Finally, Some Leadership

by Gary Snyder

Kudos to The Robert Wood Johnson Foundation joining the Center for Creative Leadership by launched a national program to train the next generation of nonprofit leaders. Its focus is to boost the skills and capabilities of early-to mid-level professionals working in health and health-related organizations in nine U.S. communities.

Health care is one of the largest segments in the nonprofit world. Based on Nonprofit Imperative, my monthly e-newsletter, it is certainly one sector that needs attention. As a former hospital administrator, I can attest that there are substantial weaknesses in the staffing skills, but more importantly, its governance. Healthcare institutions are very complex organizations. Reimbursement and other financial matters are very unique and require a skill set on the part of staff and board that is atypical to any other nonprofit.

Because of the heavy involvement of government in regulating the institutions, another set of unique skills is needed. Depending upon the size of the institution and the staffing complement, financial and regulatory issues could easily consume an inordinate amount staff.

Unknown to most of the general public, healthcare has a small margin in which to work. With recent changes, the revenues over expenses are increasingly narrowing. This presents problems relating to acquiring capital and maintaining cutting edge technology. It’s a tough challenge!

This new program is, hopefully, a thoughtful response to a critical need within the overall charitable world. A lack of leadership in the nonprofit sector has resulted in a growing number of abuses and poor practices.

A study reported in the New York Times showed that an estimated cost of fraud was $40 billion or 13 percent of the $300 billion donated. Other studies have similar results.

With these egregious offenders getting growing press coverage, the public’s confidence in our charitable organizations is diminishing. Harris Interactive Polls, for 2005 and 2006, have indicated that barely one-tenth of those surveyed believe that charities do a very good job spending money wisely.

There is a growing perception that all nonprofits lack accountability. Without trust, the backbone of our charitable organizations cannot be preserved, therefore compromising contributions.

In most instances, healthcare organizations have minimal standards to which they must adhere. If other nonprofits do not subscribe to a set of principles and practices that are generally acceptable to the public, the Internal Revenue Service, Congress, and state attorneys’ general will force adherence to a new regulatory code.

While I applaud the RWJ Foundation/Center for Creative Leaderships plans, the linchpin for success is going to be the content of the program and the degree to which it will change current practice.

I wish them well.

Gary Snyder is the author of Nonprofits: On the Brink (iUniverse, February, 2006) and articles in numerous publications. He is also a board member of NCRP. His email: gary.r.snyder@gmail.com; website: www.garyrsnyder.com; phone: 248.324.3700.

Diversity Debate Rages On

by Yna Moore

The debate over California's AB 624 legislation continues. The bill would require the state's largest foundations to disclose diversity information regarding their board, staff, grantees and vendors.

Many foundations and their trade associations have strongly opposed the bill, arguing that their decision to fund an organization is based solely on their likelihood of achieving the most impact.

However, “improving the societal impact of foundations and improving their support for diverse communities need not be mutually exclusive propositions,” said Aaron Dorfman in a recent posting on this issue. “In fact, there is growing evidence that diversity and effectiveness go hand in hand.”

In a recent commentary on the Chronicle of Philanthropy (Foundations Should Be Required to Disclose Data on Charity, May 1), Pablo Eisenberg[1] notes that despite being “poorly crafted,” the legislation’s purpose—to require foundations to disclose race and gender information of their boards and grantees—is fundamentally sound. The bill will “provide the public and the foundations, at least in California, with a more accurate picture of the extent of diversity at foundations and their grantees,” said Eisenberg. “Armed with this information, as well as their growing awareness of the problem, foundations hopefully will begin to take much more seriously their responsibility for adequately supporting what has now become the majority of Americans.”

In a separate article (California’s Legislation Won’t Achieve True Diversity At Foundations), Mark Rosenman argues for foundations to truly reflect on their missions and how they translate this into practice. Beyond the numbers, the issue of diversity is about redistribution of power among foundations and nonprofits.

In an earlier post on this blog, Pete Manzo suggests that we’ll need better information than what AB 624 mandates to improve how philanthropy responds to the needs of underserved communities. He proposes a system that allows us to view where foundation dollars are going, the demographic attributes of those places, and information on the subsets of people being served by those grants.

Do you think it’s necessary to have legislation like AB 624 requiring foundation disclosure of diversity information? Why or why not? Do you think AB 624 is an effective way to channel more foundation funding to nonprofits serving communities of color and other marginalized groups? If not, how might this legislation be improved (assuming that you think legislation is needed)? Are there other ways to go about measuring and disclosing more accurately and effectively the current state of diversity in foundation practices and grantmaking? Tell us what you think!


[1] Pablo Eisenberg is a co-founder and former board chair of the National Committee for Responsive Philanthropy.

Yna Moore is communications director at the National Committee for Responsive Philanthropy.

Are grant application and reporting procedures impediments to efficiency and effectiveness?

by Niki Jagpal

This week Project Streamline, a joint effort of grantmaking and receiving organizations to improve reporting and application procedures, released a new report Drowning in Paperwork, Distracted From Purpose. The report identifies ten ways that current application and reporting systems inhibit nonprofit effectiveness including insufficient net grants and lack of trust between nonprofits and funders. The report makes four recommendations for grantmakers based on the study’s findings.

Project Streamline’s report comes at an opportune time; a recent article in the Chronicle of Philanthropy (subscription required) highlights efforts by the Internal Revenue System (IRS) to increase the effectiveness and efficiency of charitable organizations. Steven T. Miller is the current commissioner of the IRS’s tax-exempt and government-entities division. As the Chronicle notes, he made a series of remarks at a conference on tax-exempt organizations convened by Georgetown University Law Center Continuing Legal Education Department this week. One strategy Miller suggests is for the IRS to “create and enforce a standard to ensure that organizations spend in line with their resources.” While monitoring is not currently the purview of the IRS, Miller said that the IRS would be “more aggressive” in keeping a watch over the “efficiency and effectiveness” of charitable organizations.

If nonprofits are to be truly empowered to achieve their missions by focusing on effectiveness and efficiency, it is clear that cumbersome application and reporting procedures have to be addressed. But the process of grant applications and reports is only part of the solution; as Miller states “[…] every charity should be make responsible and appropriate use of its resources to achieve its charitable purposes. That is what the tax-exempt subsidy is for.” [emphasis added]

Moreover, while the Chronicle article and Miller’s remarks discuss revisions to the IRS’s 990 form, the publicly available informational tax returns filed by nonprofit grant recipients, the same standard of effectiveness and efficiency ought to apply to the form 990-PF, the IRS’s tax form filed by private foundations. While efforts to include “efficiency indicators” in the revised 990 forms failed, the new forms will include questions about nonprofit governance and management policies. Miller sees the link between increased transparency and enforcement: “the question is no longer whether the IRS has a role to play in [governance] but rather what that role will be.”

Project Streamline’s work is commendable and adds value to sector-wide attempts to improve the grantmaker-grantee relationship. Now, imagine what the charitable sector would look like if we had simple criteria on the 990 PF forms for measuring philanthropic management and governance to support Miller’s vision of more effective and efficient charitable organizations?

Niki Jagpal is the research director at NCRP.