Nonprofit Help – is the Federal Government Affecting Your Organization?

It has been too long since I have posted an article.

My apologies.

However, I have not been away from the subject of nonprofit ethics, governance, and accountability for a single day. There is a lot going on at the national level and, together with the challenging economy, I am more concerned about the viability of the nonprofit sector than I have ever been during my lifetime.

I have done a lot of reading and listening. Now it is time to resume writing with thoughts and feedback that I hope will be beneficial, based on what I have been hearing.

A number of nonprofit organizations have already failed. While we count the number of banks that have failed, we do not hear any mainstream news media accounts of failing nonprofits. To be fair, tracking the number of nonprofit failures is not the issue; rather, the focus should rightly be placed on what to do to keep additional nonprofits from failing. The harsh economic reality is that some nonprofits probably need to be closed. What can we do to assist those who need to remain viable? How can organizations with a critical mission be distinguished from those whose mission is potentially outdated and no longer beneficial?

Let’s check on the sentiments that seem to be coming from our elected officials at the national level and see what positions they are taking on the subject of nonprofit organizations.

Earlier in the Summer, President Obama announced that he would travel across the country to find “the most promising nonprofits in America” in conjunction with ongoing administrative decision-making as to how to spend a new $ 50-million fund that is intended to help charities expand innovative social projects. (see June 30, 2009 White House press release)

Obama met with 100 philanthropic leaders at the White House. He wants ‘deep pockets’ and government and foundations to help his administration create a “new kind of partnership between government and the nonprofit sector.” You and your organization will have to decide whether this ‘partnership’ is good or bad.

The $ 50-million Social Innovation Fund will be managed by the Corporation for National and Community Service and was created by the Edward M. Kennedy Serve America Act, which Congress signed into law this past Spring. According to the president, Melody Barners, domestic-policy advisor, and members of the White House Office of Social Innovation and Civic Participation, would search for grant candidates in every region of the country. “We won’t just be seeking the programs that everybody already knows about, but we also want to find those hidden gems that haven’t yet gotten the attention they deserve,” according to Obama.

The president also noted that “Solutions to America’s challenges are being developed every day at the grass roots – and government shouldn’t be supplanting those efforts, it should be supporting those efforts.”

With this bit of background, let’s shift gears and talk about what individual nonprofit groups should be doing to save their organizations from extinction, assuming that their mission is still representative of a viable community need.

The Center for Ethics, Governance, and Accountability (CEGA) is a strong advocate for proactive management of nonprofits. The issues of ethics, governance, and accountability form the foundational blocks by which a nonprofit should operate and should expect to survive by convincing grantors and foundations that the nonprofit is based on key principles, following IRS regulations, and surpassing minimum requirements for its nonprofit status. If any nonprofit is not taking this opportunity to delve into these key areas and make necessary adjustments, I would suggest that a major opportunity is being lost.

As the future wears on, particularly in the light of the current economic conditions, I would suggest that not a single nonprofit can afford to have its ethics, governance, and accountability questioned – not by its membership, not by the public it serves, and certainly not by the IRS who regulates all nonprofits. Almost assuredly, albeit an assumption, any nonprofit considered to have ‘solutions to problems’ that have not been ‘noticed’ by those whom it is to serve would most likely tend to be a relatively new organization.

Why can we make that assumption? It is within the relatively new – and small – nonprofit organizations that the greatest potential for the key issues of ethics, governance, and accountability to be initially sub-par. This condition is most likely associated with the myriad of organizational tasks and start-up pressures to seat the founding board, hire the founding staff, and solicit start-up funding to support its core mission.

We would not recommend that any organization pursue the principles espoused by CEGA for the sole purpose of qualifying for the $ 50 million in the federal funding ‘pot’ that currently exists. The financial needs of non-profits across the nation are far in excess of this minor funding resource. Instead, we have followed the issues, watched the painful demise of a number of formerly strong non-profits, and whole-heartedly suggest that each nonprofit strengthen itself from within before trying to compete with its peer groups for funding.

One last thought comes to mind.

It is very difficult to recruit world-class members for a nonprofit board of directors. I have discussed this issue for years. And, it is even more difficult to find a board member willing to serve as chair of the organization.

So, just how much power does (or should) a nonprofit board chair either be given or allowed to exercise? This is a very challenging question. While no nonprofit board officer, or board member, or key staff member, should have unreasonable control of the organization, the balance must be found between ‘dictatorship’ and ‘leadership’ with the latter being of paramount importance. In economic times such as those we face today, the mere survival of many nonprofits is seriously threatened, and board members and staff should support the chair and the executive director (consistent with strong adherence to ethics, governance, and accountability) in order to maximize the opportunity for sustaining the organization.

Please let me know if your organization receives any of the $ 50-million federal ‘pot of money’ but, more importantly, let me know how your organization is progressing with its policies on ethics, governance, and accountability. Also, please let me know if excellence in these key areas has, in fact, positioned your organization in a positive light with your funding requests.