Wednesday, March 4, 2015

Donations to LA Mayor’s Charity Present Policy Question

The Los Angeles Times is running a piece that calls into question the creation and use of charitable nonprofits by political leaders to raise money funding activities that accomplish the leaders’ agendas.  The focus of the article is the charity established by Los Angeles Mayor Eric Garcetti, the Mayor’s Fund for Los Angeles.  There is no allegation that the fund is intervening in political campaigns or otherwise unlawfully influencing the political process.  The concern is that big donors to the fund can obtain influence by supporting the Mayor’s pet projects.  The story explains:

The contribution is one of dozens the Mayor's Fund has received, from companies with a stake in City Hall decisions and from charitable foundations, according to records reviewed by The Times. Modeled on similar nonprofits in New York and other cities, the fund provides a financial boost for civic programs — as diverse as environmental initiatives and summer jobs for thousands of inner-city kids — that might otherwise fall victim to city belt-tightening.

 

But the nonprofit, which took in about $5.2 million between its formation in June and last month, can also offer a discreet destination for special-interest money that is not subject to campaign finance restrictions. City law caps contributions by individuals or businesses at $1,300 per election for mayoral candidates. By contrast, the average donation to the Mayor's Fund has been $111,000.

According to the Times piece, “Garcetti's fund has benefited from donations of as much as $1 million from prominent charities as well as manufacturing, engineering, telecommunications, software and financial firms, or foundations linked to those companies.”  The Times also reports that “some donors to the fund said they had enjoyed one-on-one meetings with the mayor and dinner receptions at his official residence.”  The mayor, for his part, is reported to have insisted that “he keeps his distance from the organization's operations and that donors are dealt with by the nonprofit's staff.”

 

JRB

March 4, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Governance Reforms of the Bernie Mac Foundation

The Chicago Tribune reports that the Bernie Mac Foundation (“BMF”) has adopted numerous reforms to improve its governance following an audit by the Illinois Attorney General prompted by a journalistic probe by the Tribune. The need for change is perhaps best captured by the following fact reported by the Tribune: Only $152,000 of $900,000 worth of the BMF’s expenditures from 2009 to 2013 “went to charitable programs.”

The late comedian Bernie Mac created the BMF to combat sarcoidosis, a disease that afflicted Mac. After his death, the BMF’s board at one point reportedly dwindled to three people consisting of two family members and a long-time associate of Mac.  The BMF received several hundred thousand dollars of charitable contributions after Mac’s death, but problems soon surfaced.  According to the story, much of the donated money “ended up going to salaries and contracts that benefited board members, and the foundation fell far short of recognized benchmarks for charitable spending.” 

But all of that now appears to have changed.  The BMF is reported to have increased its board membership to eight people, giving the board “a range of community leaders and professionals.” The Tribune further reports:

[T]he Bernie Mac Foundation's charitable spending is expected to increase this year.

 

The organization also will stop contracting with two companies controlled by Mac's longtime associate, board Treasurer Edward Williams, according to new board member Manotti L. Jenkins, who is serving as a spokesman for the group. Several experts told the Tribune that the sums paid out to one of Williams' companies seemed large for the financial consulting and investment management services it was listed as providing.

In addition, says the piece, the BMF’s bylaws now prohibit board members from receiving salaries from the charity and from voting on transactions in which they are financially interested. Other reforms include (1) formalizing the BMF’s support of its primary charitable beneficiary, the Bernie Mac Sarcoidosis Translational Advanced Research (STAR) Center, established at the University of Illinois Hospital & Health Sciences System, and (2) requiring modest participation in fundraising by board members.

 

JRB

March 4, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 3, 2015

Issues Abound in For-Profit College Conversions

Readers of this blog are likely familiar with issues surrounding nonprofit hospital conversions.  It appears that we may be witnessing a trend of conversions in the opposite direction (i.e., from for-profit to nonprofit form) in another field – education.  In Some Owners of Private Colleges Turn a Tidy Profit by Going Nonprofit, the New York Times reports that recent governmental regulations and extensive negative publicity have led some for-profit colleges to opt for a solution quite distinct from going out of business.  These schools have chosen to convert to nonprofit corporations.  Apparently to illustrate the risk that for-profit culture may (or at least may be perceived to) carry through to the newly created nonprofit entities, the Times presents the case of Florida’s Keiser University.  Says the Times:

In 2011, the Keiser family, the school’s founder and owner, sold it to a tiny nonprofit called Everglades College, which it had created. As president of Everglades, Arthur Keiser earned a salary of nearly $856,000, more than his counterpart at Harvard, according to the college’s 2012 tax return, the most recent publicly available. He is receiving payments and interest on more than $321 million he lent the tax-­exempt nonprofit so that it could buy his university. And he has an ownership interest in properties that the college pays $14.6 million in rent for, as well as a stake in the charter airplane that the college’s managers fly in and the Holiday Inn where its employees stay, the returns show.  A family member also has an ownership interest in the computer company the college uses. 

The piece quotes fellow blogger Lloyd Mayer of the law school at the University of Notre Dame as observing the concern that newly formed nonprofit schools “may be providing an impermissible private benefit to their former owners.”  

Dr. Arthur Keiser reportedly has dismissed the notion that the conversion of Keiser University raises concerns by stating that transitioning to the nonprofit form was long contemplated and by observing, “We disclosed everything. There’s nothing wrong with it.”  However, not all appear convinced.  According to the Times, former Education Department official Robert Shireman “filed a complaint with the Internal Revenue Service accusing Mr. Keiser and three board members of violating tax regulations and using the nonprofit ‘for personal gain.’”  Keiser is reported to have responded to these allegations by stating that “all the financial arrangements ‘are at fair market value terms and conditions,’ and that the college adheres to ‘generally accepted auditing and accounting principles.’” Further, Dr. Keiser points out that the valuation of the college when sold was supported by “two independent auditors” and that he donated much of the value to the new school. 

The Times reports that the structure of the Keiser University conversion is not atypical.  Others are reported to have financed the purchase of for-­profit colleges through a combination of loans and charitable contributions “to a closely affiliated nonprofit.” According to the story, the newly formed tax­-exempt schools also may lease space from the original owners at hefty rents.  The piece discusses conversions of Stevens-Henager, CollegeAmerica, California College (all owned by Carl B. Barney), Remington College and Herzing University, and a planned conversion of Grand Canyon University.

 

JRB

 

March 3, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Monday, March 2, 2015

Northeastern University Pays Portion of Requested PILOT

According to a recent article in the Boston Globe, “Northeastern University recently retroactively paid the city of Boston $886,000 to help cover the costs of municipal services after the school faced criticism for failing to give anything this past fiscal year.”  The Globe further reports that the city had requested $2.5 million, and that the letter accompanying the lesser payment states that it “should not be construed as support or commitment to the PILOT formula, so much as it reflects our willingness to work with your administration to arrive at a financial number that properly reflects Northeastern’s relationships with the city.”

The story sets forth additional facts that provide context to the Boston PILOT program:

 

Fifteen of the 19 colleges [owning highly appraised property in Boston], including the city’s wealthiest universities, did not pay the amounts requested by the city during fiscal 2014.

 

The amounts the city requests are based on the total assessed value of tax-exempt properties owned by the nonprofits. Northeastern has been criticized sharply for failing to pay what the city requests despite its large size. The university owns about $1.3 billion worth of tax-exempt property in Boston, which is the third most of any college in the city.

 

Boston University owns $2 billion worth of tax-exempt property and last fiscal year paid the city about $6 million, about $500,000 less than the city requested. Harvard, while based in Cambridge, owns about $1.5 billion worth of tax-exempt property in Boston and paid the city $2.2 million, while the city requested about $4.3 million.

Northeastern, reports the Globe, already pays the city more than $2 million annually in property taxes, and has stated that it not only provides annual community benefits exceeding $28 million, but also has committed millions to improve a nearby city park.

 

JRB

March 2, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Proposed Legislation to Expand In-Home Elder Care in Massachusetts

The Boston Globe reports that Massachusetts lawmakers are hearing many proposals for expanding services that the commonwealth provides the elderly who need more help to enable them to live at home.  A coalition of nonprofit entities are reportedly supporting various legislative initiatives that, proponents say, ultimately will save taxpayers money because they will reduce the time that older residents spend at expensive institutions, such as hospitals and nursing homes.  Proposals include providing older people of moderate means assistance with grocery shopping and taking medicine, as well as teaching family members how to perform in-home nursing tasks.  Laws governing the latter, says the story, have already been enacted in Oklahoma and New Jersey.

 

With the expanding costs of healthcare and the aging population of baby boomers (who must think not only of their current and future medical care needs, but also of their parents’ present health care requirements), a proliferation of similar proposals across the country would not be surprising.

 

JRB

March 2, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Friday, February 6, 2015

Most Recent Nonprofit Advocacy Matters

The most recent edition of Nonprofit Advocacy Matters, published by the National Council of Nonprofits, contains a number of entries that may interest readers.  Headlines include the following:

 

Federal Budget 101 (discussing the significance of the President’s Budget, the Budget Resolution prepared by the House and Senate Budget Committees, the Appropriations process and the process of Budget Reconciliation)

 

Got Influence? (opining that “nonprofits from eleven states have the inside track on delivering the message on how tax exemptions, giving incentives, and regulations” affect the charitable sector because leadership assignments in the Senate Finance Committee “will affect the policy debates and legislation for the next two years”)

 

Maine Governor Proposes Taxes on Nonprofits (reporting that the budget plan of the Governor of Maine “would remove the full exemption from property taxation on properties owned by nonprofit organizations with an assessed value in excess of $500,000, and reduce the exemption to 50 percent on the portion of the value in excess of $500,000”)

 

Court Orders Massachusetts to Update Rates Paid to Nonprofits (reporting that a state judge has ordered the Massachusetts Secretary of the Executive Office of Health and Human Services to “update the rates paid to nonprofits for human services provided on behalf of the Commonwealth”)

 

Nonprofit Independence Challenged, Preserved in the Northeast (citing recent examples of how “public and government officials often misunderstand the relationship between governments and charitable nonprofits and mistakenly presume that rules and mandates by government ought to automatically apply to these independent organizations”) 

 

Taxes, Fees, PILOTs (noting developments in Alaska and Pennsylvania)

 

New State Offices for Faith-Based Nonprofits (discussing the creation in New York of an Officeto assist and leverage community and faith-based organizations in the delivery of education, health, workforce training, food programs, and social services to communities, particularly those most in need” and proposed legislation in Pennsylvania to establish an Office “that would do much of the same work contemplated for the new New York Office”)

  

JRB

February 6, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Thursday, February 5, 2015

NY Governor Cuomo Proposes Tax Credit for Gifts to Educational Nonprofits

As reported in The Buffalo News, New York Governor Andrew Cuomo is proposing that those who donate to organizations “that give scholarships to low- and middle-income families to attend private schools would get a tax break,” as would those who donate “to education foundations and other groups that help public schools.”  The form of the proposed tax incentive is reported to be a state income tax credit that “would take up to 75 cents off the tax bill for every dollar donated, up to a $1 million.”

Enacting the proposal into law may require some political maneuvering.  The story continues:

In Albany, debate over the tax credit has been framed as a fight between private school supporters and public school advocates. But Cuomo last month linked it to another education proposal, the DREAM Act, short for Development, Relief and Education for Alien Minors, which would let children of undocumented immigrants get college tuition assistance.

 

Cuomo told lawmakers last month that he would only approve the two together.

The article states that opponents fear the proposal will lead to less support for public schools, whereas others see benefits to public education in that donors to charities “that raise money for school improvements or academic programs at public schools would be eligible for the tax credit under Cuomo’s plans.” 

 

JRB

February 5, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 4, 2015

Tax and Spending Proposals Affecting Charities and Charitable Gifts

The Chronicle of Philanthropy is running three stories discussing certain of the provisions affecting the charitable sector in President Obama’s proposed budget, one of which stories also notes efforts in the House of Representatives to make permanent several temporary charitable giving incentives. 

 

One article observes the “mix of praise and criticism for a nearly $4-trillion budget package for fiscal year 2016 that was formally released by the White House on Monday.”  The sense of the article is that the nonprofit sector is (unsurprisingly) embracing many of the President’s funding initiatives, while (also unsurprisingly) expressing some disappointment with his perennial proposal to limit the value of the charitable contributions deduction to higher income taxpayers.  One of the fairest assessments comes from a YMCA leader:

              

Regardless of what is ultimately passed by Congress, the proposal is a good reflection of the President’s priorities, said Neal Denton, senior vice president and chief government affairs officer for the YMCA of the USA. “We’re especially happy to see his focus on ensuring opportunities for children and families to learn, grow, and thrive,” he said, noting line items that would increase access to child care and early education, among other things.

  

Key excerpts from another article, which focuses on tax matters:

 

Part of a massive $4-trillion proposal, President Obama’s plan would limit the value of all itemized deductions, including one for charitable gifts, to 28 percent for individuals who earn more than $200,000 and couples who earn more than $250,000. …

 

The budget plan follows a tax proposal President Obama made in January that would raise the capital-gains tax rate and close what the White House called the "trust-fund loophole," which limits heirs’ exposure to gains in the value of the assets they inherit. The president’s plan would subject appreciated value to the capital-gains tax but would provide an exemption if the assets are donated to charity.

 

Joanne Florino, senior vice president for public policy at the Philanthropy Roundtable, an organization that represents donors, said it was curious that President Obama exempted charitable gifts on those inheritances, yet is still pushing to limit the deduction over all. …

 

Meanwhile, House Republicans are pushing to make a set of temporary tax breaks for charitable giving permanent. The tax benefits, for gifts of land for conservation purposes, gifts of food to food banks and other charities, and gifts made by retirees straight from individual retirement accounts, are part of a slate of about 50 temporary tax provisions called "extenders" that are usually renewed each year.

 

And yet another piece explains why the President’s proposal to raise the estate tax rate – while simultaneously not subjecting appreciation on assets to federal income taxation when the assets are donated to charitable entities – is a significant tax incentive for charitable giving:

 

An estate-tax increase would provide a huge benefit to charities because donations to these groups would become the only easy way to legally avoid capital-gains taxes, according to Len Burman, director of the Tax Policy Center.
 
Rather than pass assets down to heirs and incur a higher tax levy, more wealthy tax filers will chose to bequeath their assets to charities upon their death, Mr. Burman said.
 
“The president has locked up the philanthropic sector vote,” he wrote in TaxVox, a blog maintained by the center. “Except, of course, he isn’t running again.”

 

For an opinion-free survey of the President’s tax-related proposals affecting charities, see this previous entry on the blog.

 

JRB

February 4, 2015 in Current Affairs | Permalink | Comments (1) | TrackBack (0)

Monday, February 2, 2015

BC Center on Wealth and Philanthropy Expected to Close

The Boston Globe reports that Boston College’s Center on Wealth and Philanthropy, established in 1970, will cease operating when its leaders step down.  The Center’s director, Paul Schervish, a former Jesuit priest, and associate director John Havens, reportedly plan to retire soon, perhaps by this summer (barring the Center’s receipt of an unforeseen grant that would prolong their interest in operating the Center).  The Center’s work apparently has been tied closely to the unique, complementary backgrounds and personalities of its leaders: 

[B]oth [leaders] say their distinctive blend of expertise — Schervish’s background is in literature, sociology, and theology, while Havens’s training is in economics, mathematics, and physics — has created an academic partnership that would be difficult to replicate.

“We have a special chemistry, and that’s led to a unique working relationship,” Havens said.

The story features an interesting discussion on misconceptions about the relationship between estate taxation and philanthropy:

In 2006, the center published a paper refuting the long-held belief that the main reason wealthy people leave money to charity is to avoid estate taxes, and that charitable bequests would plummet if estate taxes were eliminated.

On the contrary, Schervish and Havens found, the wealthiest Americans tend to give to charity for more altruistic reasons once they reach financial security.

“We always focused on spiritual context,” Schervish said, “and our statistical work was always the foundation for a moral question: How can you use your wealth for deeper purposes when you no longer need to achieve a higher standard of living?”

The Globe reports that Schervish was recently appointed a visiting research fellow at Duke University and intends to serve on the faculty of Boston College until the end of the year.

 

JRB

February 2, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Monday, January 12, 2015

More on the New Nonprofit Hospital Final Regs

As reported here on your faithful Nonprofit Law Prof Blog by Roger Colinvaux, the IRS issued final regulations under Section 501(r) on the requirements for nonprofit hospitals at the very end of last year.

Over the weekend, The New York Times did a report on these regulations, focusing on efforts to stop "aggressive tactics to collect payments from low-income patients."   To me, the most interesting part of the article isn't the summary of the regs with regard to collections - it's the quote (and accompanying picture) from Senator Grassley:  "Nonprofit hospitals and for-profit hospitals have often been indistinguishable... The rules make clear that tax-exempt hospitals have to earn their tax exemption."

It seems to me that Senator Grassley has been some what low key on charitable issues in the past few years - I'm guessing we will be hearing more from him with the resurgence of Republicans in Congress.

For other coverage of the final regulations:

- The Chronicle of Philanthropy

-briefly, at Independent Sector

-PriceWaterhouse Coopers

I'm happy to add any other links that people have found useful.

 

EWW

 

January 12, 2015 in Current Affairs, Federal – Executive, In the News | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 6, 2015

NonProfit Times: 5 Fundraising Predictions for 2015

With the New Year just six days old, The Nonprofit Times has published its top five fundraising trends for 2015: conversion optimization, or improving donation flow to raise more money; the ability to engage with Millennials; donor retention and treating all donors as if they are major donors; online fundraising and mobile; and the ability to share stories in a very visual way.

The Times quotes Rich Dietz, senior product manager for digital fundraising for Abila Software in Austin, Texas, as saying that “2015 will be a big year and a transitional year for the nonprofit sector as business-minded tactics slowly gain ground and organizations think about increased growth versus simply being sustainable.  Engagement strategies will reach new levels as Millennials continue to emerge in importance and nonprofits think about the best way to interact with their supporters.” 

Dietz's predictions for 2015 fundraising include:

  • Conversion Optimization: Organizations will begin to think about how to better convert existing website visitors versus simply attracting new visitors. This is a business practice that many small businesses have adopted recently and will work well for nonprofits. Conversion optimization revolves around measuring, testing and optimizing the donation flow to raise more money.
  • Millennial Engagement: According to The Brookings Institute, Millennials will make up 75 percent of the workforce by 2025. As Millennials enter the workforce and have money to spend, organizations will need to put strategies in place to best engage this demographic. Many follow a different path to becoming a donor than is traditionally done and nonprofits will need to adapt to these differences.
  • Donor Loyalty and Lifetime Value: Tracking donor engagement will be crucial. Organizations will spend more time analyzing characteristics and behaviors of all of their constituents — not just major donors — to better understand what drives their giving behavior. By tracking donor engagement, organizations will be able to further segment their appeals, personalize their outreach to donors, significantly increase donor loyalty, improve lifetime value, and treat all donors like major donors.
  • Online and Mobile: Online and mobile have played an increasingly key role for organizations the past few years, and that will continue in 2015. Social will play a key role in the “attention economy,” and responsive design will be necessary to allow supporters to access an organization’s website at any time from any device. 2014 was the tipping point for more web traffic coming from mobile devices than desktop computers. According to Pew Research Center, more than 90 percent of all Americans own a cell phone.
  • Storytelling Becomes Visual: Creating a narrative and sharing a story has always been important for nonprofits to successfully engage donors, but doing so in a visual way is becoming essential. Organizations will have to find creative and innovative ways to engage supporters in a world full of distractions, and visual components are key. Web posts with visuals drive up to 180 percent more engagement and research indicates people process visuals 60,000 times faster than text.

 

Vaughn E. James

  

January 6, 2015 in Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)

Friday, December 19, 2014

On the Road to Nonprofit Collaboration

        Nonprofits today are turning to creative collaboration to accomplish their goals. For-profits have long utilized various forms of collaboration to capture market share. With a foray into collaboration, nonprofits now must determine the extent to which collaboration will be legal versus non-legal. The Stanford Social Innovation Review recently featured an article entitled “Collaboration-palooza” that shows the four main types of collaboration nonprofits are using and where they fall along the spectrum of legal forms. The article also deals with the impediments to collaboration. Specifically, the article details the following three:

        “Along with strong momentum across the collaboration spectrum, we found three inconsistencies between funders and nonprofit leaders that are creating barriers to collaboration done right.

        1. Struggling to find philanthropic support A significant barrier is nonprofit leaders’ perceptions of low philanthropic support across the collaboration spectrum. Fewer than 20 percent of nonprofit leaders said they received support from their funders during the process, and more than 50 percent reported no support whatsoever for any form of collaboration. Leaders pointed to especially low levels of funder backing for sharing support functions, which are usually intended to lower operating costs and free up funds to expand programs. This foots with survey data from Grantmakers for Effective Organizations 2014 report Is Grantmaking Getting Smarter, which found that 53 percent of funders never or rarely funded collaborations and only two percent did so consistently. Yet, strikingly, the reason funders most frequently cited for failing to support collaborations was that their grantees didn’t ask. Further, they told us in follow-up interviews that they worried they would inject bias if they initiated the conversation. A program officer in Pennsylvania said, “We have to be careful. Whenever I speak up at a meeting, I get a proposal about the idea!” But the same funder told us that when grantees came forward with a plan to collaborate, he was eager to support it.

        2. Difficult match-making A second barrier to collaboration lies in finding the right partners and negotiating respective roles. Nonprofits and foundations both cite defining relationships and roles as a top challenge to collaboration. But nonprofits rated finding the right partner as the biggest barrier, while foundations rated it the smallest one. In our study, helping nonprofits find partners was the most common way that funders supported collaboration, but they said they needed to tread cautiously: “I don’t feel comfortable recommending partners,” said a Chicago grantmaker. “In part I worry that nonprofits might take my word as dictate, but also I feel that they need to be committed enough to do their own homework.”

        3. Unsuccessful joint programs A third challenge is the disparity between funder and CEO perceptions about which forms of collaboration fail more often. Funders see joint programming as the most successful form of collaboration. Nonprofit CEOs, on the other hand, found that the more integrated forms (shared support functions and mergers) were most likely to succeed and cited joint programs as having the highest failure rate (20 percent).”

If collaboration nonprofits are able to show overall better returns, i.e., social impact, the first barrier will be largely resolved.  Donors could play a role in the second barrier if they have enough information about the social impact various charities are having.  A push in the sector toward using legal forms, such as mergers, would assist with the overall success rate.

The full article is available here.

 

Khrista Johnson

December 19, 2014 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 17, 2014

Unfriendly Competition?: For-Profits and Nonprofits

    As nonprofits and for-profits increasingly compete in the same fields, several legal issues are emerging.  Two of the main issues are the following: (1) UBIT and (2) for-profit attempts to limit the market nonprofits can attract.  Nonprofit Quaterly featured an article highlighing this tension, which explored Alabama Dental Association's (ALDA's) opposition to the expansion of Sarrell Center, a nonprofit that provides dental treatment to poor children.  ALDA has considered advancing state legislation to "control" the nonprofit, and Sarrell brought a suit against the University of Alabama at Birmingham when it announced its students were no longer available to volunteer at Sarrell clinics.  Even the YMCA has been under attack from for-profit exercise clubs in Idaho.  Ultimately the Board of Equalization decided to impose a 19% tax on YMCA profits.  The issue has arisen in numerous areas, including day care centers, theaters, etc.  The line between nonprofits and for-profits has been overlapping tremendously, and unfair competition appears to be an issue that will persist.  Read more about this issue here.

 

Khrista Johnson

December 17, 2014 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 16, 2014

Donor Refund Policy?

        Although charitable contributions traditionally have been perceived as a contract between the donor and the charity, donors who are displeased with how their funds have been used are asking for refunds according to a recent WSJ article. In fact, some courts are starting to recognize donors’ rights over gifts after they have been given. This highlights the need for greater transparency and accountability in terms of charitable giving. The tools used in impact investing could prevent such drastic donor disappointment. It is really the result of the larger problem of uninformed giving. In an upcoming article, I examine how the tools used in impact investing can solve it. First, we must provide donors with a way to measure “return” on their investment, i.e., social impact. An impact investing tool that provides a standardized set of metrics for measuring social impact is the solution. However, not all charities merit review under this tool, and we must limit the group of charities that will undergo this review by conducting an initial qualitative analysis. Second, we must enable donors to select charities based upon a comparison of their level of social impact. The current rating system used in impact investing will achieve this end in the charitable sector as well. The article proposes a system for evaluating and rating charities by applying the tools of impact investing in order to establish what I have termed an efficient charitable market. It shows the end result will enable U.S. charitable investors to make even smarter decisions that dramatically better our world. In terms of a side note, it will also help prevent donors from seeking refunds.

 

Khrista Johnson

December 16, 2014 in Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)

Monday, December 15, 2014

New Report on the Impact of Impact Investing

A few days ago, the Aspen Institute issued a report entitled The Bottom Line: Investing for Impact on Economic Mobility in the US. The report shows how impact investing is increasing economic mobility for low-income families. The report is another example of how the nonprofit sector may have serious lessons to learn from the impact investing sector.
The report is available here.

 

Khrista Johnson

December 15, 2014 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Friday, November 21, 2014

Most Recent Nonprofit Advocacy Matters

The most recent issue of Nonprofit Advocacy Matters, published by the National Council of Nonprofits, is out. Stories include discussions of what is on the table in the lame duck session of Congress, the spending reduction pressures facing several state and local governments, statewide ballot measures and constitutional amendments that were passed by voters earlier this month and that affect nonprofits, and tax & fee proposals in Oregon and Hawaii of relevance to nonprofits.

 

In addition, in its “Worth Quoting” section, the issue highlights an interesting observation of Ann Goggins Gregory, COO of the Greater San Francisco Habitat for Humanity:

Overhead in the for-profit world—sales, general and administrative costs as a percentage of total sales—is 25% across all industries and 34% for service industries. The cruel irony of holding nonprofits to a much tougher standard is that donors often say that they do this because nonprofits ought to ‘run more efficiently, like a business.’ Most people don’t know the overhead of businesses because profitability matters more.

 

The point is rather thought-provoking, and prompts some questions.  The following come quickly to mind: At what point does too much emphasis on reducing overhead lead to work environments that hinder the productivity of nonprofits’ employees?  How much of for-profit firms’ overhead is better viewed as a form of disguised compensation to employees?  Can we devise better metrics of social value produced by nonprofits and examine correlations between social output and overhead?  Who receives the primary, direct benefit of various types of overhead?  Is there a way to analyze whether nonprofits in certain fields should have higher overhead than others by studying differences in overhead incurred by for-profit firms in different industries?

 

JRB

November 21, 2014 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Wednesday, November 19, 2014

Former Controller of the Hereditary Disease Foundation Charged with Embezzlement

In Former Controller of Medical Nonprofit Is Charged With Embezzling $1.8 Million, the New York Times reports that Karen Alameddine, who served as the controller of the New York-based Hereditary Disease Foundation from September 2005 through January 2014, has been charged with embezzling more than $1.8 million of the nonprofit’s funds.  Further details appear in the story: 

Federal prosecutors in Manhattan said in a criminal complaint unsealed on Tuesday that Ms. Alameddine began diverting money by disguising entries in the foundation’s accounting software “to make what in reality were transfers to her personal bank account appear as if they were wire or bank transfers” to grant recipients.

 

The government said Ms. Alameddine, who also went by Karen Dean, worked for the organization in recent years from her residence in Perris, Calif. The funds she diverted went into accounts she controlled with names like Abacus Accounting, Chez Cheval Ranch, Dean & Co. and Karen Dean Exports, the complaint said.

The alleged scheme reportedly came to light after Alameddine’s departure, when the foundation investigated a complaint from a grant recipient that he had not yet received his check from the foundation.

JRB

November 19, 2014 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Monday, November 17, 2014

Philadelphia-Area Nonprofit Illustrates the Changing State of International Adoption

In Era Ending in International Adoption, The Philadelphia Inquirer reports that Pearl S. Buck International, a nonprofit that for years has worked to find homes for children unlikely to be placed in families through typical adoption agencies, has terminated its international adoption operations.  The change is portrayed as a sign of the times – a perfect storm of legal, economic, and cultural factors now stifling international adoptions.  According to the story,

A paradigm shift is taking place in countries across the globe, including the United States, that have enacted more restrictive adoption policies. As a result, the international adoption rate has plummeted by 70 percent since 2004 and squeezed out some long-established programs, such as the one founded by Buck.

"What we're seeing is the end of an era," said Adam Pertman, president of the Massachusetts-based National Center on Adoption and Permanency and author of the book Adoption Nation. "International adoption as we've come to know it is morphing into something new and something different and something that involves far fewer children."

Factors reportedly contributing to the legal restrictions that are reducing international adoptions include nationalism, economic improvement in some countries that historically have welcomed international adoptions, and concern over past illegal trafficking in babies and profit-motivated corruption.

Also mentioned is the United States’ ratification of the Hague Convention on Intercountry Adoption.  The story continues:

The new regulations, which advocates support, have added extra financial burdens in the way of more social workers as well as more costly insurance and fees. For Pearl S. Buck International, the confluence of higher costs and fewer children led to the program's demise, CEO Janet Mintzer said.

"You can't really support an adoption program when you have seven adoptions," she said. "It just doesn't make sense for us as an organization."

For Pearl S. Buck International, the new reality means that it “will continue its mission of serving children through child sponsorship and running cultural exchange programs” with foreign countries.

JRB

November 17, 2014 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Thursday, November 6, 2014

Privacy Debate Returns To Harvard

 

Last year a privacy debate erupted at Harvard when it was revealed that the university had searched the email accounts of 16 junior faculty members.  The debate prompted a major self-examination and promises by the administration to do better.

Today's New York Times is reporting that the prickly topic is back.  This time, the university has acknowledged that as part iof a study of attendance at lectures, it had used hidden cameras to photograph classes without telling the professors or the students.

While students and faculty members did not view the secret photography as serious as looking through people's email, it struck them as out of bounds -- or, at least, "a little creepy."  It also set off more argument about the limits of privacy expectations. 

The Times reports Jerry R. Green, a professoir of economics and former university provost, as saying, "I wouldn't call it spying, but I don't think it's a good thing."

The Times continues:    

Some students called the secret photography a violation of trust, while others shrugged it off because cameras are already ubiquitous, said Sietse Goffard, a junior who is vice president of the Harvard Undergraduate Council. “It’s a question I’m still really conflicted about,” he said.

The episode comes as the university is getting familiar with a new honor code that will go into effect next year. That code, Mr. Goffard said, “stresses the importance of transparency and community trust.”

Carolyn O’Connor, a first-year student, said she would be concerned if the pictures were made public. But “if it’s for academic reasons, I don’t have a problem with that,” she said.

Researchers at the Harvard Initiative for Learning and Teaching set up the cameras to investigate professors’ complaints that many students skipped lectures, and that attendance dropped as a semester wore on. (The photos confirmed both points.) The researchers were concerned that letting professors or students know could skew the results.

They received clearance from Peter K. Bol, a vice provost, and took still images in the spring in 10 classes, which have not been identified, with a total of about 2,000 students. Administrators said that students were not tracked, that professors were not judged on the results, and that after attendance figures had been compiled, the pictures were destroyed.

Harvard's respect for privacy is a touchy subject because of the email search of last year.  When word broke of those searches, many professors were furious, arguing that although the university owned the email system, the professors had an expectation of privacy.  In response, the administration adopted a policy on electronic privacy.

This time around, the photography has not drawn the same kind of reactions.  "This should have been done better," the Times quotes Wilfried Schmid, a mathematics professor, as saying.  "This is not in the same league as the email searches.  It's more like a lack of courtesy."

Vaughn E. James

 

November 6, 2014 in Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)

Prospects for Nonprofits Under GOP-Controlled Senate

With Republicans poised to take control of the Senate following Tuesday's elections, Alex Daniels writes in the Chronicle of Philanthropy that it is likely that lawmakers will dig deep into the Internal Revenue Code soon after a new Congress is sworn in next year.  Daniels continues:

While that means added scrutiny on the charitable deduction and the tax treatment of nonprofits, charity leaders are confident a solidly Republican Congress will keep their cherished provisions intact.

Before the current Congress wraps up its business, however, charity officials expect lawmakers to consider certain items in the tax code, including moving the deadline for claiming the charitable deduction from the end of the year until April 15 as well as a set of tax preferences that are usually renewed each year.

Also, Congress has yet to take action this year on the "tax extenders," expiring provisions of the tax code that include benefits for land conservation, donations to food banks, and contributions to charity made from certain retirement accounts.

Republicans strengthened their hold on the House of Representatives, and will hold at least 52 seats in the Senate. Michelle Nunn, a nonprofit executive who ran for the Senate in Georgia, was among the candidates Democrats were counting on to help them keep control of that chamber, but she was defeated handily by Republican David Perdue.

Next year, when Republicans control the Senate and operate with an even stronger hand in the House, they are likely to consider a much more comprehensive tax overhaul. While the chances of enacting the first major changes to the tax code since 1986 are slim, some say, any legislative action during the next session of Congress will set the stage for future tax debates during the 2016 presidential campaign.

Daniels lists five top issues he says nonprofit organizations are watching for legislation and executive action:

  • Internal Revenue Service rules governing 501c(4) social-welfare organizations. The IRS is considering what constitutes political activity by these groups and whether their donors can remain anonymous.
  • Foundation excise taxes. The House has passed a measure to simplify and lower this tax to 1 percent.
  • A proposal to require donor-advised funds to pay out at least 5 percent of their assets each year.
  • The provision of federal support for social-impact bonds that fund "pay for success" efforts at the state and local levels.
  • Pending rules that limit how to conduct federated campaigns. The United Way hopes a Republican Congress will remove recently added federal regulations.

Time will tell whether Alex Daniels is correct. 

Vaughn E. James

   

November 6, 2014 in Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)