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).

Tuesday, November 07, 2006

How are we doing?

A few days ago I mentioned Charity Navigator, it's a non-profit devoted entirely to tracking and reporting on non-profits. Its primary intended audience is donors but the information they put together, at impressive scale and depth, is of great interest to anyone working in the field.

An important caveat: of course they haven't solved, any more than most of us have, the problem of measuring the results of our efforts towards our missions. If a non-profit's mission is for youth to become deeply engaged in the natural world, how do we truly measure how much or well that is happening? We know that anecdotes aren't evidence and that measuring such change is harder than counting widgets sold, and that's about all we can yet agree on. In our weaker moments we fall back on witless cliches about "lies, damn lies and statistics" or how "you can make numbers say anything"; hopefully that's just honest frustration getting the better of us. It's the top issue for our sector and tends to dominate discussion at every conference I attend these days.

Wow that was quite a lot of throat-clearing wasn't's a touchy subject. Anyway what Charity Navigator can do is provide some consistent measures of the caliber of our efforts, and that is certainly worthwhile regardless of the above. They seem pretty balanced in terms of putting the spotlight on both the good and bad, such as with their "Top Ten" lists. For instance I'm glad to have worked for #7 on this one; very glad never to have contributed to the follies at any of these. (And anybody on staff at one of these needs to be very concerned!)

The "Hot Topics" section is quite nice, where they highlight charities related to a currently-newsworthy subject; so for example for October, Breast Cancer Awareness month, they provide a one-stop list of all groups working on that. There's lots of good info on each non-profit and it appears to be kept quite up-to-date. It's probably worth searching for the place you work for, and I hope it turns out to be operating as well as you thought!

Monday, November 06, 2006

The tax man cometh and we are...confused

This past August, Congress passed and the President signed the "Pension Protection Act of 2006" which, as its name clearly implies, included a number of changes to federal law related to...charitable contributions and certain types of charitable foundation! One of those sausages from our lawmaking mill, like when a defense-budget bill turns out to include amendments authorizing new studies of wombat psychology...anyway if your work has anything to do even tangentially with donor-advised funds or supporting organizations you'll want to be informed about the law.

However that won't necessarily be easy, the Council on Foundations says the thing is a mess: "The provisions in the PPA have varying effective dates....Many of these provisions [some of which are now already the law of the land as I type this] are ambiguous and cannot be applied absent regulatory or other IRS interpretation..." Full gory details are available here.

Sunday, November 05, 2006

Is the cello half-full or half-empty?

ArtsJournal does an interesting thing making excellent use of this technology: they invite people working in a specific sector to participate in a focused online discussion, a short-term blog. This seems to have all the useful advantages of online discourse (like the ability to easily point readers to sources) without the disadvantages which can render open online chats pointless.

So for instance they got several knowledgeable people to discuss the state of classical music in the U.S. It makes the most sense to read if you click the "older entries first" button. I wasn't aware for instance that the New York Times recently declared this to be a golden age for classical music in America...At least some experts in the field seem to agree: "Virtually all of recorded history is at our finger tips. There are more opportunities to hear live performances than ever before. More opportunities to play music in any of the thousands and thousands of community groups that have sprung up in recent decades. The level of performance generally across the land seems higher than ever..." The chairman of a big-city chamber orchestra asserts that "no one has put forth a credible argument that there has been a real decline in the percentage of the population that appreciates the classical music art form."

However they also report serious troubles at a lot of major symphony orchestras, which are struggling to fill seats as people are less interested in subscribing and have more choices. That reminds me of the sad story of the San Jose Symphony which was well described in this report; it's quite unusual (and scary) for a non-profit institution of that size and history to actually go belly-up. One ArtsJournal commenter places those difficulties in the context of that all "producers of "popular" culture are scrambling to reinvent the ways they do business." He provides some excellent examples which, without using the term, amount to the "long tail" trend in action (which I'm now finding just keeps popping up in all sorts of disparate contexts).

Saturday, November 04, 2006

Causes in the comics

Get Fuzzy is a favorite daily comic and today's strip made me spit up my locally-grown organic scrambled eggs....perhaps Satchel (the dog) needs an advocacy t-shirt or two:





Friday, November 03, 2006

"Non-profits should be run like a business"

How many times have we all heard that one? From board members, relatives, U.S. Senators from Iowa, ad nauseum. Like most non-profit professionals I used to roll my eyes and get defensive every time I heard this piece of sage advice, and hence used to get eyestrain a lot.

Some folks in our field are firing back to say: run like a business? Why aim so low? The clearest exponent of this view is someone who's never worked in non-profits: business consultant and writer Jim Collins in his monograph Good to Great and the Social Sectors: Why Business Thinking Is Not the Answer. I've read it and he makes a valid point: most businesses are not run well. That's the nature of the free market, for every successful Southwest Air there are several sluggish stupid failing airlines. People telling non-profits to operate "like a business" always cite the few smart winners while forgetting that the norm is mediocrity, like sports fans who remember Mickey Mantle and grumble that today's players can't carry his cleats. (No they can't and neither could 99% of the players in 1960, because he was MICKEY FLIPPING MANTLE, duh). If the business world was so beautifully well-run would Dilbert cartoons be pinned up in a million cubicles?

But honestly that response, while accurate, is responding to a straw man - this cliche is not actually trying to tell non-profits how good to be but something different. Through some instructive experiences I've come to the idea that folks parroting it are completely wrong in the way they usually mean it and dead on the money in a different way.

Most often that statement is rooted in the idea that non-profits are not operated in a business-like manner: that we don't do "real budgeting" or have to comply with normal legal standards or ever fire poorly-performing staff, etc. Perpetrators of such silliness invariably turn out never to have worked for a non-profit and are astonished to discover that we don't actually operate in the same manner as Aunt Bea's annual bake sale for Opie's scout troop.

Spend any amount of time working for or with smart successful businesspeople however, and a blunt truth is inescapable: that the non-profit sector needs to learn their essential skill of setting and enforcing choices and priorities in our work. We talk endlessly about that nowadays, boy do we ever -- walk past a non-profit-management classroom and "strategic planning" and "SWOT analysis" will pop into your head like that old TV jingle you can't stop humming -- but we don't yet truly get it in the way successful businesspeople do. Deep down we still think that our noble self-sacrifice in accepting lower salaries than we "could be making in the corporate world" exempts us from the free-market dynamics which focus the minds of those poor soulless automatons over in Dilbert-land.

And so we write four-paragraph-long mission statements, and lovely business plans which never get read again, and my favorite the strategic plan which declares _ten_ top priorities (half of which begin "Address issues of..."). We start big new programs because we've heard that "foundations are throwing grant money at that", without bothering to research what foundations are and are not actually willing to fund in that subject. (Let alone penciling out what the new program will cost when the startup grant ends and we can't bear to shut it down because it's become so essential that we meanwhile re-framed our mission statement to include it).

Poorly-run businesses do those things, and the market punishes them until smarter businesses kill them off. The same, eventually, is true for non-profits. The most-important thing we can learn from the successful businesspeople is how to make a disciplined, reality-based plan and stick to it. So the next time one of them acts like we don't do real accounting, perhaps we should show them a couple of FASB circulars and then ask for help with what they do actually do better than us.

Thursday, November 02, 2006

Staying safely agnostic, thanks

A foundation officer I know wrote of a grant: "The only funds released were to support the IT infrastructure, which was a critical organizational need that had no associated
intellectual issues." Well perhaps not but to start a lively theological brawl just walk past an open-source advocate and whisper, "Windows NT is stable and secure"....

How are our top dogs doing?

More on non-profit salaries, a couple of things were recently published regarding salaries of non-profits CEOs. The printed Chronicle of Philanthropy reported on the salaries of the CEOs of 300-plus large non-profits, finding an average in the $350,000 ballpark. The trouble is that the sample is not even vaguely representative of the staffed-nonprofit universe, it's largely university presidents and chiefs of big hospitals and so forth. What the president of Yale is paid isn't really what we mean when we ask how much "non-profit directors" make.

Charity Navigator (about whom more on another day) has assembled a more representative sample covering about 5,000 U.S. non-profits. They have this sort of data because (a) all non-profits paying any salaries of at least $50,000 must list them on the organization's annual tax return, and (b) assembling and analyzing this sort of data is what Charity Navigator does. They found an average CEO salary of $141,000. They found that CEOs of education and health-related charities earn the highest amounts; those who guide religious groups or animal-related non-profits earn the least. (Okay the religious I get, vows of poverty and all that, but animal-related? Philanthropists don't like to pay for monkey houses anymore?)

They broke the CEO salaries down by organizational budget size. Not surprisingly the two are linked (the larger the organization the more the executive director makes); for example the average top salary at non-profits with budgets under $3.5 million is less than $100,000. That squares with my own observation and experience.

To examine the question of non-profit vs. for-profit salaries, what we'd like but I haven't yet found yet is that specific comparison: how do the CEO salaries compare for non-profits and for-profits of similar size? If anyone has seen such a comparison, pointers are welcome.

P.S. Anyone who thinks that only the business world has plenty of examples of CEOs getting outrageous salaries compared to the performance or sizes of their companies should read the bottom half of Charity Navigator's report, alas.

Wednesday, November 01, 2006

Bless us every one!

Made me giggle: a fine non-profit devoted to building bridges between religious denominations around environmental issues recently wrote to its supporters, "Join Us for a Blessing of the Solar Panels!" (newly installed on the roof of a member church that is going green) I pictured one of the Monty Python guys in a white robe intoning, "...and furthermore bless this new insulated pipe, running over from the Holy High Efficiency Hot Water Heater, without which we might continue to waste Your heavenly energy since some of us are simply unable to remember to wear long woollies and hence spend each Sunday service complaining without justification..."