January 20, 2012
Campus Based Micro-Loan Programs
I will round out my week with yet another blog about campus-based Social Innovation (or Social Entrepreneurship, or Community Empowerment, or plain old charity). Earlier this week, I mentioned my work with a Social Innovation Incubator on my college campus and the fact that student organizations were pitching their ventures to panels of older folks (of which I was one) who would decide which organizations would gain support. I did not mention that one of the organizations is involved in making micro-loans to low-income members of the surrounding community, particularly people who are homeless. Coincidentally, today the Chronicle of Higher Education reported that campus-based micro-loan programs are an increasing trend across the country. I suppose this means that our local group may be effective (there is plenty of evidence that they are) but they are not necessarily on the cutting edge of innovation.
January 19, 2012
Another Nonprofit Scandal
The Los Angeles Times and many other news outlets are reporting that Ward Connerly, a former University of California regent who led efforts to end affirmative action in California and across the country, has been caught with his hand in a nonprofit cookie jar. Connerly is a principal of the American Civil Rights Institute, a nonprofit that works to end affirmative action. According to various reports, he has been drawing a salary of $1.3 million from the Institute, far more than similar officials at similar organizations. (He says that the group reduced his pay to $850,000 after the 09-10 fiscal year.) There are dark hints of additional improper financial behavior. This would have been a relatively run-of-the-mill nonprofit scandal, perhaps good fodder for Nonprofit Law class discussions about fiduciary duties, private inurement, intermediate sanctions and the like, were it not for the juicy fact that whistle blower was none other than Jennifer Gratz, the named plaintiff in Gratz v. Bollinger, the case that struck down U. Michigan's diversity admissions plan.
State Limits on Executive Compensation?
The New York Times reports that Governor Cuomo has proposed a number of budget saving measures to address his state's fiscal crisis, including steps to improve monitoring and spending controls for nonprofit organizations that receive state funds. One proposal would limit state reimbursement for executive salaries at state-subsidized nonprofit groups to $199,000. As we all know, many hold the view that states, not the IRS, ought to be addressing executive compensation issues.
January 18, 2012
A recent Chronicle of Philanthropy story higlights problems faced by nonprofit organizations that lost their tax exempt status as a result of failing to file their Forms 990for three years in a row. The IRS's process for granting reinstatement has been cumbersome, murky, and slow.
Although the article does not say so, it seems clear that most of the organizations dropped from the list were low-budget charities that under the previous law were not required to file 990s. As we all know, many of those organizations run on a shoe-string and lack the assistance of lawyers and accountants.
My clinic is representing one such organization. They are an African-American community center whose primary function for many years has been to receive food pantry donations and distribute them to hungry community residents, mostly senior citizens. They were unaware of the new requirement and only discovered their plight when the food pantry agency informed them that they could no longer receive distributions because they had lost their tax exempt status. Last summer, they filed a new Form 1023 and paid a fee to the IRS as required, but they still have heard nothing and have had great difficulty determining the status of their application. In the meantime, people are going hungry.
More on Social Innovation and a Brief Rumination on Language
I just returned from my first pitch session at the UNC Social Innovation Incubator I wrote about yesterday. Turns out I was wrong about one thing: the Incubator is not exclusively or even primarily for projects that will become c3s. In fact, two of the three organizations that gave their pitches are more likely to form as for-profits, though their motivations are largely charitable. Over the coming days I will serve on a panel that will hear pitches from ten finalists. We will narrow the group to three organizations that will receive space and support from the Incubator.
Hearing the pitches got me ruminating on the language employed by young, campus-based idealists and those who encourage them.
When I was in college in the early 1980s, the Community Service movement was sweepingthe land. I volunteered as a coach in an urban soccer league and for a homeless shelter and a therapeutic horseback riding organization and felt I was doing my part to better the world. A bit later, Service Learning became a rage and it was no longer enough to volunteer for charitable organizations. With Service Learning, students (and professors) were encouraged to use the classroom to study the systemic causes of poverty and other social ills. The notion -- essentially correct, I still believe -- was that the service and the learning would both be improved if they were combined. Along the way, Community Empowerment became the watchword, and those who merely addressed the effects of poverty -- putting Band-aids on the problems -- were wasting their time.
For a while, in the mid-1990s, the Service Learning and Community Empowerment efforts and language were crowded out by Leadership Studies. It always struck me as a dubious notion that you could train idealistic young people to be leaders, partly by sending them out to communities in need to lead them toward a better life. I thought the best thing for the aspiringyoung leaders and the communities in need would be to teach the young ones to listen more carefully, not jockey for leadership positions. But that's just me.
In more recent years, college campuses have been guided by updated labels for the same sort of work. When I arrived at UNC, it was all about Engagement. College campuses were supposed to create symbiotic but essentially charitable relationships by engaging the communities that surrounded them. Later, similar work took place under the label of Social Enterprise. Entrepreneurship centers (and clinics) started popping up across college campuses. More recently, we began marching under the banner of Innovation, Social Innovation in particular; thus the Incubator I have begun working with.
It's mostly the same people, doing mostlythe same things, and much of it (though a diminishing percentage) happens in the charitable sector; however, the labels and the language have changed significantly over the past thirty years. Anyone want to predict the next wave?
Back to law in the next post.
January 17, 2012
The Community Development Law Clinic that I supervise recently agreed to become a partner in UNC-Chapel Hill's Social Innovation Incubator. The Incubator will be a space on campus where student groups engaged in social enterprise and social innovation can get advice, capacity-building training, and back office support for their ventures. If the ventures grow to the point that they can be sustainable charitable organizations, the Incubator will assist them with the process of forming and launching a c3 organization. My law students and I will do some of the training and much of the legal work.
The concept is appealing for several reasons. One is the simple fact that the Incubator may bring some order and reason to what heretofore have been unruly (but often effective) groups of students who have charged off the campus to do work in communities of need. Too often they launch into their community projects blithely unaware of legal problems. They conduct potentially high risk programs without insurance or waivers, they run finances through their personal bank accounts, and, as often as not, they make no plans for sustaining the organizations after they graduate. The Incubator will provide support and guidance to help them avoid some of these problems.
There is, I believe, a potential downside to launching a campus based incubator. Far too often, bright young men and women on college campuses -- thetypes who come to campus with prestigious fellowships that are supposed to groom them as future leaders -- are told that one mark of leadership is forming a nonprofit organization. It's something they all seem to want on their resumes these days. Predictably, many of the c3 organizations these "young leaders" form wither and die as soon as the young leaders graduate and move on to law school or business school. Although the Social Innovation Incubator may prepare these impressive young folks for the legal (not to mention moral) responsibilities of operating nonprofit organizations, I fear that it may also legitimize the notion that all young people of promise and ambition ought to start one.