Root Cause Analysis Part I: Three Nonprofit Crises in Visual Studio .NET

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Root Cause Analysis Part I: Three Nonprofit Crises
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Exhibit 41
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crisis comparisons
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ARC UWNCA The UWNCA board was replaced The PriceWaterhouseCooper s forensic audit identified how the previous board had ignored clear signs that Mr Suer was embezzling money The previous board was too cumbersome to be a serious governance entity Beard The board was forced to resign, and a new board was seated A second board was seated to oversee the awards activities
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Organizational Component Board
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Because the ARC s Board of Governors is divided between political appointees and Red Cross insiders, it was unwilling to deal with a dysfunctional organizational culture Perhaps Sen Grassley should have insisted that the entire board be replaced, along with the Disaster Services division The public is now aware of Red Cross disaster fundraising strategy During the 2004 Tsunami disaster, the Red Cross stopped collecting funds when the campaign reached peak capacity for activities related to this disaster Red Cross senior management did not want another Congressional inquiry Red Cross National Headquarters laid off staff in 2002 and 2003
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Operations
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The UWNCA no longer handles the Combined Federal Campaign It closed offices in surrounding communities The new Executive Director is hoping that time will heal wounded relations with the corporate sector Donations from the public were down significantly in subsequent years UWNCA has had to lay off staff and close offices in the surrounding communities
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The Beard Foundation is operating in two sections, the Foundation s administration and a separate division that oversees the annual awards
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Staffing
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The James Beard Foundation website now includes a page extensively describing the Foundation s mission and commitment to ethical behavior in the workplace The page includes discussion of the new Whistleblower Policy and Conflict of Interest policy The Beard Foundation s public is the culinary world Despite the scandal and Mr Pickell s trial, the Beard Foundation Awards Ceremony went on and are scheduled to continue
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Relations with the public
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In the midst of the Congressional inquiry and the adverse publicity, the Red Cross changed its policy on the Liberty Fund and used it exclusively to provide cash gifts to the victims families
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Public support of the UWNCA dropped dramatically The Executive Director and his team are looking for ways to inspire public confidence
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Conclusion
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Conclusion
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Nonprofit disasters do indeed happen The three crisis scenarios reviewed in this chapter illustrate the price of inattention, inertia, hubris, and colossal greed All three of the nonprofits suffered to some extent and Senator Grassley will no doubt be monitoring the Red Cross for some time The best outcome from these sad events is the heightened awareness of Congress, the public, and donors The Grassley hearings in 2004 and 2005 on nonprofit accountability set the stage for real reform even if some nonprofits will enter the 21st century kicking and screaming!
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Root Cause Analysis Part II
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In 4, we examined the recent crises at three nonprofit organizations, the
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American Red Cross, the United Way of the National Capital Area (UWNCA), and the James Beard Foundation How could SOX compliance and best practices have either prevented these crises or reduced the effects of the crises The focus of this chapter is twofold The first emphasis is on the ways in which compliance with SOX requirements and adaptation of SOX best practices could have helped these nonprofits avoid the damage caused by these calamities The intent is to provide the reader with a SOX best practices template that directly addresses the common areas of dysfunction identified in these crisis scenarios The second focus is on the findings of the Panel on the Nonprofit Sector s Final Report to Congress and the Nonprofit Sector on Governance, Transparency, and Accountability as a means of describing the direction this collaboration of Congress and the nonprofit industry sees for future nonprofit practice
Overview
Although hindsight is indeed 20/20, compliance with SOX and adaptation of best practices could have had a mitigating effect on the severity of the crises we examined in 4 The compliance requirements of Whistleblower Protection and Document Preservation could have provided an earlier warning that something was wrong Best practices from SOX would have served to strengthen the nonprofit s infrastructures and ensured that their boards were awake, alert, and, most importantly, accountable