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.
Tags:501c3, Advocacy, Board of Directors, Boards of Directors, charity, governance, Marketing, Mission, nonprofit, Nonprofit management, nonprofits, not for profit, philanthrocapitalism, philanthropy, Poverty, Private Philanthropy, social entrepreneurship, volunteer
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 »
March 17, 2011
Here’s something strange: a concept thrown around routinely and casually in conversations among nonprofits and philanthropies is simultaneously the subject of fierce debate and sometime disapproval by the Internal Revenue Service, a committee of the American Bar Association, and other experts. What is going on?
The notion of Low Profit Limited Liability Corporations (L3Cs, for short) is that they’re a vehicle for doing well by doing good and therefore an improvement over the typical nonprofit structure. L3Cs are permitted to earn profits but proponents claim that their praiseworthy intentions—to end hunger or provide clean water or whatever—make those who lend to them eligible for the special tax benefits attached to program-related investments. In other words, this is a legal structure presented as a technique for gaining access to capital (always a struggle for nonprofits) by providing a tax benefit to lenders.
Of course, foundations already get a tax benefit for program-related investments in regular nonprofits, so what, exactly, is the appeal? In theory, foundations might be more interested in program-related investments that generate a reliable flow of capital (in the form of profit) than in program-related investments that generate nothing but additional nonprofit programs and services. Likewise in theory, regular venture capitalists outside of foundations will be more interested in making investments in profit-making entities than in pure nonprofits. This—the notion goes—will increase the amount of capital available to support general good-guy behavior.
However, a number of scholars and lawyers (Daniel Kleinberger of William Mitchell College of Law prominent among them) see the L3C as, at best, redundant and, at worst, an invitation to fraud. They point out that regular limited liability corporations can be organized for any purpose, including public-spirited and low-profit ones. They point out that the IRS has not yet issued (and does not seemed inclined to create) a rule awarding automatic program-related investment status to any investment in an L3C. So anyone who invests in an L3C on the basis that it provides a higher return than a regular nonprofit with the same tax benefits will find out to his/her sorrow that this is not the case.
What strikes the Nonprofiteer as peculiar, though, is that in the many discussions she’s heard and read about L3Cs, only one mention (specifically, Professor Kleinberger’s Nonprofit Quarterly article) has ever surfaced of this opposition from the bar and Federal regulators. Not until her tax lawyer Stuart Levine asked about the [successful] efforts in Illinois to create L3Cs did she realize there was anything controversial about the phenomenon. After bringing her up to speed Levine wisely said,
L3C’s don’t work unless there is a change in federal tax law. In other words, L3C’s are a little like Oreo-Tycin-Myacin—the wonder drug for which there is no known disease.
L3C’s raise difficult issues of fiduciary duty and the inherent conflict between “charitable” purposes and “business” purposes. At the least, these conflicts cannot be dealt with via a quick-fix state statute.
Doubtless the Nonprofiteer spaces out on frequent occasions and misses aspects of what’s said or done in the sector. But she suspects there’s also a disconnect between what nonprofit executives and L3C promoters expect and describe and what lawyers and regulators understand.
So if you’re considering investment in an L3C, be the aware buyer of whom you’ve heard.
Tags:501c3, charity, Executive Director, Executive Directors, foundations, Fundraising, IRS, L3C, low profit limited liability corporation, nonprofit, Nonprofit management, nonprofits, not for profit, philanthrocapitalism, philanthropy, Private Philanthropy, program related investments, Relations with funders, social capital, social entrepreneurship
Posted in Coverage of nonprofits, Current Affairs, Earned income, Finances, Foundation Hall of Shame/Stupid Foundation Tricks, Fundraising, Investment, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Relations with funders, Social enterprise | 8 Comments »
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.
Tags:501c3, Board of Directors, Boards of Directors, charity, church, Fundraising, governance, IRS, Mission, nonprofit, Nonprofit management, nonprofits, not for profit, personnel, phony nonprofit, Religion, religion, scam
Posted in Boards of Directors, Charitable Choice/Church-State Separation, Charity scandals, Earned income, Finances, Fundraising, Mission, Nonprofit management, Nonprofits--General, Volunteers/Volunteerism | Leave a Comment »
November 19, 2010
More about the troubles of the do-well-by-doing-good gang, this time in the financial services sector.
Which raises the question: when does “profiting” turn into “profiteering”?
Tags:charity, Conflict of Interest, corporate giving, Fundraising, International, Mission, nonprofit, Nonprofit management, nonprofits, not for profit, philanthrocapitalism, Poverty, Relations with funders, social entrepreneurship
Posted in Nonprofits--General, Relations with funders, Coverage of nonprofits, Current Affairs, International, Fundraising, Charity scandals, Investment, Poverty, Earned income, Mission, Conflict of Interest, Nonprofit management, Finances, Social enterprise | Leave a Comment »
November 17, 2010
A new study—poignantly titled “Social Enterprise: Innovation or Mission Distraction?”—reports that nonprofit agencies which choose to support themselves with for-profit businesses end up serving their clients less and worse. Moreover, when the businesses thrive the profits go back into the business, while when the businesses falter the losses are taken out of the hide of the agencies. (So glad to see nonprofits acting like businesses! This “heads I win, tails you lose” approach is just what the investment bankers did—en route to destroying the economy.)
Gloating is unattractive, and unwarranted. After all, any friend of the nonprofit sector would be delighted to learn there was a way to strengthen it without having to stretch every penny into a copper wire, or grovel to wealthy people who understand the situation less well than the people they may or may not deign to help. But a bit of schadenfreude directed at the prophets of social enterprise really can’t be avoided.
It’s always seemed obvious to the Nonprofiteer that if there were money to be made in ending poverty, poverty would long since have been ended. The challenge is to provide services and alleviate suffering when it isn’t profitable. It seems equally obvious that any system which must allow for a private person to make money before the clients get served is one that reduces the resources available for those clients.
Now, lots of things that are obvious also happen to be false. And certainly there’s a reasonable discussion to be had about whether, once you factor in all the costs of raising donations, it would be cheaper or more efficient—even with a profit margin—to organize charities as business enterprises. But a decade’s worth of experimentation suggests that the answer is “No.”
Are services provided by social entrepreneurs better than no services at all? Sure, but it demonstrates the poverty of our current mindless anti-tax political discourse that those seem like the only two choices. The real alternative to entrusting the provision of public services to for-profit groups is having them supplied by the public. Anyone familiar with the history of the private subway franchises and private lending libraries and private schools of the 19th Century will be grateful that our predecessors decided to eliminate the middleman markup and run subways and libraries and schools as the public goods they are.
Have social enterprises ever succeeded? Certainly, and more power to them. But anyone who claims they will supplant philanthropy, charity or social change movements is selling snake-oil.
The most thoroughgoing enthusiasts of the market seem to forget that Adam Smith himself recognized areas in which it would, and did, fail. Those of us caring for people who can’t make profits for other people are dealing with the consequences of those failures. So let’s face it: we’re outside the market economy. Let’s stop contorting ourselves to fit into it, and concentrate on figuring out how to make our own systems function more fairly, transparently and effectively.
Tags:501c3, Fundraising, Mission, nonprofit, Nonprofit management, nonprofits, not for profit, philanthrocapitalism, philanthropy, Poverty, Private Philanthropy, recession, social capital, social enterprise, social entrepreneurs, social entrepreneurship, social services
Posted in Coverage of nonprofits, Current Affairs, Earned income, Fundraising, Investment, Mission, Nonprofit management, Nonprofits--General, Poverty, Private Philanthropy, Social enterprise | 10 Comments »
October 21, 2010
Dear Nonprofiteer,
Several friends and I have started a new musical arts ensemble and are seeking to incorporate as a non-profit. There are 8 artists in the ensemble, so we are a very small organization. Since starting the ensemble was my idea, I have been serving as “Artistic Director,” choosing music, organizing rehearsals and performances, etc., as well as being an Artist in the ensemble.
We are currently working on our Bylaws and so have been thinking about how to structure our Board. We have decided to have all the usual positions (President, VP, Secy, Treas) plus an Artist Representative, and a variable number of at-large Board members (no more than 5). We have a provision in our (in-process-of-being-written) Bylaws where the Board can only select or remove the Artistic Director with a 2/3 consensus of the Artists.
At this point, all of our Artists will serve on the Board in some capacity (either as Officers or as at-large members), though we want to allow for a future time when the Artists get to be just Artists and let other people run the business side of things. The other Artists want me to have a say-so in the running of the organization since the group was formed by my “vision”.
So my question is this: Is it legal, ethical, practical, etc., for me to serve as both President AND Artistic Director (and an Artist in the ensemble)? Or should one of the other Artists serve as President and I (as Art Dir) be only ex-officio with no vote?
I should also mention that my husband is also an Artist in the Ensemble, and so would also sit on the Board (for now).
Thank you very much for any advice you can give. Signed,
Wearing Many Hats
Dear Hats:
Last issue first: it is never a good idea to have a married couple on the Board of a nonprofit, nor is it a good idea for one-half of the couple to serve on the Board while the other is employed by the agency. (I gather you’re not getting paid as Artistic Director, but if you can be selected or fired by the Board, you’re an employee.) A husband and wife on the Board stacks the voting since more often than not they will vote together, and the more important the issue the more likely they will march in lockstep. Majority or not, they constitute a bloc, and blocs or factions create trouble on any Board.
And if your husband’s on the Board and you’re the Artistic Director, you’ve stacked the deck in your own favor on every issue while at the same time guaranteeing the maximum damage to the Board (your husband’s resignation) in case of any disagreement. Don’t start out your nonprofit life with a built-in conflict of interest.
Further, as you seem to realize, no staff member (including the Artistic Director) should serve on the Board at all (whether President or not) except in an ex officio, non-voting capacity.
But let me suggest that you pause here to consider why you want to create a nonprofit structure at all. Don’t become a nonprofit because “all arts groups are nonprofit;” the Nonprofiteer did that for a client once and it was a disaster. As soon as there’s any money involved, you’ll find yourself fighting with the Board over whether those dollars should go directly to you, as Artistic Director; to the artists, in some proportionate way; or back into the institution. So imagine yourself confronting that question now, and build the structure that will get you the answer that you want.
It’s fine to fill your Board with ensemble members and thus guarantee complete artistic and financial control of the agency by its artists. But if you do, an “ensemble representative” would be redundant and should be omitted from your bylaws.
You might further consider that if you’re entirely ensemble-governed, you’re missing the opportunity to use the Board for its central purpose, which is to connect the group to the wider community (and, yes, raise money from that wider community to support the work you do). You do your art for people; perhaps some of them should be represented on the Board—not just to do “the business stuff” but to help you maintain perspective about the relationship of your work to its audience.
In other words, as the Nonprofiteer has said in other contexts: nonprofit and 501c3 status are not mere legal trivialities to permit you to collect donations tax-free. They’re statements about the kind of organization you are, namely, one answerable to the community through its Board. You’re trading a certain amount of freedom for a certain amount of stability. If you’re not ready to do that, skip nonprofit status and live hand-to-mouth til you’re ready to be a full-blown community institution–or until you figure out how to support your art entirely at the box office.
Tags:501c3, arts groups, Arts Organizations, Board of Directors, Boards of Directors, charity, Conflict of Interest, Executive Director, Executive Directors, Fundraising, governance, Management Advice Day tip, nonprofit, Nonprofit management, nonprofits, not for profit, personnel, volunteer, volunteers, Women's Issues
Posted in Arts Organizations, Boards of Directors, Conflict of Interest, Earned income, Fundraising, Nonprofit management, Nonprofits--General, Personnel Issues, Volunteers/Volunteerism, Women's Issues | 8 Comments »
July 28, 2010
Dear Nonprofiteer:
What rules govern the websites that provide a free useful service to people but also have a PayPal “donate” button on their page to keep the service free?
If that person’s PayPal is linked up to it, does that not mean that the donations (if any) cannot exceed the IRS annual exclusion amount of $13,000? Or should that person try to register the Website as a non-profit?
Signed, Prepared to Pony Up But Puzzled
Dear Puzzled:
The Nonprofiteer was completely stymied by the legal and technical nature of your question. Fortunately, she has a colleague in the Association of Consultants to Nonprofits whose knowledge of nonprofit law is encyclopedic. Attorney Kathryn Vanden Berk kindly provided the following responses to your questions:
At first blush, I assumed that the Websites are 501(c)(3) entities, and that the advice is offered without charge — with the “ask” being a free-will tax-deductible donation.
However, I wonder if you’re talking about a for-profit entity that is asking for a free-will non-deductible “donation” in lieu of a charge.
In the first instance, there is no prohibition against an exempt organization (EO) giving advice or asking for donations. It can even charge for the advice, as when Lumity requires payment for the book I wrote about how to start nonprofits in Illinois. If it is asking for a free-will donation so that the service will remain free, then anyone can make up their own mind as to whether or not they want to click on the donate button. I used to use the Cornell University Law School LII (Legal Information Institute) to get into the IRS Code. It would often put up a screen asking for donations for the site’s upkeep. I just returned to their website and found that they still ask for donations. You can see this at http://nimbus.law.cornell.edu/civicrm/civicrm/contribute/transact?id=6
In the second instance, a person may request a “donation” so long as they don’t hold themselves out to be a 501 (c)(3) charity, and/or claim that the “donation” is tax-deductible. This might be a good way for some enterprising law firm to throw things out on the web to see if anyone finds it to be sufficiently useful that they are compelled by guilt (or appreciation or whatever) to pay for it.
If that person’s PayPal is linked up to it, does that not mean that the donations (if any) cannot exceed the IRS annual exclusion amount of $13,000? Or should that person try to register the Website as a non-profit?
I’m not sure what you mean by this. The annual excludable amount for charitable contributions is related to one’s income, not to any arbitrary number. Can you be more specific? Are you talking about standard deductions?
The Nonprofiteer wonders whether the $13,000 cited by Puzzled refers to the limit on tax-free gifts to individuals. If so, then yes, gifts to a personal PayPal account must be counted toward that total. If not, she urges Puzzled to clarify her question in the comments section below.
Whatever the circumstances, there’s no option simply to “register the Website as a nonprofit,” unless it actually IS a nonprofit, meaning an agency with a public purpose governed by a Board of Directors. As in the case of “What about gifts to individuals?”, the Nonprofiteer stresses that nonprofit status is not camouflage for other economic arrangements; it’s an actual status requiring service to the community.
Many thanks to Ms. Vanden Berk for her expertise. Input on these technical questions from other lawyers and IRS specialists gladly accepted!
Tags:501c3, charity, donors, Fundraising, gifts, Management Advice Day tip, Marketing, nonprofit, Nonprofit management, nonprofits, not for profit, philanthrocapitalism, philanthropy, Private Philanthropy, tax deductible, tax exempt
Posted in Earned income, Finances, Fundraising, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Technology | 3 Comments »
July 21, 2010
Dear Nonprofiteer:
We are a small non-profit music school. We have been running into a problem with grants strategy–as in, we aren’t getting any.
I am consistently getting feedback:
1. “Lovely program but we are only funding projects that can promise to reach 500-1000.” We are small with 350 students and while I can conceive of a program that would reach a larger audience, I don’t feel I can creditably offer that in a proposal.
OR
2. “Great ideas but we only fund people who we funded before.”
Previous executive directors in more generous times had decided that grant seeking was not worth the effort. I think we need to make a big push but I am starting to wonder if they were right.
We have a subsistence existence with only earned income and I feel we are desperately in need of a more diverse income stream if we are ever going to grow or prosper. Operating at less than break-even is not an option with my board.
What’s the small non-profit to do?
Signed, Stymied at Every Turn
Dear Stymied,
The Nonprofiteer suspects, as you’re starting to, that your predecessors were right when they gave up seeking foundation support. At the best of times, foundations have the attention span of fruit-flies, which means even agencies receiving support spend the whole grant term sweating blood over whether they can get it next time–nonsensical program-officer-speak to the contrary notwithstanding. (What kind of response is, “We only fund those we’ve funded before,” anyway? It’s barely lucid, let alone reasonable–unless it’s just a bald-faced lie.)
And these aren’t the best of times. (Like you hadn’t noticed.) Some foundations are stepping up and spending a larger percentage of their income on grant-making to make up for a loss in their portfolios; others can’t, or won’t. And as aggravating as it is to have a foundation ask you to provide services on a scale beyond your capacity, the Nonprofiteer will defend that point of view: foundations are in the business of trying to have broad impact with narrow means, and your program simply doesn’t meet their needs.
So you have to seek funds from another source. Earned income is all very well, but of course you’re required to raise one-third of your budget in contributions simply to maintain your 501(c)(3) status. How?
Well, as the Reverend Mother did not say, “When a foundation closes a door, somewhere an individual donor opens a window.” Stop pounding your head against the foundations’ doors and get thee to an individual gifts program. This may be your only option; it’s certainly your best one. Seek small gifts through an annual campaign, and big ones through individual appeals made by you and members of your no-deficit Board. (They made the rules, now they have to play the game.)
The annual campaign: Ask your students and their families, as well as any alumni you may have, to help you make up the difference between what it costs to provide this first-rate music education and what you charge in tuition. (If you don’t know that number, figure it out: it’s magic. Not only does it encourage contributions, it makes future tuition increases easier to swallow. Why do you think colleges keep repeating, “Tuition covers only a fraction of the cost of educating a student”? Though at $40,000-plus a year, one might begin to wonder what fraction, exactly.)
Ask at “Back to School” time, and again around Christmas, and again before or during recital/graduation season. Also, ask at performances. Don’t be shy: remember that most people say they give because “Someone asked me.” Your school is just as deserving as any other charity, and with 350 people in the program someone connected to you should be willing to cough up some dough.
Major gifts: Identify anyone who’s already been giving you money and take him/her out to lunch and ask for more. If your Board members aren’t already giving, conspire with your Board president to get them to do so–and once they’ve given, ask each of them for the name of one person who could be asked. Remember the Nonprofiteer’s rule: Board members don’t ask their friends for money–they ask each other’s friends for money!
Individual gifts come in smaller chunks than foundation gifts (though not in your case, actually). Moreover, they’re infinitely renewable and will sustain your school for years to come. Good luck, and let us know how you do.
Tags:arts groups, Arts Organizations, Board of Directors, Boards of Directors, charity, charity promotion, donors, Education, foundations, Fundraising, grantmaking, grants, IRS, Management Advice Day tip, nonprofit, Nonprofit management, nonprofits, not for profit, philanthropy, Private Philanthropy, recession, Relations with funders
Posted in Private Philanthropy, Nonprofits--General, Relations with funders, Current Affairs, Boards of Directors, Arts Organizations, Fundraising, Education, Earned income, Foundation Hall of Shame/Stupid Foundation Tricks, Nonprofit management, Finances | 2 Comments »
September 17, 2009
Dear Nonprofiteer,
I am just finishing a year as an ED for a small nonprofit arts organization which has been struggling for almost all of its 30 year history. We have a 2-person admin team and most things seem to fall to me–from grant writing to plumbing.
While we have met our challenges this year and will not go into the red, I have not been able to realize the high hopes that I started this job with last September.
We face the challenge of an old, crumbling and uncomfortable building. We have a board-–of people I personally like–which is resistant to fundraising responsibility but eager to micro-manage small details. I have tried hard to develop a grant campaign but found no funders willing to support our projects. So we limp along on tuition revenue–enough to secure breakeven but not enough to undertake new initiatives.
I try to keep telling myself that this is the way of things in this economy but I am becoming very depressed and am having a hard time getting myself motivated this fall. I am not in a position to walk away from this job and as an older woman in this job market I am not optimistic about other prospects.
And more whining – my office is a broom closet.
Any advice?
Signed, Depressed in the Dumps
Dear Depressed:
The situation you describe is serious but not hopeless. It only feels hopeless because you’re probably trying to solve all the organization’s problems at once, when they need to be solved step by step. The central problem you identify is the Board–for without its fundraising support, you’ll never be able to expand, or repair your building, or get out of the broom closet.
Sit down with your Board president and explain, in the straightforward terms you’ve done here, that the only reasonable source of expansion capital for the group is the Board of Directors and that this Board of Directors seems unwilling to answer your urgent calls for its participation. Propose two things: that you and the President get the Board engaged in a serious effort at recruiting new and motivated Board members, and that once you complete this effort (which should be doable in about 3 months) you conduct a training session for new and veteran Board members alike in which they will learn to ask for money. If the President agrees (and there’s no reason why s/he shouldn’t), this will give the Board something to do that will keep it from micromanaging you AND will result in a new focus on fundraising, even before the current members have been trained to do that work themselves. Most Boards–and most EDs–find the process of brainstorming about new recruits and then conducting recruitment breakfasts or lunches or dinners or midnight snacks an exhilarating one, and it sounds as though a bit of exhilaration wouldn’t come amiss right now.
Once you’ve set this in motion, stop pounding your head against the wall with general-purpose grant applications and go looking for funders who will pay for “capacity building,” a phrase encompassing everything from updating your computer system to teaching your Board how to do its job. Ask for money to hire a Board development consultant, and use that person to help push the Board through the recruitment process or to give them training or both. Your grant proposal should stress that the function of this activity is to enable you to reduce your dependence on grants in the future; this goes over big with people whose job it is to give out grants, contradictory as that may seem.
Finally, consider the possibility of framing this entire project as a prelude to a campaign to improve or replace the building. These are terrible times for capital campaigns, and your Board will figure that out soon enough; but they’ll be more excited about expanding their number, and more expansive in their thinking about who in the community should join them, if they think there’s a possibility someone will want to put a name to a bricks-and-mortar project. You can always disabuse them of this notion later–or, if you don’t, maybe they’ll become properly agitated about the condition of your “office.”
If there is anyplace else in the building your desk can be placed, move there now–being in a windowless space makes everything seem darker, both literally and figuratively, than it actually is. You’re the ED–pull rank and choose someplace better to sit. “Better” may be a term of art meaning “loathesome instead of positively grotesque,” but at this point a change is as good as a feast.
And if all the foregoing sounds exhausting rather than energizing, then do two more things: take a week off NOW and spend it sitting in a bubble bath or hiking through autumn leaves and not thinking about this place at all; and then come back and use the computer in your broom closet to start job-hunting. It’s a bad economy and older women do face discrimination in the workplace, but you’ll be able to find small arts organizations with better attitudes and atmospheres which will be thrilled to have you. You’ll also be able to find large arts organizations whose development, marketing and education departments could all use someone with your background–and which won’t expect you to fix the toilet.
Finally, please try to remember what made you take the job in the first place. If you love this art form, see if you can’t get back in touch with that fact and with the way that working for this agency contributes to the art form’s growth. If you don’t love the form–if you took the job because it was a job, or because you love “the arts” and figured any one was as good as any other–then this is never going to satisfy you, no matter how well-restored the building or cooperative your Board or spacious your office. Conversely, if this kind of artistic work is the love of your life, then you’ll fix toilets and make coffee and browbeat Board members to make sure it thrives.
Check in and let us all know how things go for you.
Tags:arts, Arts Organizations, Board development, Board of Directors, Boards of Directors, capital campaign, Executive Director, Executive Directors, funders, Fundraising, Management Advice Day tip, Mission, nonprofit, Nonprofit management, not for profit, recruitment, Relations with funders, Women's Issues
Posted in Arts Organizations, Boards of Directors, Earned income, Finances, Fundraising, Mission, Nonprofit management, Nonprofits--General, Relations with funders, Women's Issues | 12 Comments »
