Saturday, December 30, 2006

Let's recruit board members to hold cultivation events in their virtual houses

By now you've probably heard of Second Life, the online virtual world that now has more than 2 million "residents" and rising fast. It now includes businesses which make both virtual and real-life money, houses, clubs and societies, virtual sex (of course), arts and music and filmmaking communities, GM opening a car dealership, educators opening schools, and more. Like it's own reality TV show (wait, so that's a "reality" show which is watched in a non-real universe er um....existential conundrums give me a headache).

It also has a non-profit sector. Established non-profits are extending events into Second Life, or simply exploring it and recruiting volunteers there, taking real-world fundraising events into Second Life, conducting charitable-giving drives...for all I know somebody's right now organizing Second Life's first sector conference at which the cocktail-hour chatter will be all about whether "there are too many non-profits chasing too few donors..."

Wednesday, December 27, 2006

The case against more gen-ops grants

NOTE: my first attempt at describing the CEP report was more truthy than accurate (see reader comments), and is now revised and hopefully better.

There are a couple of "inside baseball" type subjects which keep coming up anyplace non-profit and foundation staffs gather, regardless of what the specific conference/workshop/briefing/luncheon is actually about. One of them is evaluation (of non-profits, of projects, etc.); the other is that foundations should make more general-operating grants rather than project grants. Say the words "program grant" at any such gathering and you'll quickly be surrounded by knowing sighs and frowning head-shakes.

However the Center for Effective Philanthropy recently assembled a bunch of data suggesting that grantees are not nearly so worked up about that issue as are the foundation staffs who fret about it at conferences. The CEP also reports that a lot of foundation CEOs think that more general-operating grants would be better, although they mostly actually issue restricted grants: funding which can be used only a specific project or program.

As the CEP reports, the top reason that foundation boards prefer restricted grants is one that I find perfectly respectable: to be able to track specific outcomes of grant investments. (Foundations no less than operating non-profits are tying themselves into knots these days trying to figure out how to track and document the results of their work and not simply the amount of work they perform.) And while the CEP notes the obvious fact that grantees prefer to get unrestricted grants and hate the paperwork related to restricted grants, their main point is that non-profit directors are actually far more concerned about the length and amount of a grant than about its strings.

My own beef with this whole debate is that the relevant context is often overlooked. Foundation grants altogether are no more than one-sixth of all philanthropy in the U.S. (according to Giving USA); it would take a dozen new Gates Foundations to change that ratio significantly. The vast majority of philanthropic support for non-profits (mostly from individuals) is unrestricted. So is the large fraction of non-profit revenues (anywhere from a quarter to two-thirds depending on specific sector) that comes from earned income. Hence no more than one-tenth of non-profit revenues is actually arriving with specific strings attached. That hardly seems like a crushing burden of red tape for the hardworking executive director; and wishing that the foundations' reasons for those strings weren't necessary doesn't render them invalid.

On a side note, the CEP report includes a sidebar quoting Elizabeth Keating on the "overhead game", whose interesting proposals on that subject were described previously here.

Tuesday, December 26, 2006

We still have "women's boards"?

The other week I opened up a copy of Chicago's leading business newspaper and suddenly found myself warped back to 1975. At least that was the sensation caused by reading about major non-profit institutions which still maintain "women's boards" or a "women's association."

That's just, at this point in time, odd. Of course the Joffreys and Adler Planetariums and Art Institutes are in some ways kind of a league of their own -- but every institution listed in that article has long since had plenty of wealthy and/or influential women on their actual boards, including officers, including chairs. (In my Chicago non-profit career I've met several of them.) For example the Joffrey Ballet when it started a women's board only five years ago was being chaired by Pamela Strobel, then one of the top executives at Exelon. (She's since retired.) I know firsthand of similar examples in New York and Los Angeles and other cities.

A quick search does not turn up any recent empirical research about the gender composition of non-profit boards. This study from 15 years ago found that the boards of "cultural institutions" in six U.S. cities were around one-third female as of 1991, and rising. That sounds about right for that time at the big old symphonies and museums they were surveying. From my working experience in the other 98% of the sector I bet a fully-representative survey as of 2006 would put the female percentage on all non-profit boards well above 50%, and still rising.

As I think on it and read that article again there may be a generational thing at work here. The quotes from female business execs in their 40s who declined invitations to join a "women's board" ring true. (And notice that most of the women's-board members quoted or pictured are older than that.) Thinking of all the successful women I know who have served on various non-profit boards, few of whom are eligible for Social Security, I'm pretty sure that their private reactions to the idea of a women's board would not be so carefully phrased!

Friday, December 22, 2006

Non-profit growth as part of global social change

I recently observed a briefing hosted by the Carnegie Corporation at which the opening speaker was Alan Khazei. The specific subject at hand was youth development; Khazei's remarks ended up being partly about the global growth of the nongovernmental non-profit sector.

Khazei co-founded City Year, which recruits American college-age youth for a year of urban civic service (and which is now taking its service global). Via email I obtained his permission to report his remarks publicly here and he bravely didn't ask to review my notes, so all errors of interpretation are entirely mine.

He led off by applauding TIME Magazine's naming as its annual "Person of the Year", you. By that they mean the changes now being wrought by individuals acting directly instead of through institutions, of which most of their examples turn out to be young people.
(Some folks are rolling their eyes at the magazine's decision.) Khazei suggested that the magazine's choice fits well with "two of the most widespread global trends of the last half-century, the march of democracy and the explosive spread of the civic sector". Khazei cited surveys by outfits such as Freedom House and The Economist, which recently concluded that in a historic first more than half the world's population now lives under some form of democracy. (Though the latter, at least, thinks that the spread of democracy has stalled.)

Those two broad global trends, Khazei said, have been in driven by the United States' cultural influence but have now spread beyond any single society's control. And, he argued, "both of these changes depend on empowered effective citizenship and can be undone by the lack of it. There is nothing inexorable about any of this; less than 100 years ago autocracy was the world's growth sector.

Khazei's related thesis is that "everywhere around the world, people are concluding that the limit has been reached in the ability of big government to directly solve problems." Not a theory that centralized government needs to vanish, but rather that "the list of things which government can be the effective solution to has been exhausted." The social entrepeneurship idea flows from this notion, he noted. From his travels around the world he reported that "this is not at all just a Western idea, it is the consensus in the grass roots everywhere." In place of big government, he said, is the emerging idea of 'big citizenship': individual action and the civic sector as the primary drivers of positive change. "Young people are very excited by this and take naturally to it."

Foundations, Khazei argued, can play a key role at this juncture, "can help empower this. You can help build capacities and build citizenship and nurture ideas; you are uniquely placed to convene people at key moments and places." Also, Khazei said, "we've got to start making some big bets. We need in the non-profit sector the kind of dynamism that the business world now has, where half of our 20 largest corporations are less than a quarter-century old. Most of the non-profit models taken to serious scale, like the Girl Scouts and Amnesty International and United Way, are several decades or a century old."

Wednesday, December 20, 2006

New rules for non-profits, sort of, except not, maybe

The U.S. Treasury Department has issued new "voluntary best practices" for non-profits to ensure that they aren't being used as conduits for funding for terrorist groups. The Council on Foundations, after working to get the new federal guidance altered, now says the feds should drop the whole idea. They argue that the new procedures would impose significant administrative burdens on non-profits without much benefit because only a teeny fraction of them have ever been even accused of terrorism-related financial dealings.

Reading the entire Treasury document left me scratching my head. After nine pages of restating the blindingly obvious (charities should write down their missions?? gosh!), the feds propose a series of doublechecking practices aimed at being sure that no money is going to terrorist groups...accompanied by lengthy footnotes explaining why all that effort may not work in practice. That's it.

Those doublecheck steps do sound fairly onerous, the likely effect is that only large staffed groups would ever make grants to or hire people from outside the U.S. Would that gain a worthwhile tradeoff in making it harder for terrorists to raise money in the U.S.? I dunno, and the feds offer no data or argument about it. But anyway it's not at all clear whether this is actually required. The federal document calls it "voluntary" but the CoF says that IRS agents have questioned groups about complying with it. (How many IRS agents? How many times? Did the groups respond, and if not what happened then? They don't say.)

I'm not finding the Council's arguments on this very persuasive but the feds' approach seems incoherent. If those are to be the new rules of operating as a tax-exempt organization then let's call them rules and have a fact-driven debate about whether they make sense in practice. Perhaps a couple of large groups with staff attorneys could do a service by openly refusing to comply with these "voluntary best practices" and forcing the feds to decide whether they mean it.

Monday, December 18, 2006

That smell from the Smithsonian is not pleasant

Sitting in Chicago I'm imagining the local reaction if the Field Museum were to announce that HBO would now get "semi-exclusive" dibs on filming in its halls, or the Art Institute sold to Disney the "semi-exclusive" use of its artworks in movies. Yea that was about my response too, upon learning early this year that the Smithsonian Institution had sold a tidy piece of its soul to Showtime. The recent Government Accountability Office report on the deal is not even slightly reassuring.

Basically, the museum traded that "semiexclusive" use of its image and contents for promises of national television exposure plus some cash. The GAO found that the Smithsonian "followed its internal contracting guidelines" (whew!) and found no specific ways that the publicly-funded institution violated any laws. But it's not hard to read between the lines that the GAO staff think that the museum was dazzled by Showtime's shiny beads and sold out cheap: "The Smithsonian contends that it will be able to accommodate the same level of filming activity (outside of Showtime) as it has in the past based on its historical analysis of filming contracts. GAO found that this analysis was unreliable because it was based on incomplete data and oversimplified criteria."

And for government auditors this line is pretty scathing: "In addition, concerns have been raised about damage to the Smithsonian’s image and the appropriateness of limiting the use of the collections [which are] held in trust for the American public." What they said!

Friday, December 15, 2006

Newsweek on non-profit transparency

Newsweek lead columnist Jane Bryant Quinn's current column is preaching to this choir in general, though she's off base on some details. It's about the "budding transparency movement for public charities," and she correctly notes that the better non-profits seethe when they see less-worthy groups (let alone outright con artists) suckering well-meaning donors.

Quinn's overall point is that donors are being more and more empowered to seek out and compare real information about non-profits -- a fine thing for sure. (The true fact that as of yet the only information donors can use is about efficiency rather than effectiveness is not a reason for them to ignore it, rather it is a problem for the sector to solve.) Missing from her column is the reality that when charitable-minded folks choose not to do even minimal investigation about giving decisions, they are complicit in the inevitable bad results like 50% of their check going to a professional fundraiser rather than the cause. Hence I cringed recently upon learning that a relative blindly sends a check to every single group which sends him those pre-printed address labels -- generous in spirit but regrettable in practice. Much better for charitably-minded folks to think and act like consumers with their donation dollars.

Also, readers here know that my favorite current contributor to this sector's improvement is Charity Navigator, which I recently added to our family's list of annual donations. They unfortunately got a mild rebuke from Quinn for a really dumb reason. She thinks the fact that a GAO study claimed 64% of non-profits report zero fundraising expenses on their tax returns must mean those documents are unreliable sources of information, and since Charity Navigator collects its data from those forms she wrote that their rankings "could mislead."

Sigh. The vast majority of non-profits filing tax returns are small volunteer groups reporting zero staff or fundraising expenses for the simple reason that they have zero staff or fundraising expenses. (There are scores of all-volunteer local land trusts for every one Conservation Fund, and they all have to file a tax return if they have just $25,000 in revenues.) I guess Quinn imagined the GAO study to be claiming that two-thirds of staffed organizations reported no fundraising expenses; a shame that she couldn't have been bothered to place one phone call to the IRS or the GAO and ask one or two questions.

That laziness aside Quinn is on the mark overall, and tipped me off to a new site in the works which I think aims to be the home of Ebay-style consumer comment and reviews of non-profits. More on that after it launches.

If you can make it in Bentonville...

Environmental Defense is looking for someone to take the lead in their work to make Wal-Marts green -- from within. Joel Makower has a nice writeup of the situation at "Two Steps Forward". It sounds like they don't want someone who'd simply put a happy face on what the company does: "The ideal someone who would never have imagined moving to Arkansas."

Thursday, December 14, 2006

Land conservation takes the lead

A startling report from the Land Trust Alliance is getting some national-media attention this week but I wish they hadn't buried their lede, which is that in the U.S. the permanent protection of land for conservation is now going faster than sprawl -- and pulling away.

Last month the national conservation groups were celebrating the current boom in state/local public funding for land conservation; now the LTA has pulled together national data on non-governmental activity for the same purpose. They report that just in the past five years private non-profits protected 13 million acres, equal to a new Yellowstone National Park every year.

The national conservation-advocacy groups say that new development consumes 2 million acres per year, so the nongovernmental land trusts alone are now protecting more land than is being sprawled on each year. Obviously adding the new open space protected via all those new state and local bond referenda, and the occasional addition to federal national monuments and so forth, makes the picture even better.

The LTA report does have a couple of oddities, such as that most of their charts and graphs include only state and local land trusts when national groups like The Nature Conservancy and Trust For Public Land are a huge part of all this activity. And while criticizing the drops in direct federal appropriations for conservation they ignore the fact that all that private non-profit land protection is being subsidized by the federal tax code to the tune of billions per year now. (And the increase in federal tax benefits from donating land or easements which President Bush signed into law in August will boost all this even more.)

The non-profit land trust business is, not surprisingly, booming like dot-coms in the 90s. The LTA reports that even while the number of state and local land trusts was increasing by a third, the average operating budget increased by two thirds and salaried staff increased by almost half. In just five years, during an economic downturn! And that again doesn't count the big national/international groups.

Tuesday, December 12, 2006

Progressive pricing of education

The New York Times seems to have just discovered, in a front-page story today, the way that private colleges price their services in the U.S.: charging families higher or lower tuition based on what they're able to pay. I'm not sure why this is news -- when I was in college the financial-aid office was perfectly candid about it.

Maybe its just the cute news angle they found, about several colleges which only woke up to the game recently and discovered that raising its tuition made it seem like a better school. So they raise the tuition by 18% and the financial-aid pool by 20% and promptly start getting more applications, because full-cost-paying families assume that a place that costs more must be better. (Or perhaps because .edu-world currently offers its customers no single quantifiable measurement of quality other than sticker price, and bitterly resists attempts to create one such as the US News and World Report rankings.)

I was surprised at just how progressive private-college pricing has become: "aid is now so extensive that more than 73 percent of undergraduates attending private four-year institutions received it in the school year that ended in 2004, not even counting loans." And I happened recently in my office to hear, from the executive director of an association of small Midwestern colleges, another point made in the article: "some students may not even apply to private colleges, scared away from the start by tuition and unaware of the available discounts." The solution to which is, of course, clueing them in to the system and the opportunity to benefit from it. (Like the first time an older relative explained to you that nobody actually pays the listed price at a used-car dealership.)

The article did quote someone raising the familiar spectre of a "squeeze of the middle class": upper-income families can pay full sticker price while poor families get lots of aid. No actual data was offered to back that up, and since the article notes that aid is offered to families earning as much as $150,000/year if they have several kids, the worry seems to depend on a rather expansive definition of "middle class". Or for that matter of "squeeze."

Other than sardonic amusement at the discomfort of certain parties with discovering that they must deal with (horrors!) market dynamics like supply and demand, I'm fine with all this. Access to the finest system of higher education on the planet is being priced in a highly progressive manner? Works for me.

Donating while bankrupt: addendum

Back in November I wondered whether it's really fair that someone who has filed for bankruptcy should be allowed to continue making charitable contributions. This tightly-reasoned piece is persuasive: it isn't. Senators Obama and Hatch should drop the idea.

Monday, December 11, 2006

Glossy magazines about giving

An interesting new blog called Tactical Philanthropy is devoted to "chronicling the second great wave of philanthropy". Blogger Sean Stannard-Stockton, who is a professional money manager and donor advisor, got my attention the other day with the news an entire new genre of glossy magazine is being established, aimed at people who do a lot of charitable giving.

At least five such magazines have either just launched or are about to:
Contribute, Good, Generocity, Benefit, and Giving. (The physical resemblances to Martha Stewart Living are, I assume, intentional.)

A quick perusal of those websites left me feeling that "Generosity" is at least as much aimed at non-profit staffers as donors. "Good" seems to have an interesting business model: send 100% of subscription proceeds to charities and pay the bills with advertisers who are after the high-disposable-income readership that is thereby attracted. "Benefit" subtitles itself "the lifestyle of giving" and appears to be basically focused on the Bay Area at least to start. "Contribute" claims to be the only one that is entirely focused on donors as its audience. "Giving", which hasn't printed an issue yet, appears to be the best-funded of these and looks like its aiming to be the biggest/slickest player in this new magazine genre.

Sunday, December 10, 2006

The evil empire

Joining a foundation staff a year ago turned me from a non-profit specialist into more of a generalist as far as subject area. One subject that keeps coming up at conferences and online within the U.S. non-profit sector now is Wal-Mart.

For instance one project I'm heavily involved in at work is related to the food system, seeking to leverage a big increase in the amount of food that is grown locally and/or organically. Activists in that subject are talking a lot about Wal-Mart these days, with no clear consensus on whether on balance the company's entry into the issue is a good thing or bad. A colleague on that project who is a veteran public-health advocate mentioned one day that those folks are slightly agog over the rapid expansion of Wal-Mart's cheap generic drug offering which, if successful, seems to shake up some of the public-policy debate regarding our health care system. Pro-choice activists scored a big win early this year when the company reversed course on the morning-after pill, particularly since they sell it for far less than other pharmacies do.

On gay-rights websites there is chatter about the company's moves the last couple years on that front, as for example noted here, which is inspiring calls by religious-right groups for boycotts. And thanks to Al Gore's public endorsement of Wal-Mart as a key green change agent (which, as an aside, is my least-favorite new non-profit-sector buzzword), the company's environmental impact is getting more attention. I've seen this news article linked a few times now.

Anti-sprawl activists continue to name Wal-Mart as a poster child for unsustainable economic growth, as do labor unions. This progressive activist's research paper coming to a different conclusion gets linked a bit and the author got a couple of invitations to speak on campuses and debate online, but he's been largely ignored by the mainstream media.

And recently a friend who is heavy into the stock market noted this irony: Wall Street thinks that Wal-Mart, as a business, peaked several years ago. Its stock price hasn't even kept up with inflation for three years now and its sales growth lags well behind that of competitors like Target. As a dominant economic force it may be that the company's historical moment has, for better or worse, passed.

Friday, December 08, 2006

Online gaming to feed the world

I would really, really love to see Village: The Game succeed. That's a bit because the particular genre of computer game known as "real-time strategy" is one of my favorite forms of recreation, and even more due to wholehearted agreement with the issue being addressed and with the policy approach that the creators of the thing are applying to that issue.

I wish I could offer some optimism about the project's chances though...reading their website leaves me thinking that nobody who's actually played a lot of robust RTS games is involved. The game-design discussion on that website is all about look and feel and not at all about what actually makes such a game work or not work for real-life players today, namely its internal design and gamebalance. An analogy would be, if you're a serious movie fan, reading that the director and producer of an upcoming movie are spending all their time worrying about the costumes and makeup without any focus on the script. One of the early warning signs of a straight-t0-video outcome right?

(If you are a strategy gamer I will make a current topical analogy: thinking that what makes a computer strategy game successful is the pretty graphics and cool sounds leads to lame failures like Sid Meier's Railroads rather than completely-addictive bestselling hits like Civilization IV.)

Thursday, December 07, 2006

Kids today! They're volunteering, a lot

A comprehensive national study has concluded that volunteerism in the U.S. is booming, including an eye-popping doubling among teenagers compared to the late 1980s. The study also found that folks aged 45 to 64 are volunteering at higher rates than their parents did at the same age, as are senior citizens.

The study's authors think that this growth is driven by "social trends such as the rise of service and service-learning in the schools, higher education levels among adults, delayed child-bearing, and longer life expectancy." I wonder if another factor isn't some maturity in the non-profit sector in terms of how well we recruit and manage volunteers. That's one of the ways in which, in my current role as a foundation officer, I am often impressed with how much smarter young non-profit staffers seem now than my age group was at the same professional level a decade or two ago.

Wednesday, December 06, 2006

Donor intent showdown finally underway

Oral arguments have begun in the potentially-landmark case Robertson vs. Princeton in New Jersey state court, more than four years after the suit was first filed. The heirs of a huge 1961 gift to the university have been publicly arguing for several years now that Princeton has serially violated the donor's intent; that gift has now grown into $650 million. In addition to the separation of those funds from the university's endowment, the plaintiffs are seeking restitution for endowment proceeds which they say were spent contrary to the donor's restriction and which could total hundreds of millions more.

Of all the web-accessible news coverage describing the facts of the case, that Pittsburg Post-Gazette article linked above seems the best. The Robertson plaintiffs have established a robust website for their case which of course includes only the op-ed pieces that favor their version of the situation.

Princeton's public defense, at least, was seriously damaged early this year when the Wall Street Journal went through thousands of pages of documents released as part of the court's discovery process. The reporters found memos and emails in which Princeton officials wrote frankly of hiding fund disbursements from the Robertsons, and also found evidence of two smaller gifts which appear to have been used for purposes other than those specified by the donors. The university argues that the memos were wrong and that the officials who wrote them didn't have authority over the matter. The Journal's front-page story is not web-accessible unless you're a subscriber; if you are, it ran on February 7th and was headlined "Poisoned Ivy".

The case could have a huge legal impact on philanthropy but also might not, because Princeton's legal strategy seems to open the door to a ruling that's based on any number of things. Their approach appears to be "leave no argument unturned": they dispute the plaintiffs' standing to sue, and deny that they misused the funds, and say that anyway even if they did the original bequest was implausible (then why did they accept the gift?), and argue that in any case the public interest is better served by their version of it than the family's, and they belatedly filed a countersuit claiming that actually the Robertson endowment somehow owes Princeton $235 million, and they dispute the plaintiffs' right to a jury trial on technical grounds, and in February they announced a new fellowship named for the original Robertson donors while denying that its creation had anything to do with the Robertson endowment fallout.

Uh huh....Well I'm no lawyer and I'm not at all sure that the Robertson heirs are entirely right ethically or legally, but at a minimum Princeton has been quite careless over the years and their behavior now leaves a sour odor. Whichever way the case turns out (years from now, after several well-funded appeals) its ultimate impact should be to make both donors and non-profits take the terms of restricted gifts more seriously. Follow Yale's 1995 example with the $20 million Lee Bass gift: if the donor's restrictions are too onerous and discussion doesn't yield a workable compromise, then you gotta give back the money!

Tuesday, December 05, 2006

Spending it down

The Bill and Melinda Gates Foundation recently made a rather startling (at least in charitable-foundation circles) decision: to spend themselves out of existence rather than operate in perpetuity. They will take a while to do it -- they're saying 50 years after the founders' deaths -- but still this makes Gates by far the largest foundation to do that. (And not simply because it's the biggest foundation period: all of the other multi-billion dollar foundations are permanent.)

In a sense this isn't completely surprising, because Warren Buffett's recent decision to give most of his wealth to Gates was on the same basis: that Buffett's funds be eventually spent down not be a permanent endowment. This decision puts Gates on one side of a growing debate within institutionalized philanthropy, which actually traces all the way back to its two American godfathers John D. Rockefeller and Andrew Carnegie. Rockefeller pioneered the concept of endowing large-scale permanent grantmaking, while Carnegie preferred to see his "giving back" completed during his own lifetime.

Each approach has its advocates, but the fact that Rockefeller's concept has predominated is reflected in U.S. law: the "5% rule" for charitable foundations is explicitly based on the idea that most years that will leave the endowment continuing to grow. The high-profile Gates announcement may change that; for starters many lawmakers may not have been particularly aware that permanence isn't actually a universal standard for foundation philanthropy.

The Gates folks also announced that they will accept additional donations, raising the question of whether some more Buffett-scale gifts are in the works there.

Monday, December 04, 2006

U.S. museums are bursting out all over

The American Association of Museums' new annual "state of the sector" report has spurred some media coverage of a building boom now underway. It's not clear whether the trend cuts across all sizes among the estimated 17,500 museums in the U.S., but the big ones at least seem to be merrily satisfying their edifice complex.

Major museums are adding on in literally dozens of cities; a number of new wings or buildings opening now were first planned in the 1990s economic boom. The mix of public and private funding for the capital projects seems to vary widely, which is also true with the operating finances of museums.

The obvious question here is, can the sector afford to operate all this new space? I notice that most of the capital-fundraising campaigns now seem to include new endowments to cover overhead, so somebody has learned something. Still the question of whether the building boom represents supply appropriately rising to meet demand seems unanswered: the Association press release doesn't seem to provide long-term trend data on things like museum attendance and revenues, and data sources like Giving USA don't specifically aggregate museums as a category. (The press release does repeat the non-profit sector's autocomplaint about reduced public funding having forced an increased reliance on private fundraising, but the statistics they offer don't actually support that statement so I dunno.)

Friday, December 01, 2006

Who's more generous?

The hot topic of the moment in the philanthropic media (including blogs) is a new book by an economist named Arthur Brooks, entitled "Who Really Cares: America's Charity Divide". His thesis, based on a variety of survey data, is actually three-fold (and to some degree overlapping):

(a) religious households both liberal and conservative give more to charity than secular households do, even without counting giving to their churches;
(b) politically-conservative people give more to charity than do politically-liberal folks; and
(c) the wealthy and the working poor give about the same fractions of their income to charity, while the middle class gives much less.

So to sum up (in my words not his): "middle-class secular people who usually vote Democratic are stingy hypocrites". That would be,, and most of my friends and family, and at least 75% of my colleagues in the non-profit sector. No let's be honest, more like 90%. And a similar fraction of my former colleagues in newspaper journalism.

Coverage of the book, and of Brooks' various recent op-ed pieces promoting it, has centered on whichever of those arguments causes the most outrage with the particular writer. I did get into a brief online debate that's tangentially about this, over at White Courtesy Telephone, but before saying anything further about Brooks' facts I'll read the thing. All I've done thus far is to confirm at a surface level that at least a couple of the surveys that Brooks cite do support at least some of his claims, and locate an unrelated survey that supports at least one of his points. More than that will have to await reading the book and checking its listed sources.

Thursday, November 30, 2006

So you have a friend or a younger relative...

...who thinks she wants to be a non-profit professional when she grows up. Or let's say when he graduates from college, or maybe after grad school. If you've been in this field for any length of time this scenario is probably familiar. Where do you steer them?

TO LAW SCHOOL!! OR A CIVIL SERVICE EXAM! AND THEY'RE HIRING AT THE CAR WASH, RUN BOY RUN LIKE THE --- okay sorry for that interruption, my father-in-law surprised me and snagged the keyboard. He's rather nimble for an insurance man actually...Anyhow there are a few resources out there that might be helpful. For example here is an online listing of university programs in not-for-profit management, it covers undergraduate, graduate and continuing-education, current as of 2002 and searchable by state. That link came from ARNOVA's links list which is easily the best I've seen in this subject area.

Of all the listserv type resources aimed at non-profit folks (of which there are many now), perhaps the best I've come across yet is the free weekly newsletter. It includes news links and job listings and fellowship opportunities and so forth, for all arts sectors with a nice balance between breadth and readability, and the editor puts some rather impudent headlines on article links. I haven't yet found a really good compilation of non-profit blogs; the biggest thus far is the Non-Profit Blog Exchange but it makes no attempt to sort its listed blogs by type or subject area.

Wednesday, November 29, 2006

Your tax dollars at work

The U.S. government, it turns out, has been passing federal-employee personal contributions on to more than 1,200 non-profits which owe federal taxes, and has issued billions of dollars in federal grants to the same delinquent charities.

This revelation comes from the General Accounting Office, as reported by MSNBC and written about by Trent Stamp of Charity Navigator. The watchdog agency says that the true number of non-profits delinquent on payroll taxes but still receiving federal-employee donations is undoubtably even higher. That's because federal law for some bizarre reason prohibits the relevant officials from checking whether charities that are to receive employee donations are up to date on their routine federal tax returns.

The GAO picked 15 of the delinquent charities at random to check out further, and concluded that every one of them was probably acting illegally -- doing things like buying a boat for the executive director while failing to pay federal payroll taxes. (And let's keep in mind that most of what is called "payroll taxes" is actually money withheld from employee paychecks.) The GAO made up a bogus charity, applied for funding from three local offices of the federal employee-contributions system, and received funds from all three with no trouble.

Ok clearly part of the story here is serial incompetence in our federal bureaucracy. But for me the bigger issue is this: the fact that fewer and fewer Americans still think non-profits to be highly trustworthy is not simply due to "a few prominent rotten apples that have made headlines" as I keep hearing people tell each other at conferences. There is a broader problem here in this sector and it is not being faced.

Tuesday, November 28, 2006

Giving high and giving low

Slate the other week ran a fun essay by successful business writer named Doug Smith, who proposes the creation of a legal futures market in charitable contributions.

His writeup will make many people's eyes glaze, alas, but it is an interesting concept. The idea is that someone wanting to make a donation to Favorite Charity would actually "buy" a clump of futures contracts from someone else who previously gave to that charity. Someone else wanting to make a donation would actually "buy" the clump of futures from the first person; in both transactions the charity gets the proceeds. The actual amounts involved would vary the way hog-belly futures contracts do: rising and falling as they are bid up or down in a (no doubt online) trading system.

The contracts would rise and fall in value due to the demand for making charitable gifts to that specific charity compared to others, which is the first potential social value of this: an efficient way for donors to express (and therefore be motivated to research) their conclusions about the relative merits of different non-profits. Some folks in the audience are now recoiling in horror but from me this gets a big cheer. The specific amount of each donor's tax deduction would also end up varying, which has some other interesting implications. (It's all contrived but of course so are lots of systems we take for granted, including the concept of nongovernmental not-for-profits that are exempt from taxes.)

Smith thinks that such a system governing charitable contributing would sharply increase the annual amount of philanthropy in the U.S., for a couple of reasons; could be, though I can also think of reasons why maybe not. There's no serious proposal in Congress for anything like this and the new political lineup in DC probably ensures there won't be, so for now it's just a think-tank exercise.

Monday, November 27, 2006

The arts did well in the election, too

Last week I mentioned that a lot of land-conservation bond issues around the U.S. passed easily on November 7th. It turns out that local referenda to fund the arts also did great.

Americans for the Arts reports that in eleven cities or counties plus one state, Americans voted to tax themselves for the arts or art education. The list includes the state of Louisiana; Akron (OH); Alameda County/San Leandro (CA); Alameda County/Berkeley (CA); Austin (TX); Cuyahoga County/Cleveland (OH); Dallas (TX); Marin County (CA); Portland (OR); Salt Lake County (UT); San Francisco(CA); and Santa Clara County (CA). Some of them were one-time bond issues and others were new standing taxes; if we use the ten-year total on the latter the total funding passed was something like $1.3 billion. That's without counting Louisiana's measure which was actually a tax exemption for works of art, the exact value of which is hard to project.

That may not sound like a lot in national context given this country's huge public funding for the arts (of which the NEA is a drop in the bucket), not to mention that tax-deductible philanthropy for the arts had by 2004 reached nearly $14 billion per year (quintuple, after inflation, what it was in 1964; figures are from the Giving USA 2005 report). But the really exciting part may be the precedent: unlike the land conservation referenda this election, not one ballot initiative for the arts failed to pass. Twelve for twelve is as good as it gets in any game.

Saturday, November 25, 2006

Bankruptcy: should non-profits get to be first in line?

A current tempest in Washington DC was started by a federal judge's ruling that some people filing for personal bankruptcy can't keep making charitable contributions before a bankruptcy court decides how much their creditors will get. The judge's logic is being interpreted as an unintended consequence of the 2005 revision of U.S. bankruptcy law, which was already widely seen as basically a giveaway to the credit card companies who everybody loves to hate. Sens. Orrin G. Hatch (R-Utah) and Barack Obama (D-Ill.) have quickly proposed legislation that would allow individuals in bankruptcy to continue giving to churches and charities; that bill has passed the Senate and is now before the House.

I was surprised to learn that a 1998 law had specifically allowed people in bankruptcy to exempt up to 15 percent of their annual income from creditors for tithing or charitable donations.
So the narrow issue is simply whether Congress with the 2005 law actually meant to undo that provision or not.

Nobody involved seems willing to face the broader question, namely: what all should someone who is availing themselves of the modern legal privilege called "bankruptcy protection" be allowed to hold back from that process? Bankruptcy is after all not a natural right but a highly-progressive social contract: our society agrees to impose undeserved losses on creditors so we don't have to have debtors' prisons and so that families that are hopelessly ruined financially can get a chance to start over. That's a concept which the U.S. pioneered and is rightly proud of (like the independent professionalised not-for-profit sector actually), and bankrupt families already get to keep their home and some other things safe from creditors and that's a good thing. So is writing another annual check to a favorite non-profit really fair to the parties about to be legally deprived of piles of money which they had voluntarily lent?

P.S. No doubt the preachers and their politicians will make this a religious-liberty issue (and Senator Obama climbs down into a similar rhetorical gutter with his absurd poverty straw man in that article linked above). But if we're gonna get biblical here then that columnist makes a valid counterpoint: the Bible, like every major holy writ that encourages tithing, also does not speak highly of failing to repay debt.

Friday, November 24, 2006

Outreach does not build audiences?

Classical music keeps popping up as a topic in the not-for-profit sector these days, and it's not all about big established institutions: turns out that at least in Chicago and New York there is now a thriving alternative classical-music scene. Not being a big classical fan myself I wasn't really aware of this in Chicago until taking my present job, in which capacity I've become acquainted with the dozens of small independent chamber music, opera, symphony and classical-dance groups around here. There are more than 300 non-profit music organizations in the Chicago region now, not even counting the non-profit multipurpose arts councils and such.

Meanwhile the world of big orchestras is abuzz right now with some startling conclusions of a huge long-term experiment by the large James S. and John L. Knight Foundation. Having spent 10 years and $13 million investing in audience-building efforts by a dozen symphonies around the country, the foundation commissioned a frank assessment of the results. They were trying to figure out why so many orchestras outside the top half-dozen are chronically on the edge of financial collapse?

Among the Knight conclusions: "Free programming and outreach do not turn people into ticket buyers." Also that there is a large audience interested in classical music in the U.S.: "The problems of orchestras stem not from the music they play but from the delivery systems they employ." And this interesting thought: "Orchestras need to do more research on those who do _not_ attend their concerts," that is, audience research is invariably conducted among those who have already gotten the message and is therefore useless for figuring out how to attract new ticketbuyers.

While clearly some of the conditions Knight found are specific to symphonies, I was struck by how much it sounded just like the classical dance, opera and repertory-theater sectors. Don't the folks running those institutions think that the way to entice new people is to "get them in the theater once" with a free ticket? Isn't most audience surveying by theater/dance/opera conducted among folks who are already bought in?

Wednesday, November 22, 2006

Cashing out in NYC

A recent New York Sun article echoes one from April in The NonProfit Times about charities in New York City cashing out property in the recent real estate bubble. Some of the figures are eye-popping, with associations or churches getting tens of millions for properties that they paid far less for years or decades earlier.

To a large degree this is a Manhattan story, for example the New York Historical Society may be able to get more than $100 million for a single vacant lot because it's right next to Central Park and eligible for a high-rise building. Cushman & Wakefield, a real estate services company, told Nonprofit Times that 32 nonprofits sold properties in Manhattan totaling $582 million during 2004, the third year in a row that sales exceeded purchases.

But similar things have happened in other hot real estate markets, for example Fourth Presbyterian Church on Chicago's North Michigan Avenue has had an offer on the table to sell its parking lot for a high-rise development. The potential $25 million land sale has been stalled because the local alderman doesn't like it, but seems likely to happen eventually. While the national real estate bubble has burst overall the strong growth in major urban centers hasn't, so established non-profits will be tempted to cash out longstanding headquarters properties and move someplace cheaper.

Tuesday, November 21, 2006

Wikipedia gaining steam

At this recent symposium in Chicago I took notes from an onstage interview of Jimmy Wales, founder and leader of Wikipedia. He covered many issues but most germane to this audience were some interesting aspects of Wikipedia's history and evolution as a not-for-profit enterprise.

I was interested to learn that Wales' mission is not actually the "wiki" information model per se, rather it is creating a free universal high-quality information source. That is, the Firefox of encyclopedias. His first attempt was called "Newpedia" and it was to be a freely-licensed analogue to Encyclopedia Britannica assembled in the same manner: experts writing and editing the articles, as volunteers. It stalled because, as Wales put it, "a good well-sourced encyclopedia article is a lot of work for an individual to write start to finish," and identifying and recruiting them was also a huge difficult job. "We weren't getting anywhere, so we scrapped that and decided to try the wiki concept instead." That experience has made him an evangelist of the wiki model, which is now reflected in the mission statement of the Wikimedia Foundation.

Wales is defensive about recent uncomplimentary media coverage (three links there) and would benefit from the wise counsel of someone like this; he modestly declined the interviewer's invitation to crow about the Nature article that found no more errors in Encyclopedia Britannica articles than in Wikipedia ones. He did note that contrary to media reports, "We are not locking articles on Wikipedia. In fact we are locking fewer articles now than we used to. What we are doing is locking out articles from editing by anonymous users and users who have just joined the wikipedia community within one week."

That last has become a core part of their operating concept now, the existence of a wiki community of regular contributors/editors. It numbers somewhere around 1,000 regulars now, and Wales has come to see it as central to the effectiveness of the wiki model, how
accountability happens in real-life practice.

Wales dropped one other nugget which was quite impressive to me: Wikipedia's total operating costs only just recently passed $1 million/year. (Their 2004 Form 990 on Guidestar shows total expenses well under half that so that checks out.) Talk about leverage -- that's quite impressive compared to what the organization has accomplished, regardless of whether you find their theories compelling or not.

P.S. Wikipedia was in the news last week regarding China: in contrast to Google and Yahoo, Wikipedia has bluntly refused to censor its content for that country. Hence Wikipedia has been blocked in China...until October when it was suddenly unblocked, and then last week it was suddenly re-blocked. Wales has no idea why: "We never heard anything from the Chinese government about those decisions, I have no idea what they're thinking now." He seems confident that in the big picture the Chinese government is pissing into the wind, that in the wireless-network era they can't keep that sort of top-down control of Internet access in their country.

Monday, November 20, 2006

Bigger than transportation or finance, and spreading

If you're a non-profit manager about my age (let's just say 40-something and leave it at that), maybe you share my distinct impression that this sector is bursting out all over in the U.S. The researchers at John Hopkins have crunched official detailed employment data and the numbers agree that paid employment in private non-profits is booming.

For example more people are employed in private not-for-profit organizations than in transportation or in finance and insurance combined. Non-profit employment is now more than 8 percent of all private employment nationally, and rising: in a sample of five states for which they analyzed the state further, non-profit employment from 1995 to 2003 rose at triple the rate of total employment.

There are clear regional differences: private non-profit employment basically rises (as a percentage of all jobs) as you move west to east across the country. The sector "has tended to be concentrated in urban areas," but "the concentration of nonprofit employment in urban centers is changing. Like the population generally, nonprofit employment is growing rapidly in suburban areas....nonprofit job growth in the suburbs has not only been faster than that in the cities, but it has also been faster than private job growth generally in the suburbs."

This is the same data that informs the researchers' conclusion that the non-profit wage gap (that people get paid less for the same work at non-profits than at for-profits) is at best a half-truth. More of their reports on non-profit employment, including state-by-state breakdowns, can be found here.

Sunday, November 19, 2006

"Giving circles"

A new form of personal philanthropy which appears to be gaining steam in the U.S. is the "giving circle", in which groups of people gather once a month or so to pool small amounts into a single larger donation to a charity they've discussed and agreed on. So for example a dozen individuals or families each giving $20 might vote on a single charity each month that gets the whole $240.

All the examples being written about thus far in the media are groups of women, probably because that gives reporters and editors a chance to make smug analogies to sewing circles and book clubs, but there are all-male and mixed-gender examples too. Some of the amounts described are fairly impressive, like a Los Angeles giving circle that collects $5,000 per year per participant.

Some research has been done on this trend, see here and here. Though thus far it's not terribly rigorous, it does suggest that there are now thousands such groups and that most of them have been founded since the late 1990s. A couple of the big national foundations have financed those initial research and advocacy efforts.

Is this a good thing? Well...obviously the trend plugs into the concept of leverage: individuals who can each only afford $50/month can band together and feel like they're making a bigger impact. On balance people being recruited into giving circles seems likely to increase total charitable giving. And it certainly sounds like more fun to be philanthropic in that manner rather than just writing a check -- at least until serious disagreement arises, what's the over-under on that in months for a typical group? And I'm a big fan of donors behaving like investors, which the entire sector would be better for and which this concept would seem to encourage. So a tentative thumbs up from here, while acknowledging that we don't yet know much about the real-world long-term impacts of this concept.

Saturday, November 18, 2006

Are non-profit hospitals holding up their end?

The Democrats' big win on November 7th is expected to bring new focus on the issue of how much community benefit non-profit hospitals actually provide, in the person of new House Ways and Means Committee chairman Charles Rangel (D-N.Y.). Committee chairman Bill Thomas (R-Cal.) has been raising the same questions as Illinois' Democratic Attorney General (and likely future governor) Lisa Madigan; Rangel as ranking member has defended non-profits in general but has also expressed concerns about how much charity care the hospitals are providing.

Hospitals, in order to qualify as tax-exempt non-profits, are required by every state to provide some free care for the indigent. However Illinois is one of many states where no specific amount of such care is required; in other states it's low, 5% or less of total patient revenues. Federal rules are soft, allowing non-profit hospitals to demonstrate "community benefit" in other ways such as public-service announcements, medical research, and health fairs. Madigan in 2003 commissioned a study which reported that Illinois hospitals were providing actual free care worth as little as 1% of patient revenues; the NY Times in June reported that the IRS is now examining the same question nationally. Madigan's tough bill in the Illinois General Assembly was deferred this past spring to be taken up in 2007.

The American Hospital Association has proposed instituting a standard definition of community-benefit costs which every non-profit hospital would have to report on as part of its annual tax return. They want that definition to continue to go way beyond free care, and specifically they want it to include bad debt: patients who never pay their bills. That last item gets a big raspberry from watchdog groups such as Charity Navigator, whose president has become Madigan's biggest cheerleader: he asks why patients who were billed because they are not indigent should suddenly count as charity work just because they fail to pay up?

The real issue might be a broader one which this blogger eventually touches on, namely: should hospitals have to meet a different public-benefit standard than other non-profits? The basic non-profit social contract is: exemption from taxes in exchange for a publicly-beneficial operation which spends any profits only on that operation. Non-profit symphonies and museums are not legally required to give away 10% of their tickets for free. Less-blunt incentives encourage them to do a lot of things like that, but the law does not impose an arbitrary minimum amount of it. If hospitals are to be held to a different contract with society in order to be tax-exempt, then what other types of organization should the same logic apply to?

Friday, November 17, 2006

Give me land, give me land...

U.S. conservation groups like Trust for Public Land and the Land Trust Alliance have been celebrating a November 7th election result that hasn't risen to the top of the media coverage: voters in 23 states approved raising their own taxes by $5.7 billion for new permanent parks or nature preserves.

A total of 99 state, county or local referenda for this purpose passed, many by overwhelming margins. That's out of 128 which were on ballots; the 77% winning percentage is similar to national elections going back a decade but the amounts keep getting bigger. The winning referenda this time were scattered around the country, six in Texas alone, with the biggest being California's at $2.25 billion.

That follows a huge conservation victory in Congress in August, an expansion of the tax benefits for donating permanent conservation easements on private land. That was buried within the federal Pension Protection Act (which included other provisions that were less clear and less welcome) .

Thursday, November 16, 2006

It's for, like, charity. You know, save the wombats or somethin'. Has the keg line gotten any shorter?

While this year's nationally-relevised Ohio State-Michigan football game is deciding which team is numero uno, the biggest parties will be going on in the parking lots in Columbus: several local non-profits will be helping save the world for drunken football fans.

Turns out that only non-profits can get liquor licenses for outdoor events outside Ohio State's mammoth stadium; no doubt that provision was politically helpful in convincing local residents to allow a temporary outdoor beerfest for thousands of close friends. So for example Boys & Girls Clubs of Columbus lets a nearby restaurant use it to get a permit for a bash costing at least $50,000 just for the food and drink, but no worries: the non-profit nets a nifty $800 in exchange for its good name.

Then there's "Hineyfest" (as in "tailgating", get it?). A different local charity held out a bit better on that one, they'll receive around $25,000 out of an event gross somewhere south of $200,000. The promoters charge $7 per beer and expect several thousand can do the math. What's the Oscar Wilde line about how we've established the nature of the transaction and now we're just haggling over price?

Wednesday, November 15, 2006

Overhead: let's make it plain

One of the interesting sessions at the recent Grantmakers in the Arts conference, of direct relevance to folks working in all non-profits, was led by Elizabeth Keating of the Kennedy School at Harvard. She argues persuasively that the ways funders and grantees interact regarding overhead expenses is irrational for all concerned, and that more transparency would enable mutual improvement.

[All which follows is my version of Keating's ideas, any transmission errors are mine.]

If you're a program manager or artistic director who's ever had to debate with your own finance staffer about which grant can pay for which costs, she means you. Or perhaps, as in my case, you've been that grants administrator! For several years at a large complex organization in the 90s I was that spreadsheet geek trying to rationalize a dozen grants with differing rules and reporting requirements, and I'm sure our hard-working program staff didn't enjoy the process any more than I did. (If Laurel, Dave, Steve, Michael or Diane read this they will right now be either laughing or wincing.) Of course now I'm on the funder side of the conversation, to which role I bring direct knowledge of how the bodies get buried so to speak...

Which is not to say that I think the process was entirely time wasted -- actually it forced us as a staff team to deal with important decisions including programmatic choices. But it sure was awkward and messy and arbitrary, and some of the incentives were perverse: the honest answer to a funder's question "What are the overhead costs?" would be "It depends, what are your overhead rules?" Yecch. Many perfectly well-intentioned staff teams have had that experience, and many funders have felt misled.

That last is actually what Keating means by her slightly-unfortunate presentation title "Is There Enough Overhead in This Grant?" She's not particularly arguing that funders should be magically made to only issue unrestricted grants. (Which is good cause they ain't about to, and there are good reasons why not.) Rather she argues that the core of the problem is that there is no consistent definition of "overhead" in detail or even in principle, and that the two parties in the funder-fundee relationship aren't honest enough with each other about the subject.

Keating proposes that non-profits adopt the sort of transparency that is standard for corporations about their finances, and she's working on some promising tools (software, and report formats) for that. She proposes mandatory non-profit openness on this subject once they get big enough to accept project grants: "Once a non-profit has to figure out an overhead allocation for any one grant, they must make that data public as part of financial reporting or annual audits." In return, foundations would agree (locally or nationally) to standard definitions of what is overhead and how much of it is reasonable. We could as a sector have sensible conversation about how much is or is not too much, and have no more jerry-rigged 90-page spreadsheets which arbitrarily assign the copier lease to this grant and the office assistant's salary to that one. Works for me, and the sooner the better.

Tuesday, November 14, 2006

Non-profit mergers -- too many or too few?

Mergers are not common in our sector but a few large ones have been in the news this year, such as in Boston, Cleveland, and Memphis. A good number of veterans in the field, particularly at foundations, react to that news by saying, "Good! There are way too many non-profits today!" It's one of the most-common threads of conversation nowadays.

It also seems odd. When a new Target or Wal-Mart opens up in town do we say, "Good! There are way too many small businesses around here"?

It is a fact that there are far more incorporated not-for-profit organizations in the U.S. today than there used to be (and radically more than in any other nation in the world). Even assuming that a fair number of the organizations on the books with the IRS are actually defunct, the active total basically doubled from 1990 to now. There's no sign of any slowdown either.

To me, that's on balance a good thing. Healthy industries, and for that matter societies, are attractive to people -- the clearest sign of the decline and fall of the U.S. will be when the day comes that millions of people are no longer so eager to come raise their children here. The non-profit sector is booming because more and more people are willing to fund it, which is because it's gotten more and more smart and effective, which in turn attracts more smart young people into the field, rinse and repeat.

Healthy growing economic sectors are dynamic with lots of churn, that's part of the deal. We could ask the U.S. auto industry what the opposite feels like....Now if it one day turns out that the not-for-profit sector has been growing faster than the demand for it (expressed in earned and contributed revenues) then there will be some shakeout. I'm not cavalier about this because I once had to shut down a failed non-profit, and if you haven't been there you've no idea how much that sucked. But again: it's part of the big picture, and the big picture is overall terrific.

For example it's easier today to discuss and test new paths to greater effectiveness, and evaluation, and efficiency, and interdisciplinary bridgebuilding and several other hot topics, because at the crowded industry conferences the rooms are full of smart focused 30-somethings who aren't wedded to the rules of thumb and so forth which some of us learned on back in the paleolithic era. A big thumbs up to that (cue George Burns: "I wish I was 28 again...").

It's not that older non-profit staff are simply threatened by the flood of new folks, I detect little of that. It could be that funders are simply uncomfortable with the idea of having to act like customers and choose from among more and more possible grantees. It may be that we don't want the implied pressure of our sector being healthy and thriving with strong growth in resources: it doesn't fit our collective self-image as the underdog fighting upstream to improve the world despite endless funding cuts and the slings and arrows of a regressing society and so forth (cue violins).

Well I vote for dynamic and growing. Like the cliches go about democracy: it's messy, noisy, frequently unpleasant, and beats the heck out of all the alternatives.

Sunday, November 12, 2006

How NOT to deal with a $20 million donor

The wire-service story seems clear enough:
MIAMI, Nov. 10 (UPI) -- A medical entrepreneur has withdrawn a promised $20 million donation to the planned Florida International University medical school.

Herbert Wertheim, a former optometrist [and a university board member for nearly 20 years] , said that Florida International University President Modesto Maidique hurt his feelings by saying he was getting the medical school named after him "on the cheap," the South Florida Sun-Sentinel reported. Wertheim has also resigned from the board and has asked that the name of the school be changed.

The dispute, which appears to have ended a long friendship between Wertheim and Maidique, began with a disagreement about structuring the gift. After promising a lump sum, Wertheim said he needed to change that to 26 months of installments for tax reasons and was told that a lump sum was needed to get a matching grant from the state. "Most offensive to me was your comment that I was given the naming rights of the medical school 'on the cheap,' and that you could now get $100 million for it," Wertheim wrote Maidique. "After we finished speaking, I felt hurt, empty and disappointed."

[Yea, that's not really the feeling one hopes to leave behind from a call with a longtime major donor to one's organization is it?. Methinks the rest of the university's board might soon be making President Maidique feel "hurt , empty and disappointed".]

Microfinance: for profit or not for profit?

The awarding of the 2006 Nobel Peace Prize to Muhammed Yunus put the microcredit/microfinance concept onto the front pages. Those of us who see global poverty as humanity's most-fundamental issue were thrilled to see the issue get such media attention, and you can count me among those who have long been excited by microcredit. Then the October 30 issue of The New Yorker made public a hot theoretical debate about whether microcredit works best in a non-profit or a for-profit form.

Grameen Bank, Yunus' organization, is a non-profit which initially used grants and soft loans for its work; now it is almost self-sustaining. (It's an example of an institution that is openly and unapologetically biased in favor of women, on the grounds that as Yunus says, women are more responsible about re-paying the loans and poor families benefit more when the women control the money; whether that practice would be legally sustainable in the western world is debatable.) Now a group of socially-minded entrepeneurs, who see Yunus as a well-meaning example of founder's syndrome, think that microfinance can reach truly global scale plausibly only as a for-profit sector.

They seem to think that more contributions could be pried loose from the western world's newly-wealthy entrepeneurs to for-profit microfinance funds than to non-profits, an idea which reflects an outdated view of the non-profit sector and which isn't supported by the current flood of huge contributions being made towards this movement. Perhaps more relevantly, they think that commercial enterprises can tap the capital markets for investment funds at a scale that dwarfs even the stunning scale of philanthropy in today's world.

Yunus and his supporters recoil from that in part on philosophical grounds, feeling that profit as a required payoff for helping the poor is vaguely immoral. More tangibly, they worry about mission drift: that commercial competitive pressure inevitably would mean that only the less-poor or the working poor would be considered reasonable risks for loans. One response is that adding working-class customers is simply a way to stay afloat so as to keep lending to the really poor, but that flies in the face of Yunus' core argument that the poor can be reliable borrowers even at high rates of interest.

Hmm, all good it necessarily an either/or choice? We have both non-profit and for-profit hospitals, ditto theaters, also some other important sectors -- is that diversity of structures and motivations not positive in some important ways?

Another thought is that this seems like a perfect fit for non-profits to leverage the foundation sector's increasing interest in mission-related investment, where part of a foundation's endowment can be invested at higher-than-normal risk or lower-than-normal return provided the investments have a mission purpose. Hopefully somebody is talking seriously about this with some of the multi-billion foundations like Gates, Ford, et al.

Saturday, November 11, 2006

Whole lotta shakups goin' on

Two of the biggest, best-known non-profits in the world have launched major reorganizations: the American Red Cross and the Girl Scouts.

The Red Cross shakeup is in response to a series of missteps and criticism in recent years, most famously related to the 9/11 attacks and then Hurricane Katrina. Basically they are adopting what most non-profit people would recognize as a normal structure at the top, with a self-recruiting policymaking board of directors which hires a CEO to run the place. The Red Cross has since 1947 had a 50-person board largely chosen by state chapters which tried to directly run the organization; different board members had different titles, operational decisions were made by committees, and not surprisingly three CEOs have resigned since 1999. No doubt the current highly-democratic structure will be missed by the state and local chapters, but it just wasn't plausible for running what is now a $4 billion/year operation with 35,000 employees deployed in hundreds of local offices.

Girl Scouts of the USA, meanwhile, has announced a huge internal consolidation: 312 local councils will be consolidated into 109 over the next three years. In some places as many as seven current councils, each with their own local boards and staffs, will be combined into a single new one. The primary motivation here is simple efficiency; local councils are naturally worried about how many camps might end up getting closed, staff positions eliminated, and so forth. What the organization hopes to gain isn't just reduced administrative costs but new ability to modernize their program nationwide.

Friday, November 10, 2006

IKEA is a non-profit?

In yesterday's quick rogues' gallery I forgot to mention what is in dollar terms probably the largest non-profit scam in history: the fact that IKEA, the giant Scandinavian retailer, is wholly owned by a charitable foundation so as to evade taxes on its profits.

The Economist detailed this arrangement in its May 11, 2006 issue. "The parent for all IKEA companies—the operator of 207 of the 235 worldwide IKEA stores—is Ingka Holding, a private Dutch-registered company. Ingka Holding, in turn, belongs entirely to the Stichting Ingka Foundation. This is a Dutch-registered, tax-exempt, non-profit-making legal entity, which was given the shares of (IKEA founder) Ingvar Kamprad in 1982." Depending on who's doing the math, that foundation is on paper arguably the largest in the world, even bigger than the Gates Foundation's $30 billion in assets. The declared mission is to promote “innovation in the field of architectural and interior design” and “for investing long-term in order to build a reserve for securing the IKEA group, in case of any future capital requirements.”

A five-person executive committee, chaired by Kamprad, runs the foundation. "This committee appoints the boards of Ingka Holding, approves any changes to the company's statutes, and has pre-emption rights on new share issues. Mr Kamprad's wife and a Swiss lawyer have also been members of this committee..."

That sort of thing was once common in the U.S., albeit never at such a size, but was first addressed by a 1950s federal law and today couldn't be done at all because of the 1969 Tax Reform Act. But "Dutch foundations are very loosely regulated and are subject to little or no third-party oversight. They are not, for instance, legally obliged to publish their accounts [annual financials]." There is no minimum grantmaking requirement as U.S. foundations operate under, so despite receiving at least a half-billion dollars per year in IKEA dividends the foundation doesn't appear to be issuing more than a couple of million per year in grants, The Economist found. Something to think about the next time you're scoring one of those nifty $9.99 table lamps....

Thursday, November 09, 2006


Every day the news includes some reasons to feel proud of working in the private non-profit sector -- in fact the concept of such a sector is itself arguably one of America's greatest gifts to the world -- but then there are examples like these listed by the president of Charity Navigator.

Or this wealthy asshole who used contributions to pay for his daughter's $200,000 wedding. Seriously. That article also covers the notorious case of two directors who spent years systematically stealing from the Florence E. King Foundation in Dallas; the foundation sued and a jury ordered the pair to repay $7.5 million plus pay $14 million in punitive damages.

Then there's the five politically-conservative non-profits who laundered money for Jack Abramoff. And last year five different arrests for non-profit fraud were made in a single month in Lincoln, Nebraska. (Makes you wonder what might be going on in Omaha...?)

Yecch. Something a bit more uplifting tommorrow, hopefully.

Wednesday, November 08, 2006

Fundraising in the buff (almost)

I bet every fundraising staff in the free world has, at some point, mused half-seriously about doing a cheesecake calendar for their charity. C'mon, admit it -- "Conservation Cuties"? "The Men of [your organization name here]"? "Taking It Off To Clothe The Homeless"? You've teased your executive director about posing for the cover shot, you've made board members giggle at a Development Committee meeting, you've gotten slightly alarmed when younger staffers start seriously discussing layout concepts. You know who you are. Cause really at some point doing another silent auction just doesn't get the blood flowing, right?

Well a young opera company in Chicago has actually done it, and earned a nice writeup with photo in today's Chicago Tribune. The artistic director was the first to pose; each month's photo is a real-live singer posed as a character from a well-known opera. Cue Aretha Franklin soundtrack: "Divas are doin' it for themselves..."

I know I speak for the entire dot-org readership base (ahem) in promising to, strictly as a gesture of non-profit solidarity, buy a copy. Or two -- a perfect stocking-stuffer for the opera fan in your life eh? Cause you've never seen Salome quite like this (well not at the Lyric anyway, which is the point OperaModa is trying to get across).