Housing is considered “affordable” when it requires no more than 30 to 40 percent of a family’s monthly income, or when the sum of housing plus transportation expenses eat up less than 45 percent.

About 34 percent of Twin Cities residents are “cost-burdened” with respect to their housing and transportation costs, according to Minnesota Compass. The burden falls most heavily on low-income workers, including many who provide essential services in health care, food service and administrative support roles. To make matters worse, the cost of renting in the Twin Cities is going up, while wages for many are stagnant or falling. The Metropolitan Council reports that only 6 percent of the new housing built in 2013 was affordable, based on a family earning 60 percent of average median income; compare that to 29 percent in 2012.

“Nonprofits are trying new solutions to what is now a crisis in affordable housing,” says Eric Muschler, a program officer with the McKnight Foundation. He points to several nonprofits that are making a difference and emphasizes that creativity and fresh thinking are needed. “We realize we can’t spend our way out of the affordable housing problem, so we need to work differently,” Muschler says.

McKnight is playing a catalytic role, working to help business, government and nonprofit partners to leverage new and different sources of capital for affordable housing. They want to create and sustain housing infrastructure that will support workers at all income levels.

Link to column at Twin Cities Business.

The new federal overtime rule has nonprofits hustling to comply with higher wage costs.

If you run a business or manage people, you probably already know that the Department of Labor announced new rules for employers that update federal overtime regulations and provide expanded protections for workers who put in extra hours at work. The new rules take effect December 1 and are proving to be especially complicated for the nonprofit sector.

The new rule, issued in May, sets a new salary threshold (from $23,660 to $47,476) under which white-collar full-time workers are entitled to overtime pay if they work more than 40 hours per week. The final rule maintains the federal definition of the kinds of job responsibilities that the government considers “executive, administrative and professional,” and for which an exemption to overtime can apply, and provides for automatic updates to the salary threshold every three years. An estimated 79,000 Minnesota workers (out of a total 4.2 million workers nationally) are affected.

Nonprofits of all sizes are responding to the new rulemaking and its relatively short, six-month implementation period:

• Service and advocacy organizations like the Minnesota Council of Nonprofits, along with consulting, tax, and legal firms with nonprofit clients, are offering a flurry of workshops and creating information resources to help nonprofits understand and comply with the new rules.
• Nonprofits are analyzing their workforce’s position descriptions, staffing requirements and compensation levels to determine what actions may be required.
• A field-wide discussion about the low-wage and high-hours nature of nonprofit work is prompting soul searching and debate among nonprofit leaders and policymakers.

Nonprofits have a reason to be wary of the new rules. Unlike businesses that may be able to pass along increased costs to their customers, most nonprofits are in the business of offering services that the market can’t support. While most nonprofits would gladly pay their staffs more, their revenue is often dictated by reimbursement rates on rigid government contracts, or is limited to the philanthropic support they’re able to attract and sustain.

Two Minnesota nonprofits offered perspectives on the impact the rule is having on their operations.

Living Well Disability Services has been recognized among the Star Tribune’s 150 top workplaces in each of the past two years. The Eagan-based nonprofit operates residential group homes for 300 individuals with intellectual, developmental and physical disabilities; it also provides support services for individuals living independently or at home with family members. Many of these people have complex health conditions in addition to their primary disability, and require 24/7 companionship and care. Julie Manworren, president and CEO, says, “Our rates are set by the government. We’re not an entity that can turn around and raise our prices.” A full 95 percent of Living Well’s 650 employees provide direct services, and 97 percent of the organization’s funding comes from the federal and state government, and Medicare and Medicaid reimbursements. Within the constraints of government contracts and the demand for the services that Living Well provides, Manworren is faced with the dilemma of restructuring staff and services to meet the new federal requirements.

In response, she and other nonprofits that provide disability services have banded together nationally through ANCOR, the American Network of Community Options and Resources, to help create H.R. 5902, the Disability Community Act of 2016, a bill that proposes a three-year targeted Medicaid funding increase to provide dollars to service providers so that they can meet the salary threshold without reducing staff. Unless such funding increases are approved, Living Well has few options besides re-structuring and possibly reducing services.

At the Family Partnership, formerly Family and Children’s Service, executive director Molly Greenman also is engaged in an analysis of staffing and services. After the HR department looked at all of the organization’s 140 staff positions one by one, 16 were identified as needing some sort of action, whether it was curtailing hours so that the employee doesn’t accrue overtime, raising salaries to the threshold level, or changing job descriptions to move positions from exempt to non-exempt, and vice versa.

Greenman estimates the impact of these staffing shifts at about $90,000 within the agency’s budget of $10 million. While a small percentage of the total budget, the impact is nonetheless challenging since it represents about one full-time-equivalent position once benefits, overhead and administrative costs are applied. “We have to manage very carefully, but we always have had to do that,” Greenman says. “One reason is that the cost of overtime is challenging. Another reason is that we want to be a family-friendly workplace and we don’t want people to have to work significant hours beyond full time.”

That sentiment—that nonprofit workers should not be expected to work long hours for low pay— has become a hot button in nonprofit media since the overtime rule was enacted. In Nonprofit Quarterly, author and attorney Andy Schmidt wrote an article with the provocative headline “Is Exploiting Workers Key to Your Nonprofit Enterprise Model?” Calling the nonprofit sector’s response to the new rules puzzling, Schmidt says, “This is great news for the very people the sector is supposed to help.” In an Atlantic article, “The Plight of the Overworked Nonprofit Employee,” author Jonathan Timm asks, “Do mission-driven organizations with tight budgets have any choice but to demand long, unpaid hours from their staffs?” The sector’s key premise—that people will work long hours because they’re passionate about nonprofit causes—is being called into question.

The debate is a good one. As a society, how do we want to provide services for those who need help? What sacrifices do we expect service providers to make? What is “overtime” if you are a social worker, child care provider, theater artist, caregiver, or hold any number of other relatively low-paying jobs that require both significant skills and long hours? Minnesota’s nonprofits have no choice but to answer these questions by meeting new federal guidelines by December 1. What might you do to help?

Our state’s racial disparity data shows a reprehensible gap in academic achievement, employment and housing—to name just three indicators—between Minnesota’s white population and our state’s residents of color.

The recent shooting of Philando Castile during a routine traffic stop in Falcon Heights galvanized Minnesotans and is spurring some serious soul-searching in the white community about the ways majority-Minnesotans have not acted fast enough, compassionately enough and effectively enough to combat racial inequities and foster civil society in our state.

This is not a technical problem with a solution that can be applied. There’s no instruction manual, no quick fix. This is a cultural division that requires cultural change. We’ve reached a painful but important tipping point: The state’s white population is realizing, at last, that change begins in our own hearts, homes and heads. We have to imagine a different future for our community, one where race does not divide us and where cultures act together, not collide.

Many of Minnesota’s nonprofits are actively working to combat racial inequities. Here are some resources that Twin Cities Business magazine readers can explore to learn more about confronting racism and cultural bias personally, and in our businesses and communities. There has never been a better time to reflect on what you can do, personally, to join those working toward cultural change.

Pollen, the social network for the civically engaged set of mainly younger, tech-savvy “community connectors,” recently led a crowd-sourced project asking for artistic and creative responses to the Castile shooting. Titled A Portrait of Grief, Power, Protest, and Love, the work is archived at pollenmidwest.org and incorporates 25 achingly honest responses from mainly Minneapolis-St. Paul artists and writers. Jamie Millard, Pollen’s executive director, also recommended these additional resources:

An essay on the Minnesota Council on Foundations’ website, mcf.org, titled How Minnesota’s White Foundation Leaders (and Not Just CEOs) Can Step It Up on Racial Equity, written by Leah Lundquist, leadership development program manager. Lund-quist advocates for embracing your own discomfort while taking responsibility to educate yourself; hiring and promoting people of color for staff and trustee positions; linking racial justice to your philanthropy mission; taking a stand publicly; and providing long-term support for grassroots organizing groups.

Millard also suggested ‘Minnesota Nice’ and Minnesota Racism by Andrea Plaid, published on the Twin Cities Daily Planet website (tcdailyplanet.net). Quoting the Atlantic’s assessment that Minnesota is the third-worst among the 50 states for black people, the article breaks down the author’s experiences as a newcomer to the state to offer fresh insights on racist attitudes she encountered and attacks the state’s “abiding mediocrity … and … the soft bigotry of low expectations.”

To see an excellent example of a mainstream majority organization that took a deep look at its own values and how they are practiced, spend time reading the Minnesota Philanthropy Partners (MPP) 2013 Racial Equity Framework (mnpartners.org). Drawing on the insights of a multi-racial advisory group and led by the late Ron McKinley, Mescalero Apache and esteemed Minnesota philanthropy leader, the framework details the ways MPP will make progress toward racial equity in all of its community roles: as grantmaker, employer, convener, investor and fund-raiser. Approved two years ago, the framework is influencing policy and practice at MPP as the organization devotes itself fully to culture change across its business units and grantmaking programs.

Also consider My Neighbor Is Muslim, a study guide created by Lutheran Social Service (lssmn.org) for area congregations . Distributed first to Minnesota’s Lutheran churches and then nationally, CEO Jodi Harpstead introduces the guide, saying its intention is “simply that this resource will open doors, minds and hearts and dispel stereotypes and myths about Muslim neighbors just enough to start more conversations.” The study guide is a detailed introduction to the Muslim faith and cultural traditions. It could be easily adapted for workplaces or for personal study.

Finally, a rich repository of resources is offered on the Wilder Foundation’s website, wilder.org, where the research staff has developed a “Racial Equity Resource Directory for Minnesota.” The searchable listings offer links to sources for cultural competency training, for organizations working on policy change to reduce institutional racism, and to anti-racism organizations across the state.

In the Twin Cities and across Minnesota, we have more than adequate evidence of the gaps in opportunity that residents of color face. The question is: What are we going to do about it? If you haven’t asked yourself that question, and you’re not personally engaged, the time to act is now.

About a year ago, the New York nonprofit world hit an unhappy trifecta: FEGS, the largest social service nonprofit in the city, declared bankruptcy. The agency provided job services to people with disabilities and poor people. It was “praised by corporate titans and community leaders alike,” according to the New York Times. The news came on the heels of the New York City Opera’s collapse and financial turmoil at Cooper Union, the esteemed art and architecture school. All three were once-lauded nonprofits that fell on hard times.

Some important lessons have come out of that carnage, however, and they apply to Minnesota nonprofits. Prompted by the FEGS failure, Oliver Wyman, a management consulting firm, and SeaChange Capital Partners released a discussion paper, Risk Management for Nonprofits, earlier this year. The paper is a thorough introduction to a neglected topic and offers important advice that’s relevant to any nonprofit, of any scale and in any sector.

The paper’s premise is that hard times rarely come in one fell swoop. Problems develop over time and can be more or less successfully mitigated based on a nonprofit’s ability to analyze and deal with risk on a continuous basis. Further, the paper says we ought to care—a lot—about risk in nonprofits. Our social safety net, our medical care, our cultural assets, our educational system and our community development activities, to name a few, rely on healthy nonprofits that function at a high level and deliver on their missions on behalf of all of us.

The core of the report analyzes the performance of New York City nonprofits against the three core resilience factors that the authors urge nonprofit boards to monitor. These are:

• Cash to cover immediate needs.
• Unrestricted net assets—“the best definition of a nonprofit’s ‘equity’ that is available to bear losses or make investments.”
• Operating reserves—“defined as the portion of the equity that is available in the short term.”
  Aggregate statistics compiled by the authors revealed that more than 10 percent of the nonprofits studied were technically insolvent (liabilities exceeded assets), with the highest percentage in health and human services, many of which are described as “limping along” with less than a month of cash on hand.

Further, about 40 percent had virtually no margin of error, with cash and reserves totaling less than two months of operating expenses. Data further showed that the larger human services nonprofits overwhelmingly relied on government funding sources, which can be fickle and/or subject to changes in regulations; and, while most nonprofits are small, the large ones provide the vast majority of services.

The report details eight best practices—and puts responsibility squarely on trustees’ shoulders for implementation and monitoring:

• Governance and accountability for risk management. This is part of the board’s legal duties of care, loyalty and obedience. The suggestion is that this role is appropriate responsibility for the finance and/or audit committee.
• Scenario planning. This should include contingency planning to address a running list of the major risks the organization faces, identifying both the likelihood of the risks and the expected losses.
• Recovery and program continuity planning. This should account for continuing services in the event of a financial disaster. The authors propose that organizations develop “living wills” to allow faster transfer of programs, and recommend that organizations plan such actions long before a crisis hits.
• Environmental scans. These should brief trustees on longer-term trends in the organization’s operating environment.
• Benchmarking and self-rating. Trustees can use these to compare financial performance against peer organizations, using the publicly available tax returns in a peer or “watch” group.
• Financial stability targets. These are created for operating results based on minimum and long-term needs. They could include targets for cash, unrestricted net assets, reserves and access to credit.
• Reporting and disclosure. These would provide readily available summaries of financial and programmatic results, and should be proactively distributed to all of the organization’s stakeholders.
• Board composition, qualifications and engagement. These factors should be combined to foster a functioning partnership between management and trustees. “Many organizations, particularly large complex ones, would benefit from having an experienced nonprofit executive on the board with firsthand experience of the programs and associated funding streams,” according to the report.

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