Guest Column

Is it panic time for nonprofit organizations?

August 1, 2014
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Nonprofit organizations increasingly are facing financial challenges. Many face competition from other nonprofits seeking donors’ attention. Some are being bypassed by other more efficient organizations. Some face declining government funding. Some are impacted by changing times.

Yet some of their responses give rise to concerns, especially if they concentrate on finances rather than service. Unfortunately, if they focus too heavily on finances, their pursuit of a mission is not apparent. Fundraising sometimes appears to takes priority over service. Is it time to panic?

In the health care sector, nonprofit organizations provide a wealth of services, many of which could not occur without the generosity of donors. Yet donated resources are not limitless — just ask the local United Way, which must make regular decisions about what to fund or not fund.

Increasingly, financial challenges cause concern about sustainability. Yet nonprofits’ first reactions should be related to their mission. And their mission must be embraced by their boards. If financial panic starts to outweigh pursuit of the mission, board members are obligated to ask some questions:

  • Is the mission still valid?
  • Are we providing what the community wants, or what we believe it should have?
  • Can we show that we are pursuing the mission, and are we doing what we say we should?
  • Do funders still value our mission, and what is the pattern of support: stable, increasing or declining?
  • Who are our funders and what do they say about our services?
  • Are our fundraising activities taking up valuable service time?
  • Do our fundraisers complement our services, and is there a connection between fundraising and our services?
  • Can other organizations provide our services more efficiently or more appropriately?
  • Do we need to stay in existence?
  • What would happen if we went out of business?

An example of an organization confronting reality comes from the National Foundation for Infantile Paralysis, better known as the March of Dimes. One of the largest national charities at one time, it was founded to combat polio. A major figure in its support was President Franklin Roosevelt, himself a polio victim. It faced a key point when, in 1955, polio vaccinations were pronounced safe and effective. National immunization campaigns caused the polio rate to plummet.

Yet the March of Dimes was well organized to raise money and simply could not go out of business. In 1958, it publicly changed its mission to preventing birth defects after its board decided either the mission had to change or the organization had to go out of existence. For the sake of those with preventable birth defects, thankfully it chose to change.

Do current boards of directors of nonprofit organizations have the ability to make such critical decisions? This depends on several factors:

Are the board members committed to the organization or its mission?

Are the boards effectively in control, and do they have clear policies to affirm their understanding of the need for their leadership?

Are such policies being followed?

Does the board meet regularly and schedule time to discuss the pursuit of the mission?

Do members closely review financial statements to be sure they are solvent?

If revenues are falling, do they assess their community’s concern for their mission?

Do members consistently attend meetings?

Are rates of pay for any staff appropriate?

Obviously, danger lurks if paid employees exert control of the organization’s directions. Too often, employees are more concerned with keeping a job than pursuing a mission. This is fine for the for-profit sector but unseemly for nonprofits. Just as our Congress contemplates a lawsuit against the president for failing to follow the mandates of laws, might some nonprofit agency staff be challenged for not following the mandates of their boards?

I am aware of some nonprofits that allow their staff to dominate. Where budgets are not followed. Where policies, if adopted, are ignored — policies that might require open elections of board members and officers, quorums for voting at meetings, competitive bidding for contracts or consultants, open disclosure of conflicts of interest, amendments of budgets if spending needs change, avoiding conflicts of interest in hiring and spending, etc. Effective oversight sometimes appears to be lacking, with panic over finances being the excuse for failure to be effective board members.

Our nonprofit organizations provide many needed services and make our communities richer. However, they must continually examine themselves to be sure they stay on target and respond to the higher calling of their mission. Panic over finances must be secondary to the very purpose of an organization. Those that can articulate the relevance of their mission and make the case for continuation deserve our support. Some must face the fact that their time may have come and gone.

Lody Zwarensteyn is a longtime observer of the West Michigan health care scene and former president of a health care nonprofit in Grand Rapids.

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