Wednesday, March 28, 2007

Private colleges may be getting it

Last week I was in full finger-wagging mode at American colleges and universities, but fair's fair: on at least one very big issue they deserve kudos.

I've remarked before that .edu-land today seems to have a perception problem: working-class American families aren't aware of the fact that the cost of going to college is now priced in an extremely (and historically-unprecedented) progressive way. In other words the better off you are the more you pay, and the well-off families paying full sticker price are subsidizing everyone else. But that reality is obscured behind a fog of complex forms and jargon, so lots of families who aren't well off and who see the newspaper headlines quoting $30,000/year sticker prices never even try.

Another sign that the institutions are grasping this comes from the excellent online journal Inside Higher Ed. They report that "several elite private universities and flagship public universities have effectively eliminated loans for students from low-income backgrounds", and that the schools are making this change public.

Other top-level private colleges have in recent years made the "pricing based on ability to pay" reality much more apparent and simpler: Harvard for example eliminated any expectation of family contribution for households earning less than $60,000/year and others are following suit.

This whole trend gets a big happy salute from me for several civic reasons that are probably obvious. It also seems wise from a strictly business point of view provided of course that a given college has a healthy-enough financial base to be not overly reliant on earned income to pay the bills.

Monday, March 26, 2007

Alberto Gonzales is saying, "at least I don't work at the Smithsonian..."

It just keeps getting worse for America's national museum. Revulsion over the pay and spending of Smithsonian chief Lawrence M. Small has inspired the full U.S. Senate to freeze the institution's public funding and cap executive salaries at no more than the President's (which would mean a pay cut of more than 50% for Small). The former auditor of the place claimed Small pressured her to back off looking into his spending, and today Small finally did the obvious.

Of course that whole thing follows the general disgust over the Smithsonian's deal last year with Showtime, an issue which remains unresolved.

Meanwhile, and apparently unrelated to the above, a blue-ribbon panel appointed in 2005 by the Smithsonian has concluded that the institution's eight art museums are "failing on many levels." The panel's leaked report says, according to The Art Newspaper, that “The Smithsonian’s art collections, taken together, might be expected to be a kind of national encyclopedia of the world’s art, like those in New York, Boston, Philadelphia, or Chicago; but in reality they are not. [And] to the extent that their designation as ‘national’ museums implies qualitative superiority and leadership, they have seldom lived up to their names.”

Ouch and double ouch...the panel thinks at least two Smithsonian-related art museums should be flat-out closed, and is barely more kind about a couple of others. With the director of the National Museum of Natural History keeping Small's chair warm, the Smithsonian is conducting a national search for his permanent replacement. They're going to need somebody a lot sharper than they've had lately, from all appearances.

Thursday, March 22, 2007

Updates: Red Cross, Robertson v. Princeton, symphonies

Quick updates tonight on some subjects previously covered here:

The American Red Cross, it turns out, has to get formal permission from the U.S. Congress in order to reorganize themselves into a normal non-profit structure. That's because of the organization's special disaster-response status granted by Congress decades ago. It sounds like the legislators are receptive to the basic premise that the organization's outdated governance structure is the root of its recent troubles including losing three CEOs since 1999. The current board chair told a House committee that the proposed changes have helped lured some strong candidates for the job.

Princeton University has quietly (at least they wanted it to be quietly) reimbursed the Robertson Foundation almost $800,000 which the university can't bring itself to admit was used contrary to donor intent. (Rather, they say its because university officials failed to properly disclose the use of those funds.) This move has not taken any steam out of the huge lawsuit being pursued by the Robertson heirs; in the court of public opinion, Princeton just continues to shoot itself in the foot.

And the John S. and James L. Knight Foundation has summarized its hard-earned knowledge about the state of symphony orchestras into a short "issue brief" which should be required reading for everyone involved in classical music today. They do not pull any punches, and their core messages continue to remind me of some of the existing thinking and practices in other fields such as non-profit theater and dance. "Classical music lovers are everywhere, but most of them are not in the local concert halls....Interest in the art form looks healthy. Yet orchestras are struggling to remain relevant in a rapidly-evolving cultural landscape...."

Monday, March 19, 2007

The dot-edu sector isn't yet connecting the dots

A consulting firm has just attempted to do to doctoral universities what US News and World Report famously does to American colleges: use various quantitative data to arrive at easily-understood rankings. Inside Higher Ed has a thorough writeup posted.

The consulting firm's chosen headline for their data (that public universities are falling behind private ones in their productivity of PhD-level research) seems highly debatable for a number of reasons covered in that article. Well down in there an administrator from Arizona State, after blurting the usual silly cliche about how "you can say anything with statistics", actually does a nice job detailing core flaws of the specific data being used here. The response from the consulting firm is quite unpersuasive.

For me though this small tempest fits into a broader storyline about this country's educational institutions and experts. Like charitable foundations, that sector still seems mostly to think that 21st-century America is still happy with its 20th-century social contract. There are lots of signs to the contrary, such as the growing public interest in some way to compare institutions' actual productivity other than just taking their word for it. The educational system's customers, which is everybody, are less and less willing to do that and the sector itself continues to fail to offer any other robust way to measure and compare its own output.

Hence we see the current standardized-testing mania that has infected our primary and secondary schools, which everyone agrees has tons of drawbacks -- but so long as educators offer no practicable alternatives that would measure educational results on a wide scale, the parents will keep voting for politicians who impose standardized testing. Looking at colleges and universities its clear that a similar dynamic is underway: the educators insist that their output cannot be measured objectively and respond to college and university rankings mainly by deploring the very idea.

That "trust us to know what's best for your children" attitude will not wash in today's world, and a good thing too. Moreover this society's expectations about transparency have moved way past what the .edu sector gets -- 15 years ago Congress had to pass a tough federal law just to get universities to admit how many young women were being date-raped on their campuses. If colleges and universities don't feel like getting serious about identifying measurable, transparent, regular ways to document and compare their output, it will be done for them. Slowly, erratically, clumsily and who knows how intelligently -- but it will.

Saturday, March 17, 2007

U.S. foundation giving keeps surging, and changing

The Foundation Center, the best source of information on charitable foundations, has released its latest trend data. While the fact that foundation grantmaking continues to boom is hardly a surprise given various newspaper headlines the last few years, there are some changes underway which development directors and executive directors would be wise to think about.

The Center's data comes from the largest 1,100 foundations, representing about half of all foundation grant dollars awarded. Total grant dollars from those institutions are rising now at close to twice the rate of inflation: up about 6% in 2005 after a rise of 8% for 2004. (And the center predicts an even greater increase for 2006 thanks to various high-profile foundation gifts starting to turn into new grant dollars).

Those increases are in dollars awarded, though -- the total number of individual grants issued rose only half as much. So the average size of individual foundation grants is rising. At the top end, a record 308 individual grants were at least $5 million each in 2005.

The common accusation that foundations have limited attention spans is supported in some ways by this data. For example the largest grantmaking increases by subject area in 2005 were environmental and animal-related causes, two categories which had declined the previous three years.

Unrestricted grants rose by only 1% for 2005, meaning they declined as a fraction of all grant dollars. So that's one recurring gripe which is not yet being persuasive for many folks on the foundation side of the discussion (I'm one example of that, actually).

Thursday, March 15, 2007

Boomers are volunteering more -- for now

A large U.S. federal study says that as the Baby Boomers moved into middle age they sharply ramped up their rates of volunteering, but that they are also less willing to consider stereotypical envelope-stuffing as worth their time. Since there are more and more opportunities today to do more than that, it follows that non-profits which still think in the older terms will increasingly fall behind in volunteer recruitment.

The Corporation for National and Community Service, which was created in 1993 as the parent agency of AmeriCorps, used data from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau to compare volunteerism rates in the 1970s, 1980s, and 2000s. They concluded that "Boomers in their late 40s to mid-50s are volunteering at higher rates than members of the Greatest Generation and Silent Generation did at the same age. Boomers were volunteering at lower rates than their predecessors while in their 30s, but that trend has reversed."

The study found that volunteers today are most interested in making active, challenging contributions with their time, in particular "professional activities – such as managing people or projects", "music or some other type of performance" and "tutoring, mentoring and coaching". The researchers concluded that volunteers who are asked to do general simple labor for non-profits are far less likely nowadays to return for more.

That research fits with a couple of trends in the non-profit sector. One of them is the success in certain niches of programs where a relatively complex mission is carried out entirely by volunteers. I've participated in one spectacular example which was in large part invented here in the Chicago area: intensive ecological restoration carried out by self-governing volunteer groups who follow the scientific advice of trained ecologists. More and more civic efforts in other fields, such as disaster relief and public-schools improvement, are accomplishing things via similar structures.

A related concept is that of non-profits whose mission is to formalize professional volunteerism and thereby enable more of it. Such a group takes responsibility for recruiting professionals who want to do some volunteering with their particular professional expertise (marketing, accounting, legal advice, information technology, whatever) and matching them up with non-profits which really need the specific help and which are equipped to make good use of it. This gets at the problem that we've all seen of well-meaning professionals who end up feeling like their time and energy was wasted or that the non-profit they volunteered at was really just trying to cultivate them as a donor (both feelings often being, alas, accurate).

One type of this sort of "volunteerism broker" group is service groups organized by subject, such as Lawyers for the Creative Arts and their analogues in numerous other cities. A new organization which is attempting to take the concept to scale across professional disciplines is Taproot Foundation (which makes "service grants" of volunteer time, not money grants), founded by the son of the original designer of the Peace Corps.

If that federal research is right then more such organizing efforts could yield major long-term benefits for the U.S. non-profit sector and for that matter for American society in general, and could like the formal civic sector itself become an American invention which spreads around the world.

Monday, March 12, 2007

The Congressional spotlight is being focused

The Washington DC Examiner reported the other day that a Congressional Philanthropy Caucus is being organized in the House, co-chaired by North Carolina Republican Robin Hayes. The Democratic co-chair was not identified, and the newspaper didn't name its source for the story. Some quick poking around just now didn't turn up any denials, and the Chronicle of Philanthropy appears to believe it.

Such a move seems inevitable given the various non-profit and philanthropy related issues that have in recent years been the subject of Congressional bills or hearings, and the general increase in public awareness due to things like the Gates and Buffett philanthropies and some non-profit scandals. And it does seem clear from kludgy messes like last year's federal Pension Reform Act that a lot of Congressmen and Senators are not yet up to speed on what this sector does and how, and a defined caucus ought to help with that learning curve.

Nonetheless I can't help thinking of the prediction Joel Fleshman is going around making (out loud and in his book) about foundations: that if they don't define and adopt a new more-transparent version of the charitable-foundation social contract, Congress will eventually define it for them. I think he's right about that -- our society slowly but continuously becomes less tolerant of secrecy from all its public or civic institutions, including publicly-held companies, and there's no reason to expect foundations to be exempted from that.

And I would apply Fleishman's logic to the not-for-profit tax-exempt sector as a whole: the statute of limitations on permission to be a young industry is not yet defined but it's also not open-ended. In some ways we perform our role in society better than other sectors do and some ways we don't, at all; and we won't be allowed to avoid that fact forever.

Thursday, March 08, 2007

Too many for what, exactly?

Next month I'm attending a discussion gathering of foundation staffs for which the invitation begins, "As non-profits grow in number and stretch available resources..." Notice that this premise is stated as simple obvious fact: that the number of non-profits has been growing faster than the available funding for them. That's a widely-believed factoid which has made it into the mainstream media; its a commonplace among foundation staffers. It is easily the most-common reaction I hear to this recent report that my foundation published online.

The thing is, as stated it simply isn't true: the number of non-profits in the U.S. has not grown faster than overall non-profit revenues, indeed hasn't even kept up with the growth in charitable giving.

Independent Sector says that non-profits roughly doubled in number from 1980 to 2005; or put another way, that non-profit employment doubled from 1977 to 2001. The IRS reports (see Table 16 there) that the number of tax returns filed by non-profits increased by 138% from 1985 to 2002. [It makes sense that this increase would be a bit higher than the overall creation of new groups because the filing threshold has not been indexed for inflation.] So okay let's take that basic premise as documented: that there are somewhere around twice as many non-profits as a quarter century ago.

That same IRS table shows that total non-profit revenues increased by 112% above inflation from 1985 to 2002. (The table shows raw totals not adjusted for inflation; I applied this inflation calculator which uses the official federal Consumer Price Index through the years to make conversions.) And apparently non-profit spending has not been increasing as fast as have the revenues, because the IRS figures show total non-profit fund balances increasing by 161% above inflation in the same period.

For some corroboration I checked the printed Giving USA 2005 report: it says (page 26) that total charitable contributions in the U.S. increased by 148% above inflation from 1980 to 2004. [The heavy growth has been in non-religious giving: giving to religious organizations grew only 66% during those years (page 37).]

The time periods of these various figures don't match up exactly, and obviously there may be large differences between types of non-profits. With all that stipulated, it is clear that overall this particular piece of conventional wisdom is not rooted in reality: the booming growth in this sector is not at all "stretching available resources". At a minimum, arguments that we now have "too many non-profits" need to be driven by a different issue.

Tuesday, March 06, 2007

The McCormick Tribune Foundation just moved into the bull's-eye

The Tribune Company is one of America's largest media conglomerates: owner of the Chicago Tribune, the L.A. Times, the New York Daily News, other newspapers around the country, the Chicago Cubs, WGN TV and radio, Metromix, and sundry related businesses. The company's ongoing corporate soap opera has a significant non-profit-governance element which has been overlooked or overshadowed...until now: Illinois Attorney General Lisa Madigan "has taken an interest" in the issue of whether the heavyweight Robert R. McCormick Tribune Foundation is being run properly as a charitable institution.

The source of this news is a front-page article in this week's issue of Crain's Chicago Business, the city's leading business newspaper. Madigan, who has previously put non-profit hospitals in her sights, seems pretty clear on the fact that being a tax-exempt organization in the U.S. is a legal and social contract not a blank check or inalienable right. Given the facts here, that does not look good for the foundation. Madigan's scrutiny may also may have an impact on the the ultimate fate of the media company, via a scenario explained in the Crain's article linked above.

That also does a decent job of explaining how the foundation and the company are so tightly linked and why, but the degree to which that is contrary to modern standards of non-profit governance and law doesn't really come across. The foundation remains basically a captive creation of the company, and that is one of the once-common practices that inspired the wholesale rewrite of federal charitable-foundation law in 1969. It also certainly violates the spirit, at least, of Illinois' not-for-profit incorporation statute.

The quote from Robert Sitkoff at Harvard could be correctly applied to the whole setup, not simply the specific transaction he's commenting on there. The foundation spokesman's rejoinder at the end of the article is feeble as a defense of the specific issue about responsible investing of the foundation's endowment, and that isn't the biggest odor about this anyway.

Sunday, March 04, 2007

Non-profit CEO pay keeps hitting the fan

I had a really bad travel day on Thursday but it was a whole lot better than a bunch of non-profit executives and groups who have just been nailed to the wall by the IRS, as described in that day's New York Times. In addition to finding that dozens of organizations had failed to properly disclose executive salaries, the agency "asked 40 individuals to pay a total of $20 million in excise taxes, which is the penalty it imposes when it determines a nonprofit executive has been paid excessively."

That ain't good, even a little bit. The names of the guilty have not yet been revealed.

It is a condition of federal tax-exempt status that salaries paid not exceed a reasonable range for jobs of comparable responsibility in the local market. That has not been something which has received consistent IRS attention, in part because until the 1990s the agency had no recourse short of the "death penalty" (revoking an organization's tax-exempt status) which was obviously not a politically-plausible threat against established beloved institutions. However now the feds can impose fines and penalties such as the excise taxes noted above, against both an organization and an individual.

The above discoveries have "convinced the agency that it needed to do more in the area of compensation at nonprofits" according to the article. Yea I bet...we can add to this pile the truly-outrageous case of the chief of the Museum of Modern Art in NYC, described by Trent Stamp of Charity Navigator. The guy was already the highest-paid museum official in the U.S.A., and then two wealthy board members created a trust through which to secretly pay him millions more!

Unbelievable. I hope the state attorney general and the IRS nail all concerned to the wall. Clearly there are plenty of people in this sector who need wakeup calls.