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Missing Money—Three Stories About Funding
January 11, 2010; The Times-Tribune | There have been at least three stories over the past few days about nonprofits being stiffed for money they had reasonably expected. In the first case, the United Way of Pennsylvania is going out of its way to help restore services and nonprofits that were devastated by Pennsylvania’s recent 101-day budget impasse when nonprofits were not paid for their contracts. “Three months after millions of dollars in state aid was restored following the overdue passage in October of the $27.8 billion budget, many agencies are continuing to cope with a loss of staffers and subsidies and to deal with cuts in state support for the Human Services Development Fund. During the three-month impasse from July to October when Pennsylvania operated without a full budget, United Way-supported agencies were required to borrow money and to dip into reserves to keep afloat. In some cases, agencies closed their doors.” As NPQ noted this summer child care organizations have been particularly badly effected. The United Way plans to report on the lingering effects of the impasse next month and is scheduling educational events for legislators to help them grasp the impact of that budget snafu. But in Arizona, the United Way of Tucson and Southern Arizona has, itself, missed making $400,000 in expected payments to nonprofits due to problems in its bookkeeping that were uncovered in October when it realized it did not have the cash to disburse. Unfortunately, they did not bother to share this with the agencies that were counting on the grants, delaying that communication until Christmas. In reporting on the cash flow story, the Arizona Star uncovered the fact that this United Way had also paid “more than $100,000 for marketing services to the spouse of a board member.” The United Way evidently intends to pay something on the grants in question but likely not the entire amounts awarded. And finally in New York, the Judith Rothschild Foundation, which makes small grants to arts organizations, is missing in action with 17 grants made but not paid. Apparently grantees who have made inquiries have been met with “a disconnected number and returned mail.” Some have taken it to the Attorney General’s office but other grantees reported receiving a letter from the sole trustee, Harvey Shipley Miller. Wait! The story gets curiouser . . . Reports the New York Times, “The letter had a Pennsylvania return address but gave no phone number. On Tuesday Mr. Miller answered the door at that address in suburban Philadelphia—his home—wearing a neck brace. He told a reporter that he had broken his neck in a fall last autumn and spent “at least a month” in the hospital. He added that the 2009 grants would be paid within the next 30 days. “This is the first time in 15 years we have been late for a payment,” Mr. Miller, 61, said in an interview in his art-filled living room. “These people are getting their checks within the next 30 days. If I have to mortgage this house, I will do it.” Not a good sign I’d say. It is perhaps obvious that there are enormous impacts on nonprofits and the people they serve and employ as a result of these kinds of problems with funders. At least where state contracts are concerned we should all be mounting campaigns that require reasonable practices in contracting. The other two situations are just deplorable.— Ruth McCambridge
Florida Arts Council Stripped of Funding
January 18, 2010; Pensacola News Journal | Across the nation, arts organizations are taking it on the chin in terms of reduced charitable giving and sales or ticket revenues, leaving them to scramble for public funds and stimulus moneys. In Escambria County, Florida, the county commission just withdrew $150,000 it had already allocated to the Arts Council of Northwest Florida and even terminated the Council’s lease of space at the old county courthouse. Commissioners ignored the plea of the Council’s executive director, though they decided not to immediately transfer the funds to a new organization called Arts Culture & Entertainment. Receiving funds from the county since 1996, the Arts Council had been the region’s umbrella agency for distributing grants to 39 local arts groups. But the funding cut was precipitated by audit findings released by the financial services administrator of the Escambria Clerk of the Circuit Court’s office. The findings included: the organization’s 2009 operating deficit of $155,000, that is, a budget of $20,000 but actual revenues of roughly $365,000; improper accounting of credit card purchases; a lack of internal controls; failure to distribute funds to the local groups in a timely manner; and using cash that was supposed to go to some of the local groups to pay for staff salaries and operating costs. But the creation of a new organization called Arts Culture & Entertainment strikes us as troubling. Apparently founded by a former Arts Council leader, ACE will be all-volunteer. The audit findings hint at discomfort with the notion that the Arts Council had to pay and support staff. If the motivation is to start pushing programs into all-volunteer models, that will be a problematic avenue for arts groups and for Escambria County’s nonprofit sector.—Rick Cohen
Foundation protests Goldman Sachs Head Fake
January 12, 2010; Reuters | Today begins the first hearing of the Financial Crisis Inquiry Commission in Washington and its attendees include the likes of Lloyd C. Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan Chase, John J. Mack of Morgan Stanley, and Brian T. Moynihan of Bank of America. Reported in Reuters early on January 12, this story was about Goldman Sachs trying to block a proxy vote by some activist shareholders including, notably, the Nathan Cummings Foundation. Calling this block the “the biggest head-fake in history,” Cummings Foundation President Lance Lindblom was sharply critical of the Goldman Sachs attempt to prevent the shareholders from voting to examine the wage disparities between the average worker and top executives. As the story was reported later also by Reuters, Goldman Sachs states that it sought to omit the proxy because of an error of attribution in the letter. The shareholder activists had included the quote: “executive pay is out of control and the marketplace cannot be trusted to rein it in,” in their letter, stating it was from Federal Appeals Judge Richard Posner when it was actually pulled from a New York Times column summarizing a Posner decision. According to Goldman Sachs, the letter contained “objectively false statements” that would mislead shareholders unless the SEC allowed Goldman to exclude the proposal from the ballot. Unfortunate mistake? Yes. But it isn’t like Posner hasn’t written a book and countless columns for major newspapers questioning the ability of the free market to rein in executive pay. Is this a reason to exclude an attempt to limit executive compensation at a company with notoriously high compensation of its top executives despite its participation in the collapse of our financial systems?—Kristin Barrali
Nonprofit Mergers More Common?
January 8, 2010; Sacramento Bee | For all the stories about foundations wanting to see nonprofits merge during the Great Recession, there are still relatively few that describe groups actually doing it. But in California, the SacBee reports that Ride & Shine, a group helping disabled children and adults by having them work with horses, has merged with the Grace Foundation, a horse rescue organization, enabling the program to survive and find a “new life.” We haven’t seen it, but the ED of Sacramento’s Nonprofit Resource Center says that collaborations, partnerships, and mergers are becoming more common as part of “the new reality” for nonprofits—“find[ing] new ways to be efficient and effective with less money.” Another example is Sierra Adoption Services’s acquisition of Wonder Inc., a mentoring program for foster children. Given the reluctance of many nonprofit boards to consider mergers, the Sacramento reports are intriguing. We would be interested in hearing from readers of NPQ’s Newswire about other examples of true nonprofit mergers and acquisitions, not just “collaborations” and “working together.”—Rick Cohen
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