Thursday, May 14, 2015
Ian Murray (University of Western Australia) and Fiona Martin (UNSW Australia Business School) have published The Blossoming of Public Benefit Institutions - From 'Direct' Provides to Global Networks, 40(1) Alternative Law Journal (2015). Here is the abstract:
Public benevolent institutions (‘PBIs’) form a class of not-for-profit (‘NFP’) entities that is entitled to various taxation concessions. The PBI concept was originally adopted in order to deliver selected tax benefits to a narrower group of NFPs than charities, given the wide legal meaning of ‘charitable’. As well as being eligible for income tax exemption like charities, PBIs can be deductible gift recipients (‘DGR’), which means that donors may be able to claim a tax deduction, and are entitled to fringe benefits tax (‘FBT’) exemptions, enabling more attractive employee remuneration packages. For decades, the Australian Taxation Office (‘ATO’) has insisted that PBIs must not only have purposes focused, narrowly, on the relief of poverty, sickness, destitution or helplessness, but that they must also directly provide relief to those suffering from such poverty, sickness, destitution or helplessness. The recent Full Federal Court decision of Commissioner of Taxation v Hunger Project Australia (‘Hunger Project’) clearly states that there is no such ‘direct’ requirement. The development is relevant for a range of state and federal taxes and is expected to have a large impact on federal revenue. This is due to the fact that the primary tax concessions relating to PBIs, the FBT exemption and DGR status, are currently in excess of $2 billion. The ‘cost’ of those concessions will likely increase with the broadening of the classes of entities that fall into the PBI category.
Leonel Cesarino Pessôa and Valeria Maria Trezza (both Getulio Vargas Foundation) have posted Main Problems with the Taxation of Civil Society Organizations in Brazil: Certifications and Impact on Payroll. Here is the abstract:
The objective of this paper is to identify and analyze the main problems in the taxation — regarding both taxes themselves and compliance costs of taxation — of civil society organizations in Brazil. This study is qualitative descriptive research. A multiple case study with 26 organizations was performed. The results show that the problems mainly affect organizations with lower revenue and that do not work in the areas of education, health or social care. The main problems involve the taxation of the payroll and the difficulties related to obtaining and maintaining certifications. The study concludes with suggestions for the improvement of the regulatory framework.
Karla Simon (International Center for Charity Sector Law) has written a blog post for Alliance Magazine highlighting the tensions between China's Foreign NGO Law and its most recent draft Charity Law. Here is the first paragraph:
Contradictions exist because of the Foreign NGO Law and its intersection with the more recently available draft Charity Law released by the government, which I have been invited to comment on. The Charity Law draft is extremely supportive of philanthropy, while the Foreign NGO Law is repressive towards foreign NGOs that provide funding to domestic organizations carrying out certain types of activity, such as rights advocacy. The draft Charity Law requires the government to do many things to foster charity, even going so far as to encourage schools to educate the young about the subject (this is China, after all!).
There has been a drumbeat of allegations in Canada that the Canada Revenue Agency is targeting left-leaning charities for special scrutiny with respect to their alleged political activity. The latest group to make this assertion is Sierra Club Canada Foundation, which according to a CBCNews report expected auditors to arrive at its offices this week to look for evidence of political activity exceeding the permitted 10 percent level for Canadian charities. Concerns about such audits began in 2012, when 60 political audits of charities began that allegedly disproportionately hit environmental and other left-leaning charities. In 2014 the National Post reported that more than 400 academics had demanded the end of a CRA audit focused on the left-leaning Canadian Centre for Policy Alternatives, and last month CBCNews reported on a Steelworkers charity protesting being subject to a similar audit (hat tip: David Herzig).
According to the various press reports, the National Revenue Minister has repeatedly denied any bias in audit selection, stating that CRA officials make such decisions independently of political appointees. As in the United States, CRA is not able to comment on specific audits because of tax law confidentiality rules. A left-leaning think tank has called for an independent probe, however, asserting that right-leaning charities with apparent political involvement appear to have escaped scrutiny (see also CBCNews report). There does not appear to be an investigative body, such as the Treasury Inspector General for Tax Administration in the U.S., that is well positioned to engage in such a probe, however (Canadian readers, please correct me if I am wrong on this point).
Thursday, May 7, 2015
Today's Philanthropy News Digest is reporting that as Africa "struggles to address the effects of climate change and an unprecedented youth bulge, the Rockefeller Foundation is working across multiple fronts to build the resilience of African economies."
Attributing the report to the Voice of America, the Digest reports that current efforts includes the $100 million Digital Jobs Africa initiative, which was launched in 2013 with the aim of boosting the information and communications technology (ICT) sector in six African countries -- Ghana, Kenya, South Africa, Nigeria, Morocco, and Egypt. Foundation president, Judith Rodin, told the VOA:
We are excited to see so much opportunity and such a growth market in the ICT sector more broadly across the continent. [There are] so many technology parks growing [and] so many companies really growing on technology-based platforms. We know that ... the continent has to focus on employing this extraordinary youth bulge that we are going to see. We think ... a critical part of shared prosperity as we go forward [means] developing growth in the ICT sector which often yields some of the better paying jobs.
Elsewhere on the continent, the foundation is working to help small farmers adapt to climate change by collaborating with local partners to capture run-off from flooding for use in irrigating fields. It is also working in partnership with the World Food Programme and has bankrolled a technology called risk metrics that can help predict an impending drought. As a final matter, the foundation is also -- again in conjunction with the World Food Programme -- creating a country-level insurance mechanism that enables countries to access resources in the immediate aftermath of a natural disaster rather than having to wait for international development assistance to arrive.
Wednesday, May 6, 2015
The Washington Post is reporting that just as business, political, and philanthropic leaders gathered in Marrakesh, Morocco, for the first Clinton Global Initiative meeting on Africa and the Middle East, Chelsea Clinton, the former President's daughter, said there is a "political dimension" to the controversy over multimillion-dollar gifts from foreign governments and corporations to her family's foundation.
Ms. Clinton, the Clinton Foundation's vice chair, said the scrutiny has intensified with the launch of her mother Hillary Clinton's White House run. She dismissed the idea, raised by some Republicans and campaign watchdog groups, that foundation donors seek to curry favor with her powerful parents.
Tuesday, April 28, 2015
As reported in the Chronicle of Philanthropy and Reuters, the home ministry of the government of India has cancelled the registration of 8,975 nonprofit associations for failing to declare details of foreign donations that they have received over a three-year period. The action reportedly followed India’s suspension of the license of Greenpeace India and the government’s placement of the Ford Foundation on a watch list. According to Reuters, “Critics have argued that the government's decision to restrict the movement of foreign funding to local charities is an attempt to stifle the voices of those who oppose Prime Minister Narendra Modi's economic agenda.”
Thursday, March 12, 2015
The Chronicle of Philanthropy is reporting that ten individuals using technology to improve the world will be honored tonight at the Dewey Winburne Community Service Awards at the South by Southwest (SXSW) Interactive Conference. The awards honor the late Dewey Wineburne, a co-founder of SXSW Interactive, who had deep interests in education and technology.
According to the Chronicle:
This year’s honorees, selected by a panel of previous winners who live in Austin, represent five countries and a range of interests, including literacy, economic opportunity, and journalism. Each will receive $1,000 for the charity of their choice.
Among the honorees are:
- Rebecca McDonald of Australia who, after seeing footage of the 2010 earthquake in Haiti, quit her job in Australia and moved with her husband to the Caribbean country where she founded Library for All, an online digital library accessible using tablets distributed to schools across Haiti. Books are carefully selected to be culturally relevant and language-appropriate, with most written in French or Creole. The organization pays local publishers for texts and asks larger companies, which do not usually sell books to Haiti, to donate books.
- Jukay Hsu, a native of Queens, New York, who founded Coalition for Queens, a nonprofit designed, according to Mr. Hsu, to foster "a more inclusive tech ecosystem" and "pioneer a pathway from poverty to the middle class." The organization's keystone program, Access Code, trains people — many of them immigrants — to create mobile applications and prepare for entry-level developer jobs. So far, the average income of participants going into the program has been $26,000, while their average income after completion is $73,000.
- Libby Powell, of London, England, who has used her training as a journalist to found Radar, a communications-rights organization that trains citizen reporters and promotes the stories they tell through social media and other ways online. Based in the United Kingdom, the staff offers editorial guidance to local correspondents who report from the field. The group has generated coverage about elections and Ebola in Sierra Leone and slavery in India and is working on new projects that give voice to people living with dementia and those who are homeless. Created with money raised through the crowdfunding site Indiegogo, Radar works to raise awareness among the public, policy makers, and service providers about issues affecting marginalized groups. The organization has helped place articles in The Guardian and the BBC.
- Tembinkosi Qondela, of Cape Town, South Africa, who founded Whizz ICT Centre, an organization that seeks to facilitate the use of information communication technology (ICT) tools for development efforts of the community in Khayelitsha, one of the largest and poorest areas of Cape Town, South Africa. Mr. Qondela observed that marginalization of poor people in the use of ICT and the lack of access to information perpetuates the inequalities and poverty that face most young South Africans. Whizz ICT runs a center which gives young people access to computer training, other ICT related services and training in a range of income generating skills. To date Whizz ICT has provided training to over 1000 youth.
The names and brief profiles of the other six honorees are available on SXSW's website. We congratulate them all.
Monday, March 9, 2015
Philanthropy News Digest reports that L'Oreal Paris has announced a Call for Nominations for the 2015 L'Oreal Paris Women of Worth awards, an annual program designed to honor women making a "beautiful difference" in the world through voluntarism.
According to the Digest,
Since 2006, the program, in partnership with Points of Light, has recognized eighty inspiring women who have selflessly devoted themselves to causes at the local and national level and motivated others to get involved. Past honorees have been involved in a range of important causes, from advocating for victims of childhood abuse and mentoring homeless children, to helping break the cycle of poverty and empowering teens with disabilities.
As regards the current Call for Nominations, the Digest states that this year, "ten women will be awarded $10,000 each and one woman will be named the national honoree and receive an additional $25,000 to further her charitable efforts. All ten honorees will be recognized in December at a star-studded awards ceremony hosted by L'Oreal Paris in New York."
Complete program guidelines, information about previous recipients, and nomination instructions are available at the Women of Worth website.
Saturday, November 29, 2014
Last month I had the opportunity to attend the NYU National Center on Philanthropy and the Law's Annual Conference. The conference was titled Regulation or Repression: Government Policing of Cross-Border Charity and provided an eye-opening overview of restritions imposed by many countries on foreign funding of charities and other NGOs. What made the conference particularly timely was the fact that only a month earlier a prominent member of Congress had publicly attacked foreign donations to think tanks - in the United States. This concern led to a bipartisan legislative proposal to require disclosure of foreign funding from scholars who testify on Capital Hill. The timing was particularly ironic, as at almost the same time the Economist ran two articles raising concerns about autocratic and illiberal governments placing limits on such funding: Donors: Keep Out and Uncivil Society. That said, whatever concerns charities and other nonprofits may have in the United States (including members of Congress criticizing them for accepting foreign donations), they pale in comparison to the concerns that the legal restrictions on both funding and activities raise for NGOs in many other parts of the world.
Oonagh B. Breen (University College Dublin) has posted Long Day's Journey: The Charities Act 2009 and Recent Developments in Irish Charity Law, Charity Law and Practice Review (forthcoming). Here is the abstract:
It is now twelve years since the Irish Government committed in its Agreed Programme for Government to the introduction of a modern statutory framework for the regulation of Irish charities. Twelve years on, in 2014, the promise of reform to ensure “greater accountability and to protect against abuse of charitable status and fraud . . . [and increased] transparency in the sector has never been more necessary and yet still remains to be delivered. Despite the passage of the Charities Act 2009, its non-implementation has created a regulatory void into which allegations of charity maladministration and misfeasance have filled the public consciousness.
In his seminal work on the formation of public policy, John Kingdon provides a persuasive theory to explain the opening, operation and outcomes of so-called ‘policy windows.’ According to Kingdon, at any given time, a ‘problem stream’ exists representing all the issues that are wrong in a given system. Running (often) parallel to the problem stream will be a ‘solution stream’ containing all of those suggested fixes to make a system work better. It is only when there is a convergence of those two streams within a third ‘political stream’ that policy change occurs. The nature of the political stream within which this convergence occurs can take many forms. In the words of Kingdon, it can comprise “public mood, pressure group campaigns, election results, partisan or ideological distributions in Congress and changes of administration.” The collision of problem and solution streams within this political stream results in the temporary opening of a policy window, allowing policy change to occur. The form of such resultant change may be shaped further by coincidental influences or agenda issues hovering in the vicinity of the window which attach themselves to the coat tails of the newly minted policy outcome. This conception of the policymaking process is useful, providing as it does some insight into how certain policy solutions come to be expectations or have other unintended consequences.
In an Irish context, Kingdon’s framework provides a useful lens through which to analyse the ‘fits and starts’ approach to charity law reform. Against the backdrop of the recent revelations concerning the Central Remedial Clinic and the Rehab Group charities and the catalytic effect of these scandals on the Irish charity sector and charity regulation more generally, this article reviews the current progress in the implementation of the Charities Act 2009, recent moves towards the establishment of the long awaited Charities Regulatory Authority and the prospects and challenges for better charity governance ahead.
Part I of this article reviews the existing Irish ‘problem’ and ‘solution’ streams in the context of charity regulation and outlines the political catalysts that are now instrumental in driving reform. Part II outlines the pending changes to be introduced over the coming months and the implementation challenges that will face the new Charities Regulator. Part III attempts to align the recent shortfalls in charity governance with the forthcoming statutory requirements and assesses whether the policy changes that the public are so desperately seeking will be delivered by the much anticipated commencement of the Charities Act 2009.
Kathryn Chan (University of Victoria) has posted The Co-Optation of Charitable Resources by Threatened Welfare States, 40 Queen's Law Journal (forthcoming 2015). Here is the abstract:
This paper addresses the emerging issue of the governmental co-optation of charitable resources, considering to what extent modern pressures associated with the retrenchment of welfare states are undermining the charitable sector’s traditional independence from government. It pursues this goal by advancing a theoretical contrast between ‘independent’ and ‘co-opted’ charities, and by identifying and contrasting certain legal and institutional mechanisms that either encourage or limit the co-optation ofcharitable resources by governments in England and in Canada.
The paper proceeds in the following way. I begin by advancing an argument in support of the value of an “independent” charitable sector, and the perils of allowing a nation’s charitable resources to be co-opted by the state. I proceed from this argument to articulate two indicia of a “co-opted” charity, relating these indicia to an important body of Anglo-Commonwealth law on the functional public law-private law divide and thus to debates over whether charities should bear human rights obligations and the other special responsibilities of the state. In part four, I distinguish three broad categories of co-optation that are applicable to charities: definitional (or existential) co-optation, managerial co-optation, and contractual (or fiscal) co-optation. I then examine several modern phenomena that tend towards the co-optation ofcharitable resources by government: the exertion of government influence over the legal definition of charity, the creation of statutory charities that are controlled by government or directed towards its purposes, and the exertion of influence over the administration of charitable resources through the negotiation of funding agreements or the appointment of government authority trustees. I consider how, in their response to each of these phenomena, English and Canadian laws and institutions either assist or obstruct government efforts to make charities comply with particular public welfare goals. I conclude that English law does far more than Canadian law to prevent charities from coming to function as agents of government policy, and may thus be regarded as a source of ideas on how Canada might manifest a stronger political commitment to the charitable sector’s independence.
Lilian V. Faulhaber (Boston University) has published Charitable Giving, Tax Expenditures, and Direct Spending in the United States and the European Union, 39 Yale Journal of International Law 87 (2014). Here is the abstract:
This Article compares the ways in which the United States and the European Union limit the ability of state-level entities to subsidize their own residents, whether through direct subsidies or through tax expenditures. It uses four recent charitable giving cases decided by the European Court of Justice (ECJ) to illustrate the ECJ’s evolving tax expenditure jurisprudence and argues that, while this jurisprudence may suggest a new and promising model for fiscal federalism, it may also have negative social policy implications. It also points out that the court analyzes direct spending and tax expenditures under different rubrics despite their economic equivalence and does not provide a clear rule for distinguishing between the two, adding to the confusion of Member States and taxpayers. The Article then surveys the Supreme Court’s Dormant Commerce Clause jurisprudence, under which the Court analyzes discriminatory state spending provisions. The Article concludes that although both the Supreme Court and the ECJ prioritize formalism over economic equivalence, the Supreme Court’s approach to tax expenditures is more defensible than that of the ECJ due to the different federal structures of the two jurisdictions.
Wednesday, October 15, 2014
A concept that I have introduced through scholarly writing and blogged about here is the need for a more efficient charitable market. In August, I commented upon a Vanguard Charitable study that found millennials are more likely to see their charitable giving as a form of investment and thus promote a culture of giving that demands more transparency and accountability, two hallmarks of a more efficient charitable market. A recent NPR broadcast that examined the work of Scott Harrison’s nonprofit, Charity: Water, confirmed just that.
In the segment, Harrison spoke about his dual purpose in forming Charity: Water. First, he wanted to provide clean water to the almost 800 million people globally who lack access to it by building wells. Second, he sought to make an example of how a nonprofit could do its work in a way that would resonate with the next generation of givers. He recounted his own experience of being hesitant to give to charities prior to starting Charity: Water, which stemmed from the absence of information on how a charity would use the funds. Today the nonprofit world is concerned with how approximately 80 millennials make their decisions about giving, and not surprisingly, it is different from the prior generation(s). As stated in my prior post, it is widely accepted that millennials want to view their “donation” as “investment,” and at least one commentator recommends that nonprofits refer to the latter. Another salient point is how technology intersects with millennial giving. Millennials value their time, and as a result, any form of technology that makes it easier for them to invest is preferable. Moreover, the Ice Bucket Challenge that swept through social networks over the summer shows that the desire of millennials to share the details of their lives extends to their giving. In response, Charity: Water is utilizing a birthday campaign where donors can ask their network to donate one dollar for each year celebrated, i.e., $25 dollars to celebrate a 25th birthday. Charity: Water is also placing sensors on its wells, so donors may interact with the impact of their investment in a novel manner. Charity: Water’s innovative approaches are proving successful. They have helped over 4 million more people in twenty-two countries gain access to clean water. Millennials and nonprofits like Charity: Water may just help move giving into the next century and towards a more efficient charitable market.
Tuesday, October 14, 2014
In PLR 201438032, the Service considered whether donations to a nonprofit public benefit corporation that engages in transactions of funds with its foreign subsidiary are tax deductible and whether such transactions would harm its 501(c)(3) status. The PLR confirms aspects of how a transaction between a 501(c)(3) and a wholly-owned foreign subsidiary should be structured to secure a favorable tax result. One question the IRS still has not resolved is whether a donation to a wholly-owned foreign single-member LLC is deductible. The nonprofit world will be waiting.
In the ruling, the subsidiary in question is a foreign nonprofit foundation whose activities, namely seeking to aid foreign orphanages, are carried out internationally. The governing board and governing officers are under the control of the public benefit corporation. The stated purpose of the subsidiary is to carry out the purposes and objectives of the public benefit corporation. In terms of board overlap, at least three of the five board members of the subsidiary are members of the public benefit corporation’s board. In terms of governance, it is clear that the public benefit corporation is involved in each area and ensures that the subsidiary complies with U.S. tax rules and regulations regarding tax-exempt entities, e.g., restrictions regarding private inurement and lobbying expenditures. The public benefit corporation also has the ability to expel members from the board of directors and to dissolve the subsidiary. Under the “Proposed Transaction,” the public benefit corporation may vote to transfer funds to the subsidiary. There are also mechanisms in place to ensure a type of expenditure responsibility-like accountability for the maintenance and use of funds. Finally, the public benefit corporation disallows earmarking, and its board maintains the requisite discretion and control over funds, i.e., does not have an obligation to transfer funds to the subsidiary.
Both of the public benefit corporation’s requested rulings were granted. First, the Proposed Transaction was deemed not to jeopardize the public benefit corporation’s tax-exempt status. Second, donations made to the public benefit corporation were deemed deductible under Code section 170(a). In reaching this ruling, Treasury stated that the Proposed Transaction is consistent with the anti-conduit rules of Rev. Ruling 63-252 and the discretion and control requirement of Rev. Ruling 66-79. Moreover, it looked to Revenue Ruling 68-49 which states that a 501(c)(3) organization does not jeopardize its tax-exempt status by contributing funds to non-501(c)(3) organizations as long as it can show the funds were used for 501(c)(3) purposes. Ultimately, Treasury found the public benefit corporation’s actions congruent with this ruling. In terms of the second ruling, Treasury found that since the public benefit corporation is an organization described in Section 170(c), contributions to it are deductible under Section 170(a).
Monday, October 13, 2014
As the Ebola threat looms, many observers are considering whether the responses of the U.S. government, the CDC, and the World Health Organization, inter alia, are appropriate. Similarly, nonprofit commentators are considering whether private donations of funds and resources from the U.S. are adequate. As one commentator reports, there have been several U.S. private foundations that have made large-scale contributions to the fight against Ebola; in addition, the experience of two U.S. Christian organizations operating in West Africa evinces that publicity helps generate more donations. The U.N. has estimated that $1 billion is necessary to effectively combat the Ebola virus.
A recent article in The Chronicle of Philanthropy has predicted that the first confirmed case of Ebola in the United States will lead to greater charitable donations to stop a further outbreak of Ebola abroad. Several U.S. private foundations have already made multi-million dollar gifts to combat a spread of the virus. The Bill & Melinda Gates Foundation has decided to contribute $50 million to U.N. agencies and other organizations. The Paul G. Allen Family Foundation donated $9 million to the CDC, $2.8 million to the American Red Cross, and $100,000 in the form of matching funds to Global Giving. The William and Flora Hewlett Foundation contributed $5 million to various international health organizations. Moreover, the U.S. government has provided numerous resources, including, inter alia, individuals to build treatment units and training for health-care providers. The USAID has expended over $100 million in an effort to quell the outbreak and is on record for the contribution of an additional $75 million.
At the same time, commentators have denounced U.S. donors as not donating enough. The Director of International Communications at the Red Cross has stated that the Ebola outbreak is not “top of mind as a place to donate” precisely because of the involvement of the U.S. government, the CDC, and the World Health Organization. Nevertheless, SIM USA, a Christian mission organization who had two health-care workers infected with Ebola in Liberia late in the summer, has received sizable donations to support its work in West Africa. SIM USA has seen an increase in volunteers, and although these actions are later than anticipated, they show promise for a mobilization of donors and volunteers to fight the deadly virus. Additionally, Samaritan’s Purse, also a Christian organization working in West Africa, experienced a 13% increase in cash contributions (when compared to last year’s donations) after one of its doctors was infected with Ebola and successfully treated at Emory University Hospital. (For more on Samaritan’s Purse, see JRB’s insightful post). Thus far, $4.4 million of its donations has been designated for fighting the Ebola outbreak. As the speculation about a U.S. outbreak grows, the public’s attention has become more focused on donating to assist with the global efforts already underway, e.g., see the following article on UK donations. For a complete list of non-governmental organizations responding to the Ebola outbreak, see here).
Friday, September 26, 2014
Reuters is reporting that over 120 Islamic scholars from around the world have issued an open letter denouncing Islamic State militants and refuting their religious arguments. Many of these scholars are themselves leading Muslim voices in their own countries.
The 22-page letter, written in Arabic and heavy with quotes from the Koran and other Islamic sources, strongly condemns the torture, murder and destruction Islamic State militants have committed in areas they control.
The Reuters report states in part:
"You have misinterpreted Islam into a religion of harshness, brutality, torture and murder," the letter said. "This is a great wrong and an offense to Islam, to Muslims and to the entire world."
[The letter's] originality lies in its use of Islamic theological arguments to refute statements made by self-declared Caliph Abu Bakr al-Baghdadi and his spokesman Abu Muhammad al-Adnani to justify their actions and attract more recruits to their cause.
The letter is addressed to al-Baghdadi and "the fighters and followers of the self-declared 'Islamic State'", but is also aimed at potential recruits and imams or others trying to dissuade young Muslims from going to join the fight.
Nihad Awad of the Council on American Islamic Relations (CAIR), which presented the letter in Washington on Wednesday, said he hoped potential fighters would read the document and see through the arguments of Islamic State recruiters.
"They have a twisted theology," he said in a video explaining the letter. "They have relied many times, to mobilize and recruit young people, on classic religious texts that have been misinterpreted and misunderstood."
Reuters describes the 126 signatories as "prominent" Sunni men from across the Muslim world -- from Indonesia to Morocco, and from other countries such as the United States, Britain, France and Belgium.
Among those who signed are "the current and former grand muftis of Egypt, Shawqi Allam and Ali Gomaa, former Bosnian grand mufti Mustafa Ceric, the Nigerian Sultan of Sokoto Muhammad Sa'ad Abubakar and Din Syamsuddin, head of the large Muhammadiyah organization in Indonesia. Eight scholars from Cairo's Al-Azhar University, the highest seat of Sunni learning, also put their names to the document."
Wednesday, September 3, 2014
The Globe and Mail reports that the Canada Revenue Agency (CRA) has told Oxfam Canada that its mission statement is too broad in that it provides the organization's purpose in that it includes preventing poverty, which might benefit people who are not already poor. CRA therefore concluded that preventing poverty is not an acceptable goal when asked to approval Oxfam CAnada's application for renewal of its non-profit statuts with Industry Canada. Oxfam Canada eventually conceded the point, by using the term "alleviate" instead of "end" or "prevent" in its revised mission statement. The newspaper report notes OxFam Canada has proven to be a thorn in the current Canadian government's side, and cites (not directly related) allegations that CRA is selectively auditing charities that have criticized government policies.
Thursday, August 14, 2014
According to findings of the Charities Aid Foundation (CAF), UK consumers want businesses to be more open and transparent about their philanthropy. See today’s Guardian article entitled “New Survey Shows FTSE 100 Companies Have Increased Charitable Giving.” Over half of the 2,000 British people CAF interviewed commented that they would be more likely to purchase a product if part of its price was donated to charity. In addition, those aged 18-24 increasingly express a desire to work for businesses that are ethical. Job seekers within this age range see working for a company that allows one “to give back” to be a major selling point.
As a result, UK businesses seeking to have a social impact are taking on more sustainable approaches, are re-thinking their purpose, and are marketing their products in the context of how they help solve social problems. Klara Kozlov, head of corporate clients at CAF, urges businesses to adopt a “framework for reporting their philanthropy activity and …. measur[ing] and report[ing] the impact of their giving.” She emphasizes that the public reporting of social impact is essential.
The impact investing sector in the US serves as a relevant model for these businesses. Like the nonprofit sector, the impact investing sector has social impact as goal, but it also has profit earning as an aim. In other words, it is a growing sector for those consumers and investors who are increasingly making their choices based upon their “personal, social, and environmental values”, and thus demand that businesses have a double bottom line: profit and social impact. In sum, a double bottom line means that a business will both earn a profit for investors and produce a benefit to society or social impact. (For more on impact investing, see “Impact Investing: The Power of Two Bottom Lines”). Since impact investors also expect a financial return, the sector has had to bring a level of rigor commensurate with the financial markets to bear upon the measurement of both elements of their return.
Monday, August 11, 2014
A recent opinion piece in The Chronicle of Philanthropy urged the media to stop making a big deal over big donors. See "America's Press Needs to Stop Fawning Over Big Donors." According to Eisenberg, the danger is that the media praises a giver as good based upon how much he/she has given rather than upon what impact his/her dollars have had. The real danger is that the most urgent global problems of our times are not being addressed effectively despite the number of dollars donated annually. There is adequate funding but inadequate progress. The UN has stated, “Millions still live in extreme poverty, yet the world has enough money, resources, and technology to end poverty.” Donations of wealthy donors often end up in the hands of US and non-US charities, and no one is asking systematically what these charities are accomplishing.
Earlier this summer, I had a conversation with Eric Thurman, CEO of Geneva Global, a firm that provides research and grant management for philanthropists internationally, about who should be considered the best givers. He remarked that buying a lot of stock does not make one a great investor. If someone owns stock, they look to see how their stock is performing. In the nonprofit world, often the givers who have contributed the largest amounts are the most celebrated regardless of the social impact achieved from their donations. If donors treated their donations more like investments, progress could be made toward ameliorating some of the most pressing humanitarian and global problems of our times. (For more information on Thurman’s viewpoint, please see "Performance Philanthropy," Harv. Int’l Rev., Apr. 2006, at 18).
A problem with the charitable market is that funding does not flow toward effective charities and away from ineffective charities. In an efficient market, private sector investors use information available at the time of investment to receive returns; these returns generally do not exceed average market returns because the same information is available to all investors. Succinctly stated, it is difficult for an investor to beat the market. In the inefficient charitable market, the market is easily beaten; the donor simply gives to a charity that a reputable rating organization recommends. A donor will receive more measurable social impact for his/her buck in giving to a recommended charity versus a non-recommended one. However, pervasive questions still linger. How many donors are using a thorough rating organization? Are the rating organizations asking charities the right questions?
In a forthcoming series of articles, I have set forth the concept of an efficient charitable market or one where collective charitable investment ends up in the hands of charities that will put it to its most productive use. One of the reasons inefficiency exists in the charitable market is because donors currently cannot easily differentiate between effective and ineffective charities. Granted, it is no easy task to make this distinction, but it is possible. If this became a crucial question for charities and donors, perhaps the media would report on the good accomplished rather than on the number of dollars donated.