February 26, 2008
New Study Finds That Many Americans Say Charity Overhead Costs Are Too High
A recent story in the Chronicle of Philanthropy detailed a new study issued by Ellison Research, a for-profit research group based in Phoenix, Arizona. In addition to being commissioned by clients to conduct market research, Ellison conducts its own research series on public opinions, perspectives, practices and problems. It has conducted research on the clergy, people in the church, and now charities. On February 13, 2008, Ellison released its latest study which explores public perceptions of how much money charities spend on overhead. As the Chronicle story states, the study found that "[s]ixty-two percent of the public thinks that charities spend too much money on overhead costs such as fund raising and administration." The article also contains other findings of the study but most significant is what conclusion flows from the study. The president of Ellison Research is quoted in the article as saying that, "[p]eople who believe nonprofits are spending too much on overhead will tend to make that assumption about any nonprofit they come across." He is further quoted as saying, that "[t]hose assumptions make it tough to raise money, even for charities that spend little on overhead, because people's beliefs influence their giving and people who assume charities aren't efficient are less likely to donate to new organizations."
In the comments that follow the article on the Chronicle's website, one person makes the observation that there appears to be a disconnect between the public's perception and the reality of the rising costs of doing business. The day before the Chronicle ran this article on public perception of charity spending on overhead, the Chronicle ran an article announcing that nonprofits will pay higher postal rates in May. I find this discussion particularly compelling in a time of recession when people can be expected to make fewer donations to nonprofits, and in a time when nonprofits are feeling the pressure to become more self-sufficient money-wise.
February 25, 2008
Senator Grassley Speaks Out Again on Church Ministries
The New York Times reports today that Senator Grassley, the senior republican on the Senate Finance Committee, and one known to speak out frequently on nonprofit compliance, recently spoke at Faith Baptist Bible College near Des Moines, Iowa to about 500 students. He again targeted some televangelists for what, in his opinion, are lavish lifestyles, including high pay, perks and private jets. He told the students that he sent letters to the ministries asking questions, and that he was awaiting their responses. Some ministries were interviewed for the New York Times story and counter that Grassley's questions and tone are a violation of their constitutional rights. The article quotes "Gary McCaleb, senior counsel at the Alliance Defense Fund, a religious liberty legal group," as saying, "From the get-go he's acted more like an investigator and not at all like a senator on this and that's unnerving." Mr. McCaleb is further quoted as saying that, "[Senator Grassley] has the right to get facts, but this has looked, felt and smelled like an enforcement action." See New York Times Article for full story.
Brown University Joins Others in Providing Tuition Relief to Middle Class Students
The New York Times reports today that Brown University is one of the latest private, elite universities to reduce or eliminate tuition for middle class students. The article says that Brown is "eliminating tuition for students whose parents earn less than $60,000," and substituting grants for loans for students whose parents earn less than $100,000 a year. See New York Times Article for more information.
Philanthropists Find New Ways to Use Input from the Public to Direct Giving
In a recent article in the Chronicle of Philanthropy, the winners of a contest sponsored by Steve Case, founder of AOL, and his wife, were announced. The contest "promised $50,000 grand prizes to nonprofit groups with the greatest number of donors to their cause, not the largest amount raised." As a result of the contest, "[t]he Case Foundation handed out $750,000 in awards." The article further points out that this type of competition is part of a growing philanthropy movement, which allows the public to have input in where grant maker money goes. While many applaud these efforts as open and democratic, the article suggests that others are concerned that the trend will result in less popular or more controversial charities or causes receiving less money. See the article for the full story.
February 24, 2008
New York Times Article Discusses Growing Trend of Nonprofits Opting for For-Profit Enterprises to Meet Charitable Goals
Steven Lohr reports in the New York Times today that many more philanthropists are opting to use for-profit businesses to achieve traditionally nonprofit goals. He tells the story of a former AOL executive and his wife, Mils Gilburne and Nina Zolt, who started a nonprofit with $10 million of their own money. The venture was moderately successful in that students participating in the charity's program were outscoring their peers on standardized tests. Mr. Lohr further reports that "the couple's efforts, however worthwhile, weren't sustainable." In response to the experience of the struggling, yet moderately successful charity, the couple started a for-profit business, attracting like-minded venture capitalists, and now the venture has a second chance at succeeding because it can become self-sustaining through profits and investments. In its revamped for-profit form, the former charity is working with Intel and One Laptop Per Child, a spat between these two entities was covered in an earlier January 10, 2008 posting on the Nonprofit Law Prof Blog. Below is an excerpt from the article:
To make a fresh start, Mr. Gilburne attracted like-minded angel investors, and at the end of 2006 the group bought a for-profit company, ePals Inc., to expand on the original mission and support the foundation. The ePals company has grown and now offers classroom e-mail, blogs, online literacy tools and Web-based collaborative projects on subjects like global warming and habitats.
EPals says 125,000 classrooms around the world are using at least some of its free tools, reaching 13 million students, and its ambition is to become a global “learning social network.”
National Geographic is to announce this week that it is investing in ePals, based in Herndon, Va., and will supply educational content for the ePals learning projects. Worldwide distribution should get a lift from Intel, which will soon ship its Classmate laptops, designed for students in developing nations, with the ePals icon on the screens. And ePals is also offered for use on the low-cost computers from One Laptop Per Child, a nonprofit group trying to bring the content and experience of the Internet to children in developing countries worldwide.
Mr. Lohr goes on to report about other efforts to achieve social goals in for-profit models, including microfinance enterprises based on the work of Muhammad Yunus, the microfinance pioneer and Nobel Laureate.
See New York Times Article for the full story.
Major Newspaper Confronted on How it Reports on Charities
Today, an article ran in the Washington Post wherein a veteran's charity, Paralyzed Veteran's of America (PVA) disputes an earlier story ran on the front page of the Washington Post on December 13, 2007 (See December 13, 2007 Article) about veterans' charities "shortchanging veterans." PVA believes that the earlier story created an impression that the charity was mishandling donations allegedly because too few of the donated dollars were reaching the organization's charitable activities as declared by the American Institute of Philanthropy, a watchdog group. While the charity was not directly named in the December article, an American Institute of Philanthropy report was detailed in the article. The American Institute of Philanthropy report criticized by name several veterans charities as spending too much money on fundraising and executive salaries, and too little on programming. PVA was interviewed for the December story but its name and comments were later edited out of the story. Notwithstanding, the story included a chart created by the American Institute of Philanthropy, which graded veterans charities by name on a scale from A to F. PVA was included in the chart and had received an "F." Little explanation was given in the chart or the story about how the American Institute of Philanthropy awarded the grades. There was no mention of the criteria used. The chart only mentioned that, "Letter grades were based largely on the charities' fundraising costs and the percentages of money raised that was spent on charitable activities." PVA claims that the article left the impression that the charity was poorly run, and that an actual donor withdrew a $500,000 donation because of it. In a letter written to the Washington Post in response to the December article, PVA countered that it met "all 20 criteria that the Better Business Bureau Wise Giving Alliance establishes for charities."
The key point of this article is the charity's challenge to coverage of this story by the Washington Post. Below is an excerpt highlighting the Washington Post's response:
The PVA has two valid points on Post coverage. While the story didn't mention the organization, it was unfair to name it in the chart with only vague detail on how the grades were determined. PVA officials complained that while Rucker talked to them about the report, their comments were not included in the story. The comments were taken out in the editing process, which turned out to be a problem because the chart still mentioned the PVA.
What is needed is a much broader look at veterans' charities and their fundraising and programs -- as well as the rivalry between charity watchdogs. Maryland editor Phyllis Jordan, who supervises Rucker, said, "This is not the last story we'll write about the veterans charities. We plan to continue covering this topic fully, as well as other important stories in philanthropy." Rucker, who was covering that sector, is on temporary duty at the Maryland General Assembly, but Jordan said he is continuing to monitor the beat.
That's good, because nonprofit organizations deserve more coverage. They play a huge role in this country and the region in helping (and sometimes not) people and influencing public policy.
For the complete story, please see the Washington Post Article. The article includes key links to reports and organizations mentioned.
FASB issues new Staff Position on Accounting for Endowment Funds
FASB issued a proposed Staff Position on February 22. The proposed FSP, FSP FAS 117-a, "would provide guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act . . . . This proposed FSP also would improve disclosure about an organization's endowment (both donor-restricted and board-designated funds), whether or not the organization is subject to UPMIFA."
Comments on the proposed FSP are due by April 18, 2008.
Civil Rights Icon and Leader of Nonprofit Johnnie Carr, 97, Dies
The Washington Post reports that civil rights icon, Johnnie Carr, a childhood friend of Rosa Parks, died on Friday, February 22, at the age of 97. The article reports that she "kept a busy schedule of civil rights activism up to her final days." The article further reports that "Carr succeeded the Rev. Martin Luther King, Jr. as president of the Montgomery Improvement Association in 1967, a post she held at her death." Here is a brief excerpt of the article:
As the Improvement Association's president, Carr helped lead several initiatives to improve race relations and conditions for blacks. She was involved in a lawsuit to desegregate Montgomery schools, with her then 13-year old son, Arlam, the named plaintiff. . . . [Quoting Julian Bond, a civil rights icon in his own right, the article provides that,] there were many people who spoke who were much better known . . . but she carried the day.' . . . [Bond further stated that,] she was remarkable to have had such a long career and to have held concern for justice in the forefront for all this time,' he said. 'It's a great tragedy that she's gone, and those of us who knew her are blessed to have that experience.'
The Montgomery Improvement Association is a 501(c)(3) public charity. It was founded December 5, 1995 by the Rev. Martin Luther King, Jr.