Carnegie
Corporation
of New York
Fall 2005
For better or worse, this sort of seat-of-the-pants
management and hit-or-miss oversight is not unusual in America’s
sprawling, diverse and rapidly growing nonprofit sector. Without training
or expertise in administration, many nonprofit leaders are unable to manage
their organizations effectively. Lacking knowledge about governance, nonprofit
boards often do not take the time or adopt the safeguards needed to provide
proper oversight. As Cynthia Gibson, then a program officer in Carnegie
Corporation of New York’s Strengthening U.S. Democracy program,
explained in 2002: “Small or mid-sized nonprofit [organizations],
in the best of times, are undercapitalized, understaffed and stretched
to the bone as they continually struggle to find and secure the financial
and administrative resources they need to carry out their missions.”
What can and should be done to ensure sound management and good governance in the nonprofit sector? In the wake of high-profile media reports spotlighting ethical lapses at nonprofit organizations and declining public confidence in nonprofits, the question has drawn increasing scrutiny in recent years—both from within the nonprofit sector, and increasingly from government as well.
Consensus remains elusive, but Ostrander’s experience at the Kidney Foundation of Greater Cincinnati may suggest an important part of the answer. A year into her tenure, Ostrander attended a workshop series sponsored by the Ohio Association of Nonprofit Organizations. The four-session training was based on an industry-sponsored ethics and accountability project entitled Standards for Excellence—a code of best practices in nonprofit management backed up by an extensive collection of user-friendly educational materials. The Standards code was developed in Maryland during the mid-1990s and it is being replicated in several sites nationwide.
The training made a world of difference, Ostrander says: “We used it to make a lot of changes that we would have wanted to make anyway, but we were able to make them much more quickly because we had this national organization behind us which put some real thought into why they set these standards.”
The Kidney Foundation quickly developed not only a new accounting system but also a conflict-of-interest policy to ensure that all funds were properly spent and accounted for. “The materials—the educational packet—were amazing,” Ostrander recalls. “The examples they gave us for what you need to do to put every piece in place and make sure you’re covered, and the sample policies they included in our packets, made for a really valuable resource. I think it was the best nonprofit training I’ve ever received.”
Similar stories and similar praise can now be heard from dozens of nonprofit organizations in Maryland as well as Ohio and the four other states with nonprofit associations that adopted Standards for Excellence during the first phase of a national replication project, launched with support from Carnegie Corporation and other foundations in 2001. A September 2004 interim evaluation report declared: “The adoption of Standards for Excellence by statewide associations of nonprofit organizations continues to be widely accepted as a very good idea, for the associations, their stakeholders, and for the nonprofit field as a whole.”
In June 2004, the Maryland Association of Nonprofit Organizations—which developed and still guides the project—opened the Standards for Excellence Institute to take the model coast-to-coast, and two more organizations have since signed on as replication partners. Thirty other groups have expressed interest in becoming partners, and the Institute is developing procedures to work directly with interested nonprofits in areas where no replication partners operate.
Despite this progress, however, the Standards for Excellence face an uncertain future. The most immediate concern is financial. To date, the development and replication of the Standards have been heavily subsidized by national foundations. But with foundation resources for nonprofit capacity building increasingly scarce, the long-term business plan for the Standards program requires hundreds of thousands of dollars of earned income each year via licensing fees from replication partner organizations and user fees from participating nonprofit organizations—a difficult and unproven strategy.
The scarcity of dollars has been a factor behind the decision of some replication partners not to offer individual nonprofits an opportunity to become “certified” as complying fully with the Standards code—a core component of the original Standards design and a prominent feature in most publicity surrounding the model. Even where certification is offered, the number of nonprofit agencies earning the program’s Seal of Excellence has been limited due to the heavy costs involved for applicants and for the certifying agencies themselves.
The small number of agencies certified by the Standards for Excellence thus far—just 106 organizations nationwide, including Maryland, as of May 2005—has undercut the program founders’ ambitions to position the Standards as “the national standard for ethics and accountability in the nonprofit sector.” Nonetheless, wherever it operates, the Standards for Excellence program is proving a valuable asset for the nonprofit sector.