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October 6, 2008 The Third Sector

Dying light | How to recognize the end of your nonprofit is near, and how to manage its passing

By Elizabeth Banwell

One of the most difficult decisions a nonprofit leader has to make is to cease operations permanently and dissolve his or her organization.

The decision to choose death with dignity is especially challenging when the organization has labored for decades, overcome critical developmental crises and contributed to the community.

Leslie Poake knows this first-hand. She was the manager of finance and administration for Bangor-based Project Atrium, a residential program for teens with an annual budget of $1.5 million that after more than 30 years in operation decided to close last year.

“The state changed its funding requirements, and we were 99% state-funded,” recalls Poake. “We just didn’t have the capital to innovate or develop new programming. You can be the best managers, and we were, but if you don’t have resources to change and the money goes, you have no options.”

When Poake, her colleagues and the board made the official decision to dissolve, the organization had enough cash to survive a few months and wanted to help its 24 employees find new jobs. “It was emotional and hard for everyone. Some of our board members had been involved for over 30 years. They had survived many crises, and couldn’t imagine this one couldn’t be surmounted.”

Poake has been Project Atrium’s sole employee for the past year, working with a four-person closing board to wrap up financial, legal and employee matters. Poake now helps other social service agencies contemplating closure.

Shana Pike, leader of Harvest Place, a state-funded transitional housing program in Saco with a $500,000 annual budget, is one the leaders of state agencies who have contacted Poake. “We stopped getting referrals, began borrowing money and maxed out our line of credit. When I started putting in my own money, I knew it was time to make a serious decision,” explains Pike.

Fading stars

Like the saying, “Old rock stars never die, they just fade away,” there are many nonprofit organizations in Maine that retain their internal revenue service status but have long since existed as shadows of their former selves.

Of Maine’s 2,333 reporting nonprofit organizations (or organizations that raise $25,000 or more annually), 967 have budgets of $100,000 or less and 735 are under $499,000, according to 2005 data compiled in the nonprofit economic and social impact report “Partners in Prosperity” from the Maine Association of Nonprofits.

Dianne Holcomb empathizes with these organizations and their leaders. As executive director of Portland-based Partners for Ending Hunger, which has a $100,000 annual budget, she recently helped her board make the decision to end the struggling organization after more than 25 years in operation.

“In the end, it is not a bad thing,” says Holcomb. “I want to help eliminate the isolation, shame, sense of failure leaders feel when they are faced with the decision to dissolve. I want people to see the decision can be freeing.” All nonprofits, Holcomb believes, should have dissolution plans as part of their risk management portfolio.

“As an organization with one executive director, a part-time bookkeeper and a small board, we had many strikes against us,” says Holcomb, who moved to Maine three years ago to assume the leadership position, formerly held by the founding director. “If I had known then what I know now, I would have told the hiring committee, ‘You don’t need a new director. You need to dissolve.’ The impact resulting from the departure of a founding director cannot be underestimated.”

According to the 1991 Fieldstone Alliance report, “Going Out of Business: Why, When and How to Do it Gracefully,” organizations on the brink of decline are often losing significant financial support (sometimes as a result of disappearing federal or state funding) and key staff, and are unable to meet service and financial projections and financial obligations.

When Partners for Ending Hunger decided to close, the organization had $2,000 in outstanding financial obligations. The amount was not enough to file for bankruptcy, so Holcomb wrote what she calls her “death with dignity” letter, asking loyal supporters to “pay for the funeral,” which they did. In addition, she resigned but kept her bookkeeper employed, and filed the necessary federal form and the intent to dissolve paperwork with the state.

Holcomb is also currently working with another policy organization in Maine interested in taking on Partners for Ending Hunger’s agenda.

In the end, the goal is to create a climate in which dissolution can be considered and managed in a thoughtful and responsible way.

Elizabeth Banwell is director of external affairs for the Maine Association of Nonprofits in Portland. She can be reached at editorial@mainebiz.biz.

 

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