Friday, January 29, 2010

Liquidity and Inflation an Increasing Concern for Nonprofit Investment Managers, Study Finds

SEI Investments Management Corp., a for-profit investment company, recently released the results of a survey of over 100 executives overseeing asset pools ranging from $25 million to more than a $1 billion.  Among the survey's findings was that more than 95 percent of the respondents said maintaining liquidity and ensuring inflation protection are now a priority.  The survey also found that most of the respondents continue to invest significantly in alternative investments, although given that a major portion of SEI's business it to provide avenues to such investments these findings should be scrutinized carefully.


January 29, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Canada: Class Action by 2,825 Donors Certified

The Carters Professional Corporation, a Canadian law firm, reports that the Ontario Superior Court of Justice has certified a class action brought on behalf of 2,825 individuals who participate in the Banyan Tree Foundation Gift Program.  We previously blogged about the Canada Revenue Agency's decision to disallow over $200 million in donations to the Foundation.  According to the Carters' report, the plaintiffs in the current lawsuit are asserting breach of contract and negligence claims against both the promotes of the program and a law firm that provided legal opinions in support of the program.  According to a letter on the Foundation's website, the Minister of Revenue revoked the Foundation's charitable status on September 19, 2008.


January 29, 2010 in International | Permalink | Comments (0) | TrackBack (0)

AGs in Action: Former Officials of Connecticut Medical Charity and Denver Human Society Targeted

The Hartford Courant reports that Connecticut Attorney General Richard Blumenthal has filed suit against the former executive director of Remedy, Inc., a New Haven medical charity, accusing him of using approximately $100,000 in donations for his personal expenses from August 2007 through May 2008.  The alleged expenses include a laundry list of living expenses, including automobile costs, grocery purchases, and travel.  The charity promotes recovering unused medical supplies for use globally.  The AG's press release states he is seeking restitution, penalties, and an order blocking the former executive director from further violations.  It also notes the investigation began after a complaint from the organization's founder, who had discovered the alleged inappropriate expenses.

Separately, the Denver Post reports that Colorado Attorney General John Suthers has settled a civil lawsuit against former officials of the Colorado Humane Society.  As part of that settlement the former executive director and her husband have been barred from operating or managing charitable organizations for a decade, and from owning and operating any business covered by the Colorado Pet Animal Care Facilities Act for the next five years.  The executive director's daughter, who served as the charity's director of operations, is barred from both operating a charity for the next two years and operating any business covered by the Pet Animal Care Facilities Act for one year.  According to the AG's press release, the original complaint alleged numerous violations of Colorado law, including of the Charitable Solicitations Act, the Consumer Protection Act, and the Revised Non-Profit Corporations Act.  In the consent decree relating to the settlement, none of the individuals involved admitted any liability or any of the factual allegations in the complaint.  In the wake of the suit, a court agreed to allow the sale the Colorado Humane Society's assets, and its responsibilities have now been assumed by the new Humane Society of the South Platte Valley.  Documents relating to the lawsuit and its resolution can be found at the website of the custodian for the Colorado Humane Society.  According to a press report, the investigation began after a local TV news program broke a story about a dozen dead animals having been discarded in a dumpster.


January 29, 2010 in In the News, State – Executive | Permalink | Comments (0) | TrackBack (0)

Thursday, January 28, 2010

Louisiana Gets Large Settlement for Charity Hospital

The federal arbitration panel ruled on the dispute over how much FEMA should pay Louisiana for damage incurred by Charity Hospital during Hurricane Katrina.  As we posted on Jan. 11, Louisiana requested $492 million and FEMA was willing to settle for $150 million.  The arbitration panel ruled that Louisiana would receive $474.9 million, almost the full amount it requested.

Louisiana intends to use the money to build a new medical complex to be owned by Louisiana State University System.  A New York Times article about the arbitration ruling suggests that the fight over whether to rebuild Charity Hospital or build the new center is not yet over.  Jack Davis, the president of Smart Growth for Louisiana, said the state should use the money to rebuild Charity Hospital.  He noted pending lawsuits that challenge the new location on environmental grounds, and also said that Charity could be rebuilt for less money than the cost of the new medical complex.  It's an ongoing controversy, but for now the arbitration ruling is good news for the state of Louisiana and for New Orleans.


January 28, 2010 in In the News | Permalink | Comments (0) | TrackBack (0)

NACUBO Reports Endowments Down 18.7 Percent in FY2009

This morning the National Association of College and University Business Officers released its 2009 NACUBO-Commonfund Study of Endowments.  While a free copy of the study is not available, the related NACUBO press release says that on average college and university endowments shrank by 18.7 percent during the July 1, 2008 to June 30, 2009 fiscal year.  Over the three years ending on June 30, 2009 the average annual return was -2.5 percent, over five years it was 2.7 percent, and over ten years it was 4.0 percent.  Publicly released tables from the report show the the schools with the largest endowments also appear to have suffered the most, with Harvard losing 29.8 percent (down to $25.7 billion), Yale losing 28.6 percent (down to $16.3 billion), and Stanford losing 26.7% (down to $12.6 billion).  They also show that when broken down by endowment size, only schools with endowments over $1 billion had a 10-year average annual return of more than 5 percent.  The tables also show that average annual endowment spending was 4.4 percent in FY2009.

Despite these dismal returns, Senator Chuck Grassley (R-Iowa) wasted no time in issuing a press release calling for all asset-accumulating charities to be subject to a consistent payout rate requirement.  While he stopped short of saying that the requirement should be equal to the existing 5 percent private foundation payout rate, he criticized colleges and universities for the fact that their average payout rates rarely topped 5 percent during the past decade even in years when they enjoyed double-digit returns.  He also urged them not to penalize students and parents for the negative results of risky investments.

For additional coverage, see:

Boston Globe:  Harvard Endowment Leads Others Down

Chronicle of Higher Education:  Average Return on Endowment Investments is Worst in Almost 40 Years

NY Times:  Investment Losses Cause Steep Dip in University Endowments, Study Finds

USA Today:  College Endowments Lose 18.7% on Returns

Wall Street Journal:  College Endowments Plunged in 2009


January 28, 2010 in Federal – Legislative, In the News, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 27, 2010

Hopt: Some (Nonprofit) Corporate Governance Thoughts from Europe

Klaus J. Hopt (Max Planck Institute of Foreign Private and Private International Law; European Corporate Governance Institute) has posted The Board of Nonprofit Organizations: Some Corporate Governance Thoughts from Europe on SSRN.  Here is the abstract:

Nonprofit organizations have been called the 'neglected stepchildren of modern organization law.' Deficits of control in nonprofit organizations are widespread. This is due to the absence of shareholders who could monitor and of the discipline by takeover markets. This article focuses on the board of nonprofit organizations as the center of nonprofit governance and tries to see what an be learned from the corporate governance discussion. The differences between the United States and Europe as to the board of nonprofit organizations is discussed at the outset. Then the organization and functioning of the board of nonprofit organizations and board responsibility are analyzed. Key problems of organization and functioning are the board structure (one-tier/two-tier), composition and size, committees, remuneration and audit. As to responsibility the duties of the board and its liability must be distinguished. At the end much can be learned from the corporate governance movement, but everything depends on enforcement, legal or non-legal.


January 27, 2010 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Urban Institute Center on Nonprofits & Philanthropy Recent Reports

The Urban Institute's Center on Nonprofits & Philanthropy recently made available the following research reports:

  • Elizabeth T. Boris, Joseph J. Cordes, Mauricio Soto, Eric Toder.  An Analysis of Potential Tax Incentives to Increase Charitable Giving in Puerto Rico:  Improved incentives for private charitable giving would strengthen nonprofit organizations in Puerto Rico. Puerto Rico’s income tax allows itemizers to deduct charitable contributions, but with limits. Taxpayers may choose between a 100 percent deduction for contributions over 3 percent of adjusted gross income (AGI) or a 33 percent deduction for contributions with no floor. Deductions may not exceed 15 percent of AGI. Removing the 15 percent ceiling would be a relatively cost effective way of encouraging more giving. Reducing the 3 percent floor, though generating less additional giving per dollar of revenue loss, would encourage broader participation.  (A policy brief summarizing the report is also available.)
  • Erwin de Leon, Matthew Maronick, Carol J. De Vita, Elizabeth T. Boris, Community-Based Organizations and Immigrant Integration in the Washington, D.C., Metropolitan Area:  This study examines immigrant integration through the lens of community-based organizations. Based on interviews with nonprofit leaders and an analysis of data from the National Center for Charitable Statistics, the study found that immigrant-serving nonprofits provide a wide range of programs and services to foreign-born communities which promote the social and political mobility of newcomers. Findings also suggest a potential spatial mismatch between immigrant-serving organizations and the people they serve. The organizations are concentrated in the metropolitan area while immigrant populations are growing in the outer suburbs. Moreover, different political and administrative structures and policies affect the ability of these nonprofits to serve their constituents.

The Center also makes available a more complete list of research reports and related publications.



January 27, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Nonprofit & Voluntary Sector Quarterly February Issue

The Nonprofit and Voluntary Sector Quarterly's February 2010 Issue is now available.  Here is the table of contents:

  • Donna Baines,
  • JoAnn Carmin and Petr Jehlicka,  
  • Beth Gazley,
  • Catherine Liston-Heyes and Gordon Liu,
  • Paul Dunn,
  • Hans-Gerd Ridder and Alina McCandless,
  • Hoi Ok Jeong,
  • Hiromi Taniguchi,
  • F. Ellen Netting,
  • Russell A. Cargo,

January 27, 2010 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 26, 2010

The World's Biggest Charity . . . Owns IKEA?

The Economist reports that the Stichting Ingka Foundation, a Dutch non-profit-making entity, owns Ingka Holding, which is the parent for all IKEA companies including those that operate 207 of the 235 worldwide IKEA stores.  While the exact value of Ingka Holding is not known, the article estimates it is approximately $36 billion - or almost $10 billion more than the value of the Bill and Melinda Gates Foundation's assets.  The article also compares Stichting Ingka Foundation to the Gates Foundation in a less flattering way, noting the former's narrow focus on "innovation in the field of architectural and interior design" and lack of transparency regarding its charitable spending, which is done through another Dutch foundation, the Stichting IKEA Foundation.  The article found, however, that some funds do apparently flow in a less charitable direction, as the IKEA trademark and concept are owned by a separate, for-profit company that appears to benefit unidentified private parties through a variety of channels to the tune of more than $1 billion annually.  The likely beneficiaries are members of the Kamprad family (Ingvar Kamprad founded IKEA), who also control the Foundation.  The primary effects of this web of arrangements appear to be secrecy, a relatively small tax bill on the profits that find their way to the for-profit company and another, related for-profit company, and takeover protection, while maintaining family control of IKEA and most of its profits.

For additional discussion, see the Tax Prof blog posting on this story and the links provided therein.


January 26, 2010 in In the News | Permalink | Comments (0) | TrackBack (0)

Congressional Research Service Highlights Concerns About Tax-Exempt Organizations

The Congressional Research Service recently issued a statement (available through Tax Analysts; subscription required) listing areas of congressional concern relating to tax-exempt organizations and charitable giving.  These areas include:

  • Increasing transparency, accountability, and tax compliance, both generally and with respect to particular types of organizations such as tax-exempt hospitals.
  • Efficiently encouraging charitable contributions and ensuring they are used for appropriate purposes.
  • Possibly increasing limitations on or disclosure of political campaign activities, as well as the recent church challenges to the prohibition on such activities by section 501(c)(3) organizations.

The statement also lists the following CRS personnel as "Issue Team Members" for these subjects: Erika Lunder (Coordinator), Donald J. Marples, Nonna A. Noto, John R. Luckey, Jane G. Gravelle, L. Paige Whitaker, Molly F. Sherlock, Edward C. Liu, Steven Maguire, and Jennifer Teefy.


January 26, 2010 in Federal – Legislative | Permalink | Comments (0) | TrackBack (0)

Article: The Effects of Ownership and Compensation Practices on Charitable Activities

Leslie Eldenburg, Fabio B. Gaertner, and Theodore H. Goodman (all from the University of Arizona) have posted The Effects of Ownership and Compensation Practices on Charitable Activitieson SSRN.  The abstract provides:

We study the association between profit-based compensation and the provision of charity care across different hospital ownership types. Recent research finds few differences in profit-based incentives between for-profit and nonprofit hospitals. Because charity care reduces profits, profit-based incentives could lead nonprofit managers to sacrifice charity care to increase profits. While this emphasis of profits over charitable activities is expected within profit maximizing hospitals, it is not clear how profit-based incentives affect the charitable activities of nonprofit hospitals. We find a negative and significant association between charity care and our proxy for profit-based incentives in for-profit hospitals, a positive and significant association in nonprofit hospitals, and no significant association in government hospitals. Our results suggest that profit-based management compensation does not lead to reductions in charity care levels within nonprofit hospitals.


January 26, 2010 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Monday, January 25, 2010

Haiti Update: Congress and the IRS Help Charities Help Haiti

Congress passed, and the President has signed, the bill we mentioned last week to permit individuals and corporations that make cash contributions now (before March 1st) to help victims of Haiti's earthquake to deduct those contributions in 2009 (that is, on the return due by April 15th of this year) instead of in 2010.  H.R. 4462 also provides that telephone bill documentation of text message donations is deemed sufficient recordkeeping for deduction purposes.  The Joint Committee on Taxation published a Technical Explanation of the bill.  In an apparent example of courtesy to former Presidents, the White House blog entry on the bill also identifies the Clinton Bush Haiti Fund as one way to contribute.

At the same time, the IRS announced that the Haiti earthquake is a qualified disaster, which means, among other tax consequences, that employer-sponsored private foundations may make qualified disaster relief payments to employees affected by the earthquake.  The official IRS notice details the definition for such payments.


January 25, 2010 in Federal – Executive, Federal – Legislative | Permalink | Comments (0) | TrackBack (0)

Symposium on L3Cs

Although I am interested in the subject, it escaped my attention until recently that Vermont Law School will be hosting its 10th Annual Law Review Symposium on the topic of Corporate Creativity: Vermont's L3C and Other Forms of Social Entrepreneurship, on February 18 and 19, 2010.  The symposium includes a power lineup of nonprofit profs including Dana Brakman Reiser from Brooklyn, Robert Katz from Indiana, Richard Schmalbeck from Duke and Betsy Schmidt from Vermont.  Robert Lang, a promoter of the L3C concept whom I have blogged about in this forum, will also be speaking.

Details on the event can be found here.


January 25, 2010 | Permalink | Comments (0) | TrackBack (0)