Posts Tagged ‘501c3’

Dear Nonprofiteer, Why didn’t I stay a volunteer?

February 22, 2012

Dear Nonprofiteer,

I need some advice.   I have been a paid employee of a non-profit for the last eight months. Before this I was an unpaid volunteer for several years. There are three of us in the office—the ED, the founder, and myself.

The Executive Director

For the last eight months I have been doing most of her job, and my own. As a result I am easily working sixty or more hours each week. Attempts to change this environment have been met with hostility. Despite repeated requests I still have no job description. My working relationship with the ED is close to breaking point. Simply put, I do not want to go into work tomorrow. I have my concerns about her integrity. At the start of the month I was told we were 20K above budget. Last week I overheard her tell the founder we were 40k under budget. I have no proof of mis-, mal- or nonfeasance, and to find that information would be extremely difficult. I would like to prepare a fact laden letter to the Board, but have very little proof.

The Board

I believe the Board has lost confidence in her ability. Their relationship with her appears strained. I also believe they have lost focus on what is best for the organization. A majority of the board are employees or board members of another organization, a non-profit in the same field. We take on the debt. They profit. The cynic in me wonders if there is an element of tax avoidance occurring. Despite repeated requests I am not shown Board minutes. There are open spaces on the Board, but only people friendly to this other organization are accepted. I have nominated two extremely qualified candidates to open positions. Emails inviting them to meetings have been “lost”.

The Numbers

We are a forty year old 501c3. There are three full time employees. During our busy periods we employ around 100 seasonal workers. Our turnover is approximately 300k a year. We provide a service to approximately 1400 children, teenagers and adults. We are four weeks away from the busiest time of our year.

The mission of the non-profit is very important to me. I want to do whatever is best for the long term health of the organization.

I have considered handing in my notice and writing an open letter to the Board explaining my decision. I love this organization though and don’t want to leave it. I have also considered raising my concerns with the state AG, but fear that could spell the end of the organization. Unfortunately I do not have the ear of anyone on the Board that I can speak to in confidence about this.

I am really torn as to what to do. Please advise.  Signed,

Concerned in Carolina

Dear Concerned,

You’ve laid out the central aspects of the situation very clearly: the organization has trouble in the staff, trouble on the Board, and at least the potential for trouble in its finances, which will make it difficult to continue serving this large number of clients and paying this large number of seasonal workers.  As you describe your own position, you are essentially powerless: the Executive Director doesn’t listen to you, the Board is unaware of your concerns, and you don’t want to damage an institution that you care about by involving the authorities.

But that leaves the Nonprofiteer with a question: what, exactly, do you love about an institution with an inept and/or dishonest Executive Director and a Board whose independence may be compromised by its relationship with another organization?  If what you mean is that you love the group’s mission, that’s all very well; but that’s like the Nonprofiteer’s saying she would love her boyfriend if only he were 6’10.”  This is a phenomenon therapists refer to as, “It would be so great, if only it were different.”  It’s not different, and if you have no power to make it so, your only realistic choice is to find another agency to work for: one whose mission you can believe in AND whose governance and management support that mission.

You are best off to find that organization and secure that new job before you leave this one, and certainly before you write any kind of letter to anyone about what you believe and suspect is going on.

It’s rarely worthwhile to burn bridges with that kind of valedictory note—all you get is a reputation as an arsonist, while the people on the other side of the river continue to do what they’ve been doing all along.  But if you feel you need to, you must do some more research to confirm or refute your suspicions.  The Nonprofiteer doesn’t quite grasp the relationship between your agency and the other one for which you think it may serve as a form of tax dodge, so she can’t suggest exactly what you need to find out.  But it would have to be something as clear as your Board members’ being paid by the other organization, which then reduces its own account of taxable profit, for it to be worth taking to the state’s Attorney General.  The very “mis-, mal- or nonfeasance” for which you don’t have evidence is what would be required to cause the authorities to step in.

If you feel you must speak up but don’t have this level of proof, simply write a post-resignation letter to the Board president (with copies to the rest of the Board) laying out only those facts of which you’re certain: that the Executive Director is in the office only 3 hours a week, that she’s using members of the staff to run her personal errands, or whatever the case may be.  If the Board is compromised, though, this won’t make any difference; and if the Board is honest and diligent, it will discover all this about the Executive Director as soon as you leave, because there will be no one available to cover for her by doing all her work.

The Nonprofiteer’s best advice: find a new job, send a one-sentence letter of resignation to the Executive Director, and write an intemperate five-page screed blasting the entire agency, which screed you will then put in your desk drawer or the fireplace.  You’ll have the release of having said everything that needs saying without putting yourself at risk—one of life’s rarest pleasures!

Write again so we know what you do and how it goes.

Give the people at Komen a piece of your mind . . .

February 2, 2012

as they seem to have lost their own.  Komen’s decision to de-fund Planned Parenthood at the behest of an anti-choice Board member reminds us how ready the right wing is to sacrifice women’s health for political gain.

There’s a petition to sign if you want to want to make your voice heard.  If you’ve been a Komen supporter and you now de-fund the organization, your voice will be heard even louder.

The Nonprofiteer has been wondering what to write about . . .

February 1, 2012

but she’d really have preferred not to have this as an inspiration.  There is no excuse for the decision of Susan G. Komen for the Cure, until now a respected source of information and funding in the fight against breast cancer, to defund Planned Parenthood‘s program of providing breast exams to poor women.

In fact, the decision doesn’t even make sense–unless you consider that a recent addition to the Board of Komen is an anti-choice ex-politician from Georgia.  As another commentator has wisely noted, Planned Parenthood will survive this latest injury–the Nonprofiteer’s determination to support the agency has just been redoubled, and probably her gift will be, too–but Komen may not.

Please join the Nonprofiteer in notifying Komen of your distress at its decision to let irrelevant politics endanger the lives and health of poor women, and of your decision to redirect to Planned Parenthood any support you may have been giving to Komen.

The billionaire vs. the free riders

January 13, 2012

The Nonprofiteer’s readers might enjoy this account of a pissing match between Warren Buffett and Mitch McConnell.  The Senator from Kentucky has been urging the Sage of Omaha to make voluntary contributions to the Treasury if he felt he was undertaxed.  Buffett has now responded that he’ll match any such contributions made by Republican Senators.

This dialogue makes in a different form Milton Friedman’s point as recounted by the Nonprofiteer yesterday.  Voluntary contributions to reduce poverty (or do any of the other things we rely on the government to do) are insufficient, because everyone would be willing to pay his/her share only if s/he could be sure that everyone else would be willing to pay his/her share.  Otherwise, no dice.

Doubtless McConnell will ignore Buffett’s challenge and continue his nonsensical bluster about Buffett’s freedom to pay extra if he feels “guilty” about his low tax rate.  But the point isn’t, of course, how Buffett feels, or even what he does—it’s what everyone else does.  And if McConnell and his buddies don’t donate to the Treasury, then they are poster children for the free-rider problem—thereby proving Buffett right: philanthropy is not sufficient and taxation is necessary.

H/T the indispensable Rick Cohen at The Nonprofit Quarterly.

Taxes vs. philanthropy: the view of a raving lefty

January 11, 2012

I am distressed by the sight of poverty; I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; the benefits of other people’s charity therefore partly accrue to me.  To put it differently, we might all of us be willing to contribute to the relief of poverty, provided everyone else did.  We might not be willing to contribute the same amount without such assurance.

Therefore, this wild-eyed radical continues, the government must step in.  If poverty is to be alleviated, everyone must be taxed so that no one gets a free ride to the benefits of poverty eradication.

How appalling!  How socialistic!  Of course, what else could one expect from an ivory-tower academic complete with Nobel prize?

No, not that one (or even that one): Milton Friedman.

When the man said “There ain’t no such thing as a free lunch,” he meant it.

H/t Allen R. Sanderson.

At war with oneself over the charitable deduction

January 10, 2012

From an article in the New York Times whose date the Nonprofiteer neglected to notice:

“It’s admirable when people back their charitable impulses up with donations,” said Scott Klinger, tax policy director of the group Business for Shared Prosperity.  “But the tax code shouldn’t allow the wealthy the kind of loopholes that let them, essentially, force other taxpayers to underwrite donations to their pet causes.”

“The kind of loopholes . . . “  Is there some other kind?  That is, can we have the tax code encourage individual generosity without delegating to private individuals decisions about what constitutes the public good?  The Nonprofiteer doesn’t see how.  Either you have a tax subsidy—which means by definition that other taxpayers bear a bigger burden—or you don’t. 

Without the subsidy, current donors might give less but the government would have more to give out to public causes (health, education, welfare) now privately supported.  And perhaps without the subsidy, current donors would be replaced by those less-burdened other taxpayers in a burst of their own generosity.  And maybe this would mean fewer snow-globe museums and more attention to human services in the nonprofit sector.

Or maybe it would just mean a reduction in charity and an increase in the government’s resources, which could then be used on public education and public housing.  Or missiles and drones.

This is why the Nonprofiteer remains at war with herself over the charitable deduction.  She wants a thousand flowers to bloom.  She believes any free society requires a counter-balance to whatever the current government has decided about anything.  And she believes this counter-balance requires money.  The whole point of the nonprofit sector is that it permits people to identify and respond to their own needs in their own communities, producing a closer fit between service and community than is possible with centralized programs.

But she also believes that society-wide priorities should be funded society-wide, which means limiting the number of pots of money exempted from inclusion in the public fisc.  And she doesn’t want society-wide priorities to be determined by people who have so much money they can buy entire public school systems and experiment on them.

To quote the great Yul Brenner: Is a puzzlement.

Guest post: One Book, Three Challenges

January 1, 2012
by Lesley Rosenthal

Good Counsel: Meeting the Legal Needs of Nonprofits
by Lesley Rosenthal
(John Wiley & Sons 2012)

As I embarked on writing Good Counsel: Meeting the Legal Needs of Nonprofits, well-meaning and concerned folks cited at least three reasons why no one had written such a book before, and (implicitly) why I shouldn’t try: it’s too dangerous, too hard, too scary.

The “too-dangerous” crowd, personified by some of the most successful leaders of nonprofit turnarounds on several continents, worried that legal information in non-lawyers’ hands would result in the unlicensed practice of law by a bunch of irresponsible, budget-strapped do-it-yourself nonprofiteers. Who knows what kinds of mission mischief non-lawyers would make with their newfound knowledge – the legal equivalent of sewing your own sutures! Fortunately my own boss, the President of Lincoln Center, and several of my other mentors before him, including a former Bar Association president and a federal judge, helped forge my conviction that the law belongs to the people. They encouraged my desire to put it into plain English for all to know.

The “too-hard” folks, also well meaning, recognized the enormous variety of laws that commonly arise in nonprofits and thought it impossible to provide a general overview in one volume. I know what they meant: the tangle of specialized state and federal laws that make our sector one of the most highly regulated in the whole economy, such as state nonprofit corporations laws, Section 501(c) of the internal revenue code, IRS rules, regulations and expectations surrounding the tax exemption and good governance, multi-level filing and disclosure requirements, pension, endowment and investment laws, lobbying restrictions, and a web of 50 different states’ fundraising laws. Many fine books have been written on each of these subjects, but rare is the legal resource that touches upon them all. Then, the skeptics continued, there are also general business laws that apply to these organizations – contract law, labor and employment laws, intellectual property laws, consumer regulatory laws, real estate laws, building codes and more. And business laws apply to the nonprofit sector in weird ways not necessarily intended by lawmakers, forcing volunteer-driven organizations, for example, to think long and hard about how to structure their activities to comply with minimum wage and hours laws. Pile on top of all of those layers the additional specialized laws that apply to the wide world of nonprofits, such as FDA regs for blood banks, student privacy laws for higher ed, permitting and accreditation for hospitals and mental health facilities and so on, and the whole enterprise of writing a book about the legal context of nonprofits threatens to die under its own weight.

The “too-scary” people are the most sympathetic people of all. They are the good-hearted lawyers who are already serving as counsel, as board members – or as both simultaneously – to nonprofit organizations. Their values may line up perfectly with the mission of the organization they serve – an elder care lawyer, for example, serving on the board of a community-based senior center, a real estate lawyer counseling a neighborhood development organization, a sports and entertainment lawyer doing board duty on her town’s local Little League or scout troop – but their legal expertise may be far afield of the legal issues facing the organization. It scares them to no end when a legal question arises in the boardroom and all eyes turn toward them. UBIT – what’s that? Conflict of interest policy pertaining to co-investment interests? Ugh. Section 501(h) election for lobbying activities? Isn’t this meeting almost over? They could have just begged off answering these questions – that’s not my area of law, you see, you wouldn’t ask a dermatologist about your chest pains, would you? – if only Good Counsel didn’t exist to connect the dots between the law they do know and the law they need to know to better serve their favorite charity.

Good Counsel is intended – charitably – to defy all three objections. In 300 pages it places the law of nonprofits in the hands of board members that oversee and executives that actually run the organizations – CEOs, CFOs, program managers and staff, fundraisers, personnel directors, communications professionals, operations and facilities managers and more. Does it answer every question? No. Does it sensitize non-lawyers to common legal issues in the highly regulated context in which they operate? I sure hope so.

Lawyers who make their living practicing in this field needn’t worry that this one volume will displace them; to the contrary, placed in the right hands, the book will generate more sophisticated questions and ultimately more and better client relationships. Corporate and transactional lawyers who have not yet found an outlet for their volunteer yearnings – because it seems that most pro bono projects are more aligned with the skills of litigators, not business lawyers – may feel empowered to see how readily they can translate what they know to the legal needs of prospective nonprofit corporate clients.

Law school deans concerned about the criticism being leveled at the entire enterprise of legal education may find a path forward in Good Counsel. With case studies, work plans and focus questions following each chapter, the book lays out a path for law students supervised by clinical professors to engage with a particular nonprofit organization and assess its legal needs – growing the students’ legal skills and stretching their capacities as counselors in ways that will serve them well even if they do end up in private practice after graduation, as most do.

And the legal profession, which despite the canon of lawyer jokes is as public-spirited as any I know, may find that Good Counsel can be used to foster and strengthen more pro bono relationships between lawyers and organizations. There is a great deal of goodwill for nonprofit organizations among public-spirited lawyers. I know, because I have been both a purveyor and voracious consumer of pro bono legal services, that there is more time and willingness to serve among the legal profession than has been fully tapped to date. A pilot program of the New York State Bar Association and the New York Attorney General’s Office Charities Bureau has adopted Good Counsel as a training resource for that very purpose: to help launch up to 50 new pro bono relationships between lawyers and charities in the initial pilot year of a program called Charity Corps: Lawyers Helping Nonprofits.

Far too many of our nation’s one million public charities lack regular access to counsel. At the same time, good-hearted lawyers are floundering in their efforts to help their favorite nonprofits, or are afraid to try because they think the field is so distant from subject matter they know. Law students graduate in debt up to their ears but lacking the practical skills they need to begin servicing clients after law school. Good Counsel is a playbook, intended for all three audiences.

And while I admit it was a little hard, scary and dangerous, ultimately there were far more supporters than skeptics for this project. I invite readers – lawyers, nonprofit leaders, and academics – to take a look and let me know if it works.

Lesley Rosenthal
www.goodcounselbook.com

goodcounselbook@gmail.com

Schedule of upcoming Good Counsel events in NYC, LA, Detroit, Miami, Philadelphia, Boston, DC and Buffalo, NY available on www.facebook.com/GoodCounselBook or at the book’s website, www.goodcounselbook.com.

Available for purchase at http://www.amazon.com/dp/1118084047/ref=rdr_ext_tmb

Review copies for academics, media, upon request to tbatanchie@wiley.com

Staying out of jail and up to technological speed while running a nonprofit

December 21, 2011

Some days the Nonprofiteer is happy to serve just as a pass-through for the good work other people are doing. This is one of those days.

On January 11, look out for the publication of Good Counsel: Meeting the Legal Needs of Nonprofits, Lesley Rosenthal’s guide to every possible legal issue in nonprofits. (The Nonprofiteer urged Lesley, who is Lincoln Center’s general counsel, to call the book “How to stay out of jail while running a nonprofit,” but for some reason she demurred!) Having had a chance to review the book in manuscript, the Nonprofiteer is happy to give Good Counsel her strongest possible endorsement, and not only—not even primarily—for big agencies with their own general counsels.  The lawyers on your Board who are forever being expected to know everything legal that might affect your agency (and who are secretly wetting their pants from anxiety because they don’t actually know all those things) will be particularly grateful for this brief, well-written and comprehensive guide to, well, staying out of jail. And—how moderne!–it’s also available for Kindle and I-Pad.  Publisher John Wiley & Sons/Lincoln Center.

And, in other useful news, elevationweb.org announces that it’s prepared once again to provide free Web development services to nonprofits which can match Elevation Web’s contribution.  Last year this “socially conscious Web design and media company” donated $400K in services to 95-plus nonprofits.  So if you (like most of the Nonprofiteer’s clients) think that upgrading your Website and making it easier to use (i.e. donate from) is of critical importance in the coming year, check out the group and complete the application at http://www.elevationweb.org/one_for_one.php.

What should (but won’t) be the last word on the charitable tax deduction

December 20, 2011

The most powerful argument Jack Shakely makes in his LA Times op-ed piece opposing the charitable tax deduction is that it’s a poor trade-off.  The retired foundation executive points out that charities have permitted themselves to be shorn of their ability to influence policy and politics in return for a mess of pottage.  Of course the restrictions on charitable participation in the public arena aren’t as draconian as nonprofit executives (and especially Boards) think they are—but the point is that nonprofits understand themselves to be constrained, and rather than bothering with the details remain quiescent politically.

As strong a proponent as the Nonprofiteer is of the pursuit of individual gifts, in the real world virtually every social service agency needs seriously more government money if it’s going to make any dent in the social problems it faces.  The more social service agencies feel free to advocate for this particular budget bill or that particular provision in a piece of legislation—both prohibited by the current tax-code provisions—the more likely it is that those bills and provisions will pass, which would serve way more of the agencies’ clients than the most blue-sky estimates of their potential for growth in individual giving.

And for someone with foundation cred to say this!  All hail Jack Shakely.

h/t The Nonprofit Quarterly Newswire.

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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