posted on: Wednesday, November 28, 2007

There has long been the idea of “healthy competition” in America. Today, the idea continues to evolve and has surfaced in the matter of education reform.

NCRP’s new report Strategic Grantmaking explores education reform through a number of small and large foundations’ effective support of school privatization. Many of these foundations, particularly those considered “conservative,” see competition between schools as a worthy approach to improving the quality of education.

The Walton Family Foundation, of Wal-Mart Corporation fame, is the largest contributor to school privatization movement with nearly 16 percent of the Walton Family Foundation’s total grantmaking supporting school choice organizations in the year 2005.

Walton’s theory is, “that the ‘yardstick competition’ of private schools, drawing pupils armed with scholarships and vouchers, will compel public school systems to change, to become more malleable to parents’ needs, to break the constraints he and other believe inhibit effective K-12 education.”

Chester Finn, President of the Thomas B. Fordham Foundation, also supports the idea of competition for improving our public school system. He says, “What public education needs is to be forced to change… That force can come from the marketplace, from the customer, via competition from private schools and charter schools and virtual schools and privately managed schools and home schools and much more.”

Does today’s public school system need to be “forced to change”? Is creating competition with private schools enough to improve standards in public schools?

We have heard it time and time again…”I resign my position as CEO of the American Red Cross”. We’ve heard it four times in the last 7 or so years. We’ve seen hundreds of thousands of dollars in severance pay approved by the ARC board.

 

On November 27, 2007, Mark W. Everson, CEO of the Red Cross and former head of the Internal Revenue Service just 6 months ago, resigned “for personal and family reasons”.  The ousted president took personal liberties with a subordinate.

 

To its credit, the board of governors acted promptly when it found out that Everson had engaged in a “personal relationship”. However, the board should be well rehearsed in terminating CEOs. The departure continues a trend of rapid turnovers at the top. To be fair, personalities and performance were the initiators in the previous three. Bernadette Healy, a physician, after mishandling September 11 attack response. Marsha Evans left in 2005 after the Katrina fiasco. Interim president, Jack McGuire served between Evan’s departure and Everson’s appointment.  There was apparent friction between the board of governors and some of the former executives.

 

As with the last three executives, the board tried to cover its tracks by saying that this departure “is disappointing…but the work of the American Red Cross will go forward”. Not a ringing endorsement of the Red Cross’ future.

 

This is a serious blow to the organization as it started to gain some momentum in wiping out its dilapidated image. The September 11 and Katrina responses were a hit to the already tenuous organization. It had bureaucracy and accountability problems. Many of the local and regional executives were at wits edge in dealing with the national organization. The organization lost its coveted designation as the first responder, the go-to agency, to FEMA. Recently there was criticism of the Red Cross over its aid program for victims of Hurricane Katrina, Means to Recovery.   The agency was, however, gaining some praise for its role during the recent Southern California wildfires.  

 

The American Red Cross should have seen a problem brewing when Everson, cognizant that the organization was bloated at the top, brought in several of his associates from the IRS. While that shouldn’t be an indictment in itself, he chose one of his closest former employees, his chief of staff, as the Red Cross’ ombudsman…the organization’s chief critic. Congress created the position after a lengthy investigation.

 

The selection process for the CEO is taking place under cloudy circumstances. To trim expenses, Everson indicated that he was going to have to lay off 3,000 employees at the national headquarters. The Board is in the midst of a newly revised charter which clarifies the roles of the executive and board and eliminates over half of the board seats in a couple of years.

 

Times are a changing! The leadership of one of America’s stalwart agencies has a challenge as it has never had before. Hopefully the decision-making will result in better results.

 

A lot of people are watching.

 

 

Gary Snyder is the author of Nonprofits: On the Brink and articles in numerous publications. His website: www.garyrsnyder.com. He can be reached at 248.324.3700

 

posted on: Tuesday, November 06, 2007

Virtually everyone has seen the financial and trust problems facing the charitable sector explode because of the leap in malfeasance. Some say that number represents 6% of all transgressions. Estimates in 2006 have pegged nonprofit fraud as high as $18- $40 billion each year. Last year, Nonprofit Imperative has documented, solely from public sources, more that a billion dollars in misdeeds.

For years we have been comforted to know that our prosecutorial system would weed out the bad apples. But the tide is turning in favor of the crooks and with more frequency they are turned out on the street with little more that a slap on the wrist. There are several reasons for lack of strict enforcement.

The current situation in a Michigan county is quite common. In August, 2007, the chief judge of the circuit court ordered sentence reductions for 266 prisoners at the county jail to alleviate chronic overcrowding. The day the order was issued, 45 percent of the inmates were released. Since August 2005, more than 1,800 inmates have been released.

The overcrowding and other issues have other consequences. We are seeing prosecutors suggesting lighter sentences. In California, a judge disregarded a probation recommendation from prosecutors and imposed a jail term on a woman who embezzled $110,000 from the Red Cross while working as a financial manager. That is a rare occurrence. On the other hand, the head of the Juvenile Diabetes Research Foundation in Southfield Michigan pleaded guilty to stealing $250,000 and got no jail time.

At Santa Clara County's Goodwill Industries the executive was accused of playing a lead role in a conspiracy to embezzle as much as $20 million from Goodwill during his 17-year tenure as local president. Weekly bundles of $3,000 in skimmed cash were given to him. The executive was specifically accused in that indictment of diverting at least $800,000 himself to overseas bank accounts. He is to merely pay restitution, not serve any prison time

Prison or jail sentences are apparently going to become rarer. Because of an inability to fill senior positions at the Department of Justice and because of a budget squeeze at the U.S. Attorney” offices, there has been declines in crime prosecutions and delays in major investigations. Prosecutions are down in white collar offenses such as charitable embezzlement. In a two year period, 2004-2006, the number of prosecutors fell 2.4% and continues falling to this day. Prosecutors have had to raise thresholds for prosecution which means more money can be stolen before it reaches the radar for investigation.

For decades, the nonprofit sector has maintained a well-deserved imagine that has endeared it to the general public. The basis of that relationship has been trust. Trust is a precious resource. As recent studies have shown, the public’s trust in charities has plummeted. Even though those nonprofits involved in malfeasance are small it is growing exponentially-the amount of dollars involved is huge. With the sector’s trust breaking down, all nonprofits begin to look suspicious.

Relaxing sentences is not a good start.

Gary Snyder is the author of Nonprofits: On the Brink and articles in numerous publications. His website: www.garyrsnyder.com. He can be reached at 248.324.3700