June 15 Issue Of The NonProfit Times

 June is one of those special months for readers of The NonProfit Times. Instead of just one issue, we have two with the release of the June 15 edition.

While there is no Special Report in this issue, it still hits some important topics in the nonprofit sector. Let's take a look at the stories within the pages:

Articles

• Books Without Illumination: In this age of technology, some nonprofits are ditching e-readers in favor of traditional books. Our intrepid reporter Patrick Sullivan takes a look at some of these organizations.
• Mobile Bids Changing Auctions: In another piece on technology, contributing writer Gary Morton examines how the rise of mobile technology is impacting how auctions are run.
• Making Fundraising Truly Mobile: In the latest NPT Executive Session, our editor-in-chief, Paul Clolery, talks with Carrie Ann Munk, Ann Andrews Morris, Jennifer Snyder, and Rick Christ about how nonprofits can use online technology to advance their mission.

Columns

• Database Archeology: What are the best ways to sift through your donor databases when it comes to planned giving? This column examines the four best ideas.
• Challenged Or Driven: John Davidoff of Davidoff Communications wants you to think about whether or your organization is mission-challenged or mission-driven.
• Who Needs Words?: At the recent Nonprofit Technology Conference in San Francisco, Calif., serial doodler Dan Roam shows how pictures truly are worth a thousand words.

We hope that you will enjoy this latest issue of The NonProfit Times. Check out all of the articles by visiting our website.

8 Things That Make Nonprofits Vulnerable To Fraud

Nonprofit boards and executives never want to believe that fraud can happen to their organization. It's one of those things that happen to the unprepared, they think, surely it can never happen to us.

Unfortunately, that is far from the truth. Fraud can happen to all nonprofits because, according Marci Thomas, CPA, MHA and Kim Strom-Gottfried, Ph.D. In their book "The Best of Boards," the two authors wrote that nonprofits are especially vulnerable to financial crimes because they rely on the trust of their donors, funders, and employees. If that trust is broken, organizations will have a hard time finding success.

Thomas and Strom-Gottfried wrote that organizations must have strong internal controls to make sure these factors don’t lead to fraud:

• Control by a chief executive; employees believe that there is no one to whom they can report unusual actions or requests;
• Existence of transactions, such as contributions, which are very easy to steal;
• Environment of trust, especially in financial personnel;
• Focus on the mission to the exclusion of administrative systems of controls and risk management;
• Failure to devote sufficient resources to financial management;
• Failure to include people with financial oversight expertise on the board;
• Failure of the board to challenge the chief executive for fear of losing the person; and,
• Fear that the cost of implementing controls will outweigh the benefit and spending money that, in their view, would be better spent on programs.

Complete The 2012 Salary And Benefits Survey

UPDATE: Due to overwhelming demand, the deadline to complete the survey has been extended to June 30. That doesn't mean you should delay, though!

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Time is running out for you to complete The NonProfit Times and Bluewater Nonprofit Solutions' 2012 Salary and Benefits Survey.

So what will the 2012 Salary Survey help you do? Here are some of the advantages:

• Make sound decisions on staff salaries and benefits. Give your board and managers the data they need.
• Get current salary and bonus pay data on 300 + nonprofit jobs from entry-level to the executive office.
• Check YES when the IRS asks you on your Form 990 if salaries for your chief executive and key employees were set using comparability data for similar positions.
• Learn about 94 employee benefits - health insurance, retirement, and more.
• Track changes and trends from 2011 to 2012 for ALL Salary & Benefits information. 
• Get data by nonprofit field, budget size, number of employees, and region throughout the U.S.A. 
• Discover what special benefits are being offered to 15 executive level positions.
• Stay competitive.

You can read more about the survey by clicking here.

Boy Scouts Board Member Wants End To Gay Ban

The chairman and CEO of Ernst & Young and a board member of the Boy Scouts of America (BSA) has become the latest voice to speak out against the organization's ban on gay members.

According to a report in Reuters, Jim Turley said that he plans to "work from within" to help change the policy that prohibits gays from being members or leaders of one of the nation's largest youth organizations.

"I support the meaningful work of the Boy Scouts in preparing young people for adventure, leadership, learning and service. However, the membership policy is not one I would personally endorse," he said.

Turley's statement comes at a time when there is growing calls for BSA to end its long-standing policy. A petition on Change.org -- started by Jennifer Tyrell, a former den leader who was ousted when it was revealed she was a lesbian -- has already been signed by 275,000 people. The petition also calls for Tyrell to be reinstated into the organization.

"We are at a tipping point, with national leaders within the Boy Scouts now taking a firm stand to help end discrimination," Tyrrell said in a statement issued by Change.org.

One of those leaders Tyrell mentioned was Turley and, to a lesser extent, Randal Stephenson, another BSA board member and CEO of telecommunications giant AT&T. Stephenson said in a statement that he favors diversity, but would not make an outright call for the policy to end.

"We don't agree with every policy of every organization we support, nor would we expect them to agree with us on everything. Our belief is that change at any organization must come from within to be successful and sustainable."

So far, BSA has mostly resisted calls to change its policy. In a statement Wednesday, the organization reiterated that, while it respects the views of its board members, it has no plans to back down on this issue. The group said in an earlier statement that "While the BSA does not proactively inquire about sexual orientation of employees, volunteers, or members, we do not grant membership to individuals who are open or avowed homosexuals or who engage in behavior that would become a distraction to the mission of the BSA."

Founded in 1910, BSA won a 2000 Supreme Court decision 5-4 that allowed the organization to ban gays, on the argument that they violated its values. The organization reported that it had 1 million adult volunteers at the end of 2011.

You can read the full story in Reuters.

Washington Nonprofit Health Insurers Reach Record Surpluses

Two nonprofit health insurers in Washington State have accumulated record surpluses of more than $1 billion, causing the state's insurance commissioner to sound the alarm.

According to the most recent quarterly filings with office of the insurance commissioner, Premera Blue Cross has a surplus of $1,015,692,693, while Regence BlueShield's surplus reached $1,048,103,555. The insurers are two of the largest in the state.

In a press release, Insurance Commissioner Mike Kreidler blasted the surpluses, saying “At a time when people are paying more for their health premiums and getting less, these companies have stockpiled huge assets."

Kreidler has proposed legislation in the past to consider surpluses when reviewing rates. Current state law requires the insurance commissioner's office to ignore them when going over proposed premiums from insurers. The most recent attempt at changing this law was Substitute Senate Bill 5247, which failed to come out of the Senate Rules Committee earlier in the year. Kreidler says he intends pursue this legislation again next year.

“Families are clearly struggling to afford insurance,” said Kreidler. “More than a million Washingtonians have no health coverage at all. Yet very few people know how much these nonprofit health insurers are sitting on.” Kreidler went on to dismiss some insurers' claims that these surpluses are actually reserves, saying that the money is "above and beyond" what the company has set aside.

In a statement, Regence BlueShield defended its surpluses, saying they are needed as a safety net to protect its members against unknown risks and costs. Premera Blue Cross spokesman Eric Earling gave a similar reason, reasoning that the money is needed to pay claims and invest in new technology. He also reasoned that the money is needed since nonprofit health plans don’t have access to equity markets or other forms of capital.

“It’s ironic [Kreidler] is continuing to advocate that idea given that all three local health plans in Washington lost money in the individual market in 2011. Meaning, they’re already drawing on reserves to balance those losses,” said Earling.

Both Premera Blue Cross and Regence BlueShield have seen their surpluses grow since 2000. Regence had a surplus of close to $400 million that year, while Premera had nearly $300 million.

Nonprofit's Organizational Issues To Cost City Thousands

Organizational issues within a Durham, N.C. nonprofit have forced the city to transfer $366,323 into a housing program that is on pace to lose the same amount of federal funds.

Rebuild Durham, Inc. received a loan of $460,000 from the city in 2000 so the organization could rehab 12 low-income houses, according to a story in The Herald Sun. Only eight of those houses were completed three years into the contract, but the city council agreed to increase their loan to $810,000 so Rebuild Durham could complete 13 houses before moving on to another 15.

That's when the real trouble started.

The organization completed the 13 houses in July 2007 -- three months after the city had agreed to provide $138,000 to get to work on the next 15 houses. That money never went to work, however, as Rebuild Durham got rid of its interim executive director, and the deadline to using the loans passed by that time.

Durham's Community Development Department (CDD) urged the organization in 2009 to sell off its properties or give them to another nonprofit after the group ran into trouble paying back city loans and housing violations were found in its properties. Instead, the organization hired yet another executive director, Edythe Thompson, in fall 2010.

Four of the 13 homes that Rebuild Durham completed are in no shape to be rented out to low-income tenants, meaning the city will have to reimburse the U.S. Department of Housing and Urban Development (HUD) $366,323 in federal Home-program grants.

Rebuild Durham has already re-worked a deal it had with SunTrust Bank -- which holds mortgages on most of the properties -- in an effort to restructure its debts. The interim head of the CDD, Reginald Johnson, said it's not likely another nonprofit will step in to help without concessions from Rebuild Durham.

You can read the full story in The Herald Sun.

How To Collaborate Before A Merger

Nonprofit mergers don't just happen overnight. It's a long process that has many ups and downs and complications. In order for everything to happen smoothly, there needs to be constant communication between the parties.

This is the advice of Thomas A. McLaughlin in his book "Nonprofit Mergers and Alliances, Second Edition." He wrote that organizations must keep each other in the loop when discussing the possibility of a merger. This should begin by agreeing in advance -- verbally and in writing -- that no major decisions will be made without prior notice.

What other topics should be discussed during merger collaborations? McLaughlin suggested the following topics:

• Board of directors’ role or composition changes.
• Changes in accreditation status.
• Changes in major leases.
• Changes in office or program site space.
• Collective bargaining status.
• Insurance coverage lapses.
• Major asset acquisition or disposal plans.
• Major media attention planned or anticipated.
• Major new positions being added.
• Management changes of any material kind.
• New programs or services.
• Planned borrowing activity.
• Plans to submit proposals/new revenues received.
• Possible or actual litigation.
• Public processes anticipated (e.g., license renewals)/
• Significant budget variances.
• Unmet tax liabilities.

Arts And Culture A Boon To Local Economies

A new report from Americans for the Arts showed that the nonprofit arts and culture industry generated $61 billion for local economies in 2010.

The report -- "Arts & Economic Prosperity" -- revealed that another $74 billion came from purchases by audience members, according to The Huffington Post. That bought the total to $135.2 billion. The industry also delivered $22.3 billion in local, state, and federal revenue, and provided more than 4 million jobs.

While these numbers are impressive, they are still down from the years before the Great Recession, according to Americans for the Arts CEO Robert F. Lynch. In addition, a report last year in The NonProfit Times indicated that grants to the arts were at their lowest level since 2003. Still, Lynch told The Huffington Post that he was satisfied with the numbers from the report, considering the economic problems that occurred in 2010.

Here are some other nuggets from the report, which was released in conjunction with Americans for the Arts' annual convention in San Antonio, Tex.:

• Visitors from out-of-town to arts events decreased 7 percent.
• Spending in general decreased $25 billion.
• 9,271 arts organizations and 151,802 of their attendees were surveyed as part of the report.

You can read the full story in The Huffington Post.

Nonprofit Donates $2 Million To Fight Short-Term Lending Limits

In an effort to fight potential restrictions on short-term lending, a Kansas City-based nonprofit has donated $2 million to a political action committee (PAC) dedicated to oppose such limits.

Missourians for Responsible Government (MRG) made its latest donation to the PAC -- Missourians for Equal Credit Opportunity (MECO) -- yesterday, according to The Kansas City Star. The latest gift was $181,500, raising the organization's total amount given to MECO to about $2.1 million since last August. MRG is the only donor to the PAC.

MRG hopes its donations will be enough to fight a proposed ballot measure in Missouri that cap annual interest rates on short-term loans at 36 percent. These include things such as payday or car title loans. A 2007 study by the Missouri Division of Finance found that the average interest rate for a payday loan in the state is 445 percent per year, which is about 54 percent higher than the national rate of 391 percent.

The fate of the proposed ballot measure is currently in limbo, after a Cole County judge ruled that the ballot summary and cost estimate were insufficient. The Missouri Secretary of State's office is currently appealing the ruling. Should the ruling be overturned, MRG will be hoping its investment will be enough to stop the measure.

You can read the full story in The Kansas City Star.

Six Questions To Ask About Management Reports

A lot of nonprofits think they have the best and most ambitious plan for the future. That's certainly possible, but it's important to remember a plan is just that. Plans have an annoying habit of going astray, and it's up to management and the board to ensure things stay on track.

Part of this process is creating reports on how the nonprofit is doing. These are called "performance reports" and, according to Howard Berman in "Making a Difference," they are just a subset of a larger management reporting performance assessment and evaluation function.

Before your management team starts pumping out these reports, there are six questions you must ask. Berman wrote that they must be answered if you are to create the most comprehensive report.

• Is the enterprise doing what it said it was going to do? Is it executing its operating plan, producing the anticipated outputs, on time and on budget?
• Is the enterprise doing what it said it was going to do efficiently? Is cost divided by output at least continually improving -- if not, at an absolute best practice?
• Are the outputs that the enterprise is producing achieving the expected outcomes? Is it achieving the expected results -- or benefits for the involved stakeholders?
• Are the realized outcomes being achieved in an efficient manner? This is a combination of questions 2 and 3.
• Are the outcomes producing a significant impact? Are they producing a result that would not have otherwise been achieved?
• Is the effort sustainable? Can it be continued or will it fail of its own weight, due to either financial and/or operational imbalance?

IRS Denies Tax Exemption To Political Group

The Internal Revenue Service (IRS) has revoked the tax exemption of a small political nonprofit, sparking speculation about the future of organizations that are already spending big dollars on the 2012 presidential race.

The name of the nonprofit wasn't revealed in the IRS's original announcement, but Bloomberg News learned that it was Emerge America from its president, Karen Middleton. Based in San Francisco, Calif., the group works with nine state affiliates that train women candidates for the Democratic Party.

In the letter to Emerge America, the IRS wrote that group could no longer be exempt from property taxes because it was not "operated primarily to promote social welfare." Middleton told Bloomberg in an e-mail that the organization now falls under tax code Section 527, which requires them to release the names of its donors.

The IRS's decision has led some to wonder whether prominent political groups, such as the liberal Priorities USA and the conservative Crossroads GPS, could be next. Critics of these groups claim that since their motives are just as political as Emerge America's, they should also not be exempt from property taxes. Washington, D.C.-based Citizens for Responsibility and Ethics in Washington has already asked the IRS to determine whether the American Action Nonprofit should have tax exempt status. The nonprofit is best known for raising $26 million to help elect Republican candidates during the 2010 midterm elections.

Political nonprofits have been increasing their spending on campaigns since the controversial Citizens v. United decision by the Supreme Court in 2010. The ruling removed restrictions on corporate and union expenditures for political campaigns. The decision had an impact almost immediately, as groups that were allowed to keep their donors hidden spent $138 million during the 2010 midterms, according to the Center for Responsive Politics. This was down from $1.3 million in the 2006 midterm elections.

You can read the full story in Bloomberg News.

Grant To Nonprofit Goes Missing

New York Attorney General Eric Schniderman has ordered Queens-based New York 4 Life (NY4L) to explain why a $33,000 grant from the state went missing.

The nonprofit, which is run by Queens councilman Ruben Wills, was supposed to use the grant money to fund a  series of events, including a breakfast for single mothers. Investigators allege that Wills did not fully comply with a subpoena, prompting the state to file a motion to get the organization to reveal its financial records.

The New York Daily News reported that funds were earmarked in 2008 by State Senator Shirley Huntley, who had Wills as her chief of staff. This is the third grant sponsored by Huntley that has come under investigation by Schniderman, though she is not a target in this case.

Wills has been on New York 4 Life's board since its creation in 2006, and also serves as the organization's chairman. The issue with the $33,000 grant first came up when he allegedly did not respond to an April 2011 letter from the Office of Children & Family Services requesting to know how the money was spent. The state then requested NY4L either provide documentation for the funds, or refund it to the state, neither of which occurred according to the state.

After being issued a subpoena by Schniderman February, Wills met with the attorney general and his investigators. He bought only documentation of an undated invoice for $980, according to court papers filed by Schniderman's senior counsel, Emily Bradford. The papers also accuse Wills of skipping other meetings with investigators, including leaving mid-sentence during one questioning.

You can read the full story in The Daily News.