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Practical Application of

Illinois Nonprofit Principles & Best Practices:


FIVE CASE HISTORIES FROM
NONPROFITS & GRANTMAKERS
Acknowledgements
Researched and Developed by Donors Forum
Valerie S. Lies, President and CEO
Robin Berkson, Senior Vice President for Membership and External Relations

Funding
This project was undertaken with the generous support of the Henrietta Lange Burk
Fund, administered by Bank of America Merrill Lynch.

Project Direction
Celeste Wroblewski, Vice President, External Relations, Donors Forum

Research and Writing


Dan Baron, Consultant

Leaders and Organizations Profiled


Christine Edwards, Winston & Strawn, LLP (for Metropolitan Family Services)
Bob Glaves, Chicago Bar Foundation
Sandra Guthman, Polk Bros. Foundation
Richard Jones, Metropolitan Family Services
Art Mollenhauer, Big Brothers Big Sisters of Metropolitan Chicago
Carrie Newton, Camp of Dreams
Suzanne Strassberger, Metropolitan Family Services

Editing
Marilou Jones, Director of Communications, Donors Forum

Publication Design
Frances Duberstein, Development and Communications Volunteer, Donors Forum

Copies of this report, as well as a downloadable PDF or an html copy


of Illinois Nonprofit Principles and Best Practices, are available on Donors
Forum’s website: http://www.donorsforum.org.

Copyright ©2009
Donors Forum
All rights reserved
Printed in the United States of America

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Table of Contents

Nonprofits
• Big Brothers Big Sisters of Metropolitan Chicago, pg. 4
Principles booklet “helps organizations make right decisions”

• Camp of Dreams, pg. 9


"Principles helped us set benchmarks"

• Metropolitan Family Services, pg. 14


Booklet offers “specific, user-friendly” approach to governance

Grantmakers
• The Chicago Bar Foundation, pg. 19
“Principles gave us road map on key issues”

• Polk Bros. Foundation, pg. 24


“Principles is a motivating force in push for accountability”

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Practical Application of
Illinois Nonprofit Principles and Best Practices

Nonprofit Case Study: Big Brothers Big Sisters of


Metropolitan Chicago
Principles booklet “helps organizations make right decisions”

The following case study focuses on how Big Brothers Big Sisters of Metropolitan
Chicago has used Illinois Nonprofit Principles and Best Practices, which was developed
by Donors Forum as a call for nonprofits and grantmakers “to strive for excellence in
realizing their missions, managing resources effectively, and governing well.” The
booklet is part of Donors Forum’s Preserving the Public Trust Initiative, which
began in 2004.

The booklet addresses a variety of key topics faced by nonprofits and grantmakers,
including mission and purpose, governance, legal compliance, fiduciary
responsibility, communication, and disclosure.

Need for Principles


In recent years, greater focus on ethics has affected corporate and governmental
sectors, most famously, perhaps, through the Sarbanes-Oxley law that holds public
companies accountable. The Principles booklet emerged in the context of growing
interest in ethical standards in the nonprofit sector. One of the most important
responsibilities of nonprofit organizations is governance. In recent years, the Internal
Revenue Service has devoted more attention to governance in the nonprofit sector;
one example is the decision to revise the governance section of Form 990, which is
submitted by tax-exempt and nonprofit organizations to provide the Internal
Revenue Service with annual financial information. At the same time, more
nonprofits are also realizing how closely good governance and overall success are
linked.

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Big Brothers Big Sisters of Metropolitan Chicago
For more than a century, Big Brothers and Big Sisters organizations have served
youth through mentoring programs. Through the model, adults develop one-on-one
mentoring relationships with youth. Early on, Big Brothers and Big Sisters
organizations operated separately. In 1977, Big Brothers of America and Big Sisters
International joined forces and became Big Brothers Big Sisters of America.

Structure
In Chicago, the organization’s board includes the executive, program, finance, and
board development committees. Board members are required to contribute a
minimum of $10,000 to the organization annually. In addition, Big Brothers Big
Sisters of Metropolitan Chicago (BBBSMC) features a leadership board of young
professionals that provides funds; recruits and develops future mentors, partners,
and board members; and works to generate public awareness of the organization.

Since the first Big Brother - Little Brother match was made in Chicago in 1969;
more than 12,000 children from metropolitan Chicago have had their lives enriched
by relationships with caring adults through the program. A study conducted by
Public/Private Ventures found that kids involved with Big Brothers Big Sisters were
46% less likely to start using drugs, 27% less likely to start using alcohol, and 33%
less likely to hit someone than their unmatched counterparts.

Big Brothers Big Sisters of Metropolitan Chicago has received high rankings for its
effectiveness from a range of sources, including Forbes magazine, which ranked the
organization as one of its top charities; Charity Navigator; and the American
Institute of Philanthropy.

The total revenue of the organization (2009 figure) is $1,950,250.

Using Principles
Art Mollenhauer, Executive Director of Big Brothers Big Sisters of Metropolitan
Chicago, came to the organization after a 24-year career with Baxter Healthcare.
Mollenhauer says that when he started at BBBSMC in 2006, the organization faced a
number of key challenges. As BBBSMC ran into economic problems, he says, it
began to struggle with how to maintain services while trying to not compromise and
reduce standards.

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Mollenhauer portrays an organization that, he says, had “a short-term orientation
that was driven by economic survival and was heavily in debt. We were really
struggling, and I felt we needed to go back to what is best for communities and kids.
I saw many well-intentioned people, but we needed to turn things around. We
found that the importance of standardization was great.”

“We used the Principles booklet as a guidepost,” Mollenhauer adds. “We think it is an
excellent tool. If I were governor of Illinois, these are the standards that I would
implement,” he says. “They can help make sure that the public gets a return on its
investment in nonprofit organizations.”

Mollenhauer sat on a state reform commission for after school programs and says
there is a “70 percent overlap between the Principles book and standards that were
submitted to the commission.” Mollenhauer says this effort was influenced by best
practices laid out in the Principles.

Measuring Impact
Mollenhauer says one major concern the organization was trying to understand was
how it can measure the impact it makes on people it serves. “We refer to ourselves as
the gold standard of youth mentoring – we are big on outcomes, measurement, and
research. But how do we know our work has an impact?”

One section of the Principles book confirms the importance of answering that
question, stating that organizations should “Set long (multi-year) and short-
(annual) term objectives evaluating program and organizational effectiveness, and
annually evaluate progress toward achieving objectives.” “It is really critical to have
well-thought-out impact standards defined, regularly analyze your performance, and
report this information to the donors and community partners. This assures
transparency and helps fosters development of a continuous improvement culture.”

Self Assessment
“When dealing with our organization’s turnaround, the Principles book was a useful
tool for what became an assessment,” Mollenhauer adds.

The organization, he adds, also does a self assessment with its national office.
Because there are “a lot of similarities” between the Principles book and what the
national office asks for, BBBSMC used the Principles book as an internal test before
going to the national office.

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In an era when measuring outcomes for funders and other key constituencies may be
more critical for nonprofits than ever, Mollenhauer says the book was especially
useful. “It was timely because of the emphasis on measuring what you do,” he says.
“So many organizations are competing for the same dollars, and it’s extremely
important to think key issues through.”

In the most fundamental way, he says the Principles book provided a kind of
operational audit for the organization. “When dealing with our turnaround, we
looked at these principles to help us get a handle on what we are doing well and not
doing well. That helped us figure out where we were – and, so to speak, put a stake
in the ground.”

Mollenhauer, however, says that while the organization has focused on its program
area, efforts to move the organization forward were really “comprehensive,”
involving operations, board performance, fund development, and quality controls.
“We felt that this process had to be comprehensive if we were going to make it
sustainable.”

Process
The organization used the Principles booklet to help develop a self assessment as a
good starting point for a strategic plan. In addition, Mollenhauer says, the booklet
was useful “on a day-to-day basis, as we tried to meet our goal of a continuous-
improvement culture.”

Staff and board members were involved in using the Principles book and the Big
Brothers Big Sisters National Standards for all of these purposes. In addition, Big
Brothers Big Sisters considered what leading universities had to say about best
practices in the field. Corporations, paid consultants, and pro bono consultants were
also involved. Meanwhile, oversight groups were set up in several key areas,
including program, board and resource development, and financial and risk
management.

“We tried to use the booklet with a positive attitude,” says Mollenhauer. “We used it
to learn where we can improve.” Among all participants, Mollenhauer says the
board drove this process.

The self assessment was completed in six weeks. According to Mollenhauer, it took
the organization nine months to implement its overall strategic plan. The Principles
book, he says, provided useful guidance throughout the development of the
organization’s self assessment and strategic plan.

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Sharing a Perspective
Mollenhauer says he would tell other organizations that using the Principles book is
comparable to “getting an annual physical. At a minimum, this information should
be consulted once a year. A great time to do that is when you’re going through any
kind of strategic planning.”

He says that “the sector is really in need of better practices, and can really benefit
from the Principles booklet. That can help lead to excellence.”

The Principles book, he adds, also reinforces what he believes volunteers and donors
need to do before they get involved with an organization. Mollenhauer has been
both a volunteer and donor for Big Brothers. “I had been a Big Brother, working
with a kid, and my wife and I had been donors. So I knew about the organization
from the external side. My belief is that before you volunteer time or write a
substantial check, you should be learning about an organization. Look at its financial
audits, operational standards, and programs. I strongly recommend that you conduct
due diligence before becoming a board member or volunteer,” he says.

Book Could be Used More Widely


Nonprofits and grantmakers, he says, will find the book useful. “The Principles book
is a great document,” Mollenhauer adds. “I think it should be more widely utilized,
and pushed by more donors. It goes a long way toward helping organizations make
the right decisions.”

Conclusions
For Big Brothers Big Sisters of Metropolitan Chicago, the Principles book played an
important role at a pivotal time. The book was used to help the organization
examine principles and best practices, but also fit well into overall efforts involving
BBBSMC’s national office and the state of Illinois.

The organization’s executive director frequently referred to importance of measuring


outcomes for the organization – always an important subject, but perhaps especially
crucial during a period of reassessment. The Principles book was a useful tool on this
front.

Mollenhauer says that Illinois Nonprofit Principles and Best Practices “helped us in
tangible and real terms. It really fit in with our culture, and with our need to develop
a really well-thought out process for moving our organization forward and setting a
high standard for performance the community can be proud of.”

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Nonprofit Case Study: Camp of Dreams
"Principles helped us set benchmarks"

The following case study focuses on how the Chicago-based nonprofit organization
Camp of Dreams has used Illinois Nonprofit Principles and Best Practices, which was
developed by Donors Forum as a call for nonprofits and grant makers “to strive for
excellence in realizing their missions, managing resources effectively, and governing
well.” The Principles booklet is part of Donors Forum’s Preserving the Public Trust
Initiative, which began in 2004.

The booklet addresses a variety of key topics faced by nonprofits and grantmakers,
including mission and purpose, governance, legal compliance, fiduciary
responsibility, communication, and disclosure.

Need for Principles


Carrie Newton, executive director of Camp of Dreams, says that when she started at
Camp of Dreams, she found out that members of the organization’s board were
“passionate people who cared about the program, but many had come to the
organization without the kind of knowledge included in Principles. The booklet really
provides basic tenets and principles that you need to know in the not-for-profit
world.”

In addition, the booklet came out at a time when many nonprofits were exploring
how to improve the way they govern themselves and address key ethical issues. Like
corporations and many government entities, nonprofits were focusing more on
accountability.

Camp of Dreams
Camp of Dreams is a nonprofit organization devoted to bringing uplifting,
engaging, and free educational programs to young people who would likely
otherwise go without these programs. The organization received its 501(c)(3) status
in 2004, though it operated independently since 2003 as a pilot project of a parent
organization.

Camp of Dreams serves low-income children from underserved communities


between the ages of eight and 18. According to the organization, these students “can
benefit enormously from the same types of educational, cultural, and community-
building opportunities that are more readily afforded to young people from more
privileged situations.” All of Camp of Dreams’ programs are free to all of the
participants, who are called “Dreamers.”

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The year-round project consists of two complementary components – a summer
camp and a school-year program:

• Summer camp: For three weeks in July, Camp of Dreams runs an overnight
camp at a 650-acre campus in Oregon, Illinois.

• Community Days: This component of the program is offered two Saturdays


a month during the school year and includes college preparedness programs
for the high school students.

Both programs feature a wide range of activities that target the academic, health,
civic engagement, and other needs of children.

Camp of Dreams works to help students achieve specific outcomes, including


improved grades, behavior, extra-curricular participation, high school graduation,
and enrollment in college. At the same time, the organization strives to successfully
encourage accountability among participants and a supportive community of people
connected to Camp of Dreams.

Total revenue for Camp of Dreams (2008 figure) is $346,629. Camp of Dreams has
two full-time staff members and 30 part-time staff members.

Using Principles
Newton, a corporate lawyer by training, emphasizes that the Principles booklet “is by
no means a treatise, but it does provide critical information about board
management and not-for-profit leadership that everyone needs to be familiar with
before entering the field.”

When Newton arrived at Camp of Dreams, she says, the booklet was already a
resource the organization’s board was using as it put together a board manual. A
month-and-a-half later, the organization held a retreat with a daylong series of
workshops. Newton adds that board members already respected Donors Forum.
“Everyone respects the Donors Forum – it’s a given. That lent significant credibility
to what we were trying to do.”

“It was important for me to formalize processes that were not yet in place – like a
process for bringing in board members or evaluating them,” she says. “I was pretty
adamant about setting those things into place, and I relied on two things:
independent consultants and the Principles booklet.”

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The booklet, Newton adds, contributed to a process that became collaborative, as
board and staff members worked together to define, and meet, specific goals. She
adds that that was a major departure from her work in the corporate sector.

“I was shifting my way of thinking away from for-profit America into a nonprofit
mindset,” she says. “When I have worked in corporate settings, leadership has often
operated from the top down, but that’s not always the case in nonprofits.”

Setting Benchmarks
Newton says the Principles book was especially useful at helping the organization set
benchmarks for a variety of areas, including how to orient board members and create
a system for self-evaluation. It also helped set forth requirements and duties of
board members at the beginning of each year. “A lot of these areas were already on
the table, but I wanted to bring a sense of urgency to them.”

“The Principles book provided a way of showing there is a long history and tradition
of how to run not-for-profits ethically and efficiently,” she says. “The booklet says
this very simply and directly.” When the organization produced a five-year plan, she
adds, “it started to think ‘big picture’ – this was no longer a month-to-month
organization.”

“Now, one of my goals,” she says, “is to get us to the point where the board and
organization are not doing things in a haphazard manner – that what we do is
thought through and intentional.”

Key Questions
Newton pointed to a number of key questions that the organization and its board
have tried to face – questions that the Principles booklet helped Camp of Dreams
address.

“Where do we need to improve?,” she asks. “What do we need to do to move


forward the organization from a structural standpoint? Fiscally? How can we
improve the training of board members?” “These are the kind of questions we have
asked,” Newton says, “and continue to ask.”

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Challenges of a Growing Organization
Camp of Dreams, according to Newton, is in a growth phase – leaving the start-up
phase of nonprofit life and trying to achieve stability.

There have been times, Newton adds, when she had encountered resistance to ideas
in the Principles book. “The board doesn’t dislike what I propose – it’s just new. In
some cases, I have had to step delicately in some respects, but that’s understandable.
That is when the Principles booklet backs me up. It helps push back any fear and
hesitation.”

As of result of working with the Principles, the board of Camp of Dreams


implemented a process for evaluating the executive director. In particular, the
booklet reinforced the importance of evaluation and making expectations clear.

In addition, Newton says the booklet helped reaffirm a sense of fiduciary duty for
her – and the board. “I’ve been on boards for years, but never really thought about
fiduciary duty to an organization.” Now, she says, she and board members have a
clearer sense of how each board member is responsible for the fiscal and structural
health of a nonprofit organization.

“It’s not just about writing a check,” Newton says, “but also about reviewing
financials, written materials, and marketing materials. There can be a tendency to
leave those things to staff – but that’s not how I think about it now.”

How Others Can Use the Booklet


When asked how other organizations can use the Principles booklet, Newton says
they should “read it, digest it, and take it seriously.”

For organizations focused on self-evaluation, she adds, “the book amounts to a


checklist of what a board needs to be doing on an annual basis. It’s not going to
make someone an expert on not-for-profit finances, or how to structure
programming or do fundraising. It provides a guide – the book is kind of like the
chapter headings of what to do in the not-for-profit world.”

Conclusions
Camp of Dreams provides an example of how the Principles book can benefit a small
and relatively young nonprofit organization that is trying to meet challenges related
to organizational growth. The book has also proven useful to the organization as it
makes changes under Newton, a new executive director.

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One critical point Newton makes reflects how board members learn and use
information about a nonprofit’s financial responsibilities. While the Principles book
provides clarity and guidance on a range of issues, many related to governance, it
also helped the organization navigate through terrain that might not be as familiar to
board members.

Illinois Nonprofit Principles and Best Practices also provided a framework for answering
key questions (i.e., “How can we improve training of board members?”) and setting
benchmarks. “This booklet,” Newton says, “is a great entry into understanding
pretty much every requirement that a nonprofit needs.”

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Nonprofit Case Study: Metropolitan Family Services
Booklet offers “specific, user-friendly” approach to governance

The following case study focuses on how Metropolitan Family Services has used
Illinois Nonprofit Principles and Best Practices, which was developed by Donors Forum
as a call for nonprofits and grantmakers “to strive for excellence in realizing their
missions, managing resources effectively, and governing well.” The Principles booklet
is part of Donors Forum’s Preserving the Public Trust Initiative, which began in
2004.

The booklet addresses a variety of key topics faced by nonprofits and grantmakers,
including mission and purpose, governance, legal compliance, fiduciary
responsibility, communication and disclosure.

Need for Principles


Richard Jones, Executive Director of Metropolitan Services, pinpoints one reason
why the Principles book is especially timely. “This document came out at a time
when there is a call for increased transparency for nonprofits,” says Jones, who has
more than 40 years of experience in the nonprofit sector and also serves on Donors
Forum’s Board of Directors. Nonprofits, like corporations and many government
entities, are striving to meet their goals in an era when accountability has become
more and more important. On the corporate level, perhaps the most famous
example of this trend is the passage of The Sarbanes-Oxley Act of 2002.

Principles reflects a shift in the nonprofit sector characterized by an increased focus


on accountability, transparency, and scrutiny of a variety of issues, including
executive compensation. Changes are also reflected in attempts by some in the
nonprofit sector to emulate best practices that have been carried on in the for-profit
sector, like the growth of compensation committees.

Metropolitan Family Services


Metropolitan Family Services (MFS) is a large social service agency that has served
low-income and working poor families in the Chicago region for more than 150
years. It first opened its doors before the Civil War. The organization has seven
major service centers. With 550 full and part-time staff, MFS serves families from
southwest Cook to DuPage counties, as well as Evanston and Skokie. The
organization serves close to 55,000 families and individuals each year.

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Metropolitan Family Services was the first official charitable organization in
Chicago; the agency also played a major role in the rehabilitation of the city after the
Chicago Fire in 1871, when it administered $10 million in aid to families displaced
by the fire.

The total revenue of MFS (2007 figure) is $34,607,219.

Programs and services of MFS include child and youth development, counseling,
economic stability, employee assistance network, legal aid, parent development,
older adult services, and violence prevention and intervention. The organization also
advocates for stronger public policies. In recent years, MFS has advocated for
legislative solutions on a number of issues affecting communities and low- and
moderate-income families, including predatory lending, child support, and youth
violence.

Input from communities is also an important component of how MFS operates. At


each center, community boards include residents and leaders of local businesses and
nonprofit organizations whose support helps make families and communities strong.

Using Principles
By coincidence, Jones says, a member of the organization’s Legal Aid Society and
the director of its legal aid program attended a community meeting where there was
a presentation on the Principles book. Later, a member of the organization’s board
suggested that MFS more formally explore governance and other issues, and the
organization recruited an attorney for this purpose.

“We take pride in being on the cutting edge, and leaders in the field,” Jones says.
“We are a quality service provider with a very strong reputation in the community,
and we felt the booklet was very timely. We wanted to really review where we were
in relation to the principles.”

Jones adds that MFS was especially interested in how the Principles book addresses
issues related to governance. “There was specificity in terms of how governance
principles should be evaluated and measured. That appealed to our group.”

According to Jones, one area for improvement related to how board committees
operate. The organization, he notes, did not have clearly written charges for each of
its committees. In addition, MFS had not reviewed its bylaws in a while.

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MFS was able to dedicate Suzanne Strassberger, its Vice President of Government
Affairs and Special Initiatives, for the organization to this project. "A big part of this
effort was setting up lines of responsibility within the organization,” Strassberger
says.

The book proved to be a useful and versatile tool that we turned to as the
organization standardized charters for board committees, complied with the new
990 form and executed a variety of other changes, according to Strassberger.

"I saw this process -- and Principles -- as a way of educating and involved the board
about its roles," Strassberger says. "A board whose members are comfortable in their
roles is a committed board."

Thorough Review
Jones adds that “The book encouraged us to do an extensive review. The more we
looked into it, the more we focused on clear relationships, functions, and areas of
authority. For example, it was not clear to us before this process that our budget is
not something to be approved at the community board level -- but at the policy board
level.”

Role of Attorney
MFS was also able to enlist the pro bono services of an attorney from a leading
Chicago law firm -- Christine Edwards from Winston & Strawn, LLP.

"People who join boards are often used to systems, procedures, and controls because
that's what they've seen in their own work," says Edwards. "They expect to see these
things in nonprofits."

Edwards adds that one of the issues faced by MFS was that "the organization had
not kept up with its growth. The various boards of directors did not fit easily into a
governance profile of accountability, standards for reporting, and standards of
accountability from one board to the next board."

Edwards played an important role in the development of a conflict of interest


statement that reflected the principles. She also contributed expertise toward the
development of a document destruction policy as well as review of the organization’s
charter and bylaws and other matters.

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In addition, MFS emphasized the development of a whistle-blower policy, which is
also discussed in the booklet. The organization decided to adopt a 1-800 number to
facilitate this policy, as well as clear procedures that staff or an outside agency should
follow.

"Metropolitan Family Services was a very well-run organization throughout this


whole process, and had attracted some of the most devoted volunteers that I had
ever come into contact with," Edwards says. "The booklet was a valuable resource
because it looked strategically at how all of the organization's pieces fit together.
Most boards will think about issues in isolation; the book looks strategically in terms
of overall processes and procedures."

Self Assessment
A self assessment was conducted by the seven board members, who conducted a
survey, pulled together an evaluation, and sent it to other board committees.

Overall, Jones now says he sees a difference in how MFS benefits from the booklet.
“In previous cases, we would have achieved our goals, but with the help of Principles,
we got there in a more orderly manner. Principles informed our review process,
which has in turn informed our policies.”

MFS Model
As a large organization, MFS was able to use resources that might not be available to
smaller organizations. For example, Jones cites the contribution of the organization’s
“large” board, a dedicated staff person, and pro bono legal services as having a
significant impact on the process. “It turned out that our staff person devoted
considerable time to this process,” he says. “That was not anticipated, but we
decided to continue along those lines.”

Advice
Jones says he would strongly recommend the Principles to other nonprofits. “The
book is manageable and user-friendly -- and it gives you a nice clear path so that you
can avoid all that second-guessing. It’s an especially great summary of best practices
for governance of nonprofits that I believe are the best [standards] available.”

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Conclusions
Metropolitan Family Services made a major commitment to strengthening the
organization, and Illinois Nonprofit Principles and Best Practices played an important
role in that process. It became apparent through MFS' process that it was able to
dedicate staff to this project -- and pro bono counsel -- in a way that other
organizations may not be able to do. That said, Jones suggests that nonprofits can
adapt their own needs and capacities to addressing key issues -- and using the
Principles booklet.

The organization, says Jones, did not view this challenge as a challenge that is met
once -- but as a continuous process in which policies will be reviewed on a regular
basis.

Another key may lie not just in what the organization achieved, but in how it
responded. MFS is a large nonprofit that had not updated many processes for a
number of years. The organization used the booklet to help guide what became a
very intensive commitment to looking at how it operates -- and used Principles to
help guide changes.

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Grantmaker Case Study: The Chicago Bar Foundation
“Principles gave us road map on key issues”

The following case study focuses on how the Chicago Bar Foundation has used
Illinois Nonprofit Principles and Best Practices, which was developed by Donors Forum
as a call for nonprofits and grantmakers “to strive for excellence in realizing their
missions, managing resources effectively, and governing well.” The Principles booklet
is part of Donors Forum’s Preserving the Public Trust Initiative, which began in
2004.

The booklet addresses a variety of key topics faced by nonprofits and grantmakers,
including mission and purpose, governance, legal compliance, fiduciary
responsibility, communication, and disclosure.

Need for Principles


In recent years, greater focus on ethics has affected corporate and governmental
sectors, most famously, perhaps, through the Sarbanes-Oxley law that holds public
companies accountable. The Principles book emerged in the context of growing
interest in ethical standards in the nonprofit sector. One of the most important
responsibilities of nonprofit organizations is governance. In recent years, the Internal
Revenue Service has devoted more attention to governance in the nonprofit sector;
one example is the IRS’ decision to revise the governance section of Form 990,
which is submitted by tax-exempt and non-profit organizations to provide the
Internal Revenue Service with annual financial information. At the same time, more
nonprofits are also realizing how closely good governance and overall success are
linked.

The Chicago Bar Foundation


The Chicago Bar Foundation is part of the Chicago Bar Association, one of the
leading metropolitan bar associations in the country. Founded in 1874, the
association is governed by a 23-member board of managers and has 55 practice
committees, 23 service committees, and 15 special committees.

The Chicago Bar Association, which is a voluntary association, has over 22,000
members. The total revenue of the organization (2007 figure) is $6,186,215. The
organization provides a wide variety of services to the legal profession, the state of
Illinois, federal courts, and the public. The array of services includes a career and
placement center, various programs that promote diversity in the legal profession, a
judicial evaluation committee, a lawyer referral service, and many other services.

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As the charitable arm of the Chicago Bar Association, the Chicago Bar Foundation
(CBF) advances the work of pro bono and legal organizations that provide legal aid
to thousands of vulnerable residents in the area.

Using Principles
Bob Glaves, Executive Director of The Chicago Bar Foundation, says that the
Principles booklet provides meaningful information for an increasingly diverse sector.
“In the nonprofit sector, there are so many different types of organizations. To
adopt a ‘one size fits all’ approach to regulating nonprofits can really put difficult
requirements on very small organizations. What this book has done is strike a
balance. The principles are really intended to apply to everybody, while the best
practices provide some flexibility based on the type of organization you have.”

For The Chicago Bar Foundation, the principles were used to help the organization
develop more efficient ways to address critical issues, from governing the
organization to creating policies that spell out how it should face challenges like the
need for new whistle-blower policies. “The principles help keep us on track and
provide us with a framework on these issues,” Glaves says. “That’s been very helpful
and has allowed us to be a more efficient organization.”

As an organization that runs numerous programs, allocates grants, and serves a


sizable membership base, working with the Principles was not as much about solving
a single specific problem at The Chicago Bar Foundation, but putting into place
stronger policies.

Self Assessment
The Chicago Bar Foundation asked its nominating and governance committees to
conduct a self assessment to determine how Illinois Nonprofit Principles and Best
Practices applied to the CBF – and where the organization stood in relation to
specific principles. The CBF’s associate director and development director played a
key role in examining the principles. Now, the organization reviews how it reflects
the principles once a year.

For example, a key recommendation of the booklet is that “The governing body [of
an organization] regularly assesses the organization’s mission and the effectiveness of
the organization and its leadership in assessing it.” Before it worked with the
principles, The Chicago Bar Foundation had not conducted regular governing body
evaluation in any formal way. Now, it conducts that kind of evaluation through
surveys that include questions developed by a board committee.

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Glaves says the principles have encouraged CBF to take a look at practices it might
not otherwise have considered. “When you get down to best practices, like whistle-
blower policies and document destruction, most nonprofits didn’t address these
issues before a few years ago. Now they are required. What’s nice about the
Principles book is that it gives you a kind of map. If you use an assessment tool
annually, it’s a cue to see if a policy needs to be updated.”

The goal, according to Glaves, is to “make the Principles a living document. Having a
whistle-blower policy doesn’t mean a lot if people don’t know what it is. We try to
remind the board and have information about it on our website. We don’t want to
get into a situation where this policy is necessary. But if it is, we need to make sure
you can find and understand that policy.”

Likewise, The Chicago Bar Foundation now has a gift acceptance policy – and has
educated staff about what it means.

Another section of the principles recommends that “The role, responsibilities,


selection and tenure of the governing body are clearly stated in the organization’s
governing and policy documents and understood by the governing body members.”
Glaves says that the CBF “had something in place to address these points, but we
realized it could be better. Paying attention to the Principles has helped us improve in
these areas.”

Process
While one committee at the CBF reviews policies every year in light of the
principles, five or six committees, and sometimes the board, are responsible for all
making sure all points are covered.

Using the principles has helped the CBF address key issues in a more comprehensive
and structured fashion, according to Glaves. “The idea is to create with your board
and donors an atmosphere of transparency and accountability,” he says.

Need for Education


CBF also offered an educational program for executive directors of nonprofit
organizations. The program focused on governance issues and featured Donors
Forum staff who were involved in the creation of the Principles booklet.

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“To expect people to be well-versed about issues like governance, financial affairs,
and disclosure is not realistic,” Glaves says. “These issues are also not what got
people into the nonprofit arena – in most cases, we find, people who get involved in
this field who are attracted to a mission. It’s so important to educate board and staff
about critical issues.”

Creating a Framework
Glaves says that one of the greatest benefits of the booklet is that “it gives us good
guideposts to review issues on an ongoing basis. That has been very helpful, and has
allowed us to be a more efficient organization. The biggest thing that stands out is
our processes – we have developed more formal ways to address governance and
other key issues. When we looked at these issues in more informal ways, we may
not have been as consistent about it.”

Also key, he notes, is that the organization is committed to working on issues


addressed by the book on an ongoing basis.

One sign of how The Chicago Bar Foundation regards the principles is that three
years ago, the organization made it a condition in grant guidelines that grantees
must agree to subscribe to the booklet’s principles and strive to adopt best practices
that are pertinent to them. Grantees, he says, have also consistently provided
feedback that the principles provide a strong framework for how to tackle important
issues.

Glaves says that other organizations using Principles might want to consider
establishing a committee that is responsible for governance and a process to review
key policies. He acknowledged that not all organizations are likely to have the
capacity to establish a separate committee for this purpose, but that they can adapt
their situation to employ the principles in way that fits what they can do.

“We have seen a lot of organizations appreciate this book for similar reasons that we
appreciate it,” Glaves adds. “It gives them a road map to addressing these issues.”

Conclusions
Perhaps the key phrase Glaves used to describe how The Chicago Bar Foundation
used Illinois Nonprofit Principles and Best Practices as a “road map.” The book
provided a point of reference, reminders, and organized information that helped
CBF orient itself as it addressed key issues.

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Glaves also emphasized the importance of paying close attention to critical issues like
governance over an extended period of time. The idea, he suggests, is that issues
raised in the Principles are best addressed in a consistent way over the long haul, not
as one-time-only concerns. The Principles book not only provides guidance – it serves
as a tool that helps engage board and staff members on various issues.

The Principles book has also proved to be a valuable tool for self assessment at the
organization – not only in terms of targeting how the CBF meets specific goals, but
by encouraging a systematic and consistent review of key aspects of the organization.

Another key phrase also emerged in conversations with Glaves: “formal processes.”
“Because of Principles,” Glaves says, we are more likely to look at key issues on a
regular basis and make them part of our work.”

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Grantmaker Case Study: Polk Bros. Foundation
“Principles is a motivating force in push for accountability”

The following case study focuses on how the Polk Bros. Foundation has used Illinois
Nonprofit Principles and Best Practices, which was developed by Donors Forum as a
call for nonprofits and grantmakers “to strive for excellence in realizing their
missions, managing resources effectively, and governing well.” The Principles booklet
is part of Donors Forum’s Preserving the Public Trust Initiative, which began in
2004.

The booklet addresses a variety of key topics faced by nonprofits and grantmakers,
including mission and purpose, governance, legal compliance, fiduciary
responsibility, communication, and disclosure.

Need for Principles


Sandra Guthman, Chair and CEO of the Polk Bros. Foundation, was on Donors
Forum’s Board of Directors when the original principles were developed. She says
the Principles respond to issues that were being discussed in the nonprofit sector at
the time – as well as corporate and governmental sectors.

“There had been issues in the press for several years about foundation governance
and whether foundations were living up to their fiduciary responsibility,” she says.
“We wanted to demonstrate to the public at large that we were serious about
governance and transparency.”

Guthman adds that principles described in the book “are always relevant, but in the
current economic climate there are more situations where not-for-profits are going
to be turned down for grants or discouraged. It’s a tougher environment, so the
transparency and clarity that principles bring to the industry hopefully help relieve
some of the stress in the system.”

“We as funders have a responsibility to grantees,” she says. “If the rules have
changed, we need to tell them.”

Polk Bros. Foundation


The Polk Bros. Foundation is one of Chicago’s largest charitable organizations.
When the original Polk Bros. furniture, home appliance, and electronic retailer
closed in 1992, assets moved to the foundation, which was founded in 1959. The
next year, Guthman – who is the daughter of Samuel Polk, an original founder of
Polk Bros. – became CEO of the Foundation.

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The Foundation works to reduce the impact of poverty and provide area residents
with better access to quality education, preventive health care, and basic human
services. The primary focus is on programs that “impact populations of need –
particularly public school children and their families – in underserved Chicago
communities,” according to Polk Bros.’ program guides.

The Foundation’s largest area of funding, social service, includes workforce


development, housing, legal services, community/economic development, and youth
and family support.

The Foundation also actively seeks out partners and joins collaborative efforts.
While these initiatives and collaborations span a number of issues, many of them
focus on public school education and housing/homelessness issues.

The total operating and administrative expenses of the Foundation (2007 figure) is
$1,872,740. Total expenses and disbursements (includes operating and
administrative expenses as well as contributions, gifts, grants paid) is $26,042,287.

The total assets of the Foundation (2007) are $432,331,206.

Using the Principles


“We used the Principles book a lot internally during our strategic planning process to
make sure we had best practice policies and procedures in place,” says Nikki Will
Stein, executive director of the Foundation. “Many people might have originally
talked about standards, principles, and practices because of some crisis. But this
document stands on its own – it doesn’t require a crisis for it to be very useful.”

Guthman says the Principles book helped the Foundation “tighten up and clarify our
governance principles. The principles were a motivating force in push for
transparency, clarity, and accountability.”

At the same time, she emphasizes the relationship between the Foundation and
grantees when discussing the Principles book. “One of the things we’ve done that is
subconsciously driven by the principles is develop a mindset that says to grantees
‘this is not a game of keepaway – we will tell you what we are thinking and why we
are thinking it.’”

The Foundation has also tried to make sure all staff members are aware of the
booklet.

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Being Specific
While using the Principles book, the Foundation addressed key board-related issues,
including selection, tenure, and systems for ongoing communication. The booklet
was also useful as the Foundation considered key governance issues like mission, the
need for periodic review of policies, and establishing written criteria for policies.

In addition, the Principles book was used to address numerous issues involving
finance and investment, the board as a whole, nomination of board members, and
other concerns. The Foundation also took steps to create an audit committee during
this process.

The Foundation did not see a need to examine or explore all areas related to the
principles in an equal way. For example, the areas of legal compliance, fiduciary
responsibility, and responsible stewardship already seemed to be implemented in
accordance with the principles and so required less attention than other areas.

Assessment
Guthman says that the Polk Bros. Foundation was “going through a strategic
planning process as the Principles book was published. “The book helped us set the
agenda for our strategic planning,” she says. “We talk about assessment all the time –
assessment is obviously a challenging thing to do. We used Principles to guide self
assessment for governance.”

Education
The Polk Bros. Foundation has had little turnover of board members; at the
moment, there are seven board members – three of whom are Polk family members.

One section of the Principles book cites the importance of educating board members.
“The governing body ensures that its members are competent and knowledgeable,
and it seeks diverse points of view and experience as needed to provide credible and
effective oversight of all aspects of the organization’s work,” according to the
booklet. Principles also cites the importance of developing the skills and experience
of board members -- and ensuring that they have “access to sufficient information
and diverse perspectives.”

Guthman says the Foundation is doing more to educate board members, and the
Principles book is playing an important role to reaffirm that process. “The book is
not a cookbook, but a starting point to remind us that this work needs to be done
on a regular basis,” she says. “We are laying out an education process for board
members.”

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That process, she adds, will involve taking board members on occasional site visits.
The Foundation has also brought in experts for breakfast briefings for the board
once or twice a year. “What this document does,” she says, “is remind us that
educating the board is an ongoing responsibility.”

Just as Guthman says the Foundation has tailored the Principles book to its needs,
she believes other organizations can use it for the same purpose. “Everyone has a
document they can turn to, a document that will remind them not to forget any of
their duties,” she says. “It’s the kind of book that grantmakers, and grantees can
‘make their own’ based on what they need.”

Guthman adds that the booklet has been a factor in the Foundation’s efforts to
document what it does. “Our work is much better documented now,” she says. One
example: the Foundation made it a point to be more formal about creating an
annual conflict of interest statement.

Overall, the Principles reinforced the idea that organizations must stay on top of a
range of key issues. “It’s important to note that we have a goal of continuous
improvement,” Guthman adds. “We really did more to address that during our
strategic planning process.”

Conclusions
One conclusion to draw from how the Polk Bros. Foundation has used the Principles
book is tied to the Foundation's relationship with grantees. Though it is clear that, in
many cases, using the guide is about addressing specific governance issues, the
booklet also reinforced Polk Bros.’ commitment to maintaining clear
communications with grantees and those applying for grants.

Education of board members also emerged as a major issue. The Principles book
reaffirmed the importance of education, not as a one-time-only obligation but as a
consistent element of how the foundation operates.

In general, the booklet was used as a reminder and a document that could be
referred to for a myriad of issues, from nominating board members to developing a
system for ongoing communication. For Polk Bros. Foundation, Illinois Nonprofit
Principles and Best Practices was at once a guide -- and a source that encouraged a
more formal approach to planning and documenting the Foundation's goals and
activities.

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