The Built-in Risk of Growth in Government-funded Nonprofits

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March 18, 2017; Detroit Free Press

Government grants and contracts have a pattern of fueling unsustainable organizational growth by rarely funding all of the costs associated with the contracted program and service. Yet, one of nonprofits’ main functions is to provide services the state is otherwise obligated to provide. Responsible nonprofit leaders need to fully articulate program costs and improve evaluation systems, thereby providing long-term dependable services.

Recently, the Greening of Detroit laid off all of its 26 employees and temporarily shut down operations. According to its last published IRS Form 990 return, in 2014, the nonprofit organization had a budget of over $4 million and over 200 employees. Over its 16-year history, it has planted tens of thousands of trees, replacing a large number lost to Dutch elm disease. The organization plans to restart programs in April once funding resumes.

At its peak, the organization had employment training and urban agriculture programs as well as tree-planting activities. Much of its work was fueled by youth and volunteers and the majority of its funding was programmatic government grants. Unfortunately, this structure didn’t provide for the administrative or overhead costs necessary to fuel a healthy organization.

The Nonprofit Quarterly has written many articles chronicling the unsustainable growth of diverse nonprofit organizations. Often, this stems from decisions to accept government grants that barely fund the program, staffing, and equipment and not the space the program is housed in. Lacking the funds for utilities, supervisory, administrative, and overhead costs, organizations have little margin to fund activities to develop other, less restrictive funding and earned income revenue streams. Without other healthier revenue streams, the nonprofit has few options when government funds are late, disrupted, or ended.

Another trap is the belief that using volunteers doesn’t cost money. Volunteer activity may be free, but the identification, training, and supervision of volunteers are not. Without funding to support volunteers, many will become frustrated, and more staffing will be needed to replace the ones that leave.

These decisions create a propensity to continue these untenable government contracts. After all, how can nonprofits argue the contract is insufficient when they have a history of accepting it as full programmatic funding? Additionally, leaders and staff perceive it as a responsibility to provide the services outlined in the organization’s mission and not as creating a dangerous unsustainable precedent. These conditions create an environment where burnout and insufficient staffing become the norm.

Greening’s solution is to develop fee-for-service landscaping opportunities for condominiums and other large landowners. Hopefully, the new earned income revenue stream will be up and running before the federal government guts the Great Lakes Restoration program that’s responsible for funding Greening’s tree planting program.—Gayle Nelson

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In the Philanthropic Weeds: Cannabis Giving Goes Local

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January 12, 2017; Denver Post

Last November, seven more states legalized marijuana, increasing the total number of states where the use of marijuana in some capacity (recreational or medical) is not illegal to twenty-eight. Overall, the legal marijuana industry could gross as much as $20 billion in revenue by 2020. Many of the new businesses making up the legal marijuana industry are looking to give back to their communities, but many nonprofits are hesitant to accept their donations.

Tim Cullen, the CEO of the Colorado Harvest Company, was surprised by the challenges he encountered when he decided to donate some of his business’ earnings. “I have been shocked at how few places will take our money,” he said. Colorado Harvest Company is a chain of shops selling marijuana products. Cullen is also a shareholder of O.penVape, a company producing vaping pens.

Although Colorado legalized recreational marijuana over five years ago, many nonprofits continue to refuse gifts from the industry. Luckily, Cullen felt strongly about the need to give back. “I think philanthropy is what responsible businesses do. It’s not a choice so much as the next logical step,” he said. Eventually, he and his business partners at O.penVape made a donation of $250,000 to Levitt Pavilion Denver to partially fund a new amphitheater in Ruby Hill Park in the southwest part of the city. Once it is finished, the nearly $5 million Levitt Pavilion will host many events, including fifty free concerts each summer.

Accepting this gift was not a simple decision for Chris Zacher, the local executive director. Since the pavilion will be located in a city park, he first reached out to the city of Denver. City officials did not approve or object to the potential partnership but encouraged Levitt to reach its own conclusion, according to city licensing spokesman Dan Rowland. Zacher’s second phone call was to the organization’s national board. “We took it to Levitt, they took it to the board, and as long as it is legal in their state and not promoting the sex trade or tobacco, they were fine with it,” he said.

Although there are 2,966 medical marijuana dispensaries, 3,973 retailers, and 4,200 cultivators across the country, marijuana remains classified as a Schedule 1 drug by the federal government. This is the same classification as heroin, LSD, and ecstasy. At the same time, the public’s views of marijuana continue to evolve. According to a Pew Research Center survey taken in October of 2016, 57 percent of adults in the U.S. believe marijuana should be legal while 37 percent believe it should remain illegal, compared to 32 percent supporting legalization and 60 percent against ten years ago.

This evolving landscape creates risk and uncertainty for the industry, for the thousands of people who legally use it to relieve pain, nausea, muscle spasms, and other conditions, for those who use it for recreational purposes, and for the philanthropic community.

One misconception is why the industry is giving. Although Colorado Harvest Company and O.penVape will be the Pavilion’s headline sponsors, most do not give for marketing or visibility. “I think there is some misunderstanding oftentimes between cannabis (businesses) and nonprofits where nonprofits assume what cannabis wants out of donations is marketing and visibility, and we find the industry does not want that,” said Courtney Mathis, COO of KindColorado. Additionally, since the industry remains illegal in the federal government’s view, businesses can’t write off or deduct their gift on their taxes.

Due to the continued hesitation, the industry as a whole has created a giving campaign through the DoingGood.FOUNDATION. DoingGood.FOUNDATION is a national organization “providing small and local charities with free resources to help them grow and help meet more of our community’s needs!” On April 20th, 2017—yes, 4/20—they are organizing a national campaign to educate the public on the connection between the cannabis industry and local communities. All of the funds raised during the campaign will be given to small nonprofits in the states where the donations originate.

In our opinion, there are far more questionable industries nonprofits take donations from and invest with. As people’s judgment of marijuana and the legal marijuana industry continues to transform, more and more nonprofits will be exploring potential donations and beating back the unease surrounding them.—Gayle Nelson

This article has been altered from its original form. The $250,000 donation to Levitt Pavilion Denver came as two $125,000 donations, one each from Colorado Harvest Company and from O.penVape. NPQ thanks CHC for the clarification.

Original Cite: https://nonprofitquarterly.org/2017/02/08/philanthropic-weeds-cannabis-giving-goes-local/

New Open Road Philanthropic Project Takes On Nonprofit Project Derailments

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January 13, 2017; New York Times

A new philanthropic project called the Open Road Alliance has been established to help grantees that hit snags in promised projects. It is intended both to help the grantees complete projects and educate funders about the need to be supportive when such snags appear.

The Haitian nonprofit organization SOIL provides toilets to the poor residents of Port-au-Prince. These toilets don’t just offer residents a measure of dignity and safety; they also lead to the production of fertilizer, fueling employment opportunities and environmental restoration. Working since 2006, the organization, with a budget of $1.3 million, has empowered some of the poorest communities in the world to restore their environment by transforming hazardous pollutants into precious resources.

Providing services in Haiti is fraught with challenges and risks. SOIL is increasing the probability of success by employing staff who speak the local language; putting local suppliers, including local residents, to use in decision-making; creating projects with an earned income stream; and valuing diverse educational experiences. Even with all of these measures, the project was on the edge of failure less than two years ago when the private company running the local landfill lost their contract. Afterward, the area became full of smoke as trash was burned to maintain access. Employees were only able to reach the site once every two weeks, and there was no contingency landfill in the area.

SOIL’s predicament is not unusual. According to two separate reports by the Clinton Global Initiative and the Open Road Alliance, about one in five projects face challenges that could “slow or derail” successful outcomes. The large number of projects facing adversity is due in part to the failure of nonprofits to discuss likely risks with donors and donors’ inability to identify potential complications. According to the Open Road Alliance’s report, 76 percent of donors don’t ask potential grantees about the risks they face, and 87 percent of nonprofits leaders state that grant applications do not ask about potential hurdles.

The Open Road Alliance is a funding initiative providing one-time grants and loans covering “contingency funding that nonprofits frequently encounter” across sectors worldwide. Its report is based on its survey of four hundred grantors and grantees. The findings were centered on a random sample of two hundred organizations designed to determine the frequency, donor response, current policies and procedures, and consequences of unfunded requests on the relationship between funder and recipient.

Surprisingly, the report found major differences between grantor and grantee perceptions:

  • Grantees believe that asking for additional funds negatively affects the likelihood of being awarded future grants, while the vast majority of Funders claim such requests have no effect on future decision-making.
  • Funders incorrectly believe that if they deny a request for contingency funds, Grantees will find an alternate source of funds.
  • Grantees report that when requests for contingency funds are denied, projects are much more likely to be delayed and somewhat more likely to be reduced in scope than Funders believe; Grantees report 16 percent of such projects are terminated, while Funders estimate 10 percent.
  • Funders believe that Grantees are more comfortable talking about these issues with them than Grantees report.

Due to these findings, Open Road Alliance teamed up with the Rockefeller Foundation and Arabella Advisors to assemble two dozen organizations, including the Bill and Melinda Gates Foundation, Goldman Sachs, and the law firm Patterson Belknap Webb & Tyler, to develop a toolkit to identify and assess project risks. The new resource is available to the community and is constructed to encourage donors to use it in whole or in part to better assess project success.

The kit is part of an increased need to apply business fundamentals to grant making and to encourage grant makers to strategically take on more risky projects. To be more strategic, grantors need more information. The kit includes seven items to help facilitate conversations between donors and potential grantees. Equally important, the developers acknowledge the power differential between grantor and grantee.

“Part of the reason we focused on donors is they have the money,” said Dr. Michaels, a clinical psychologist who is married to David Bonderman, a founder of the private equity firm TPG.

“There’s a power differential,” she added. “It’s hard for a nonprofit to come to a funder and say, ‘How are you going to insure us if something gets screwed up?’”

While funders are fond of touting the need for innovation, taking risks and being open about the inevitable complications that surface is still somewhat foreign to many nonprofit/funder conversations. The answer, according to Open Road Alliance, is less about being a helicopter funder and more about simply being available to face reality with resources. This culture change could not come soon enough for SOIL. As the landfill access challenges continued, the organization went back unsuccessfully to its project donor to ask for additional support. The donor suggested Open Road Alliance, who granted SOIL $100,000 for a new composting site.—Gayle Nelson

Original post: https://nonprofitquarterly.org/2017/01/25/new-open-road-philanthropic-project-takes-nonprofit-project-derailments/

Sexual Assault on Campus, Anonymity, and Title IX

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January 4, 2017; New York Times and National Public Radio

According to a 2007 study by the National Institute of Justice, one in five female college students (and one in 16 male college students) are sexually assaulted and more than 90 percent do not report the crime. One of the reasons students do not report is fear of retaliation, particularly when the accuser is one of their professors. If the student reports the crime to the college’s Title IX office instead of the criminal justice system, they can remain anonymous—but that can often lead to other problems.

Two University of Kentucky entomology graduate students were separately assaulted by one of their professors. They feared retribution and explored opportunities to report the crime while maintaining their anonymity. One of the students explained their decision:

I just spent a good portion of my life in grad school trying to further my career and if I’m labeled as someone who filed a sexual assault claim against a professor, that could very easily backfire against me. There’s a lot of people in academia who think that there are women who make up stuff like this.

They filed a report in the university’s Title IX office. Title IX is a federal law prohibiting gender discrimination on college and university campuses. Schools failing to follow Title IX risk losing federal funding. Once a report is filed, the office is required to investigate. During the investigation, the accused and accuser remain anonymous. Unfortunately, the investigation and subsequent hearings are fraught with challenges.

One obstacle is that each school’s office has jurisdiction only over its students and personnel. If the accused decides to leave the institution before the hearing is completed, the proceedings end immediately without any reference to the investigation on their record, allowing the accused (assuming he or she were guilty of the offense) to potentially assault additional students at the new school.

Another challenge is how the hearing is decided. Who presides over the hearing varies from school to school and usually doesn’t include officials from the criminal justice system. Title IX mandates the hearing utilize the “preponderance of the evidence” burden of proof. This standard is significantly less than “beyond a reasonable doubt,” which is required in a criminal trial. Nonprofit Quarterly has reported on the controversy surrounding 2011 U.S. Department of Education “guidance” on college sexual assault that has been opposed by some in academia, including one specific letter issued by 28 Harvard Law School professors criticizing the lack of due process in college sexual assault invstigations. Participating in a hearing is often extremely difficult for a survivor of assault because of the stresses that come with proving the activity occurred. By using the lower standard of proof, the hearing puts a limit on any additional pain, trauma, and expense.

In the case of the two University of Kentucky students, the Title IX office scheduled an official hearing after interviewing dozens of people and collecting evidence. But the hearing never occurred because the professor resigned before it could begin. Frustrated, the women reported the assaults to the university’s student newspaper. The media attention led to many additional stories and FOIA requests for the full Title IX report. The students feared their anonymity would be compromised and joined an action by the university to stop the report release. Judge Thomas Clark of the Fayette County Circuit Court plans to issue a ruling in the next two weeks.

Schools that fail to conduct proper hearings can be subject to government complaints and lawsuits. Currently, over 200 institutions are under federal investigation due to complaints connected to sexual violence investigations and proceedings. A better solution might be a society that better supports survivors of sexual assault.—Gayle Nelson

Update: On Tuesday, 1/24/2017 The Judge ruled in favor of the University to prohibit the release of the report to protect the anonymity of the students. The Newspaper states it will appeal the decision.  http://www.npr.org/2017/01/25/511554841/judge-sides-with-university-in-legal-fight-with-student-newspaper

Original post: https://nonprofitquarterly.org/2017/01/12/sexual-assault-campus-anonymity-title-ix/

18 Months of Budget Impasse in Illinois Stresses Nonprofits and Devastates Lives

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November 29, 2016; Chicago

Throughout the 2016 fiscal year, Illinois government leaders failed to pass a state budget. Without a budget, many nonprofits did not receive any state funding even though they had valid contracts and performed the promised services. One day before the 2017 fiscal year began, state leaders passed a six-month stopgap budget to fund services for the first half of 2017. That budget will end on December 31, 2016.

Last week, the legislative session ended without state leaders passing a budget, leaving many Illinois nonprofit leaders holding their breath on their organizations’ ability to provide essential services after January 1st.

Over the last eighteen months, the Nonprofit Quarterly wrote extensively on the state of Illinois’s lack of a budget and its devastating effects on some nonprofits. During this time, nonprofits providing programs mandated by the state constitution were paid but those providing non-mandated services were not. These nonprofits had valid contracts with the state to provide these essential services, and most struggled to provide the services as required under the contract.

The governor, Bruce Rauner, and his staff promised to pay the providers after the impasse was resolved. But once the stopgap budget passed, the governor used a clause in the contract to limit reimbursements. Additionally, since the state did not have the revenue to make the payments, the disbursements were further delayed. Nonprofit leaders, including Diane Rauner, the governor’s wife, who leads a large Illinois nonprofit organization, sued the state. They lost in county court and the suit is now on appeal.

The failure of the state to pay for “nonessential” services caused great hardship for citizens throughout the state. For example, college students did not receive their MAP grants, K-8 schools did not receive educational funding, and people scheduled to leave prison were forced to stay locked up because halfway houses could not pay the staff that would support their reentry. At the same time, 62 percent of Illinois residents reported the budget impasse did not affect them.

In These Times and Kartemquin Films are creating an eight-part documentary, Stranded by the State, on the effects of the 2016 budget impasse on residents and the nonprofit institutions that serve them.

In These Times is a Chicago-based independent nonprofit magazine dedicated to advancing democracy and economic justice. The first program was released two weeks ago, highlighting the effects on Illinois’s higher education system and the tens of thousands of students served.

The limited late payments and decreased tax revenue continue to devastate an already damaged safety net and the State as a whole. As of November 16th, Illinois owed $10.6 billion in outstanding bills and possess a deficit of over $5 billion. Last month, North Side Housing and Support Services announced it would close a 72-bed shelter on the North Side of Chicago by the end of the year.

Currently, state leaders are meeting behind closed doors to try and reach agreement. Although Democrats lost a small number of state house representatives and senate leaders, they continue to hold majorities in both legislative houses. The Republican Governor continues to demand nonbudgetary items, including term limits on legislative leaders, before he will agree to a budget; Democrats in the legislature refuse to discuss these items. The Democrats won the State Comptroller’s office during the November election, but it is unclear if and how this will affect the impasse.

To create a balanced budget and begin to pay down the debt without instituting major long-term budget cuts, the state needs about $7 billion dollars in additional revenue annually. In the meantime, nonprofit leaders must recover from the presidential election and advocate for a solution before they and the residents they serve are stuck in another devastating situation.—Gayle Nelson

Original cite: https://nonprofitquarterly.org/2016/12/05/18-months-budget-impasse-illinois-stresses-nonprofits-devastates-lives/

When Public Parks Become a Civil Rights Issue

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September 29, 2016; The Atlantic

Public parks and recreational areas in urban regions often support activity and healthy living for low-income communities. In the past, these amenities were mostly suburban enhancements, but today’s city leaders realize their importance in encouraging more vital lifestyles for all residents. They can also lead to gentrification driving out the people they were designed to serve.

For three years in a row, Minneapolis has boasted the best parks system in the U.S. as judged by The Trust for Public Land, a forty-four-year-old nonprofit dedicated to protecting and creating public parks throughout the country. The city’s numerous parks are also the center of a bitter dispute with many residents of color, who allege the parks are primarily maintained and presented for the benefit of the metro area’s affluent white residents. As noted in The Atlantic article:

In America, bike trails and baseball fields are luxurious perks of many affluent neighborhoods, boosting property values and creating a sense of community. Meanwhile, in many inner cities, public parks are magnets for crime and casualties of disinvestment.

The battle is most evident at the Minneapolis Parks and Recreation Board’s regular meetings. The semi-autonomous agency, overseen by a nine-member elected commission and superintendent, is responsible for managing the City’s parks. Often, the meetings are disrupted by groups of young African American men carrying signs demanding the agency increase minority hiring and equalize park funding throughout the region. The protest is organized by Voices for Racial Justice and Community and other nonprofits. The park board is all white, while the city is only 66 percent white, compared to 87 percent in 1980. It has a history of funneling substantially more funding to parks in wealthier areas in southwest Minneapolis at the expense of northern areas where most of the city’s low-income minority residents live.

The protests led to Minneapolis being the first city-park system to prioritize capital spending to parks in low-income/large-minority communities and those in the worst condition. State leaders are also advocating for expanded funding to increase minority communities’ knowledge of regional parks. Millions of residents visit regional parks annually, but only three percent are minorities.

The disproportionate access of minority communities to parks and recreational areas is a national concern. Earlier this year, the U.S. Secretary of the Interior, Sally Jewell, recognized the country’s history of funding parks in areas where older, white Americans reside and the need to expand access to younger, more diverse residents.

In Chicago, city residents are celebrating the one-year anniversary of the 606 Trail. Eighty thousand residents live within ten minutes of the 2.7-mile trail, which was converted from an abandoned railroad track. Residents use it year-round for recreation as well as traveling to and from work. It has also sped up gentrification in surrounding communities. The real estate industry has marketed homes near the trail nationwide.

Compare the $95 million project to the Major Taylor, a similar project in Chicago’s low-income South Side communities. The Major Taylor trail is over twice as long, but without the lighting, snow removal, and other amenities of the 606 Trail, it has fewer users and property values surrounding the trail have not increased.—Gayle Nelson

Original cite: https://nonprofitquarterly.org/2016/10/11/public-parks-become-civil-rights-issue/

WNBA Players Stand Up in the Face of Fines

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June 23, 2016; NBC Sports

As the Black Lives Matter movement continues to grow, more and more African American athletes are participating and showing their support. NBA players are among the loudest, and their WNBA sisters recently strengthened their refrain.

Last week, the WNBA fined three teams—the New York Liberty, Phoenix Mercury, and Indiana Fever—for altering their uniforms. The players wore black T-shirts during warm-ups with references to the shooting of African American men and police officers. WNBA officials fined each team $5,000 and each player $500. (Many fans are used to professional sports members being fined. In most cases, the fines amount to a slap on the wrist, but since WNBA players’ salaries top out at $107,000, fining a player $500 is a much harder slap.)

After the fines were imposed, Liberty and Fever players boycotted their required post-game news conference and instead held their own. During their conference, players stated they would only answer questions related to Black Lives Matter.

The fines were imposed weeks after the WNBA organized activities in support of the Orlando community after the shooting at the Pulse Nightclub. In those instances, six teams wore warm-up shirts reading “#ORLANDO UNITED” under a rainbow-colored heart. The WNBA and its players also organized fundraising activities and blood drives.

In the face of controversy and standoff, the WNBA rescinded the fines. President Lisa Borders tweeted:

Appreciate our players expressing themselves on matters important to them. Rescinding imposed fines to show them even more support.

— WNBAPrez (@WNBAPrez) July 23, 2016

More and more players are using the sports arena to voice political outrage. They follow in the footsteps of Muhammad Ali, Bill Russell, Tommie Smith, and John Carlos. According to a recent article in Sports Illustrated, NBA players’ voices have been by far the loudest. For example, last year, after the death of Eric Garner, many NBA players, including LeBron James and Derrick Rose, wore “I Can’t Breathe” shirts during warm-ups. They were not fined.

One of the main reasons why NBA players have used their pulpit to show their support may be their personal experiences and connections to the communities of the slain African American men. Seventy-seven percent of NBA players are black, a much higher percentage than in any other professional sport. (67 percent of NFL players are African American, and only 8.3 percent of Major League Baseball players.) Clearly, in the WNBA, where 67 percent of players are African American, these feelings are shared.

The NBA itself has not stepped away from using its strength and voicing its support for political issues, either. Last week, leadership pulled the 2017 all-star game from Charlotte, North Carolina, in response to recent legislation prohibiting trans persons from using the bathroom of their gender identity.

Although the fines were rescinded, the WNBA’s decision to fine their players for actions tolerated and perhaps supported by NBA players exposes much larger cultural attitudes around the role of women and their right to show their support of their beliefs and communities.—Gayle Nelson

Original cite: https://nonprofitquarterly.org/2016/07/26/wnba-players-stand-face-fines/