Birmingham, AL--More than 300 nonprofit representatives from all over Alabama are attending the "2008 Nonprofit Summit. It's sponsored by the Nonprofit Resource Center of Alabama. This is no "happy hands" workshop. Participants hear lectures on such topics as "How To Ask For Major Gifts," "Discovering Profit Opportunities in the Nonprofit World" and "Proactive Media Strategies".
"Nonprofit is a business."
Summit attendee Verna Gates is the Executive Director of the nonprofit, Fresh Air Family.
"We are a business, and you have to run it professionally, and being professional is a crux to being successful. No matter what you do, you have to be professional which means having good accounting schemes. Good fundraising programs, good programs for people you serve. A good strategic plan, that you, where you're going, and how you intend to get there."
Welcome to the new world order for nonprofits, especially those, which focus on the arts. When the Jefferson County Commission cut off $4.2 million a year in funding for the art and culture, it was like a massive punch to the solerplexus, knocking the wind out of many local arts organizations. The resulting funds shortfall made many take a look at the way they conducted business. Without retooling their business and fund-raising practices, some could go out of business. That would greatly affect the $120 million that nonprofit arts and culture groups pump into the local economy each year. It's no wonder nonprofits are looking to the for-profit world of accountability, branding and creating business and marketing strategies to survive.
For all nonprofits, the first order of business for staying alive, keeping folks employed and serving their clients is to create a business plan.
"If you don't plan, and if you don't grow, you will die."
Cathy Lee is a consultant to nonprofits in Birmingham.
"You wouldn't open a company, any kind of company, without an adequate business plan, and that what we need to do with nonprofits. What's it going to cost us to do what we're dreaming? Is it even doable? Figure out how much of that is earned revenue and fundraising funds follows last."
From that business plan, a nonprofit should have a very good idea of not only who should be on their board, but also what skill sets are needed to move the organization forward.
"This is a new breed of volunteer, 'I'm joining our board because I like bimbo, and bimbo invited me, and I'll do it for him, and he'll do it for me, and he said that I didn't have to come to meetings'. Those days are over."
Jerry Jacobs is an attorney for the Washington, DC law firm of Pillsbury, Winthrop and Pittman. He's represented over 200 nonprofits over the last 20 years. He says two events caused the government to pass laws dictating the roles of for and not for profit boards. Enron and other corporate scandals resulte din the Sarbanes-Oxley Act in 2002. It established new and enhanced accountability and financial reporting standards for all U.S. public companies. Then, in 2004, the executive director of The United Way of America pleaded guilty to stealing almost half a million dollars during his 27 year tenure.Jacobs says since then, Congress has passed legislation which regulate the duties of board members for nonprofits."
"The law is very clear. Board members have a fiduciary or a loyalty, obligation to act in the organization's best interest, not in the individual's best interest. First and foremost, though they're supposed to have a good sense of the finances of the organization. They're supposed to give direction and guidance."
"You need independent oversight. And, I also think the board should be selected by the board, rather than the chief executive."
Phil Buchanan is the president of the Center of Philanthropy in Cambridge, Massachusetts. He says that many times, the executive directors of nonprofits select their board members. He says a board's primary function is to occasionally hold the executive's feet to the fire. If the board is stacked with their friends, that's not good for the organization.
"Again, that doesn't mean they get cut out of the process. Ultimately the board decides who's on the board. Otherwise you don't have real independent oversight, and the chief executive has too much power, and it becomes a personal fiefdom."
Many local arts organization's boards prevent this with bylaws that state members rotate off the board every two or three years. When a position is open, the board members and executive director work together to find a person with the skill sets needed to move the organization forward.
Like board members, the job description for executive director is changing, as well. The days when the executive director, or the head of the nonprofit was responsible mostly for fund-raising, or scheduling and holding meetings are largely gone.
Ellen Grady, of the United Way of Central Alabama, says she is seeing nonprofits are looking for someone who has a passion for the cause and a good head for business.
"That may have a background in accounting, or the may have a background in business or administration for example."
Corporate or wealthy donors are carefully scrutinizing nonprofits before making contributions or becoming members of their boards. They're looking closely at who's on the board, the background of the executive director, their finances and their use of sound business practices-to ensure that every dollar counts.
-- Les Lovoy, March 26, 2008