State Senate Approves Nonprofit Board Pay Ban

The Massachusetts state Senate approved a bill on Friday that would ban public charities from paying their boards of directors.

The bill, which is attached as a budget amendment, would forbid boards of directors from earning hefty salaries, all while attending only a few meetings a year, according to a report in The Boston Herald. State Senator Mark Montigny (D-New Bedford), who created the amendment, said that the new law would only impact charities that are paid for by taxpayers.

The bill must now be passed by the House and signed by Governor Deval Patrick.

State Attorney General Martha Coakley had previously made it clear that she wanted this practice illegal. In March 2011, she blasted nonprofit board pay after a report in The Herald showed that Blue Cross Blue Shield of Massachusetts paid its boards of directors $90,000. The organization has since suspended that compensation. Coakley praised Montigny's bill in a statement and reiterated her objection to the practice of paying board members.

"Voluntary service by board members is the practice at the overwhelming majority of public charities, and for good reason," she said. "Compensation of board members raises concerns about maintaining board independence and ensuring the proper use of charitable funds."

You can read the full story in The Boston Herald.

NY Attorney General Sues Race Horse Nonprofit

New York Attorney General Eric Schneiderman announced yesterday that he has filed a lawsuit against the directors of a nonprofit for retired race horses.

The Rochester Democrat and Chronicle reported that Schneiderman accused the Saratoga Springs, N.Y.-based Thoroughbred Retirement Foundation (TRF) of providing inadequate care for its 1,100 retired race horses. The suit alleges the organization took on more horses than it could handle, leading to poor food, unattended injuries, and a lack of shelter for severe weather.

In a statement, Schneiderman said that both the state and the nation need TRF to succeed but that the group's "board has driven this vital organization into the ground." The foundation is also accused of paying its boarding farms less than $3 per horse a day to provide care -- less than half spent by similar organizations -- and that the board diverted funds for horses to repay loans by two of the organization's directors.

TRF Chairman John Moore has denied the allegations, saying that suit is based on a "pile of lies." He insisted that all of the horses they care for are in good condition, and that TRF would pursue every legal avenue to defend itself.

You can read the full story in The Rochester Democrat and Chronicle.

Getting Your Board To Fundraise

Getting nonprofit boards to fundraise is about as easy as pulling teeth.  You're going to get a lot of resistance and, frankly, it's going to be painful.  But there are some ways to make it a little bit easier.

One of the most common complaints from board members is that fundraising is not a part of their job description, so they shouldn't have to partake in it.  The reality is that raising money is a huge part of a board's responsibility.  If you're ready to start a board-bashing party, hold on just a second.  Although it's easy to lay all the blame on the board itself, a lot of it should actually fall on the organizational culture.

In "Nonprofit Management 101," Bob Zimmerman writes that a nonprofit should create an environment that encourages fundraising.  He lists three examples of bad organizational culture:

• Nonprofits that don't let board members know that fundraising is one of their responsibilities;
• Nonprofits that don't train the board in successful fundraising techniques; and,
• Nonprofits that don't recruit new members that have experience with giving and fundraising

If you are to get your nonprofit board on the right track, it is imperative that you make sure your organizational culture doesn't resemble the traits above.

You can learn more fundraising tips like this by subscribing to NPT Instant Fundraising.

Head Of Chicago Nonprofit Ousted

Robert Wharton, the head of one of the largest nonprofits in Illinois, was ousted from the organization after a series of financial-related scandals.

The Chicago Tribune reported the news today after the announcement from the board of the Community and Economic Development Association (CEDA) of Cook County.  The move follows a report from The Tribune earlier in the week that Wharton, who was CEO of the organization, had failed to make court-appointed payments to his former secretary, 91-year old Dorothy Hork.

The Cook County public guardian accused Wharton of manipulating Hork, who has dementia, over several years to write him checks for tens of thousands of dollars.  Wharton had agreed in 2011 to repay her $78,000 through a series of monthly installments.  He eventually defaulted on those payments after writing her checks that bounced due to a lack of funds.  He still owes Hork $71,000, which he has since agreed to pay using retirement funds.  Circuit Court Judge Ann Collins-Dole has demanded he pay $17,400 by the end of the month.

Wharton had led CEDA since his appointment in 1997.  The organization helps residents of Cook County with programs such as child and family development, housing, and weatherization.  Abe Thompson, a spokesman for the organization, would not say how the board came to its decision, but it's likely Wharton's recent problems played a big role.

You can read the full story in The Chicago Tribune.

Zurich Webinar Highlights

UPDATE 12/12/2011: The slides and recording are now online.  You can see them in our online library.

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Thanks to everyone who attended today's webinar on risk assessment and designing internal controls.  We once again send our thanks to Zurich, as they were instrumental in getting this webinar done.  We also want to send special thanks to our three speakers, Peg Jackson, Tom McLaughlin, and Susan Ellis.  They were all fabulous today.  If you were not able to attend the webinar, here are some of the things that participants learned:

• Boards must review Form 990 before it is submitted to the IRS.
• All boards should have an audit committee.
• The most functional board size is no more than 15 individuals.
• CEOs shouldn't receive compensation that is 25 percent more than the next highest paid executive at the nonprofit.
• If a volunteer does something seriously wrong--something that could put the organization at risk--it is within the rights of an organization to remove them.
• Make sure a volunteer can perform all tasks necessary before hiring.  They should be able to back up the skills they claim to have.

We will also be posting the slides and audio of the webinar on our online library within the next 24 hours.  Stay tuned.

MBA Programs Pair Students With Nonprofit Boards

Nonprofit boards are trying to get an influx of youth.  That goal may be within reach thanks to help from MBA programs.

According to an article in Bloomberg Business Week, schools with MBA programs in nonprofit management are teaming up with local nonprofit boards.  The article cites the example of Columbia Business School's Nonprofit Leadership Program, which pairs 30 MBA students with a local nonprofit board each year.  Ryan Bell, who attended the school in the Fall of 2010, was assigned to the board of Friends of the Children of New York.

Bell didn't just attend meetings while serving as a Board Fellow; he also assisted the board's fundraising committee by analyzing the organization's five-year strategic plan.  His assistance played a key role in developing a new evaluation system for students, which ultimately resulting in $275,000 in additional funding.  All this was done at the end of his one-year term.

Programs like the one at Columbia are becoming more popular as nonprofit boards are seeing it as an opportunity to connect with a younger audience.  We had written an article a couple of years back that showed that only 2 percent of nonprofit boards have members younger than 30.  Make sure to check that out to get a better sense of the age disparity at nonprofit boards.

If you want to read the full article on Board Fellow programs, check out the Bloomberg Business Week website.

Nonprofit Board Member Term Limits Spark Debate

Nonprofit boards often spark debate among people.  There are some who believe that board members should be paid, while others think that is exactly the wrong thing to do.  Board term limits are also a hot button topic in the nonprofit sector.  These limits are discussed at great length in the latest issue of The NonProfit Times, using two opposing viewpoints on the role of nonprofit governance.

The first of these views comes from Richard Buery, president and CEO of Children's Aid Society.  His organization has instituted four, three-year terms for board members this year.  The vote for this change was unanimously approved by the board.  Buery believed this was the right change to be made because it helped limit the size of the board.  He thought that in order to have critical conversations about the future, you "can't have 50 people in the room."  This point was backed up by research that showed that when there are more than seven people in a room, the conversation will start to lose focus.

Children's Aid Society is not alone when it comes to imposing term limits on boards: 70 percent of nonprofit boards have them, according to the BoardSource Nonprofit Governance Index of 2010.  That doesn't mean everyone thinks they are a good idea.  Bruce Hopkins, a partner in the Kansas City, Kan., law firm of Polsinelli Shalton Flanigan Suelthaus, believes that nonprofits should be able to manage themselves without forcing people out:

"Limits can force new blood on a board, which can be a good thing but sometimes organizations lose people who are competent, who can serve and want to serve, but can’t."

What do you think?  Are term limits for boards a good idea, or are they unnecessary?  Feel free to chime in below.

Management Tip: Firing Up Your Board Members

Did you know board members can be very successful fundraisers?  Given the right opportunity, they can do a lot to help your organization raise money.  What can nonprofits do to use their boards to their full potential?  The answer is simple: Fire them up!  OK, maybe that's a little vague.  Onto the bullet points!

* VIP Prospect List -- Have them write down the 10 most important people they know who could catapult the organization.


* Host Small Socials -- Don’t just solicit people for money, have a good time during it while having a party.


* Host Tours -- Invite board members to have friends tour program sites together, while having them call their friends the next day to get their impressions.


* Thank You Calls -- One out of 10 gifts comes from board members making a thank you call after 24 hours of receiving the gift. After the next solicitation, those who gave, gave 39 percent more, and after 14 months gave 42 percent more.

Want to learn more on this topic?  Read the full article over at our management tips page.

NPTtv Summary: End of Nonprofit Board Ban?

Note: This is a summary of a story from the newest episode of The NonProfit Times TV.

Could a 15-year ban be coming to an end?

If The Office of Government Ethics (OGE) has its way, federal employees will be allowed to serve on nonprofit boards without approval from their agencies.  The organization published a proposed rule in the Federal Register to do away with that regulation, which has existed since it was first passed in 1996.  They noted in their new proposal that the supposed conflicts of interest between an employee’s job and their financial duties to a nonprofit are more theoretical than real.  Therefore, they argued, the regulation was not necessary.

Whether this rule will become law is anybody's guess, but it's certainly something to keep an eye on.