paying gig is that she discovered something improper or unethical, pointed it out as something that needed cleaning up, and encountered a stone wall. Whether it’s mis-, mal- or non-feasance, it’s not something a professional wants to be anywhere near. Nor is it something you would want to be involved in as a Board member.
Could you join the Board and turn it around? Maybe. But as a newcomer, and without your inside contact, you’d have less leverage in insisting on a clean-up of whatever needs cleaning up, and/or bringing in new blood (in the form of other new Board members) to wash the infection away.
What might be the problem? The list is long, but with start-ups one common difficulty is that they’re not actually charities at all. Perhaps they’re secretly profit-making entities for the founding Board; perhaps they’re tax shelters. But not every organization that gets a preliminary ruling from the IRS should actually be considered a tax-exempt charity, and your friend might have discovered this sort of foundational issue.
Practically the least serious reason for a consultant to walk is that she hasn’t been paid. But if this is the kind of organization that doesn’t pay its bills, again, I think you should count yourself lucky if it’s passing you by.
If you’re determined, though, to make this your experience of Board service, there’s no reason for you to be shy: after all, you’re a volunteer offering your services, not a supplicant begging for a job. Pick up the phone and call the Executive Director and say, “I’d gathered you were recruiting me for the Board: was that correct? I’m still interested in serving.” No point in beating around the bush: listen to her answer, and if she’s at all evasive or indefinite about when she might want your services, then you’ll know it’s time to walk away.
It’s frustrating to have invested time in an agency with the expectation of being promoted to the Board, and then have that expectation frustrated. But better that than the long-term frustration of serving on the Board of an agency whose integrity is in serious question.
____
*Apologies to Stevie Wonder.
Tags:Board of Directors, Boards of Directors, charity, conflict, Executive Director, Executive Directors, Management Advice Day tip, Mission, nonprofit, Nonprofit management, nor for profit, scandal
Posted in Boards of Directors, Charity scandals, corporate giving, Mission, Nonprofit management, Nonprofits--General, Volunteers/Volunteerism | 1 Comment »
April 13, 2009
Hey, Nonprofiteer, here’s my beef:
Every pay period I take money from our payroll account; but instead of giving it all to our employees, I have to pay a big hunk of it in taxes–and believe me, we don’t have any too much to spare around here. If we’re a tax-exempt 501(c)(3), shouldn’t we be able to use that money for the good of our agency and clients instead of forking it over to the Feds? How can we work this out?
Signed, Tax-free and Cash-poor
Hey, Free and Poor:
If you decide to take your employees’ withholding taxes and “use that money for the good of our agency,” you can “work this out” by being imprisoned and poor instead, alongside every single member of your Board. Creative as you are, you’re not actually the first person to figure out that there would be a lot more money available to nonprofits if they just skipped that annoying remittance every pay period, as a result of which the IRS imposes personal liability on every executive and Board member of an agency attempting this little maneuver, not to mention an additional 20%–you read that right, one-fifth again–in interest and penalties.
Why? Because here’s the deal: a 501(c)(3) is exempt from Federal taxes on income that it generates. You may also be exempt from State sales taxes, if you’ve filed a separate application for that purpose with your Secretary of State. But what you send to the government every pay period isn’t YOUR taxes–it’s your employees’ taxes, which they’ve asked to have withheld in advance so they don’t face a huge bill on April 15. Trying to use that money for something else constitutes stealing from your employees, and there’s no special nonprofit exemption from the general prohibition against thievery.
Besides, you’ll get caught. Most nonprofit executives who “borrow” withholdings to get through a cash crunch assume that the IRS is big and they’re small and no one will notice. Most such executives get a rude awakening when it takes less than a year for the IRS to exhaust its patience (in the form of dunning notices) and simply levy their bank accounts for the balance due.
If you’ve been trying this in a small way–a common device is to write the IRS check but throw it in a drawer, so you have the comfort of knowing there’s actually more money in the account than there appears to be, reducing your risk of bouncing all the other checks you write; in theory, you’ll mail the IRS check when that big grant comes through–clean it up NOW and come clean with your Board about it in executive session.
And if you’ve found someone who’s been willing to sign off on your year-end audit despite a mysterious trail of uncashed checks to the taxing authorities, you might mention to him/her that accountants too are eligible for all-expenses-paid stays with Uncle Sam–all expenses paid, that is, after the accountant joins the Board and Executive Director in paying the taxes, interest and penalties.
Tags:501c3, accounting, Boards of Directors, charity, employees, Executive Directors, nonprofit, Nonprofit management, not for profit, tax exempt, taxes, withholding
Posted in Boards of Directors, Charity scandals, Earned income, Finances, Nonprofit management, Nonprofits--General, Personnel Issues | 2 Comments »
January 8, 2009
It’s probably too late to keep Harry Reid and the rest of the forelock-tuggers masquerading as Democrats in the U.S. Senate from caving to Rod Blagojevich and seating Roland Burris; but here’s a nugget from the Nonprofiteer’s world for them to chew on (H/T Tim Novak and Carol Marin):
As the Chicago Sun-Times reports, a couple of developer pals of the Mayor’s got hold of some prime land near Chicago’s downtown by helping to arrange a new home for its inconvenient preexisting resident, the Chicago Christian Industrial League, a charity serving homeless men. And when the move to a new building left the charity in financial trouble–for, like many shiny daydreams before it, the scheme turned out to be a money pit–the group did what any right-thinking Chicago institution would do: it hired the Governor’s wife as a highly-paid fundraiser. Yes, that would be the same Governor caught on tape trying to sell the President-elect’s Senate seat to the highest bidder.
Could Patti Blagojevich possibly have been recommended for this lucrative gig by Christian Industrial League board member Fred G. Lebed of Burris & Lebed Consulting, when yes, in fact, that IS “Burris” as in “Senator-Designate Roland Burris”? And could Fred’s doing a favor for Rod’s wife Patti possibly have redounded to partner Roland’s benefit?
Inquiring minds . . .
N.B.: The Nonprofiteer feels terrible being so suspicious of the people who are running charities and governments in her city and state. Shame on that wicked Patrick Fitzgerald for making her feel that way.
Tags:Blago, Boards of Directors, Burris, Christian Industrial League, Conflict of Interest, Fundraising, Nonprofit management, pay to play, Real Estate
Posted in Boards of Directors, Charity scandals, Conflict of Interest, Coverage of nonprofits, Current Affairs, Fundraising, Housing, Nonprofit management, Nonprofits--General, Public private partnerships, Real Estate, Social Service Agencies | 1 Comment »
July 18, 2008
instead of manufactured ones like whether ballet companies are promoting smoking by accepting tobacco money. If the American Psychiatric Association receives funds from manufacturers of psychoactive drugs, might it have an incentive to suggest that those drugs are effective against mental illness? Even when they’re not? So Congress is asking the question.
And before people have apoplexy about government interference in the professions, let’s remember the cardinal rule: Those Who Do Not Police Themselves Will Find Others Doing It For Them.
Tags:Conflict of Interest, dirty money, drug companies, Fundraising, Health care, nonprofit, not for profit, Private Philanthropy, psychiatry, Relations with funders
Posted in Charity scandals, Conflict of Interest, Coverage of nonprofits, Current Affairs, Disease charities, Foundation Hall of Shame/Stupid Foundation Tricks, Fundraising, Health care, Nonprofits--General, Private Philanthropy, Relations with funders, Uncategorized | Leave a Comment »
July 11, 2008
Here’s an eloquent and thoughtful response to the argument that Leona Helmsley’s private foundation for dogs is a private matter, appropriately shielded from public critique under the rubric Chacun a son gout.
As long as private foundations enable people to avoid taxes, it will always be appropriate for taxpayers to ask what those foundations are doing with what otherwise would be public money.
Tags:charity, dogs, foundations, Helmsley, Mission, nonprofit, not for profit, philanthropy, Private Philanthropy
Posted in Charity scandals, Coverage of nonprofits, Foundation Hall of Shame/Stupid Foundation Tricks, Mission, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Uncategorized | 1 Comment »
July 4, 2008
on Leona Helmsley’s will.
“I said the country was GOING to the dogs, not that you should GIVE it to the dogs!”
Happy Independence Day to all.
Tags:animal welfare, charity, dogs, legacies, nonprofit, not for profit, philanthropy, Private Philanthropy, Relations with funders
Posted in Charity scandals, Foundation Hall of Shame/Stupid Foundation Tricks, Private Philanthropy, Relations with funders, Uncategorized | Leave a Comment »
July 3, 2008
Dear Nonprofiteer,
I received this in an e-mail newsletter from Chicago Non-Profit, a newish organization that aims to “connect Chicago’s charitable community.” I’m not familiar with AIP, but the wording that concerned me was the section I’ve highlighted below. I’ve been working with the board on developing a reserve that is sizable vis a vis the monthly operating costs of our organization. I believe it is both responsible and completely mission-driven to ensure that the organization can weather fiscal crises.
How do Charities Rate?
There are over 15,000 registered charities in and around Chicago. Cook County alone is home to over 10,000 of these charites – yet we continue to hear about a charity in the press every now and again that has abused people’s trust; often discouaging people from giving more to charites. Charities are not about to stop asking for money, however – so the question becomes how can we ensure we are giving money to a fiscally responsible charity?
Unfortunately, the non-profit industry is highly unregulated, offering few barriers to keep people from starting a charitable organization and raise money for a “good cause.” A great resource in arming yourself with some education about a charity, however, is the American Institute of Philanthropy (AIP). Located in Chicago, AIP’s founder Dan Borochoff has created a rating system that is easy to understand yet more complicated than some of the more well-known rating systems. Unlike other rating organizations, AIP does not charge non-profits to be rated. This helps to reduce the risk of a charity’s influence of skewing data. Additionally, AIP doen’t reward charities who sit on large fiscal reserves. Rather, AIP applauds and encourages charities to spend the money they’ve raised on programming – which are the reasons the charities were founded in the first place.
What are your thoughts?
Signed, Unreservedly Pro-Reserve
Dear Reserve:
The Nonprofiteer is familiar only in passing with AIP and other charity watchdogs; but she’s happy to report that AIP’s formal position statement on reserves is more nuanced than the report you received of it. It reads as follows:
CHARITIES WITH LARGE ASSET RESERVES
AIP strongly believes that your dollars are most urgently needed by charities that do not have large reserves of available assets. AIP therefore reduces the grade of any group that has available assets equal to three to five years of operating expenses. In AIP’s view, a reserve of less than three years is reasonable and does not affect a group’s grade.
These reductions in grades are based solely on the charities’ asset reserves as compared to budget. If you agree with these charities that reserves greater than three years’ budget are necessary to enhance their long-term stability, you may wish to disregard the lower grades that AIP assigns on the basis of high assets.
This seems like a reasonable perspective: except in special cases (of which none come to mind), a three-year reserve ought to be sufficient to enable an agency to weather a financial crisis. If it’s not, that must be because the agency has a completely nonfunctional financial model, in which case three years ought to be sufficient to discover that and amend the model, or else be compelled to go out of business.
Criticism of excessive reserves doesn’t in the slightest preclude what you’re doing, which is to come up with some multiple of your monthly operating expenses as an umbrella for a rainy day; but this not-so-subtlety apparently was lost on the newsletter editor, who preferred a snappy phrase like “programming…the reason charities were founded to begin with.”
There’s a complicated conversation to be had about the proper role of endowment in the life of charities. The Nonprofiteer herself is mostly anti-endowment, and has watched with glee as people have finally awakened to the fact that institutions sitting on billions of dollars are nonetheless asking college kids to wash dishes 20 hours a week to pay their tuition. But she also understands that endowments have a role to play in assuring the financial stability of institutions designed to last into the indefinite future, and it sounds like the people at AIP understand that, too. It’s a shame that the discussion–in lay publications, but also in our trade press, apparently–seems so often to be over-simplified into, “Naughty charities, hoarding money or spending it on overhead while the poor get poorer.”
That’s one reason the Nonprofiteer doesn’t spend much time investigating the charity watchdogs; she thinks their work, intentionally or un-, plays into the hands of those who think the Red Cross shouldn’t have a paid staff but should put every dollar it receives into this week’s disaster.
The other reason she pays relatively little attention to these groups is that she finds disproportionate the amount of effort necessary to assess the assessments they put forward. Each watchdog makes a set of decisions about what’s proper or im- in charity management, and by the time she’s compared this particular gang’s standards to her own she’s too worn out to give money to anyone.
Which may be the point; but she hopes not.
Tags:charity, charity watchdog, Endowment, Evaluation, Management Advice Day tip, Mission, nonprofit, Nonprofit management, not for profit, operating reserves, philanthropy, Private Philanthropy
Posted in Charity scandals, Coverage of nonprofits, Endowment, Evaluation, Mission, Nonprofit management, Nonprofits--General, Private Philanthropy, Uncategorized | Leave a Comment »
