Risk Management: Directors of Nonprofits

Court of Appeals to Directors of Nonprofits: “Nonprofit” Does Not Mean “No Risk for You”

WRITTEN BY BRUCE A. ERICSON, JERALD A. JACOBS, AND MARLEY DEGNER
CREATED ON WEDNESDAY, 22 APRIL 2015 12:29

The U.S. Court of Appeals for the Third Circuit recently upheld a $2.25 million jury verdict against the directors of a nonprofit nursing home, holding them personally liable for breach of their duty of care. Their sin? Failing to remove the nursing home’s administrator and CFO “once the results of their mismanagement became apparent.” While the court overturned a punitive damages verdict against five directors (the jury had found nine other directors liable for compensatory damages but not punitive damages), it upheld punitive damage awards of $1 million against the CFO and $750,000 against the Administrator. The decision, while unusual, illustrates that serving on a nonprofit board is not risk-free even if as in this case, the directors do not breach their duty of loyalty or engage in any self-dealing. [In re Lemington Home for the Aged, 777 F.3d 620 (3d Cir. 2015).]

The Lemington Home Case

Founded in 1883, the Lemington Home for the Aged was the oldest nonprofit unaffiliated nursing home in the United States dedicated to the care of African Americans. For decades, the Home had been “beset with financial troubles” and by the early 2000s it was being cited by the Pennsylvania Department of Health for deficiencies at a rate almost three times greater than the average.

In 2004, the Home’s Administrator [Mel Lee] Causey started working part-time while continuing to draw a full salary. That same year, two patients died under suspicious circumstances; an investigation by the Department of Health found that Causey lacked the qualifications, knowledge and ability to perform her job. An earlier independent review also recommended that Causey be replaced. Although the Board obtained a grant of over $175,000 to hire a new Administrator, the funds were used for other purposes and Causey stayed on.

The Home’s patient recordkeeping and billing were in a state of disarray. The Home was cited repeatedly for failing to keep proper clinical records. CFO Shealey stopped keeping a general ledger, instead simply recording cash transactions on an Excel spreadsheet. When a consultant conducting an assessment of the Home for a major creditor requested records, Shealey responded by locking himself in his office, forcing the consultant to “camp outside.” Shealey also failed to collect at least $500,000 from Medicare because he stopped sending invoices.

In January 2005, the Board voted to close the Home, but concealed that fact for three months before filing for bankruptcy. In those three months, the Home stopped accepting new patients, making it less attractive to potential buyers. While in bankruptcy, the Board failed to disclose in its monthly operating reports that the Home had received a $1.4 million payment, which could also have increased its chances of finding a buyer. The court held that these facts supported the jury’s verdict that the defendants had “deepened” the corporation’s insolvency, which the court said was actionable under Pennsylvania law. [777 F.3d at 630.]

The court of appeals upheld the jury’s compensatory damages verdict against the directors despite the Home’s bylaw provision protecting the directors from claims for simple negligence and requiring proof of selfdealing, willful misconduct or recklessness. [Lemington, No. 10-800, 2013 WL 2158543, at *6 (W.D. Penn. May 17, 2013).] Both the court of appeals and the district court held that the evidence supported a finding that the directors breached their duty of care by recklessly (1) continuing to employ the Administrator despite actual knowledge of mismanagement and despite knowing that she was working only part-time in violation of state law; and (2) continuing to employ the CFO despite actual knowledge of mismanagement, including his failure to maintain financial records. [777 F.3d at 628-30; 2013 WL 2158543, at *7; In re Lemington Home for the Aged, 659 F. 3d 282, 286-87 (3d Cir. 2011).] Despite these holdings, the court of appeals reversed the award of punitive damages against the five directors, holding that there was insufficient evidence that they possessed the requisite state of mind and no evidence of self-dealing. [777 F.3d at 634-35.]

The Result in Lemington Home: Unusual But Not Unique

Lemington Home is not the only case in which a court has held that directors of a nonprofit breached their fiduciary duties. Other cases—some new and some old—show how directors of nonprofits sometimes find themselves in the crosshairs, especially after an institution fails.

Perhaps the best-known case is Stern v. Lucy Webb Hayes Nat’l Training School for Deaconesses & Missionaries, 381 F. Supp. 1003 (D.D.C. 1974), where the district court held that the directors breached their fiduciary duties of care and loyalty by failing to supervise the nonprofit’s finances and by approving transactions that involved self-dealing. The court found that the board’s finance and investment committees had not met for over a decade, and the directors had left management of the nonprofit to two officers who worked largely without supervision. Nevertheless, the court declined to award money damages against the directors, opting instead to impose certain reforms on the board.

Starting in 2007, seven years of litigation (and millions of dollars in legal fees) ensued between two nonprofits interested in the creation of a memorial to Armenians who died during the First World War and two of their directors; the nonprofits lost their claims against the directors and ended up having to indemnify them. The district court denied summary judgment on the issue of whether the directors had breached their fiduciary duties but then concluded after a bench trial that the directors’ decisions and the process by which they made them were reasonable and, even if the directors had breached their duty, the corporation could not show that it suffered injury as a result. Armenian Genocide Museum and Memorial, Inc. v. The Cafesjian Family Foundation, Inc., 691 F. Supp. 2d 132 (D.D.C. 2010); Armenian Assembly of America, Inc., et al., v. Cafesjian, 772 F. Supp. 2d 20 (D.D.C. 2011), aff’d, 758 F.3d 265, 275 (D.C. Cir. 2014).

In 2010, the National Credit Union Administration sued the unpaid volunteer directors of Western Corporate Federal Credit Union seeking $6.8 billion in damages on account of the directors’ alleged failure to supervise the credit union’s investment decisions. The credit union had invested heavily in diversified portfolios of securitized mortgage-backed securities; when the credit crisis hit, the NCUA took over the credit union (much the way the FDIC takes over failed banks) and sued the former directors and officers. The district court granted the directors’ motion to dismiss, holding that the directors were protected by the business judgment rule. Nat’l Credit Union Admin, v. Siravo, et al., No. 10-1597, 2011 WL 8332969, *3 (C.D. Cal. July 7, 2011). (Two of the authors of this feature represented all directors and one officer in this litigation.) The officers did not fare as well; the court held that the business judgment rule did not protect them, and at least some officers ended up paying some money to the NCUA and suffering other sanctions.

These cases are unusual, which goes a long ways toward explaining the unusual rulings. Generally, absent fraud, bad faith, a conflict of interest, a wholesale abdication of responsibility, or decisions that are clearly unreasonable based on facts known at the time, the business judgment rule will protect directors of nonprofits from personal liability for a breach of the duty of care. But vindication can take years of litigation and lots of money.


What Are the Lessons of Lemington Home?

You can be sued. To be sure, directors of for-profit corporations are sued far more often than directors of nonprofits, but directors of nonprofits can be sued, nonetheless. 

If you are sued, the litigation can go on for years and be very expensive—even if ultimately you are vindicated. 

Because litigation—even unmeritorious litigation—can be expensive, directors should not serve without the protection of adequate directors’ and officers’ insurance (D&O insurance).

Directors of nonprofits, despite usually being volunteers, can face personal liability for breach of their fiduciary duties and will be held to much the same standard of care as directors of for-profit corporations.

Some states have enacted statutes dealing specifically with nonprofit directors’ duty of care. Pennsylvania has such a statute: 15 Pa. Cons. Stat. Ann. § 5712 (2011). [See Lemington, 659 F.3d at 290. Likewise, California has such a statute: Cal. Corp. Code § 7231.] But it is far from clear that these statutes offer directors of nonprofits any more protection than they offer directors of for-profit corporations; the differences are subtle, at best.

The business judgment rule offers directors some protection, but it is not an all-purpose shield against claims based on dereliction of duty, let alone disloyalty or self-dealing. To gain the protection of the business judgment rule, a director must be assiduous and informed before making decisions. Specifically: 

The board must supervise: it must ensure that the organization’s management are qualified to perform their duties and are actually performing those duties. The failure of the directors in Lemington Home to do this led to their being jointly and severally liable for $2.25 million in damages [777 F.3d at 626, 628.] 

The board must seek and follow independent expert advice where appropriate: the directors in Lemington Home failed to follow the recommendations of independent advisors to replace the Administrator, even after being awarded funds to do so. They also ignored the advice of their bankruptcy counsel. [Lemington, 2013 WL 2158543, at *7.]

Special care must be taken if the nonprofit veers toward insolvency:

Before filing for bankruptcy, consider conducting a viability study. In vacating the award of summary judgment for defendants, the Third Circuit in Lemington Home noted that the Board declined to pursue a viability study before filing for bankruptcy and suggested that this called into question the adequacy of their pre-bankruptcy investigation. Lemington, 659 F.3d at 286, 292. Beware the “deepening insolvency” theory. Although not recognized in every jurisdiction, the theory holds directors and officers accountable to creditors if their post-insolvency management increases the losses that creditors suffer.

This article was originally published as a “Client Alert” on PillsburyLaw.com on March 27, 2015. It is reproduced with permission.

Court Ruling about Donor Restrictions Should Be Lesson To All Nonprofits

All nonprofits should learn from this recent court case.  Donors can restrict gifts, and they can take the money back if we aren't accountable.

The NonProfit Times - August 12, 2013
Read full article here.       
It’s a simple concept: If a donor gives an organization a restricted gift, the organization must use that gift for the purpose determined. Some see it differently and that’s how it ends up in court.
The New Jersey Superior Court, Appellate Division, ruled that charities that do not follow donor intent must return the gifts. A three-judge panel ruled that a Mercer County animal shelter must disgorge a $50,000 gift originally slated for specialized construction.
Judge Jose Fuentes wrote in the opinion, “we hold that a charity that accepts a gift from a donor, knowing that the donor’s expressed purpose for making the gift was the fund a particular aspect of the charity’s eleemosynary mission, is bound to return the gift when the charity unilaterally decides not to honor the donor’s originally expressed purpose.”
The case turned on a gift given by a Princeton couple, Bernard and Jeanne Adler, to animal shelter SAVE (now SAVE, A Friend to Homeless Animals). The gift was to finance the building of an area for larger dogs and older cats, whose adoption prospects are limited, as part of a new facility in Princeton.
Before construction could begin, SAVE merged with another animal welfare nonprofit, Friends of Homeless Animals. The new plan was to build a new shelter in nearby Montgomery Township roughly half the size of what the new Princeton facility would have been; construction is expected to begin in the fall of 2013. Though SAVE trustee John Sayer testified that the new shelter would “absolutely” have rooms for large dogs and older cats, according to court documents, the court said that evidence suggested otherwise.
“Based on Mr. Sayer’s testimony and the letter announcing the merger between SAVE and Friends of Homeless Animals, we are satisfied that the 15,000 square foot shelter to be constructed in Montgomery Township does not include two rooms specifically designated for the long-term care of large dogs and older cats,” wrote Fuentes.
The Adlers filed suit in Mercer County in 2007, and a judge ruled in their favor in 2010. SAVE appealed, saying the first judge erred when he determined the Adlers’ gift was restricted. SAVE also argued that even if it was restricted, its purpose would have been fulfilled and, barring that, the lower court should have reworked the gift so SAVE could spend it on a project as near as possible to the original intent.
The appellate court disagreed, saying SAVE had courted the Adlers, who had been long-time supporters but who had never made a significant gift prior, with a campaign that specifically included the two rooms and a naming opportunity. “To be clear, the record shows that SAVE: (1) decided to construct a substantially smaller facility; (2) outside the Princeton area; (3) without any specifically designated rooms for large dogs and older cats; and (4) without any mention of plaintiffs’ names,” Fuentes wrote.
The appellate court affirmed the lower court’s decision on August 5. “By opting to disregard plaintiffs’ conditions, SAVE breached its fiduciary duty to plaintiff,” wrote Fuentes. “Under these circumstances, requiring SAVE to return the gift appears not only eminently suitable, but a mild sanction.”
Read more here.

News from The Non-Profit Times

Audits Show Widespread Underreporting of UBI

By The NonProfit Times - April 29, 2013

Unreported unrelated business income in higher education was found in almost every case examined by the Internal Revenue Service (IRS).

“The audits identified some significant compliance issues at the colleges and universities examined,” said Lois Lerner, director, Exempt Organizations division of the IRS. “Because these issues may well be present elsewhere across the tax-exempt sector, all exempt organizations need to be aware of the importance of accurately reporting unrelated business income and providing appropriate executive compensation.”

This is part of the multi-year project on tax-exempt colleges and universities. The Colleges and Universities Compliance Project was launched in 2008 with the distribution of detailed questionnaires to 400 randomly-selected colleges and universities. The IRS selected 34 of the 400 for examination because their questionnaire responses and Form 990 reporting indicated potential noncompliance in the areas of unrelated business income and executive compensation.

Unrelated business income (UBI) is the income from a trade or business regularly conducted by an exempt organization and not substantially related to its exempt purpose. Unrelated business taxable income is the UBI that is taxable after deducting expenses directly connected to the trade or business. Because UBTI is calculated by totaling the UBI from all activities and subtracting the total allowable deductions, losses from one activity can offset profits from another. Examinations have resulted in:

• Increases to UBTI for 90 percent of colleges and universities examined totaling about $90 million;
• More than 180 changes to the amounts of UBTI reported by colleges and universities on Form 990-T; and
• Disallowance of more than $170 million in losses and Net Operating Losses (NOLs, i.e., losses reported in one year that are used to offset profits in other years), which could amount to more than $60 million in assessed taxes.

The primary reasons for increases to UBTI in the completed exams were:

• Disallowing expenses that were not connected to unrelated business activities.

The IRS found that examined colleges and universities were reporting certain losses as connected to unrelated business activities when they were not. The misreporting occurred in two ways:

1. Lack of profit motive: The IRS found that organizations were claiming losses from activities that did not qualify as a trade or business. Nearly 70 percent of examined colleges and universities reported losses from activities for which expenses had consistently exceeded UBI for many years. UBI must be generated by a trade or business.

An activity qualifies as a trade or business only if, among other things, the taxpayer engaged in the activity with the intent to make a profit. A pattern of recurring losses indicates a lack of profit motive. The IRS disallowed reporting of activities for which the taxpayer failed to show a profit motive. Those losses no longer offset profits from other activities in the current year or in future years, with more than $150 million of NOLs disallowed.

2.  Improper expense allocation: The IRS also found that on nearly 60 percent of the Form 990-Ts examined, colleges and universities had misallocated expenses to offset UBI for specific activities. Organizations may allocate expenses that are used to carry on both exempt and unrelated business activities, but they must do so on a reasonable basis and the expenses offsetting UBI must be directly connected to the UBI activities. In many cases, the IRS found that claimed expenses, which generated losses, were not connected to the unrelated business activity.

The IRS checked the calculations for all NOLs reported on returns under exam and found that NOLs were either improperly calculated or unsubstantiated on more than a third of returns. As a result, the IRS disallowed nearly $19 million in NOLs.

The IRS also determined that nearly 40 percent of colleges and universities examined had misclassified certain activities as exempt or otherwise not reportable on Form 990-T. Fewer than 20 percent of these activities generated a loss. The examinations resulted in the reclassification of nearly $4 million in income as unrelated, subjecting those activities to tax.

Examinations resulted in more than 180 changes to UBTI reported for specific activities by colleges and universities. More than 30 different activities were connected to the changes. The majority of these adjustments came from the following activities: Fitness, recreation centers and sports camps; advertising; facility rentals; arenas; and, golf.

To see the online aricle click here.

Comptroller Thomas P. DiNapoli's Weekly News

DiNapoli Audit Finds $7.7 Million in Questionable Charges by Special Education Providers

The Lake Grove School and the Mountain Lake Children’s Residence, two special education providers run by the same company, overcharged taxpayers by as much as $7.7 million over a four–year period, according to an audit released Friday by New York State Comptroller Thomas P. DiNapoli.

DiNapoli: State’s Brownfield Cleanup Program Needs To Reach More Sites; Be More Cost–Effective

The New York State Legislature should examine options to restructure the state’s primary program to revitalize contaminated properties – the Brownfield Cleanup Program – in order to fully achieve the important economic, public health and environmental goals set when the program was created, according to a report released Monday by State Comptroller Thomas P. DiNapoli.

DiNapoli Supports Lobbying Disclosure and Independent Director Proposals at Peabody Energy

New York State Comptroller Thomas P. DiNapoli Tuesday announced support for two shareholder proposals at Peabody Energy Corporation’s annual meeting on April 29 calling for Peabody to disclose corporate lobbying expenses and to require the chairman of the board to be an independent director.

DiNapoli Refers Investigation of Substance Abuse Provider to U.S. Attorney

Phoenix Houses of New York, Inc. provided inappropriate perks to its executives exceeding $223,000 while under contract with the Office of Alcoholism and Substance Abuse Services, according to a report released Wednesday by State Comptroller Thomas P. DiNapoli. DiNapoli referred the findings to U.S. Attorney Preet Bharara’s office for review.

Comptroller DiNapoli Releases Municipal Audits

New York State Comptroller Thomas P. DiNapoli Wednesday announced his office completed the following audits: the Bloomingburg Joint Fire District; the Village of Depew; the Essex County Probation Department; theEssex County Sheriff’s Department; the Town of Johnsburg; the Town of North Castle; the Town of Owego Fire District; the Rescue Fire Company, Inc.; and, the Village of Village of the Branch.

Comptroller DiNapoli Releases Audits

New York State Comptroller Thomas P. DiNapoli Wednesday announced his office completed audits of the the Beacon City School District; the Chenango Valley Central School District; the Fairport Central School District; the Monroe–Woodbury Central School District; and, the Oppenheim–Ephratah Central School District.

The Greatest Risk of All from the Non-Profit Risk Management Center

Got Risk Insight? Submit a Session Proposal Today

If you’ve figured out how to identify risks, teach safety and risk management to the board, or engage staff members in risk management initiatives… we want you on the faculty of the 2013 Risk SUMMIT. Visit the conference webpage and complete the workshop proposal form before the May 1 deadline.

The Greatest Risk of All

By Melanie Lockwood Herman

“I’m only human
Of flesh and blood I’m made
Human
Born to make mistakes”

– Human, The Human League, © Universal Music Publishing Group, Kobalt Music Publishing Ltd., EMI Music Publishing.

Many leaders of leading nonprofits worry excessively about external threats: competing organizations, fickle institutional funders, increased government regulations, the unpredictable global economy, radical political changes, and the like. Yet the most serious threats to a nonprofit mission arise from the humanity of our workforce. After all, we’re only human. Avoiding conflict, burying mistakes and feeling apprehensive about risk-taking are familiar components of human DNA.

What’s the Risk of Being Human?

·         Conflict: When we ignore conflicting opinions or work styles at the board table or in the staff work room, we may rob our nonprofits of the contributions of creative leaders.

·         Mistakes: When we severely punish employees for their errors, we may inadvertently cause staff to bury their mistakes.

·         Risk Aversion: When we allow fear to extinguish proposed action that is risky, but potentially mission-advancing, we fail to leverage our reputation and assets.

Don’t Eliminate the Greatest Risk

If the greatest risk facing your nonprofit is its human DNA, how can you manage human nature? Here are a few strategies to consider:

·         Embrace Conflict: Identify examples of unresolved conflict in your nonprofit and reflect on the consequences. What toll has conflict avoidance taken on your mission? Have high-performing staff or volunteer leaders walked away in frustration? Acknowledge that conflict is normal. Instead of pretending that everyone agrees, dig deep to find the wisdom in disagreement. Applaud the team member who has the courage to say “I disagree, and here’s why,” when everyone else has voted “yes.”

·         Bring Mistakes to the Surface: Unearth mistakes and face them head on. Provide a comfortable space in which to step up and fess up to a mistake. Is that comfortable space consistent in the divisions, departments or functions of your nonprofit? How might you reward staff who bring errors, oversights or even wrongful assumptions to light?

·         Resolve to Take More Risk: How often is a creative idea dismissed as “too risky?” Instead of allowing gut reactions or protests from your risk manager to stifle creative ideas, reflect on ways to encourage and inspire risk-taking.

The Center offers numerous resources on the topic of human-inspired risk, including the upcoming webinar on HR Risk: Take the High Road without Getting Lost. Join me live on May 1st at 2 pm Eastern, or register to watch the recording at your convenience. You can also check out some of our articles exploring HR risk and reward:

·         Creating an Effective Employee Handbook for Your Nonprofit

·         Five Things That Should Never Appear in an Employee Handbook

·         Grievance Procedures and Internal Dispute Resolution

·         Happy Endings

·         Human Resource Risks and the Forest of Fog

Melanie Lockwood Herman is Executive Director of the Nonprofit Risk Management Center. She welcomes your comments about people and risk or your questions about the Center’s services at Melanie@nonprofitrisk.orgor (202) 785-3891. The Center provides risk management Cloud tools and resources at www.nonprofitrisk.org and offers custom consulting assistance to organizations unwilling to leave their missions to chance.

NYCON Hosts Peer Group Meeting for Capital Region Executive Directors

From the New York Non-Profit Press
Written by Marissa Fariello   

The New York Council of Nonprofits, Inc. (NYCON) held an Executive Director Peer Group Meeting on Friday, April 19th, bringing nonprofit leaders together to discuss what the main focus should be of the local nonprofit sector and its executives. The meeting marked the start of a collaborative initiative between nonprofit executive directors in the Capital Region.

The informal discussion, led by Laura Ladd Bierman, Executive Director of the League of Women Voters, focused on how a peer group will benefit nonprofit leaders and organizations as a whole in our community. The attendees discussed a set of questions concerning the logistics of creating a collaboration of area executive directors, including:
-What would nonprofit leaders in the community group do with a peer group and and how it can best serve them in their job?
-Do executive directors want to have formal meetings & programming? Do they want to meet up for informal networking breakfasts?
-How will group members make sure that communication is both on-going and peer led?

Tom Tipple, Executive Director at Community Caregivers, emphasized the overall message of the group discussion: "We should sharpen our advocacy arrows through collaboration."

The executive directors in attendance agreed that the creation of a peer group for Capital Region executive directors will eliminate their "feelings of isolation" as leaders and provide a significant opportunity for holistic approaches to tackling the issues that face their organizations.

"We have a great need for more people to collaborate in an effective way," said Bill Dessingue, Executive Director of ROUSE, Inc. "It's how we're going to get things done on a regional level."

Amy Klein, Executive Director of Capital District Community Gardens, expressed more urgently the need for nonprofit leaders to come together at a time when many organizations are struggling at the budget level, suggesting that such a peer effort could bring larger grants into the area. "We don't have the money that large groups like the NRA have. The only way we will get anywhere is through numbers. We as a group should come together to bring more into the area instead of fighting against each other for what limited resources are available to us."

“This emerging group reflects what is becoming a renewed interest and energy, particularly from an advocacy and peer support perspective, for nonprofits executives across the state to develop collectively a stronger leadership presence,” said Doug Sauer, CEO of NYCON. “It is very challenging as our sector is largely on the defensive these days with government funding streams, regulations and pressures fostering division among us.”

The Executive Director Peer Group Meetings will be held exclusively for executive directors. The next Executive Director Peer Group Meeting is scheduled for May 17th from 8am to 9:30am at the NYCON office, 272 Broadway, Menands. At the next meeting, the group will choose discussion topics for future meetings and further discuss what the group's main focus should be now and going forward. The group also plans on creating a listserve to facilitate communication between area executive directors.

For the online article click here.

Business council holding talk on synergies at Queensbury Hotel, Glens Falls

From Post Star

GLENS FALLS -- The Adirondack Nonprofit Business Council, an Adirondack Regional Chamber of Commerce program, will hold a panel discussion on “A Synergistic Community: Strengthening the Connectivity of Business,” from 8 to 10 a.m. Friday in the Queensbury Hotel.

The panel is made up of Kelly Mathews of the New York Council of Nonprofits, Inc.; Robin Russom, vice president and retail marketing manager for TD Bank; Barb Sweet, executive director of the Tri-County United Way; and Sara Mannix, CEO of Mannix Marketing.

The panel will focus on a wide range of topics concerning the synergy between nonprofit and for-profit arenas.

The event is free to Chamber of Commerce Members, and costs $20 for non-members.

To register, contact Morag Rosa at mrosa@adirondackchamber.org or call the chamber at 798-1761.

Nonprofit CEOs face pay limits in July

New $199G cap targets health, human services

After learning that two top executives at a New York City nonprofit that serves the developmentally disabled earned nearly $1 million each and got other benefits, Gov. Andrew Cuomo 15 months ago issued an executive order limiting executive salaries of organizations that contract with one or more of 13 state agencies to $199,000 a year.

The order, which also restricts administrative spending, directed the departments to issue regulations within three months. Proposed regulations came out after 90 days had elapsed and were to have taken effect Jan. 1 of this year. Due to the issue’s complexity and questions and criticism from the nonprofit sector, they were revised and the implementation date was moved to April 1. Additional changes were published in March, and the start date is now scheduled for July 1, nearly 18 months after Cuomo’s executive order.

To Read The Full Article Click Here

Nonprofits confront cutbacks in Sullivan

By Victor Whitman

BETHEL — More than 100 people representing some of Sullivan County's largest employers attended an annual gathering of nonprofits at Bethel Woods Center for the Arts on Wednesday.

Speakers at the Nonprofit Leadership Summit 2013 emphasized that state and federal cutbacks, combined with a flat, charitable-giving environment continue to put the squeeze on the county's nonprofits.

At the same time, New York's rules and regulations and other hurdles, like turf battles among the nonprofits themselves, remain obstacles when these organizations try to share costs and collaborate to provide services more efficiently.

Three years ago, county officials came up with the idea of inviting nonprofit leaders to an annual summit at Bethel Woods. Linda Hartley, one of the three summit organizers, said the gatherings have had mixed results in fostering collaborations.

Nonprofits like the Center for Discovery, New Hope and Catskill Regional Medical Center form the backbone of the county's economy.

Catskill Regional and New Hope sent representative to this year's seminar. Catskill Regional Medical Center spokesman J.P. McGuirk said the hospital comes more for the tips from the speakers than for the opportunity to network with other nonprofits.

"There is a lot of pressure with federal and state cutbacks," McGuirk said. "We have to come up with new and creative ways to raise money and operate."

Hartley said the biggest success to date is a growing cooperation among several county arts organizations, including Bethel Woods and the Delaware Valley Arts Alliance.

She said representatives of roughly 15 arts groups got together during a breakaway session last year and continue to meet with the Sullivan County Visitor's Association. They are planning an annual festival. She said other collaborations have been harder to foster.

Doug Sauer, chief operating officer of The New York Council of Nonprofits, said partnerships can involve simply sharing information all the way up to merging. One major obstacle to forming close, legally binding affiliations, he said, is that New York state doesn't make it easy. Although nonprofits in other states can apply online and complete the process in a few months, combining services usually takes years in New York state and requires approval from multiple state agencies, he said.

Other speakers gave tips on the use of social media, recruiting volunteers and leadership building.

While organizers were pleased with the turnout, only a small percentage of the county's 600 registered 501(c)(3) organizations, attended the summit. (A 501(c)(3) organization is a charity or public service entity that qualifies for tax exemption under that section of the tax code.)

Organizers are also attempting to compile a database of the county's active nonprofits.

"We still need to have more people," Hartley said. "There are some here, but not enough."

To see the article online click here.

NYSACRA Action Alert

NYSACRA Action Alert

PLEASE consider reaching out to your assemblyman and senator to express your concern over the cuts proposed below. Springbrook provides invaluable support to people with developmental disabilities. The proposed 6% cut equates to $1.2 million for this organization.The proposed 6% cut equates to $1.2 million for this organization. The phone calls take less than a minute each. PLEASE PLEASE call.

As you are well aware, the proposed 2013-14 Executive Budget proposes a 6% across the board cut to all voluntary not-for-profit providers throughout the State of New York, effective April 1, 2013.  If this cut is enacted, the developmental disabilities system of supports and services will be negatively impacted, dramatically.  NYSACRA has received information from members as to how the reductions will be absorbed if a restoration is not successful.  Agencies will be forced to: reduce services and supports, eliminate entire programs, layoff all levels of staff including direct support professionals.  We all know how this will translate if the cuts are to be taken: the great strides we've made as a sector will quickly erode and the quality of life for people with intellectual and developmental disabilities (I/DD) will be negatively impacted.

Both houses of the State Legislature are in the process of negotiating and getting ready to release the respective one-house budget measures.  While we understand the 6% across the board cut to the not-for-profit developmental disabilities sector is gaining great attention in the State Legislature, we need to continue advocacy efforts and therefore we are asking agencies, parents and family members, agency staff and direct support professionals, self advocates to make two telephone calls this week.

WHO TO CALL:

Please make two telephone calls, one to your State Assemblymember and the other to your State Senator in their Albany Offices

WHEN:

This week (the week of March 4^th)

WHAT'S MY MESSAGE:

"I'm a constituent and I am concerned the proposed 6% across the board cut to the not-for-profit developmental disabilities providers will negatively impact supports, services and programs.  I wish to thank my Assemblymember/Senator for his/her support of people with intellectual and developmental disabilities and ask him/her to support restoration of the 6% proposed cut in the one-house budget bill."

HOW:

Contact the Assembly Operator at 518-455-4100 and ask to be transferred to your Assemblymember's Office. (if you do not know who your Member of the Assembly is, go towww.assembly.state.ny.us to identify your Member.  You may also obtain his/her direct Albany Office telephone number, rather than going through the Assembly Operator).

Contact the Senate Operator at 518-455-2800 and ask to be transferred to your Senator's Office (if you do not know who your Member of the Senate is, go to www.nysenate.gov to identify your Senator. You may also obtain his/her Albany Office telephone number on the website, rather than going through the Senate Operator).

THANK YOU FOR YOUR ONGOING ADVOCACY AND EFFORTS!

LOOK FOR MORE NYSACRA ACTION ALERTS

THROUGHOUT THIS WEEK AND NEXT WEEK

Sequestration and Nonprofits in New York State

Sequestration and Nonprofits in New York State: Telling the Story of Impact on the People We Serve

When Washington policymakers failed to reach agreement to stop the $85 billion in arbitrary budget cuts known as “sequestration,” they let loose a wide array of cuts and changes that are likely to be felt first and frequently by charitable nonprofits. We feel that the best way to demonstrate the adverse effect of sequestration on our communities is for charitable nonprofits like yours to share the stories and data of what it means to the people you serve. That is why the websitewww.GiveVoice.org has been launched by the National Council of Nonprofits.

As a member of the New York Council of Nonprofits, you are part of the nation’s largest network of charitable nonprofits, connected through the National Council of Nonprofits. This network is mobilizing to (a) alert the nonprofit community about how the new federal sequestration cuts will affect almost every charitable nonprofit in America – even those without any government contracts – and (b) start documenting the effects of the sequestration cuts on the work of nonprofits and the communities we all serve.

The cuts mean that nonprofit staff members and board members must raise billions of dollars more this year alone to handle the resulting increased demands for services.  We encourage you to visit www.GiveVoice.org to see how sequestration will have multiple ripple effects and then share your data and stories about what the cuts mean to the work of your nonprofit (including changes to your own staffing levels) at www.GiveVoice.org so state, subsector, and national trends can be analyzed the story of the impact can be documented and demonstrated.

Historically, the nonprofit community has suffered because we have been fragmented and separated into different silos. This new GiveVoice.org resource allows nonprofits here in New York to learn together and lift our voices together for the public good.

Thanks for your membership in New York Council of Nonprofits; by coming together, the nonprofit community can better serve our broader communities across New York.

National Webinar Free for Your Members

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Like yours, many nonprofit organizations often find themselves wondering...

• Do we need to have an independent audit? (And what does that entail anyway?)
• Are there special rules for us because we receive government grants?
• How can we prepare so that the process goes smoothly?
• What’s the board’s role?

To answer these questions and more, NYCON is excited to bring you Nonprofit Audits in a Nutshell, a free webinar on March 28th at [3:30pm Eastern] , hosted by our national network, the National Council of Nonprofits. This webinar features practical tips from nonprofits about their audit practices, as well as experts from BoardSource andRaffa and is designed to give you background on everything you need to know about the independent audit process (from legal requirements to practical advice).

Thanks to the support of First Nonprofit Foundation, this exclusive webinar is available, free of charge, to all members of NYCON. Don't miss this opportunity - Register Today!

Show A Little Love to Your Corporate Documents

This Valentine's Day it's Time to Give Your Corporate Documents the Love and Affection they Deserve! It's the beginning of a new year and a very good time to show a little love...to your nonprofit's Corporate Documents!  Bylaws, Personnel Policies and other Corporate Documents need regular attention to ensure they are appropriate, consistent with the Nonprofit Incorporate Law in New York State and provide sufficient protection for your organization and employees. With packages for NYCON Members we can help ensure your peace of mind at a price your nonprofit can afford.

Bylaws & Personnel Policy Review [Get Started]  Whether you are a newly created organization or a long standing one, risk management is the keystone for good governance of your organization.  Two important tools for protection of your organization from mission killing liability and litigation is the creation and annual review of corporate bylaws and personnel policies.  Our attorneys and legal staff will dissect your corporate documents and review same for legal pitfalls, returning same to you with revision comments and "best practice" advice within 30 days. A Bylaw Review is $500. A Personnel Policy Review is $700. Package price for both is only $1,000.  Want to Learn More? Click here and let us know and we´ll have one of our legal staff get back to you to start the process!

Corporate Document Review [Get Started]  Another important element of risk management is the maintenance of the proper form of corporate existence.  Our attorneys and legal staff will analyze your Certificate of Incorporation, and any Amendments for consistency between them and your internal corporate documents and Bylaws, returning the same to you with revision comments and "best practice" advice within 15 days.A Corporate Document Review is $300.  Want to Learn More? Click here and let us know and we´ll have one of our legal staff get back to you to start the process! To see the article online Click Here