Struggling to Do Good
Local Nonprofits See Upheavals In The Board Room and On The Balance Sheet
Gail Clapper arrived at the East Church Street office of Big Brothers Big Sisters of Frederick in May 2009, eager to start work as a case manager for a seemingly stable organization under the guidance of the same executive director for nearly three decades. The 51-year-old delved into learning the federally funded Mentoring Plus Program that aided children of prison inmates. The part-time job soon blossomed into a full-time role.
But after the executive director, Sushil Bhattacharjee, was let go in March 2011 for undisclosed reasons, Clapper took on unexpected tasks as the nonprofit coped with subsequent controversy, a continuing recession and repeated turnover of board members and staff.
While the community speculated about the nonprofit’s prospects, Clapper hunkered down in the office, organizing hundreds of files that had gathered in the corners and down the hall over the previous decades.
She learned the ropes of the organization’s core program when federal budget cutters pulled the Mentoring Plus grant and two fellow case managers were laid off. Other colleagues came and went, then executive director Barbara Reed Martin resigned in September 2012. The four remaining employees reported to Dario Cavazos, president of a board that had shrunk from about 16 members to five before the end of that year.
“During this time, no one was doing recruitment, marketing or seeking mentors,” Clapper says. Matches of children to mentors decreased from 120 to about 85. “For a while, we were depressed.”
She saw hope in the fall of 2012 with the hire of yet another executive director, Kevin Lollar, and a redesign of the board bylaws. In May, seven new board members were sworn in. But then Lollar laid off one full-time case manager, and on June 5 Clapper received the news she had been dreading: The organization could no longer afford her. “I was told the financials were not there,” she says. “I know they are worried.”
Although no precise statistics are available, anecdotal evidence of the struggle and turnover at Frederick County nonprofits suggests a pervasive problem. Several have cut staff and turned over executive directors amid budget squeezing, while others, like HandsOn Frederick County and Cakes for Cause, have shut down in the face of funding shortages. The 47-year-old Jeanne Bussard Center, a workplace for developmentally disabled adults, suddenly shut its doors without explanation in July 2012. Investigators subsequently arrested its executive director for failure to cooperate with a financial investigation.
In a time that Betsy Day, president of the Community Foundation of Frederick County, calls “survival of the fittest,” those nonprofits that haven’t given up are scrambling to find a solution. Many, including Big Brothers Big Sisters and other established organizations, like the Frederick Arts Council and Heartly House, are seeking firmer ground by making changes specific to board roles and executive responsibility, and hoping for a new spin on fundraising. But they have no assurances those are the right solutions.
“I think what we’re seeing is when times get tough, hard decisions have to be made,” Day says. Sometimes that goes beyond cutting staff and office expenses.
“Board members feel a greater responsibility to their stakeholders”—their clients, donors and the whole community, she adds. As a result, board members grasp for quick solutions or become overwhelmed and depart, long-term CEOs burn out, or a board’s expectations don’t match those of the executive.
Yet, often all of that turnover just further stokes concern about the long-term security of those nonprofits many expect to fill in the gaps between government services, and it panics donors already reluctant to open their wallets during an uncertain economy—which in turn further affects bottom lines.
The struggles in the local community mirror a shift in the national nonprofit sector as it seeks new revenue sourcing and answers increasing calls for accountability in the wake of high-profile scandals. Even so, Joshua Pedersen, who took over three years ago as chief executive officer of United Way of Frederick County following a succession of directors, says, “I’ve never seen anything like this in my 18 years working in nonprofits.”
‘Everyone is Asking’
Some say the problem is the unprecedented number of nonprofits begging for donations in an uncertain economy. “It’s tough when everyone is asking,” Lollar says. “What started out as a mission to do good things turns into a competition to do good things.”
Between 2008 and 2012, the number of nonprofits registered in Frederick County increased from 930 to 1,356, according to Maryland Nonprofits. That includes an increase in the number of IRS-designated 501(c)(3) groups—tax-exempt organizations that can accept tax-deductible donations—from 767 to 950. The trend is nationwide. The Urban Institute reports that the number of nonprofits registered with the IRS increased 25 percent between 2001 and 2011.
Day says there aren’t too many nonprofits when you consider population growth. Frederick County had 38 nonprofits registered per 10,000 people in 2011, a drop of 7 percent from the prior year. The county falls in the middle of the state’s per-capita rankings. And Joyce Heptner, executive director of the Ausherman Family Foundation, notes that 66 percent of those nonprofits had a budget of less than $25,000.
But it’s sometimes unclear which nonprofits listed on IRS books are still operating because they don’t always inform the agency when they close. The IRS began to clean up its books in June 2011, revoking the tax-exempt status for 275,000 nonprofits that didn’t meet a 2006 law requiring all nonprofit groups (not just those with revenues of more than $25,000) to file tax forms—and to do so for three consecutive years. The IRS said those organizations it dropped were likely to be already defunct.
Meanwhile, many of the remaining nonprofits must seek more individual and private donations as federal, state and local governments trim their own spending. The Frederick County Commissioners in 2012 cut more than $170,000 in funding to 20 nonprofit agencies and several non-county agencies, while setting aside $6.7 million for tax rebates to county homeowners. Many residents and nonprofits protested to no avail, and nonprofit funding by the county is scheduled to be completely eliminated for fiscal year 2014. While commissioner President Blaine Young said the community should cover the difference, nonprofits report that isn’t happening.
The private Ausherman Family Foundation, formed in 2006 to help support nonprofits, issued grants to 129 organizations in 2010, according to Heptner. That number increased to 155 in 2011. In 2012, the foundation focused more exclusively on Frederick County organizations and issued just 96 grants. The sizes of the grants were lower than in 2010.
Nonprofits not awarded such grants must turn more to individual donors, but those donors often are unsure who to trust. So they might not give. Or they might just open their own nonprofit, like Eileen Gideon did. Gideon, owner of Dutch’s Daughter restaurant in Frederick, says: “I was getting six letters a day from [animal welfare] organizations that needed money … and I read about these nonprofit organizations that only get pennies from the dollars you donate to them. … I said I’m not donating to these because I don’t know where the money is going. There are a lot of horror stories about nonprofit companies and money that goes to CEOs or payroll.”
So, in October 2011, Gideon launched her own nonprofit called Uniting to Save Animals and promises that every dollar donated goes directly to finance spaying and neutering strays, foster care, and financial assistance for pet owners facing high veterinary bills. For those established nonprofits, the sudden drop in financial support from all sides can be the final push over the edge if they never established a rainy day fund or are unwilling to change their tactics to tap new revenue sources, says Melissa Sines, certification manager for the Standards of Excellence Institute of Maryland Nonprofits and former board member of the now-defunct HandsOn Frederick. Less than 30 percent of nonprofits have reserves, she says.
Those financial pressures, combined with increasing demands for transparency and accountability, also further strain nonprofit management that may have been shaky to begin with.
More Than Galas
Big Brothers Big Sisters’ initial demise coincided with the loss of a long-term executive director who had operated under a board that was disengaged, admits former president Cavazos. “It was more of an executive director-driven institution rather than a board-driven institution,” he says.
That’s a bad combination to begin with, says Patricia Hanberry, chief executive officer of the Mental Health Association of Frederick County. Hanberry is credited in the nonprofit community for her strong leadership for more than 13 years—an unusually long term as director, many suggest, but one she insists is successful thanks to a strong staff and active board. “If I get hit by a truck, this agency will go on,” she states.
When Big Brothers Big Sisters neared rock bottom after Martin’s departure, the remaining board members asked Scott Alexander, former founder and executive director of the Frederick Alliance for Youth, for help. The first thing Alexander did under his seven-month contract was begin to rewrite the organization’s 30-year-old bylaws. He aimed to increase accountability by clearly defining each board member’s term and obligations that ranged from development to fundraising. “Board members really didn’t understand their role before. Now the board has requirements and [members] know they are responsible for the health of the organization and governance,” Cavazos says.
Susie Miller, who has worked and volunteered in the nonprofit community for more than 25 years, has seen board members shocked to discover they have complicated financial and oversight responsibilities. She says that,
“They thought they just signed up to go to a gala and ask friends for money.”
“They feel passionately about the organization, but don’t understand fiduciary responsibilities. And that often makes for a change in executive directors” as they turn to a manager to handle everything.
Miller is a former board member and former acting executive director of the Frederick Arts Council, an umbrella arts organization founded in 1976 that recently has faced dwindling resources. A few years ago, the council began sending board members to an annual training program, offered by the Frederick Nonprofit Alliance of the county Chamber of Commerce, that finely details board responsibilities. For the council, that training has resulted in “a very engaged board,” she says, that has become active in rebranding the organization and locating new board members who “are going to bring the best tools to the table.”
Nonprofits should be “looking at board members with skills that the organization needs,” Heptner says. That might be an attorney, an accountant, a real estate expert or other type of professional. Much of a board’s role in this age of high accountability also entails working closely with the executive director. “You can have every policy in place, but it’s who’s driving the bus that’s important … it takes a lot of talking and communication,” says Sines. That relationship is imperative in today’s uncertain economy when the operating environment is always changing.
And grant institutions like the Community Foundation, the Ausherman Foundation and United Way of Frederick are closely watching the management of nonprofits and reading news headlines. “Our committee members are citizens of Frederick County,” Day says. “They talk with their neighbors, they have access to local media. They know when nonprofits are in the headlines of the newspaper. And, of course, those issues affect the decisions that they make.”
‘Tell Me What to Do’
The relationship between a board and its executive is often where things can get dicey, nonprofit experts say.
Some organizations are launched, or taken over, by a person who serves many years as executive director. Those managers typically have a passion and energy for a particular mission, but “they forget the boards are the owners,” Sines says. And many are unwilling to relinquish control. Sines says she took a call at Maryland Nonprofits one day from a new nonprofit entrepreneur who wanted help in writing into her organizational bylaws that the board couldn’t fire her as CEO. “Um, that’s not the way it works,” Sines says, laughing.
In some situations, a board may decide it’s time to make a change because it needs to refocus its mission or, in today’s tough economy, seek a new set of skills.
Shuan Butcher, former CEO of the Frederick Arts Council, was once hailed for his dynamic leadership skills as he worked to galvanize the arts community. But when the council lost local funding in 2012 and donations became more elusive, the board decided to redefine its mission and Butcher, who had led the organization for nearly six years, was out. The council then sold the Cultural Arts Center on West Patrick Street where for 15 years it had offered performance and rehearsal space. Miller says the council decided it would pour every dollar more directly into local arts organizations and wanted a CEO with a vision for raising those dollars. In June, it hired Thérèse Keegan, a California native with a background in dance performance and early childhood education who in 2002 founded Global Homestead Inc. (later renamed Updraft Inc.), a nonprofit aimed at strengthening communities through the arts primarily via its aerial dance theater company.
But some observers in the nonprofit world think changing executive directors may be seen as a sign of poor management and a lack of communication with the CEO about expectations. “I often see board members petrified that something bad will happen on their watch. And that fear often leads to decisions that may not have been made five or 10 years ago when the economy was growing,” Day says. “It just keeps coming back to that disconnect in expectations.”
Management consultant David Grau spoke at the Ausherman Foundation’s 2013 Nonprofit Summit in March about managing change. He said boards must have a clear vision, specific goals and “a feedback system whereby people know what they are doing relative to their goals.”
Many point fingers at Heartly House and its relatively heavy turnover of executive directors over the past three years. The organization, which offers shelter and services for victims of domestic violence, sexual assault or child abuse, continues to bring in more clients and reports no decline in funding. But observers speculate whether it will survive.
Sharon Jacko, a 57-year-old retired Marine with a salt-and-pepper buzz cut and no-nonsense attitude, seems the ideal candidate to end such rumors. Yet, she reluctantly admits it’s hard to disentangle the organization from the reputation of one of its longest serving, and most popular, directors. Sue Hecht served as CEO from 1986 to 1996 and from 2003 to 2006—alternating with two stints as state delegate—and again as interim CEO when Barbara Martin resigned in 2010. Two subsequent CEOs each served barely a year. One month into Jacko’s first term on the board in the summer of 2012, colleagues asked her to serve in the interim.
As president of the nonprofit Women of Hope Project that seeks to help women in Afghanistan, Jacko knows it takes more than passion to gain the trust of clients, donors and staff. And that isn’t a replica of Hecht, she insists.
“Nonprofits are changing…”
Hecht was renowned for public relations, but that’s not what the organization needs now, particularly as it seeks to reduce the portion of its budget dependent on government grants, which is now at 60 percent. “With the economy and with grants declining, you have to get smarter and find better ways to get funds. … We have to think outside the box.”
Lollar was given the same task of thinking outside the box, while also reviving the nonprofit’s reputation. Many community nonprofit leaders say Lollar seemed a perfect hire.
Lollar is a Washington, D.C. high-school dropout who eventually became a Hood College and George Washington University Law School graduate. He returned to Frederick in 2006 and—with his serious demeanor combined with street smarts, quick wit and organizational skills—broke through community barriers to revitalize the northern Downtown as development director of the Housing Authority of the City of Frederick.
After starting at Big Brothers Big Sisters last November, he sought to energize the staff even while tightening the budget in part by doubling each of their duties, personally training such skills as grant writing and case management. And he helped Alexander recruit the seven new board members. But by June, fundraising remained insufficient to replenish the fund that the former executive director had created and that had sustained the organization through the subsequent turnover. Lollar, left with one full time employee, one part time employee, and an Americorp volunteer, continued to say, “We have to do hopefully more with less.”
“We’re staying hopeful,” he says. “Hopefully all the other nonprofits out there are staying hopeful.”