Saturday, May 31, 2008
For weeks, Republican presidential candidate John McCain had been hammered for supporting the Air Force's February decision to award a $40 billion contract for refueling tankers to Northrop Grumman and its European partner. Democrats, labor unions and others blamed the senator for a deal they say could move tens of thousands of jobs abroad.
For the entire article, see "McCain Campaign Calls; A Nonprofit Steps In" in the May 31, 2008, issue of the Washington Post.
Friday, May 30, 2008
Air China has flown over 331 relief missions from Beijing to Chengdu and plans to continue the missions. The carrier has worked with the Chinese government to fly supplies in and to evacuate those in need of medical care. The airline is also working with the Chinese Consulate in Los Angeles to coordinate shipment of U.S. aid to the devastated area. Zhihang Chi, Air China's general manager for the Western U.S. notes that the airline shoulders a greater social responsibility because it is China's only national flag carrier. To read the full story in PNN Online, go here.
The New York Times article about government attacks on the exempt status of some charities led to to a letter published today. Submitted by Larry Ottinger, President of the Center for Lobbying in the Public Interest, the letter recommends increased public advocacy by nonprofits and suggests that funders, board members, and government officials should make advocacy a normal part of what nonprofits do. Mr Ottinger notes, "If you're not at the policy table, you're on the table." For the blog about the original article, go here.
Thanks to Jeff Mechanick for letting us know that the schedule for the FASB meeting has changed. The Board will discuss FAS FSP 117-a (guidance on endowment funds) at 10:30 am Eastern time. The agenda lists 45 minutes for the discussion.
Thursday, May 29, 2008
The FASB's Action Alert, posted today, announces that the FASB will "redeliberate significant issues raised by respondents to proposed FAS FSP-117a at its June 4 meeting. The meeting is available by audio webcast (free) and telephone (.45 cents/minute). For instructions on access to the meeting, go to instructions on the FASB website. Handouts will be posted on the website one half hour before the meeting. The Action Alert indicates that the meeting starts at 9:00 am but doesn't indicate which time zone.
At the meeting the Board will consider changes to the FSP. The Board will likely defer the effective date of the guidance to years ending after December 15, 2008 (a deferral of six months), and may make other changes. For prior blog coverage of the FSP go here.
The downturn in the economy, layoffs on Wall Street, and the difficulties faced by hedge fund managers in the current market meant that the Robin Hood Foundation benefit was more subdued and raised less money this year than last. A New York Times article, "Gala Auction Feels a Chill from Wall Street Slump," describes the event. The rich and famous spent $3,000 per ticket to enjoy a lavish evening, but fewer people bid on the luxury packages in the auction and the bidding was less aggressive. Still, event organizers were pleased at the amount raised. As co-chair Barry Sternlicht said, "This is a New York-based kind of recession and it's not a good year for the hedge fund industry. But we were blown away by the response."
The New York Times reports concerns about whether one foundation, and family members connected with the foundation, controlled the investment management decisions of another foundation. Two articles, one focused on employee issues and one focused on the second foundation, the Mott Children's Health Center, appeared today.
In 1969, after the excess business holdings rules were passed, the Charles Stewart Mott Foundation had to divest some of its stock in U.S. Sugar. The Mott Foundation did so by contributing the stock to the Mott Children's Health Center, a separate foundation established in 1939. After the contribution the Children's Health Center held a 22% share in U.S. Sugar.
In 2005, when a share of U.S. Sugar stock was valued at $153 on the books of the Children's Health Center, the company recieved an offer to buy the company at a price of $293 a share. A second offer, for the same amount, was made in 2007. The company rejected both offers.
Complicating an understanding of what happened and why is the impact the rejection of the offers had on employee shareholders. In 1983 U.S. Sugar created an employee stock ownership plan (ESOP) and the employees received stock in exchange for their interests in the company's pension plan. Then in recent years, the company began laying off senior workers in order to compete with global sugar prices. The senior workers received their retirement funds for as little as $194 a share, at the time the offer of $293 a share was on the table. Although they were shareholders, the company did not tell the workers about the offers or let them vote on a decision to sell. The workers now suspect a secret agreement between the Mott Foundation and the Children's Health Center.
The end result of the rejection of the offers is that employees are being cashed out at a depressed price, and the employees' shares are returned to the company, increasing the control of those holding the remaining shares. In addition, the company has stopped paying dividends which means the Children's Health Center not only lost the opportunity to increase its investment funds (valued at $293 a share, its stock was worth $125 million) but also now no longer receives the dividends it depended on to sustain its charitable work. Because U.S. Sugar is not a public company, there is no market for the stock, so the Children's Health Center is stuck with an asset that has become a poor investment.
Some former employees of U.S. Sugar have filed a lawsuit against the company. Records of the Children's Health Center have been requested in the suit, so more information about what the charity knew and whether it acted in concert with the Mott Foundation will be coming.
Wednesday, May 28, 2008
In developing countries, girls may be pushed out of school and into early marriages and pregnancies. The Nike Foundation has identified what it calls the girl effect, the effect that providing girls with education and resources can have on a community. The girl effect brings greater economic stability, less poverty, and more opportunity for economic growth. The Nike Foundation has already devoted $36 million to projects designed to support girls in developing countries. Now Nike, Inc. and the NoVo Foundation (co-chaired by Peter and Jennifer Buffet and funded by Warren Buffett) will team up to do a lot more. Nike, Inc. has committed $45 million over three years, and Nike, Inc. will add another $55 million. The Nike Foundation foundation will manage the money and the projects which seek to build more support for girls as a way to alleviate poverty. Read more about the plans on PNNOnline and on the webpage of the NoVo Foundation.
Twenty-three states have now adopted UPMIFA, the Uniform Prudent Management of Institutional Funds Act, and eleven of those enactments happened this session. The Act has passed both Houses in New Hampshire and awaits the Governor's signature there, and a few state legislatures, including California, are still considering UPMIFA this session. For bill tracking and a legislature fact sheet see the NCCUSL website. And for a description of the Act on this blog, go here.
One of the compensation perks for top executives at North Shore-Long Island Jewish Health System, in New York, is a car allowance - up to $600 a month. As Alvin Besset, writing for Newsday, notes, the amount is not excessive and the executives and doctors pay the extra cost of driving a Porsche or a Range Rover. But Elizabeth Moore writes, also in Newsday, that seeing hospital staff driving around in subsidized luxury cars, even on Long Island, has raised concerns, first among patients and now among state legislators. As the economy falters, the idea that a nonprofit provides fancy cars for 80-90 members of its staff has upset members of the State Assembly's health committee. They vowed to look into the compensation packages. And patients were upset to learn that a treatment center would close for "cost efficiency" reasons while the nonprofit provides doctors and management with expensive cars.
Tuesday, May 27, 2008
$27 million, the amount Americans have contributed to US charities to help with disaster relief in Myanmar, sounds like a lot of money, and so does $25 million, the amount contributed to help the Chinese earthquake victims. Yet two articles describe the amounts as "relatively little" and the result of "donor fatigue." On May 19, the Washington Post published an article emphasizing the problem of donor fatigue or disaster fatigue. The article notes that in response to the 2004 Asian tsunami Americans contributed $1.92 billion and in response to Hurricane Katrina donors gave $5.3 billion. As the disasters pile up, some donors give up trying to help. The magnitude of the problems can discourage giving.
Caroline Preston, writing in the Chronicle of Philanthropy, agrees that the amount raised is small in part because of donor fatigue. She adds that lower giving may have occurred because Americans distrust the governments of Myanmar and China and because the Myanmar government has blocked aid efforts. The weak U.S. economy probably also plays a role. This article lists amounts raised by a number of U.S. organizations and also lists corporate and foundation grants.
The city of Philadelphia gave the Philadelphia Boy Scouts until May 31 to open their membership to gays and atheists or leave the headquarters building the scouts have used since 1928. The Philadelphia Inquirer reports that the Boy Scouts have filed a civil rights lawsuit to block the eviction. The U.S. Supreme Court ruled in Boy Scouts of America v. Dale that the Scouts as a private group the Scouts can discriminate in setting their membership rules. That ruling did not, however, affect the line of cases that prevent government support for private organizations that discriminate. For now, and until a ruling on the current lawsuit, the Scouts can continue to use the building. The city has said that it will likely file an eviction motion next week, as well as respond to the lawsuit. For prior blog coverage, go here.
In today's St Louis Jewish Light, Rabbi Robert Cohn describes a workshop led by Rabbi David Saperstein: "Social Justice: The Use and Abuse of Religion in the 2008 Elections." At the workshop Rabbi Saperstein discussed what he calls the "ten commandments of politics." The article includes examples from different religious backgrounds of how several of the commandments should be applied. The article provides the following list of seven commandments:
* Thou shalt not offer an explanation to the electorate about how your religious beliefs shape or alter your views on the issues.
* (Candidates) shalt discuss their views on political and legal issues that directly affect religion.
* (Candidates) shalt feel free to use religious language to explain how their beliefs or practices would affect their ability to perform as President or in another office.
* (Candidates) shalt feel free to discuss the role religion plays in shaping his or her values.
* (Congregations) shalt NOT seek to organize partisan support in houses of worship.
* (Religious organizations or clergy) shalt not use authority or threats of religious discipline to coerce decisions or actions by American citizens.
* (Congregations) shalt not endorse or oppose candidates.
Thanks to Ellen Aprill of Loyola Los Angeles for sending this link.
Monday, May 26, 2008
An article by Stephanie Strom in today's New York Times describes challenges to the tax exempt status of charities. From local assessors concerned about property taxes to Congress itself, issues about what constitutes a "charity" continue to surface. The article comments on a number of cases, and notes that Evelyn Brody, nonprofit law prof at Chicago-Kent, has said that "in studying the issue in 2002 and revisiting it last year, she had seen an explosion of cases across the country in which charities were challenged to say why they deserve their property tax exemptions."
The article focuses on a recent Minnesota Supreme Court case that ruled last December that a day care agency was not entitled to a property tax exemption because it charged the same amount for each child and "gave nothing away." The cost of care for some children is covered by payments from county and tribal governments, but the case determined that government support was not the same thing as providing charity care.
Thomas May, spokesperson for county tax assessors in Minnesota describes the problem: "From our perspective in the assessment field, it's harder to define what's a nonprofit these days because there are so many different types, and many of them are doing the same thing for-profit groups that aren't exempt are doing."
In the wake of the Minnesota court ruling, the Minnesota legislature passed a bill last month placing a one-year ban on reversing existing property tax exemptions. The bill requires legislators to determine what constitutes "purely public charity," not an easy task.
Sunday, May 25, 2008
In many states, though unfortunately not all, a strong charities section operates in the office of the Attorney General. Assistant Attorneys General and others use their too-limited resources both to investigate charities and to help charities that may have slipped up get back on track. Much of the work, and the resolution of the investigations, remains invisible. Except in a few instances, incidents involving the enforcement of charitable rules rarely end up as reported cases. That makes analyzing the way enforcement happens difficult for those of us who study it and for the lawyers who advise clients about the rules.
Although not a new resource, I thought it might be helpful to note that the California AG posts information about cases that have required AG involvement but end with a settlement and not a reported case. The website provides a brief description of three cases currently, and includes links to some documents.
The AG investigated Noah's Wish, an organization created to help animals affected by disasters. Under the settlement a substantial amount of the money Noah's Wish had raised was to be contributed to a fund based in New Orleans, to assist with rescuing and caring for animals affected by Hurricane Katrina. The settlement agreement also required Noah's Wish to add board members, provide board training and exclude its founder from any further participation in the organization. No date is provided in the description. The information suggests failure to use contributed funds in a manner in keeping with the charitable purposes of the organization, and the amount raised by the organization, $8,000,000, was large enough to warrant AG involvement.
The second reported settlement involved the Red Cross. In the settlement agreement posted on the website, the American Red Cross agreed to reform fundraising disclosure and executive compensation practices in California. The investigation, begun in 2002, found the use of misleading solicitation practices following the Alpine-Viejas fire in 2001. The investigation also determined that the funds received were not earmarked for disaster relief. The AG further determined that the American Red Cross did not adequately monitor executive compensation in local chapters, leading to overpayment of an executive in one of the California chapters.
The third case involved an organization called Sensory Integration International. The AG filed a civil complaint in this case after finding that substantial charitable assets had been diverted from the charitable purposes. On June 22, 2007 the AG obtained a preliminary injunction preventing further activities by the organization and preventing any further control by the directors and officers named in the complaint. The description of the case does not explain what decisions were made about any charitable assets remaining in the organization.
These cases aren't "news", but I thought it would be helpful to point out this useful resource on on the California AG's website. Posting creates adverse publicity for the charities, but the information about how the AG addresses misdeeds in the charitable sector is useful.
Until the provision expired at the end of 2007, an IRA owner who was older than 70 1/2 could transfer up to $100,000 from his or her IRA to charity without paying income tax on the withdrawal from the IRA. On May 21 the House passed a bill that would extend this tax break for one more year, untill December 31, 2008. See the story in the Chronicle on Philanthropy.
On May 8, Representative Becerra (for himself and several others) introducted HR 6005, a bill to treat Indian tribal governments as state governments for purposes of the public charity/private foundation distinction under the tax laws. Contributions by state governments are treated as contributions that affect qualification as a public charity under IRS 509(a)(1) and 509(a)(2). By treating tribal governments as state governments, the bill would help charities that receive support from tribal governments obtain public charity status. The bill was referred to the Committee on Ways and Means.