Marian Conway: Stop the Nonprofit Budget Fantasy. It’s Not Right.

Photo of Marian Conway by Christopher Appoldt

As our tour of Pal-O-Mine Equestrian was coming to a close, someone asked, “What percentage of funds go to fundraising and administration?”

We never learned the answer because very quickly another visitor, Cindy Krezel of the New York Community Bank Foundation, interjected, “Pardon me, I don’t mean to interrupt, but that is the WRONG question to ask if you care for this organization and its work, or about any nonprofit!”

Wait, What? Attendees were intrigued. Cindy proceeded to explain. When we asked if she’d like to share her words here, she replied, “I’d be happy to, but you REALLY ought to speak with my boss! She’s the real expert!”

So, we did – and, boy, is she an expert! Marian Conway has served the NY Community Bank Foundation since 2002. She advanced there from Program Officer to Executive Director in 2007. It’s a somewhat unique organization in that, beyond the grants they give, they spend a lot of time offering consultation to local organizations they support. She is also on no fewer than 10 non-profit boards. Those she currently serves wearing her NYCB Foundation Hat include: Cleary Foundation for the Deaf, Community Development Corporation of LI, Farm Education Inc, Long Island Arts Alliance (Board Chair), The Middle Country Library Foundation, SUNY Empire State College Foundation (Board Chair), The Queens Chamber Foundation, The Red Cross of Long Island, and the Urban League of Long Island. These are far from all the groups she’s been closely connected with.

On top of all of this, in 2013, Dr. Conway achieved her Ph.D. in Public Policy and Administration, Nonprofit Management from Walden University. Her dissertation specifically explored “What are the general operating expenses for nonprofits and who pays them.”

She’s also a teacher, both formally and just because it’s what she’s inclined to do. Usually the lessons are about what NOT to do, but she also tries to reinforce the good.

Here, we’re just going to blow off a bit of steam with her. Maybe it will drive something sensible forward...

THE WAY THE STATE TREATS NON-PROFITS IS DISCRIMINATORY
The first thing Marian does is hand us two forms from New York State regarding the rules for budgeting for contracts, one for for-profit businesses, the other for non-profit organizations: “Look at this! A for-profit doesn’t have the same restrictions a not-for-profit does. When the contract is for a for-profit to pave a road or fill a pothole or build a bridge, why is it that they are granted funds to pay workers and allow for a PROFIT, and non-profit groups can’t bill for either? I don’t even want a profit!”

All she’s asking for is reasonable compensation for nonprofit employees to do the work that has to be done. The way it is now, a non-profit often doesn’t even get reimbursement for reasonable expenses incurred while providing services! She won’t say it’s not fair – because life isn’t fair -- but it’s not right!!!

It takes hours to apply, and hours to report. They will only cover 10% for overhead, and only pay when they get finally around to it, well after the organization has laid out the funds.

On top of this, the very State that refuses to fully pay its contracts will then not only REQUIRE all manner of tedious reports, but also impose diverse legal mandates, including that nonprofits pay their employees minimum wage! So, basically, if you get a contract, YOU THEN HAVE TO EXPEND OVERHEAD RAISING MONEY TO PAY FOR STATE-MANDATED OVERHEAD.

She rattles off a few examples. For a business, a government contract can be great. For a non-profit that is actually dedicated to the public welfare? They start out with a negative number in covering costs, and if they need a loan while waiting to be paid, they have interest to be paid, too!

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All she’s asking for is reasonable compensation for nonprofit employees to do the work that has to be done. The way it is now, a non-profit often doesn’t even get reimbursement for reasonable expenses incurred while providing services! She won’t say it’s not fair – because life isn’t fair -- but it’s not right!!!
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“How great is it that someone’s job is to administer good deeds? That they get to do hard work raising money to help kids, build houses, or try to keep our water safe?

Why is paying for this considered some kind of a sin?

There are established reasonable rates for compensation. We should apply them to the NFP sector, too.”
 
JUST BECAUSE IT’S NON-PROFIT DOESN’T MEAN IT SHOULDN’T BE PROPERLY STAFFED – WE WANT GOOD PEOPLE IN THESE POSITIONS! THEY NEED TO MAKE A LIVING!

Please understand -- A mature, effective organization PAYS STAFF. Yes, it’s great when they start small – The Book Fairies are a great example of an organization that got really far with some folks pursuing the passion of a great and helpful idea. Eventually, though – especially if it’s successful! -- SOMEONE HAS TO BE PAID TO ADMINISTER THE ORGANIZATION!!!

Some do it with volunteers, yes! Still, we must recognize that the volunteer is then the one paying! What’s more, to get to the next level – or beyond the passion of one really lucky, dedicated person -- an organization ultimately needs to raise enough money to HIRE PROFESSIONALS. Passion plus heart does not equal business experience or affinity! For our nonprofit organizations to function optimally, they need the two to connect.

People can’t build houses on volunteer skill alone! Skilled professionals are required to do these jobs! Executive Directors, Program Directors, Administrative Assistants … all of these and more are positions of skill and responsibility. Furthermore, a responsible organization REQUIRES OVERHEAD -- insurance, lawyers, accountants….Human Resources! So many experts. Every other business understands this. The good ones also invest in professional development, strategic planning and evaluation.

“Why,” asks Marian, “do we expect nonprofits to function without this?!?”

THE WAY MANY FOUNDATIONS AND DONORS TREAT NONPROFITS IS UNREALISTIC
“It IRKS me – people act as though nonprofits are all pocketing the money they raise and walking out the door! Nonprofit board members are generally all volunteers. Many times they devote countless hours, next to staff members. Sure there are always a few bad actors but, by and large, the value these organizations are providing is off the charts.”

She talks about the NY Community Bank Foundation, of which she is Executive Director. This giving arm is funded entirely by bank stock and operates on dividends:
“We don’t do big grants any more, unfortunately. However, we do also give our time, which is unusual. It’s not just an online application and cold check. We offer both consulting and strategic planning assistance. And we specifically give grants for overhead!

One time, one of my own board members asked, ‘is it legal to fund that?’ DO YOU SEE THE PROBLEM HERE?!?”

Photo by Carl Heyerdahl on Unsplash

THE WAY NONPROFITS REPRESENT THEMSELVES FEEDS AN ABUSIVE FANTASY
Ok, so.…part of the requirement, whatever type of organization you are, is that you have to pay people at least minimum wage. Many folks involved in non-profits, in fact, lobby for living wages for everyone, because it seems like the healthy, socially just thing to do!

Then Marian hears some nonprofits marketing themselves as though they somehow operate with no overhead at all!

“They are MARKETING this misinformation! Who is paying for this marketing?

I mean, seriously: I’ve heard the commercial a hundred times about how all of the money donated goes directly to charity. That’s great…but…Who’s paying the actor? The film crew? The station running the ad? SOMEBODY IS!!!

Or any of that marketing telling people that only 15% is spent on overhead -- Who’s paying for the paper? The commercial? The content creation?

Think about it --- you send a check and it goes directly to the person in need….Who’s handling the money? Who’s deciding who gets it? Who’s analyzing the problem and its solution? Hopefully a professional!!!”

Some of these are great organizations, and Dr. Conway finds it troubling that they can’t possibly be representing their numbers honestly, “I tell them this. They come back at me: ‘Donors will only fund x, y and z. We have to do this because this is what they are taught is good practice.

Well, I say we have to STOP FEEDING THIS. At least ask them first! Then, if that’s what they really believe, TEACH THEM BETTER. They need to understand!!!”

A portion of this overhead is marketing and communications, she reasons. Maybe we can leverage this to educate people. Maybe we start by encouraging a slightly better message – “We pay the overhead so you don’t have to.”

Still. Somebody has to…and the world will be a bit healthier if we better value the folks doing all this work; work that, by its very nature, is designed not to make a profit, but to make the world a better place.

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"Think about it --- you send a check and it goes directly to the person in need….Who’s handling the money? Who’s deciding who gets it? Who’s analyzing the problem and its solution? Hopefully a professional!!!”
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SO, IF SMALL PERCENTAGES GOING TO OVERHEAD IS A LOUSY RULE OF THUMB, HOW SHOULD THE AVERAGE PERSON EVALUATE AN ORGANIZATION?

“Just google the organization!” says Conway, “See what they do and how well they do it. Information is everywhere. With a thorough search, bad stuff will bubble up. You can see it and think about it.”

Even better, reach out and get to know these folks, especially local organizations, which are generally very accessible. Talk to people involved. Attend their events. Check out their resources and their references. You can learn a lot, especially as a volunteer!

A little bad press shouldn’t necessarily turn you off entirely, either. “Humans are humans, and organizations – like businesses – have to deal with hiring choices they regret all the time. My advice is not to judge an entire organization based on the actions of one or two people, or even a systemic issue that may be overcome. Dig deeper and see what they’ve done about it. What are they doing now?”

Wounded Warrior is a challenging example, “That organization grew really fast. Some aspects got away from them, and some people were fiscally careless. It seems clear that there’s a good core in there, but it can still be hard to figure out.”

Others are just frustrating. She talks about stories of the Red Cross charging for a cup of coffee -- a pile of rumors including one half-truth -- that the group has had to deal with since World War I. ”I’m not even going to question that one decision now or argue how it might have actually been the right thing to do. It was ages ago. I’m serving on this local board NOW. My whole career is spent evaluating nonprofits to determine how worthy they are. I ask those who still bring this up: Are you telling me I’m no good?"

This mention of the Long Island Red Cross sparks another observation – Local organizations and national ones are often not equal – even when they carry the same name. “The locals operate here and do the hard work at home. They are often very different from national, and are generally the ones directly focused on YOUR community.”

A COUPLE OF OTHER TIPS
Just because Dr. Conway wants organizations fully funded, doesn’t mean she’s into waste or blind to limits on resources, “So many organizations are spread so thin. I beg people, please, when you see an issue, don’t just run out and start an organization. See what exists! If you do see the need for a new organization, let’s see where we can still talk to each other, so we’ve not going in counterproductive directions or being redundant.”

She also wants people to know that Long Island University will be launching a shared services program for nonprofits -- Legal, HR, Admin, etc. Basically they want to help by creating a professional employer program where resources can be pooled to be more cost effective than various organizations each paying on their own.  They’re currently seeking organizations willing to provide the services, and organizations to receive them. LIU will vet all involved.

Finally, read the NFP Quarterly to learn more about funding and budgeting, as well as many other issues facing nonprofit organizations. Marion, herself, is a regular contributor. If you found this particular subject interesting, here are a few articles that also touch on the topic, including a recent one by Dr. Conway herself!

When Performance Metrics Go Public: Problems with Growth through Contracts, Marian Conway, August 16, 2019 

Why Funding Overhead Is Not the Real Issue: The Case to Cover Full Costs, Claire Knowlton, September 12, 2018

The Looking-Glass World of Nonprofit Money: Managing in For-Profits’ Shadow Universe, Clara Miller June 12, 2017