the donors forum blog

"community of practice" to focus on solving the nonprofit overhead challenge

Donors Forum’s second "Community of Practice" focused on Solving the Nonprofit Overhead Challenge launched on January 25, 2012 with leaders from 26 grantmaking and nonprofit organizations participating. The group discovered that in total they had worked in the sector for over 576 years! Combined they bring a significant amount of on-the-ground experience working in nonprofit and funder organizations, and dealing with the challenges around the issue of nonprofit overhead – which will serve to inform this important conversation this year.

Helping to frame the launch of the Community of Practice were two national experts on the topic:

Ann Goggins Gregory (left) from Bridgespan and Kathleen Enright (right) from Grantmakers for Effective Organizations. Ann and Kathleen shared the research on overhead in the sector and talked about “the nonprofit starvation cycle” that nonprofits often find themselves in as they respond to funders’ demands and pressures to conform. The group also discussed the “burning platform” that exists and motivates them to make change here in Illinois on this important issue.

We're excited to welcome the Overhead Community of Practice group and to see the dialogue and change that develops from their community this year. 

Find more on the other Community of Practice Donors Forum is sponsoring – its title is Streamlining Grantmaking – here.

 

~Robin Berkson, Senior Vice President, Member Relations 

and Laura Zumdahl, Vice President, Nonprofit Services

 

The Brinson Foundation  and the Eleanor Petersen Fund for Donor-Donee Relationships provided partial funding for the Communities of Practice.

     

Image 1: Solving the Nonprofit Overhead Challenge inaugural meeting, January 25, 2012

Image 2:   Ann Goggins Gregory (left) and Kathleen Enright (right) presented at the meeting.

guest post: jan masaoka on the nonprofit's guide to human resources

 I once served on the board of a group whose executive director adamantly insisted that managing staff was her responsibility, not the board's. We stayed hands off until we started to hear rumors of favoritism. After we prevailed in a battle with her about getting a listing of staff pay, we were shocked to discover that her assistant was paid $20,000 more than the program director and nearly as much as the development director.  A lesson - actually several lessons - learned.

The role of the board of directors in personnel or human resource administration is frequently a sticky issue for nonprofits. Should the board approve all salaries, or just the executive director's? If a staff member has a grievance, should it come to the board? How can the board's finance committee members, for example, be helpful in hiring accounting staff, but not usurp the hiring role of the executive staff? How can a board member appropriately give feedback to the executive director on the behavior of a staff person?

Boards tend to be at one extreme or another: some insist on approving every raise for every staff member, while others never see a salary report. This article proposes specific guidelines for board oversight that don't take away from the chief executive's authority or responsibility. The board can approve various policies such as salary ranges while not interfering with the staff's ability to manage. However the board structures its oversight, it needs a formal process to exercise that oversight. These guides provide such a process, and follow the principle that the board as a whole governs the organization, while individual board members can be helpful advisors to staff.

Guidelines for the Board's Role in Human Resource Administration

1. Committee(s): The board establishes a board-staff committee that works with matters related to paid staff. Only board members have votes on the committee. This committee makes recommendations to the board for approval (rather than deciding matters on its own). Following are the areas for this committee's scope of examination.

2. Personnel policies and employee manual: The executive director is responsible for ensuring that personnel policies and procedures are disseminated and implemented, and that the policies are reviewed as appropriate by the board. Individual members of the human resources committee may be able to bring their human resources expertise to make suggestions. Every two years or so, the human resources committee (or a task force) reviews the policies with staff and, if appropriate, drafts changes or a complete revision.

3. Salary scales: The executive staff draft a rate schedule (salary ranges for each position or category) of salaries, which is reviewed by the human resources committee or task force. This ensures that the board has considered the strategic matters related to salaries: whether the schedule is in line with the organization's values, whether there is appropriate internal equity or differences among positions and departments, whether specific positions are appropriately placed on the scale, whether compensation is in line with that at similar organizations, and/or whether the compensation supports (rather than hinders) the organization's ability to recruit qualified staff.

The salary schedule is sent by the committee or task force to the whole board for approval. In this way, the executive staff are still responsible for salaries, but the range of salaries is one approved by the board.

4. Salary scale compliance: Once a year, the human resources committee or task force reviews the specific salaries of the staff (by name and position) against the salary schedule, to ensure that no individuals are being paid outside the range for that person's position. The committee's job is to protect against favoritism and ensure compliance with the salary schedule, NOT to review whether any specific individual deserves a particular salary.

5. Benefits: The benefits schedule - health insurance, long-term disability insurance, 401(k), and so forth - is reviewed annually as part of the budget process, with costs projected for the coming year. The human resources committee should review the benefits package at least every two years and suggest changes (additions or subtractions), and their financial implications, to the executive director, the board's finance committee, or both.

6. Hiring: In some cases, at the request of the executive director, one or two board members may help with hiring. A common example is the board treasurer helping to interview and select the chief financial officer (CFO) or accountant. It should be made clear to everyone involved that the final decision is made by the staff person to whom the new hire would report. In these situations individual board members are acting as advisors to staff.

7. Diversity: If an organization has established goals or principles regarding a staff that is diverse in race, ethnicity, gender, age, disability, or other characteristics such as client status, there will be an HR role to play in implementing the policies and goals. A board-staff diversity committee, or the board or board-staff HR committee, can assist with making sure that recruitment efforts reach out effectively (for example, through the ethnic press), be on the alert for indicators of weak management of a diverse workforce (such as a string of resignations from Latina nurses), and with monitoring progress towards goals.

8. Layoffs: A management decision to lay off staff usually reflects a financial situation that should already have been shared with the board. In this context, the steps that management is taking to deal with that financial situation -- whether layoffs, paycuts, new income strategies, or others -- should be discussed with the board and the board should bless or put a hold on management actions. Although in most staffed organizations the decision of who to lay off and when and how are management decisions, it's critical for the board and management to be in sync about how the organization is responding to financial problems.

9. Grievances: Grievances on the part of employees must first go through the written procedures outlined in the employee policies manual. If an individual has exhausted the grievance process and that process has been documented, individual employees may be permitted (if it is so written in the policies) to raise a grievance to either the board chair or the board's human resources committee, which then acts as the final arbiter. This may be especially appropriate where the complaining employee reports to the executive director and has an unresolved complaint about the executive director.

10. Serious charges about the organization's management: Sometimes a staff member has a serious charge against management, such as the illegal or improper use of funds, sexual harassment, discriminatory behavior, or improper accounting methods that cannot be taken up in the grievance process. To provide an outlet for such matters (other than a complaint to the state attorney general), some organizations allow staff members to raise such concerns with the board chair. When other board members hear such complaints, they have a responsibility to direct the staff person to the board chair. By making the board chair the sole recipient of such charges, the board can prevent a disgruntled staff member from trying to develop allies on the board against the executive staff,  and can provide a way to bring an organizational matter to the attention of the board as a whole.

Delegating Personnel Work

The board can choose how to delegate personnel-related work. The most common choices are:

• a standing (permanent) human resources committee,
• a human resources task force (that is, a temporary committee),
• a board-staff standing committee, or a
• board-staff task force.

 

Committee members might include the staff human resources director (if there is one) or executive director, and/or non-board volunteers such as a human resources attorney. (Note that if non-board individuals are members of the committee, either they should be as non-voting advisory members of the committee, or the committee's recommendations should come back to the board for approval.) In some cases, the human resources committee is also responsible for developing plans and strategies for appropriate recruitment and utilization of volunteers, while in other organizations the human resources committee looks only at paid personnel.

Each organization will want to choose its own guidelines on these sensitive and important issues. Striking the right balance between board and ED authority may initially be challenging, but it's far from impossible. In the end, sorting this out will strengthen your organization while making life easier for board members and staff.

Jan Masaoka is the author of The Nonprofit’s Guide to Human Resources.   This article is a condensed version from chapter 8, The Board’s Role in HR.  The book is available for sale at www.nolo.com or www.amazon.com. This article originally appeared in Blue Avocado (www.blueavocado.org). Jan is the founder and editor-in-chief of Blue Avocado, an influential online nonprofit magazine with a remarkable 63,000 subscribers. In January 2012, Jan became executive director of the California Association of Nonprofits.

 

irs revokes tax-exempt status for 13,000 illinois nonprofits

The Internal Revenue Service released a list of Illinois nonprofit agencies whose tax-exempt status was automatically revoked on Thursday.

The agencies were among 13,217 statewide.

This announcement of the revocations comes years after Congress imposed an annual filing requirement for all nonprofits and an automatic revocation penalty for those that failed to file a 990 for three years in a row. But this announcement may not, in itself, be a bad thing.

“We believe a majority of the organizations have gone out of business and failed to report it to the IRS, or their names or addresses have changed,” says Laurel O’Sullivan, Vice President of Public Policy at Donors Forum. “Even with three years of outreach from organizations like ours, the Attorney General’s Office and the IRS, this clearly speaks to the need for continued capacity building for small to mid-size nonprofits. If there are organizations on the list, Donors Forum can help them navigate the first steps in the process.”

While the IRS has established a process for nonprofit organizations whose tax exempt status have been automatically revoked to redress the issue, the process can be costly and the paperwork complicated to file, depending on the size of the organization.

The IRS will update the list every month.

Download our FAQ here.

National Council of Nonprofits has a revocation resource page here.

~Delia Coleman, Public Policy Manager, Communications/Outreach

photo credit: http://www.flickr.com/photos/nerdcoregirl/4335907588/lightbox/ via Creative Commons

 

save the date of weds. oct. 19 for vital signs -- the illinois nonprofit conference!

Network and learn with grantmaking and nonprofit colleagues, nationally known speakers, and Illinois luminaries about leadership, management, and advocacy strategies for the current economy.

Join Donors Forum and goodWORKSconnect.org for Vital Signs: Keeping Nonprofits Healthy in Uncertain Times.

It will be held at the Hilton Springfield, 700 East Adams Street, Springfield, Illinois.  Click here to reserve a room at a group rate of $109 per night using the code "Donors Forum" 

Check this event website for updates and follow the conference on Twitter using hashtag: #vitalsector

~Celeste Wroblewski, Donors Forum

it's all about succession planning: a preview of daring to lead 2011

Engaging, inspiring, and informative.

As a sector-switcher, I don’t represent the target audience for “Daring to Lead 2011,” a presentation offered by Donors Forum in May, but I found myself riveted by the presentations and panel discussion. What could have been dry statistics was transformed into a compelling, and at times humorous, presentation by Jeanne Bell, CEO of Compass Point.

Daring to Lead explored findings from a major survey of executive directors from around the country. In a nutshell, it is all about succession planning. But from my perspective, the event provided some key insights into the nonprofit sector and strategies for my own career trajectory.

First, the idea that there is going to be a huge vacuum in the nonprofit sector created by retiring baby boomers is, according to Bell, a false alarm. The data show that there are plenty of upper-level managers itching to become executive directors, and that only 34% of executives are 57 or older. Tom Adams (President of Transition Guides), who also gave a fascinating presentation, said we can expect the recent 10-12% turnover rate among executive directors to remain steady.

So the sector does not suffer from a lack of people, but a lack of transition planning. While this may be a little disappointing to job-hunters (like me) that were hoping for that job vacuum to open up, all is not lost. I learned that finding a mentor is a key step I can take right now. Moreover, when I begin interviewing for management positions, I know to be on the lookout for a few things:

• Do the board and executive director relate as trusted partners?
• Does the organization have a written succession plan and a clear organizational plan?
• Do executive level managers actively develop leaders in their organization?
• Will the organization create new job descriptions as employees grow and develop?
• Does the board support and develop executive leadership?

An effective board and an organization committed to leadership development are important not only to succession planning, but also to career planning for up-and-coming nonprofit leaders.

~Mary Penn, Communications and Development Volunteer

guest post: marc lane on tracking the social enterprise's social performance

The final chapter of my new book, Social Enterprise: Empowering Mission-Driven Entrepreneurs, (American Bar Association, 2011) raises the provocative question: "To What End?" 
 
The demand for metrics to evaluate social impact has never been stronger, and that demand comes from all quarters.  Donors and investors want to ensure that their gifts, grants and investments are directed at the most effective social programs.  Policy makers and lawmakers seek to focus on the most worthwhile and impactful segments of social enterprise.  Government budget officials need to allocate funds among those social enterprises which most effectively tackle social problems.  And, perhaps most important, social entrepreneurs themselves, along with their boards and other leaders, need to make informed decisions about their ventures based on hard empirical data.
 
Yet measuring the social good of a nonprofit, for-profit, or hybrid organization is tricky, given the wide range of social problems they seek to address. Some pursue their missions by providing products or services that address a social need directly to disadvantaged people as customers.  Others provide job and career training services directly to disadvantaged people as employees.  Still others combine both approaches. 
 
Measuring success is very different for a substance-abuse recovery center than it would be for a literacy initiative or a workforce development program.  But the process of discovering the social enterprise's impact includes the same elements:

1.    Tracking performance using selected indicators.
2.    Communicating performance both within the organization and to outsiders.
3.    Using the results to make better decisions.
4.    Implementing those decisions to improve both the organization's activities and its operations.
 
The process needs to be organization- and mission-specific, looking at inputs (the resources the organization uses to serve its beneficiaries), activities (the steps the program takes to meet its beneficiaries' needs), outputs (the program's units of service - - the number of people clothed, sheltered or fed, for example), and outcomes (the actual benefit created - - such as the number of once homeless people no longer homeless or the number of once unemployed now engaged in gainful employment). 
 
In all cases, the outcomes must serve as a fair proxy for social impact, and never should activities be mistaken for outcomes.  So a children's theater group shouldn't measure success by the number of children who see a performance, but rather by the number of children who now appreciate the performing arts.  And a food pantry that seeks to break the cycle of poverty shouldn't look only at the number of meals it's served, but the number of nutritious meals it's served while preserving the dignity of those it hosts.  Or perhaps even better, the number of newly self-sufficient people who no longer depend on free meals.
 
Where hard numbers may not be adequate predictors or measures of success, the task of measurement can be difficult.  Still, measuring social impact should be a high-priority goal of the social entrepreneur: if social impact isn't reliably measured, it surely won't be valued by the stakeholders on which the venture depends and to whom it is accountable.

~Marc J. Lane, President, The Law Offices of Marc J. Lane, P.C.

guest blog: provena decision could be canary in the coal mine for illinois nonprofits

Perhaps you’ve read about localities around the country imposing property taxes on nonprofit organizations, or revoking their sales tax exemptions, or squeezing additional PILOTS (Payments in Lieu of Taxation) from the wealthiest among them.  Perhaps you’ve even congratulated yourself on the fact that no such stories have appeared about Illinois.  Unfortunately, no news is not good news.

Rather, local coverage of the issue has been muted because Illinois can withdraw exemptions without legislative action.  Property tax exemption for charities, schools, and churches is guaranteed by the state’s constitution.  While that might seem to make exemptions here exceptionally secure, it also means that determinations of their extent are made by the courts. And while few politicians are eager to be seen beating up on nonprofits, judges –- even elected ones –- are less constrained. 

When the Illinois Supreme Court ruled this spring that Provena Covenant Hospital didn’t merit a property tax exemption because it failed to provide adequate charity care, public discussion focused on the effect on health care.  But nothing in the decision necessarily restricts its impact to hospitals.  Indeed, Provena takes its reasoning from an earlier case about nursing homes.  Each case grapples with the meaning of the word “charity” in the state constitutional provision, and each holds that the word isn’t synonymous with “nonprofit.” 

Elaine Waterhouse Wilson, a partner at the Quarles & Brady law firm, sees the decision as a threat to nonprofit  “organizations that are supported primarily by fees,” even below-market fees.  Though Provena accepted Medicaid payments which did not reimburse it fully for the care provided, the court held that insufficient to constitute ‘charity.’  “It was very clear [under the ruling] that you had to be giving things away,” said Ms. Wilson.
 
Nonprofits may organize and persuade the Illinois legislature to clarify the amount of “charity” necessary to retain tax exemption.  But Professor Phillip Hablutzel of IIT Chicago-Kent College of Law, co-author of the Illinois Not-for-Profit Corporation Act, doubts it.  “In the twenty years I’ve been involved, there hasn’t been a coherent front among charities in facing the legislature. It’s hard to get these people to make common cause–the museum people don’t see what they have in common with the churches.” 

Nor, apparently, do many human services agencies or arts groups see what they have in common with the hospitals. Despite the national trend and Donors Forum’s attention to the issue, including hosting a post-Provena program featuring Ms. Wilson and a representative of the Attorney General’s office, nonprofits in Illinois appear skeptical that the decision may have an impact on their operations. 

William Rattner, Executive Director of Lawyers for the Creative Arts expressed confidence that his organization is secure in its exemption, “They’ll keep going after the hospitals because it’s easy and that’s where the money is.”  Laurel O’Sullivan, vice president of public policy at Donors Forum, isn’t so sure.  “I’m afraid that many nonprofits are unaware of how a decision like Provena could become Illinois’ canary in the coal mine, an indication of the state’s intentions of following the national trend of seeking additional revenue from nonprofits.”

Already the Provena decision may have an effect on a pair of cases involving luxury retirement developments operated by the nonprofit Franciscan Communities Inc.  A group of local taxing bodies in Lake County defeated the group’s application to exempt its high-end senior care facility from property taxes, a decision now under review in the circuit court.

Franciscan Communities also filed suit in Cook County asking that the assessor be required to allow it to retain exemption on the Clare, Gold Coast property it purchased from Loyola University of Chicago and redeveloped as a luxury senior-care condominium community.  Though the original suit was dismissed, observers expect Franciscan to re-file it.  They also expect Franciscan to lose.

“Provena is a definitive victory for local governing bodies,” said municipal lawyer Vanessa V. Clohessy, partner at Hodges, Loizzi, Eisenhammer, Rodick & Kohn, who represented the school district in the Lake County case.  Clohessy and her associate Steven M. Richart said Provena made it much likelier they’d prevail on appeal in Lake County, but that these cases were so fact-specific it was hard to predict the ruling’s impact on other nonprofits. 

If and when a Provena-style loss of exemption hits another nonprofit, the impact on its operation will be substantial.  “In the current economy,” said Professor Hablutzel, “it would be hard to do fundraising for another one-third of your budget so the taxes could be paid.”

~ Blogger Kelly Kleiman is a consultant to nonprofits as well as a lawyer and a freelance journalist.  Her work has appeared in many media outlets, including the New York Times, Wall Street Journal, Huffington Post, Christian Science Monitor, and Chicago Public Radio.

top experts, two topics: webinars june 3 + 9 offer affordable, expert instruction

No matter where in the world you work, you can benefit from excellent and affordable instruction from Donors Forum by registering for the webinars we offer periodically.  We have two coming up soon; each is only $40 -- even less ($32) if you're a Donors Forum Member, Associate Member, or Partner.

These instructors are terrific.  I have taken workshops and been in meetings with each of these women a number of times, and I always walk away smarter and with new ideas for my job.

In Times Like These. . .Fundraising Must Continue: Thursday, June 3, Noon - 1:15 pm CST

How can you raise the most money in this economic climate?  The current economy may actually offer an opportunity to Increase gifts from your closest donors!  Join Donors Forum and fundraising leader Jamie Philippe to learn ten successful fundraising strategies that your organization can apply immediately to achieve results even in these difficult times.

A Vision for the Future: Developing a Theory of Change for Your Organization:  Wednesday, June 9, Noon - 1:15 pm CST 

Join Donors Forum and evaluation expert Susannah Quern Pratt for a webinar on how to create a "theory of change" for your organization. You can use a theory of change as a planning tool  -- for making sure that all of your activities, strategies, and resources are contributing to the impact you hope to achieve -- and also as a framework for evaluation.  Increasingly, funders are asking grantees to develop and use a theory of change to guide their work.  Funders themselves are also creating theories of change.

~ Celeste Wroblewski

economic outlook 2010: program, staff cuts for nonprofits; reduced giving by grantmakers

Economic Outlook 2010: Illinois Nonprofits and Grantmakers Still Reeling After Rough Year
Donors Forum’s recently issued report, Economic Outlook 2010: Illinois Nonprofits and Grantmakers Still Reeling After Rough Year, is based on a Donors Forum survey conducted in November, 2009. It documents the effects of the economy both on grantmakers’ current and planning grantmaking activities, and on nonprofits’ resources, capacities, and future survival strategies. For instance, 44% of nonprofits reported reduced staff, and half of grantmakers decreased their giving levels. Read or download the survey at Donors Forum's Scribd account by clicking on the image above.

~ the donors forum team

paper shares stories of five organizations that apply "illinois nonprofit principles and practices" to their work

Illinois Nonprofit Principles and Best Practices Case Studies Publication

Donors Forum issued its seminal publication Illinois Nonprofit Principles and Best Practices in 2004 as part of its Preserving the Public Trust Initiative. The publication, which offers guidance to nonprofits and grantmakers on governance and management, was updated in 2008 to reflect regulatory and legislative changes made since 2004, and to align with a set of national principles issued by Independent Sector. Endorsed by the Illinois Attorney General, the principles cover a wide range of important issues related to ethics, effectiveness, accountability, and transparency -- and go beyond federal, state, and local laws. The practices are specific steps organizations can take to implement these principles.

To demonstrate how grantmakers and nonprofits are applying the Nonprofit Principles to their work, Donors Forum developed five case studies published in a documented called Practical Application of Illinois Nonprofit Principles & Best Practices.   Grantmakers profiled are The Chicago Bar Foundation and the Polk Bros. Foundation.  Nonprofits profiled are Big Brothers Big Sisters of Metropolitan Chicago, Camp of Dreams, and Metropolitan Family Services.  Read the report at Donors Forum's Scribd account by clicking on the image above.

~ the donors forum team