Discussing Accountability

March 1, 2005       Jeff Jones      

When two U.S. Senators encouraged Washington, D.C.-based Independent Sector to convene a national panel last September, officials and nonprofit leaders started laying the foundation for a far-reaching review of the sector.

The panel spent months examining oversight and governance issues and was scheduled to give an interim report to Senate Finance Committee leadership on March 1.

Independent Sector (IS), the lead fiscal agent and organization guiding the work of the Panel on the Nonprofit Sector, has faced numerous challenges since forming the panels last October.

The panel’s original budget was roughly $2.7 million, including $1.1 million in outsourced expertise expenses and nearly $1 million in staffing costs, according to a copy of the original budget obtained by The NonProfit Times.

The panel’s budget was roughly $3.5 million as of late January, according to Diana Aviv, executive director of the panel and also president and CEO of IS.

The original budget was a planning document, and the panel understood it was likely to change as needs arose, Aviv said.

“When one mounts an effort in such short duration, costs will always be higher,” Aviv said. The panel approved budget adjustments and supported the rationale, according to Aviv.

“An effort of this kind that could cost approximately $3.5 million is one of the most important investments the sector can make,” Aviv said. “I think it’s worth saying that the nonprofit sector’s annual budgets collectively are $875 billion” and the combined assets of the sector are $2 trillion, she added.

The panel had $2.2 million in-hand from fundraising efforts as of late January, according to Aviv.

“We feel optimistic that we can meet our target,” Aviv said.

Some 79 organizations pledged money ranging from $100 to $200,000, Aviv said. Contributors are a mixture of private foundations, family foundations, community foundations and nonprofits.

“The whole purpose with regards to the panel is to get as broad support as possible, so as not to have the perception that a few funders owned the process,” Aviv said.

Significant contributors have not attempted to control the panel’s direction, according to Aviv. The panel has made cost adjustments in several areas including communications, Aviv said.

Creating a dedicated Web site, communicating with the press, federal legislators and staff, and interested nonprofit officials not involved in the panel, have contributed to increased costs, according to Aviv. And finding ways for work group and panel members to talk to each other in a secure way also contributed to budget adjustments.

Researching and analyzing accounting issues for panel recommendations and studying Form 990 reform are other areas where expenses went up due to a need for more expertise, she explained..

“We are working in a framework in which we don’t have models,” Aviv said.

As for staffing, part of the challenge was finding people who had expertise, were willing to jump into the project and work for a limited time, Aviv said.

“Judgment on who was in and out was based on the principle of what do we need to get this job done and who’s best qualified and can jump in and do it right away,” Aviv said. In some cases, IS employees were the best people, she said.

Staff allocations

Aviv, who earns $263,120 annually as leader of IS, is estimated to receive $150,000 for her work leading the panel, according to the original budget.

Aviv estimated that she’s spent upward of 85 percent of her time working on the panel during the early stages of the work.

Aviv said there’s “no double dipping,” and that her IS salary, as well as the salaries of other IS staff working on the panel, are pro-rated to accommodate any time spent on panel work.

“What we are doing is tracking everybody’s time to see what the costs are,” Aviv said. Any appearance that IS is outsourcing its employees to staff the panel, and in the process saving itself on expenses is inaccurate, according to Aviv.

IS “doesn’t benefit financially” from its staff being paid through the panel budget for their related support work, Aviv said. “It’s not a back-door way to get funding,” Aviv said.

In fact, IS has had to hire temporary employees and/or consultants to fill-in functional areas that IS staffers engaged in panel work would otherwise be doing for the national umbrella organization, according to Aviv.

IS’s total revenue was $4.6 million for fiscal year 2003, according to its Form 990. Aviv stressed that IS’s and the panel’s budget and accounts are separate.

“At this point in time we don’t see this as a net benefit to Independent Sector fundraising,” Aviv said. “I’m not ready to say it’s a loss. It has set us back in timing for fundraising for Independent Sector.”

The benefits of the panel’s work, such as bringing together organizations of all sizes to talk about these issues, are worth the investment, according to Aviv.

The panel’s final report is scheduled for a late spring release. The panel will continue examining some issues and is scheduled to complete its work Sept. 30.

For more information visit www.nonprofitpanel.org.