Does the live free or die philosophy of the New Hampshire Legislature pertain only to organizations making a profit? That's what officials at many of the state's nonprofit organizations are beginning to wonder after the Senate passed a bill mandating that state charitable organizations send at least one member to a training session with a heavy focus on fiscal management and ethics."It continues to be irritating to us," said Michael Ostrowski, CEO of Manchester-based Child and Family Services, which does $7 million worth of business - about half of its budget - with the state. "I thought this Legislature believed in less regulation. It's intrusive into a private organization, a business that happens to be nonprofit in structure."However, state Health and Human Services Commissioner Nick Toumpas, who asked for the bill, insisted it was necessary."Several organizations are failed, and when an organization just outright fails, there are concerns for the people being served by that organization," Toumpas told NHBR. "If they are financially fragile, the boards need to be trained to understand what their fiduciary duty is."The Senate passed Senate Bill 177 on Jan. 18 with a compromise amendment that stripped out some of the original measure's most controversial requirements.The original bill would have required that all organizations that receive a total of $250,000 from government at any level must provide third-party training to all board members as well as the CEO and CFO every four years. If they didn't comply, they would face getting cut off from public funding for two years or be fined $5,000 for each instance of noncompliance.That bill was sent back to committee in March 2011 in the face of pushback from nonprofits.The amended version -- the one voted on Jan. 18 -- now would require that one board member go through the training every other year, with penalties to be named later by the charitable trusts unit of the state Justice Department.The four hours of training would have to include "instruction on fiduciary responsibilities, financial controls, relative responsibility and authority of boards of directors and corporation employees, ethics and federal and state laws and regulations governing nonprofit corporations."Michelline Dufort, advocacy director at the New Hampshire Center for Nonprofits, estimated the bill would affect about 300 organizations.For and againstMost of the state's larger nonprofits already have trained board members but routinely send them to conferences for more training, said Dufort, although some smaller organizations might find the extra requirement a bit of a hardship. "It's more the members feel they should not be mandated.""Most of the organizations are highly professional," said Ostrowski of Child and Family Services. "My CFO has an MBA. We have three or four accountants, a bunch of attorneys, a retired judge. This kind of legislation is sort of an irritation."State Sen. Sylvia Larsen, D-Concord, voted for the bill in committee, because she was initially "relieved" at the changes, but she came out swinging on the floor of the Senate when it came up for a vote."Many of New Hampshire's employers are in fact nonprofits. We are a state that tries to not intrude on those businesses and a nonprofit is a business" she said. "We are not asking our for-profits to supply proof of financial training, but somehow we are moving to the nonprofit world and feeling that we can mandate they provide that information. This mandate will be burdensome on our nonprofits who already (have) lean staffs and cutbacks in revenues."Nonprofits already have to file Form 990s with the Internal Revenue Service and register with the state charitable trust unit. And in seeking government contracts, they have to complete applications that ask about their financial expertise, said Larsen. Indeed, state agencies could include proof of training requirements in their request for proposal language, she said.Besides, she said, it's hard enough to get people to serve on the boards of nonprofits. "This bill might have a chilling effect on those willing to lead a nonprofit," said Larsen.While Democrat Larsen led the anti-mandate charge, several Republican senators defended the bill."It's just a short number of hours of additional training which could be supplied by the charitable trust division," said Sen. Sharon Carson, R-Londonderry, sponsor of the bill. "So you have one person who goes to this training that can give this training back to the other members of the board. We can get an organization that runs much smoother."The training can even be conducted over the Internet, added Sen. Jim Luther, R-Hollis.And Sen. Bob O'Dell, R-Lempster, a sponsor of the bill, said he was "little bit dismayed" at the debate."We are talking about organizations that are willing to take money from the state of New Hampshire. I think they ought to be willing to have one of their board members go for a couple of hours of training every couple of years."(According to the language of the bill, the mandate applies to organizations that contract with any governmental entity, not just the state.)Larsen wanted the bill tabled, and she was joined by a few Republicans senators, who apparently were persuaded by concern about government mandates: Jim Forsythe of Strafford, Fenton Groen of Rochester and Senate President Peter Bragdon, of Milford.S.B. 177 was sent to the House on a voice vote. How the training mandate will play out there remains to be seen.
This article appears in the January 27 2012 issue of New Hampshire Business Review