Thursday, July 29, 2010

Borchard Foundation Center on Law and Aging Invites Applications for Grant Program

Philanthropy News Digest today reported that the Borchard Foundation Center on Law and Aging is inviting applications for its 2010-2011 Academic Research Grant Program.  According to the Digest, the program "is intended to further scholarship about new or improved public policies, laws, and/or programs that will enhance the quality of life for the elderly (including those who are poor or otherwise isolated by lack of education, language, culture, disability, or other barriers)." 

The Digest continues: 

The center expects grantees to meet the objectives of the grant program through individual or collaborative research projects that analyze and recommend changes in one or more important existing public policies, laws, and/or programs relating to the elderly; or anticipate the need for and recommend new public policies, laws, and/or programs for the elderly necessitated by changes in the number and demographics of the country's and the world's elderly populations, by advances in science and technology, by changes in the healthcare system, or by other developments. Each grant recipient is required to publish an article on the subject of their research in a first-rate journal.

[In the past,] scholars in the fields of health, law, medicine, and sociology have been awarded grants. The program is open to all interested and qualified legal, health sciences, social sciences, and gerontology scholars and professionals. Two or more individuals in the same institution or different institutions may submit a collaborative proposal. Grant recipients must be U.S. citizens or legal residents of the U.S. and must be affiliated with a U.S.-based institution or organization.

The grant program annually awards up to four one-year grants of $20,000 each.

Application materials are available at the Borchard Foundation Web site.

VEJ

July 29, 2010 in Fellowship & Job Opportunities, Other, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Thursday, July 8, 2010

Taxpayer Advocate: Tax-Exempt Organizations Subject to Onerous Reporting Requirements under the Health Care Act

In her mid-year report to Congress, Taxpayer Advocate Nina E. Olson raises concerns about new reporting requirements imposed on businesses and tax-exempt organizations beginning in 2012 by the Patient Protection and Affordable Care Act of 2010.  Specifically, she questions the compliance benefits of the new requirements to the IRS in relation to the potentially onerous burdens imposed on small business and tax-exempts.  The relevant portion of her report, as summarized on the IRS website, follows (emphasis added):

2. New Business and Tax-Exempt Organization Reporting Requirements. 

The report expresses concern that a new reporting requirement contained in the Patient Protection and Affordable Care Act may impose significant compliance burdens on businesses, charities, and government agencies.  Beginning in 2012, all businesses, tax-exempt organizations, and federal, state and local government entities will be required to issue Forms 1099 to vendors from whom they purchase goods totaling $600 or more during a calendar year.  To meet this requirement, these businesses and entities will have to keep track of all purchases they make by vendor.  For example, if a self-employed individual makes numerous small purchases from an office supply store during a calendar year that total at least $600, the individual must issue a Form 1099 to the vendor and the IRS showing the exact amount of total purchases.  The provision will have broad reach.  According to a TAS analysis of 2009 IRS data, about 40 million businesses and other entities will be subject to the new requirement, including roughly 26 million non-farm sole proprietorships, four million S corporations, two million C corporations, three million partnerships, two million farming businesses, one million charities and other tax-exempt organizations, and more than 100,000 government entities.   All of these nearly 40 million businesses and other entities are subject to the new reporting requirement.

TAS has not yet reached any conclusions regarding the benefits and burdens of the requirement, but the report expresses concern that the burdens “may turn out to be disproportionate as compared with any resulting improvement in tax compliance.”  During FY 2011, TAS will study the impact of the new reporting requirement more closely and, depending on what its study finds, may propose administrative or legislative recommendations to modify the provision or suggest that Congress consider less burdensome tax gap proposals, including a TAS proposal to require reporting of non-interest bearing bank accounts, to replace it.

The concerns raised in this portion of Olson's report have been likewise discussed in articles published in today's The Wall Street Journal and The Washington Post.

NAM

July 8, 2010 in Federal – Executive, Federal – Legislative, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Monday, June 28, 2010

The Common Denominator between Voluntary Taxes and Charitable Giving

An interesting story in the Boston Globe discusses the potential viability of raising governmental revenues through voluntary taxes.   The article, which quotes Yale law professor Ian Ayres and U.S.C. law professor Edward McCaffery, begins with the following fascinating statistics:


In tax year 2008, the Massachusetts Natural Heritage and Endangered Species Fund received $216,544 in taxpayer money to protect threatened species, such as the bald eagle and the marbled salamander. The state's Organ Transplant Fund received $117,654 to help patients who need new kidneys and hearts pay for medical care. And the Massachusetts AIDS Fund got $112,939 for research and education relating to the disease.  The functions of these programs differ widely, but they all share one remarkable feature.  The taxpayer dollars were not wrenched from the pockets of the Commonwealth's residents.

The gist of the article is that those who object to higher taxes would not necessarily decline to pay more taxes when asked to do so.  According to the story, research conducted by economists at the University of Texas at Dallas suggests that many people would in fact voluntarily raise their tax bills if they are given the opportunity to do something that donors to charity have long done – direct the use of their transfers to some degree.  When tax revenues are sought to support specific governmental projects, research reportedly shows that people are almost as likely to pay additional taxes to support such projects as they are to donate sums to charity.  The research suggests that people do not necessarily object to paying more to government.  Rather, they want some assurance that taxes will be spent for purposes that the taxpayers value.  The obvious potential benefit of facilitating voluntary tax payments is enhanced funding of worthy public projects.  The article also notes the possible negative effects of relying on voluntary taxes, such as enhancing the political influence of the wealthy and shifting responsibility for making allocations of public resources from governmental decision makers to private hands. 

These concerns are, of course, familiar to scholars of tax law and charity law, because analogous points figure prominently in debates surrounding the charitable contributions deduction and tax expenditures.

JRB

June 28, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 23, 2010

Corporate Philanthropy Trends, Predictions, and Recommendations Report

The Committee Encouraging Corporate Philanthropy (CECP) has issued a report titled Shaping the Future: Solving Social Problems through Business Strategy.   The report seeks to answer two questions:

1. What will the next decade look like, and what are the implications for corporate involvement in solving social issues.

2. How can corporations position themselves now to maximize their profitability and societal impact?

CECP created the report in collaboration with McKinsey & Company, which interviewed CEOs and thought leaders as well as polling CEOs who attended CECP's annual conference.  Report highlights include:

  • Global Forces. McKinsey has identified five game-changing trends that will affect the future of the global economy: talent shortages, shifting centers of economic activity, a new era of government action, increased scarcity of natural resources, and new levels of technological interconnectivity.
  • Key Uncertainties. At the same time, business leaders face two key uncertainties about the future: the level of proactive action on behalf of companies and the expectations that are placed upon the private sector.
  • Scenarios for the Future. These certainties and uncertainties combine to create four possible scenarios for 2020: the optimal being “Sustainable Value Creation” and the worst being the “Vicious Circle”. Sustainable Value Creation is a self-reinforcing state of trustworthy, pro-social corporate behavior that simultaneously delivers bottom-line results, provides competitive advantage, and leads to community benefits. The consequences for inaction are severe for both business and society.
  • Capturing the Opportunities. Both business and society have responsibility for which scenario ultimately is realized; both have ownership over the future. Sustainable Value Creation requires new forms of collaboration across sectors to achieve results. This report shows how corporations are shifting their view on globalization and economic development – they will work in partnership with nonprofits and government in the future, taking a leadership role on ethical and moral issues for positive business and societal outcomes.

According to CECP's website, Paul Newman and others helped found the now the ten-year old organization, its Board of Directors include numerous CEOs of well-known companies, and its initial funders included a number of major private foundations.

LHM

June 23, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Friday, June 18, 2010

Feds Report Volunteering Surge in 2009 as Well as Other Volunteering Data

The federal Corporation for National & Community Service issued its annual Volunteering in America reportthis week, finding that 63.4 million Americans volunteered in 2009 by contributing 8.1 billion hours of service.  These figures represented an increase of 1.6 million volunteers over 2008, the largest single-year increase since 2003, and repesenting an increase in the volunteer rate from 26.4 to 26.8 percent.  For purposes of the report, volunteers are defined as "adults ages 16 or older who performed unpaid volunteer activities for or through an organization."  The report provides either directly or through its website a wealth of information regarding volunteer demographics, geographic locations, and organizations served, including the ability to download the available data in multiple formats.

LHM 

June 18, 2010 in Federal – Executive, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Thursday, June 17, 2010

Reports Present Differing Views of Foundation Grantmaking in Response to the Great Recession

Two recent reports present sharply divergent views regarding whether and to what extent grantmaking foundations have stepped up to the plate in response to the recent economic downturn. 

The Philanthropic Collaborative, a new coalition of charities, foundations, and elected officials, released Responding in Crisis: An Early Analysis of Foundations' Grantmaking During the Economic Crisis.  Based on a non-representative sample of approximately 2,700 grants totaling $472 million, this report concludes that foundations have "quietly, expertly, and quickly . . . supported American individuals, families, and communities in need," including by sending more grants to states experiencing relatively more severe mortgage delinquency problems and an increasing proportion of grants and overall grant amounts to states with high unemployment. 

In contrast, the Center for Philanthropy released A Time of Need: Nonprofits Report Poor Communication and Little Help from Foundations During the Economic Downturn.  This report on 6,000 grantees of 37 foundations from across the country concluded that the grantees both "do not perceive funders to have communicated their responses to the economic downturn clearly, if at all" and "report that funders have offered them little useful help in responding to the challenges of the downturn." 

Given the different study methods and subjects, not to mention their limited data, the studies are not necessarily inconsistent but instead may reflect two very different perspectives, that of grantors versus that of existing grantees, on what is broadly the same issue.  The key questions are therefore which perspective is the better one, and is their an even better, third perspective from which to look at this issue

LHM

June 17, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Hudson Institute Releases 2010 Index of Global Philanthropy and Remittances

The Hudson Institute's Center for Global Prosperity released the 2010 version of its annual Index of Global Philanthropy and Remittances (executive summary (4+ MB); full report (13+ MB)).  The report reviews financial support from the United States and other countries to developing countries in 2008, including government aid, private aid, and remittances, as well as investment.  Among its findings, the report notes that U.S. private philanthropic support held steady in 2008 at $37.3 billion, as compared to $36.9 billion in 2007, and was $10 billion more than U.S. government official development assistance.  Both figures were dwarfed by remittances from people in the U.S. to relatives and friends in the developing countries, which reached its highest level ever in 2008 at $96.8 billion.

LHM

June 17, 2010 in International, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 16, 2010

Giving USA 2010 Report Shows First Decline Since 1987

USA Today reports that the annual report on charitable contributions in the United States shows such giving declined by 3.6 percent in 2009 to $304 billion.  The decline is the first reported since 1987 and only the second since the report began in 1956.  The report is available for purchase from the GivingUSA Foundation and from the Center on Philanthropy at Indiana University.

UPDATE:  A Wall Street Journal blog entry notes that besides showing a decline in giving, the report also shows a number of shifts in giving, most notably away from public-society benefit organizations and toward international aid.  Whether these shifts reflect long-term trends, however, is not discussed.

LHM

June 16, 2010 in In the News, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 15, 2010

Study of Donors Reveals Relative Performance Has Little Impact

Hope Consulting of San Francisco, supported by the Aspen Network of Development Entrepreneurs, the Metanoia Fund of Boston, the Rockefeller Foundation, and the William and Flora Hewlett Foundation, recently issued a report on charitable giving.  Titled Money for Good: The US Market for Impact Investments and Charitable Gifts from Individual Donors and Investors, the report explored three key questions through a study of donors with incomes over $80,000:

1. How can nonprofits more effectively obtain donations from individuals?
2. How can a greater share of donations go to the highest performing nonprofits?
3. What is the market potential for impact investing and how can it be realized?

As noted in a Chronicle of Philanthropy article about the report, one of the more interesting findings is that while these donors say they want to support more effective charities, they are rarely willing to to either research or base their giving decisions on performance.  These results suggest that simply requiring more disclosure of information about nonprofits is not enough to better inform donors; instead, it is also important to determine how such information can be delivered to donors such that they receive and use it.

LHM

June 15, 2010 in In the News, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Johns Hopkins Civil Society Center Issues Innovation & Performance Measurement Report

The Johns Hopkins University Center for Civil Society Studies recently issued a report on innovation and performance measurement by nonprofits in four fields: children and family services; elderly housing and services; community and economic development; and the arts.  Here are the key findings and recommendations:

I. Innovation Extensive but Facing Impediments
• The vast majority (82 percent) of all Sounding respondents reported implementing at least one innovative program or service over the past five years.
• Although innovation is widespread within the nonprofit sector, it is not as widespread as it could be.  Thus:
    - More than two-thirds of the organizations reported having at least one innovation in the past two years alone that they wanted to adopt but were unable to.
    - The vast majority of all respondents attributed their inability to adopt a proposed innovation to lack of funding.
    - Especially problematic was respondents’ inability to move promising innovations to scale due to lack
of “growth capital,” narrow governmental funding streams, and the tendency of foundations to encourage
innovations but then not sustain support for them.

II. Performance Measurement Widespread but Limited
• A striking 85 percent of all Sounding respondents reported measuring the effectiveness of at least a portion of their programs/services on at least an annual basis, and two-thirds do so for at least half of their programs or services.
• Although output measures are the most common measurement technique (used by 95 percent of groups doing any type of performance measurement), nearly 70 percent of organizations that measure program effectiveness reported using outcome measures, the measurement type increasingly promoted by experts in the field.
• Still, only minorities of respondents noted using the kinds of techniques that assessment experts insist are needed to make such measures truly convincing such as random assignment comparisons and social rate of return estimates.
• The major barriers limiting more extensive use of performance measurements are resource constraints—notably, lack of staff time and expertise and the high cost associated with good evaluation.

III. Recommendations for Moving Forward
Respondents offered a range of ideas to help overcome the remaining barriers to nonprofit innovation and adoption of performance measurement:
• The vast majority of respondents called for better tools to measure qualitative impacts, less time-consuming measurement tools, tools with clearer definitions, additional resources to support their measurement and research functions, greater help from intermediary organizations in fashioning common evaluation tools, and training for personnel in how to use them.
• Sizable proportions of respondents also urged the new White House Office of Social Innovation to reduce barriers to funding including burdensome reporting requirements on federal programs, the lack of coordination
among federal agencies and departments, the lack of long-term financial support, and the lack of funds for program evaluation.

LHM

June 15, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Thursday, June 3, 2010

Did Nonprofit Investment Strategies Worsen Economic Crisis?

A report by the Tellus Institute argues that risky investment strategies by big nonprofit endowments played a role in making the economic crisis worse.

The report studied the investment strategies at six privately endowed New England colleges and universities: Boston College, Boston University, Brandeis University, Dartmouth College, Harvard University, and MIT. The report finds that the aggressive investment strategies used by the managers of the endowments at these institutions exacerbated the economic crisis.  Here are a few of the reports' conclusions:

  • By engaging in speculative trading tactics, using exotic derivatives, deploying leverage, and investing in opaque, illiquid, over-crowded asset classes such as commodities, hedge funds and private equity, endowments played a role in magnifying certain systemic risks in the capital markets. Illiquidity in particular forced endowments to sell what few liquid holdings they had into tumbling markets, magnifying volatile price declines even further. The widespread use of borrowed money amplified endowment losses just as it had magnified gains in the past.
  • College governing boards have failed to guarantee strong oversight of the Endowment Model by relying heavily upon trustees and committee members drawn from business and financial services, many from the alternative investment industry.  . . . To take only one example, Dartmouth’s board has included more than half a dozen trustees whose firms have managed a total of well over $100 million in investments for the endowment, over the last five years. Even when there are not potential conflicts of interest, the oversight abilities of many trustees and investment committee members seem to have diminished because of their professional connections to the shadow banking system or their corporate directorships.
  • Although they had little responsibility for endowment management or oversight, students, faculty, staff, alumni, and local communities are bearing the brunt of the Endowment Model’s consequences: from widening pay inequity to demoralizing layoffs, hours and benefits cuts, and hiring and pay freezes; from program cuts to reduced student services; from construction delays and stalled economic development to forgone tax revenues. Because these six schools are among the very largest employers in their communities, the widening pay gap between over-compensated senior administrators and more modestly compensated staff not only distorts pay structures on campus but also deepens social inequality within surrounding communities.

Perhaps more surprising is that the report directly attacks tax-exemption as part of the problem. In essence, the report argues that tax-exemption and its related tax benefits (e.g., the contributions deduction) facilitated the risky investment strategies.  Again, a few quotes:

  • As major property holders in their communities, the six schools in our study own tax-exempt real estate worth more than $10.6 billion, yet collectively they made negotiated payments in lieu of taxes (PILOTs) totaling less than 5% of the $235 million in taxes they would owe if they did not have the privilege of their tax-exempt status. Some schools make no PILOTs whatsoever.
  • Gifts to endowment are tax-deductible to donors, and investment gains and income that endowments generate are tax-exempt. Endowment managers can therefore rapidly trade without considering the potential tax consequences of their investment decisions.
  • Tax-exempt bonds have allowed colleges to borrow at low interest rates while keeping their endowment assets fully invested in high-risk, high-return investments. Endowments pocket the difference in yields tax free, while investors in tax-exempt bonds also receive favorable tax treatment on income. Congressional leaders and the Congressional Budget Office are exploring how colleges benefit from this indirect tax arbitrage when they use tax-exempt bond proceeds for operating expenses in order to use other investments to chase higher rates of return. Because of the excessive levels of illiquidity in their investment portfolios, colleges have increasingly turned to the bond markets for cash.

Not surprisingly, the report recommends wholesale changes in endowment investment strategies. "Endowments need to foster greater resilience in times of crisis by investing in assets with greater liquidity and lower volatility, and a portion of excess returns generated during good times needs to be set aside in rainy-day funds for the bad. But more fundamentally, endowments need to pursue “responsible returns” that remain true to their public purpose and nonprofit mission as tax-exempt institutions of higher learning. By integrating sustainability factors into investment decisions and becoming more active owners of their assets, endowments can begin to seize the opportunities of long-term responsible stewardship."

While I don't necessarily agree with all the points made in the report, it does generate a lot of food for thought.  For example, the decline in value of endowments has been reported to death, but the press has generally ignored the collateral consequences (layoffs, salary reductions, etc.) that the endowment "crashes" caused in their local communities.  On the other hand, the big profits made in the boom years almost certainly helped create a boom in the local economies at the time.  So, I wonder: should tax-exempt organizations adopt more conservative ("sustainable" in the words of the report) investment strategies because of their quasi-public role?  I frankly don't know about this one; I'll have to cogitate on it some . . . 

JDC

June 3, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 25, 2010

Fenton Survey

Fenton has released the 2010 Fenton Forecast, the results of a survey of 1,000 charitable donors that looks at public perspectives on the leadership and effectiveness of nonprofits.  The survey reveals that most Americans have a positive view of nonprofits but that a majority will give less to nonprofits next year.  The survey provides interesting information about technology (nonprofits need to increase use of social media), the ways people judge nonprofits (stewardship of funds, trustworthyness, and the provision of valuable services are the most important factors), and which nonprofits are perceived as being the most effective (the top 3 are the American Diabetes Association, the Special Olympics and the Red Cross).  To see the survey, go here.

sng

May 25, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Saturday, May 15, 2010

Foundation Center Reports Grantmaking Down by 8.4 Percent in 2009

Logo_foundation_center In its annual Foundation Growth and Giving Estimates report, the Foundation Center makes the following key findings:

The worst economic crisis since the Great Depression resulted in the biggest reduction in U.S. foundation giving on record. In 2009, the nation’s more than 75,000 grantmaking foundations cut their giving by an estimated 8.4 percent, or $3.9 billion. This was by far the largest decline in foundation giving ever tracked by the Foundation Center.

Despite its unprecedented severity, the reduction in 2009 foundation giving could have been worse. Among factors helping to moderate the overall decline in giving were the decision of a significant number of funders to reduce their operating expenses and/or use their endowments to shore up their giving during the crisis; increased giving by the Bill & Melinda Gates Foundation; continuing gifts and bequests from donors into new and existing foundations; and the practice of asset-averaging by some foundations, which reduces the impact on giving of year-to-year fluctuations in asset values.

Findings from the Foundation Center’s annual “Foundation Giving Forecast Survey” suggest that 2010 foundation giving will remain flat—a prospect that would have seemed improbably optimistic at the nadir of the market just over one year ago. Should poor housing sales, increasing oil prices, persistent unemployment, or other unforeseen factors not derail the economic rebound that began late last year, it appears likely that foundation giving will show positive, albeit very modest growth in 2011.

LHM


 

May 15, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Report Challenges Nonprofit Hospitals on Charity Care Transparency

Two Boston area advocacy organizations that promote greater access to health care released Best Kept Secrets: Are Non-Profit Hospitals Informing Patients About Charity Care Programs challenging whether charity hospitals are complying with American Hospital Association "Communicating Charity Care and Financial Assistance Policies" guidelines designed to ensure patients are aware of charity care policies.  In the report, the Access Project and Community Catalyst described survey results for 99 randomly selected nonprofit hospitals.  They found that while most (85) of the hospitals mentioned the availability of charity care on their websites and/or during telephone calls with surveyors, fewer than half (42) provided application forms, only a quarter (26) provided information who qualified for charity care, and only a third (34) provided information in a language other than English.  The report recommended, among other measures, that states consider enacting laws and regulations designed to increase the transparency of charity care policies and that both the federal and state governments provide greater oversight to ensure compliance with all charity care related legal requirements, including compliance with the new transparency obligations contained in the recent federal health care reform legislation.

LHM

May 15, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Friday, May 14, 2010

IRS Issues Colleges and Universities Interim Report

53478004 The Internal Revenue Service released a long awaited interim report on the responses it received to a questionnaire sent to a sample of 400 public and private nonprofit colleges and universities.  Among the highlights:

  • The report provides results for the 177 private institutions and 167 public institutions that responded.  Of the remaining schools in the sample, 31 indicated they were not the type of organization targeted by the survey (e.g., not tax-exempt or only offering a two-year degree), 11 provided system-wide responses and were not included in the interim report, one was removed because it had been assigned to an incorrect size category, and 13 schools did not respond.  The 13 non-respondents were referred to Exempt Organizations Examination (memo to self: always respond to letters from the IRS).
  • Top executive compensation ranged from an average of $428,000 (median $361,000) for large schools (15,000 or more students) to an average of $202,000 (median $174,000) for small schools (fewer than 5,000 students).  For the small schools the highest paid person other than an officer, director, trustee, or key employee was most often a faculty member (approximately 50% of the time) while at the large schools it was most often a sports coach (43%), followed in frequency by a faculty member (34%).
  • Most although not all schools followed commonly recommended (including by the IRS) governance practices such as using the rebuttable presumption of reasonableness process to set at least some executive compensation (55% of the 122 small private schools that responded to this question, 71% of the 28 medium private schools, and 63% of the 8 large private schools), having a writing conflict of interest policy (over 80% in all categories), and making financial statements publicly available (over 75% in all categories).
  • Almost all schools had an endowment fund, with target and actual spending rates of approximately 5 percent across the three size categories the IRS applied.  An interesting question is whether this finding provides additional support for a mandatory payout rate - is this too little? - or undermines such a requirement - enough is already being spent without a legal mandate.  (Not surprisingly, Senator Grassley has an opinion on this point.)
  • A significant majority of the schools reported having related entities, with a large minority having at least 50% control of one or more such entities.
  • Most schools had international activities, including educational programs outside the United States and foreign investments (often through investment entities - can you say "blocker corporation"?).

The IRS launched more than 30 examinations based on responses to the questionnaire, focusing primarily on executive compensation and unrelated business income issues, including the previously blogged about audit of Harvard University.  The final report will include additional analysis and further information relating to responses.

For press coverage, see USA Today.

LHM

May 14, 2010 in Federal – Executive, In the News, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 2, 2010

Study Shows Political Advocacy Donations Reap Big Benefits

According to a report issued by the National Committee for Responsive Philanthropy, and discussed in today's L.A. Times, it is actually not a bad idea to give money specifically for political causes.  The report, available in full here, "estimates that for every dollar invested in the work of a selection of advocacy groups [in Los Angeles] there was $91 in benefits to local workers."  Wow!  Imagine getting those kinds of returns on any investment.  Put in one dollar, get back almost a hundred.  No wonder people are so concerned about the influence of corporate dollars on our political process. 

dkj

March 2, 2010 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Friday, January 29, 2010

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

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

LHM

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

Thursday, January 28, 2010

NACUBO Reports Endowments Down 18.7 Percent in FY2009

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

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

For additional coverage, see:

Boston Globe:  Harvard Endowment Leads Others Down

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

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

USA Today:  College Endowments Lose 18.7% on Returns

Wall Street Journal:  College Endowments Plunged in 2009

LHM

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

Wednesday, January 27, 2010

Urban Institute Center on Nonprofits & Philanthropy Recent Reports

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

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

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

LHM

 

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

Tuesday, January 12, 2010

Anything Can be Tax Exempt: More on Pilots too

Students at Stanford University Center on Philanthropy and Civil Society recently completeled a study in which they concluded that the IRS will approve just about any application for tax exemption, regardless of the purpose, as long as the organization complies with the private inurement, private benefit and political activity restrictions.  The study is appropriately entitled "Anything Goes" and is summarized below:

The IRS approved more than 50,000 new organizations as 501(c)(3)nonprofits in 2008. It has approved more than 50,000 organizations for every year of the past decade, leading to a massive growth in the nonprofit sector. The number of 501c3s has grown by more than 50% in just a decade. What kinds of organizations are most often approved? How strict or lax is the approval process?
 
Stanford’s Center on Philanthropy and Civil Society (PACS) new report examines the approval of nonprofit status by the IRS. The report is based on research conducted by faculty co-director Rob Reich over the summer with two terrific students, Lacey Dorn and Stefanie Sutton.
 
They found that the approval rate in 2008 was above 98%. And they found that some of the organizations that had been approved are truly bizarre. The report is entirely descriptive, but the findings raise some important questions, I think, about the nonprofit sector in the United States:
 
1. Do we need 50,000 new 501c3s every year? Do we have too many nonprofits?
 
2. Need an organization demonstrate anything beyond the so-called “non-distribution constraint” — no profits to shareholders — in order to obtain nonprofit status? Does the charitable sector not have any substantive content to it beyond not-for-profit?
 
3. Have Americans conflated the undeniable importance of freedom of association with an entitlement to tax benefits?
 
4. Is the IRS the best agency to issue determinations of nonprofit status?

The study bemons the fact that there is no apparent consistent thread regarding the definition of "charitable" for tax exemption purposes and lists 20 approved tax exempt organizations the center considers "bizarre" and implicitly not worthy of tax exemption.  My reaction, of course, is that the students are laboring under a fundamental misunderstanding of the meaning and purpose of tax exemption.  Tax exemption is certainly not a governmental stamp of approval for the particular activity; indeed, tax exemption is often conceptualized as a means of encouraging activities that most people might view as "bizzare" (though that is not the only justification offered from time to time).  There is insufficient political or financial support to gain government support for what might turn out to be a good idea over time.  Anti-slavery and women's sufferage were once thought to be bizzare activities.  Outlawing the consumption of animals seems bizzare to some people but supporting PETA through tax exemption is still a good idea.  Which, by the way, brings me back to my debate with John Columbo regarding the propriety of PILOTS. 

Its hard to essentialize someone else's argument so I apologize in advance if I get this wrong.  Colombo's primary assertion, as I understand it, is that nonprofits should not be exempt from contributing to the local government fisc because the benefits they provide are no more greater than could be obtained from a taxable organization.  This, I think, is the crux of our difference.  In fact, I am surprised because if the argument works on the local level, it necessarily works on the federal level.  I think I am correct that Clombo supports tax exemption for some activities, though he would not limit exemption to those that necessarily serve the poor.  Yet the argument he relies on to subject charities to local property taxation is that local governments can get the same benefit from taxable entities without the loss in tax revenue.  If true, tax exemption is a wasted subsidy in any instance.  The overlooked point, I think, is that nonprofits (at least theoretically) must recycle their excess revenue into a public rather than private purpose.  So it is not true that local governments get the same benefit from a taxable entity.  We must necessarily speak on the theoretical level, by the way, because most certainly there are nonprofits that do not devote their excess revenue to the public good the way we would hope.  This is a matter of enforcement and, if CMU is not operating for the purpose of public benefit -- even beyond the fee based provision of edcuation -- it ought to lose its exemption.  But CMU does not prove the case.  One of the problems in this debate is that Colombo is expressing understandable populist outrage at the exhorbitant cost of attending CMU, a cost that likely precludes all but the most wealthy from attending.  Agreed and maybe Colombo is moving closer to the notion that tax exemption should be limited to organizations that extend goods and services to the poor.  Even if the comparison should be between the benefits provided by tax exempt and taxable entities, it is theoretically false that taxable entities provide the same benefit.  Even a respectable taxable entity does not legally obligate itself to improve the community, though it may do so as an incidental or unintended consequence of its pursuit of profit. What Hansman called the "nondistribution constraint" -- and actually got famous for coining that economic mumbo jumbo -- is that very thing that makes tax exempt entities particularly beneficial, certainly more than taxable entities and thus, arguably entitled to a tax concession.  Taxable entities need never lift a finger to make life better for anybody.   They can sell cigarettes or pornography or soft drink or hamburgers.  Theoretically, then, it is not true that any taxable entity invariably or even likely provides as much benefit to the community as a tax exempt entity.  It is only true if we do not believe that the nondistribution constraint necessarily results in public benefit (which may very well be the case as a pragmatic matter, but we are dealing with the theoretical basis for tax exemption). 

The discussion necessarily allows us to hone and refine our positions so I freely admit that a vacant lot is less beneficial than a lot occupied by any legal taxable entity, even one that may contribute to obesity or cancer.  But occupation by a taxable entity employing the exact same number of persons as a tax exempt entity does not provide the same marginal increase in public benefit that has always justified tax exemption.  The extortion that PILOTS represents is ultimately an attack on the belief that legally mandated community benefit is of value sufficient to justify tax exemption.  It is an expression of political disbelief.  If Colombo is correct that taxable entities provide as much public good as tax exempt entities, then we ought do away with tax exemption altogether. 

Stanford's study is appropropriately relevant to Colombo's argument because it points out that just about anybody can claim they are benefitting the public.  That, though, is a matter of policing.  If the claim is true, tax exemption is an appropriate trade though it is hard to know if each side receives exact value for value.  If it is false, exemption should be withdrawn not whittled away in a piecemeal fashion that provides cover to local politicians who have not the courage to cut costs or raise taxes.  And certainly not in a way that lends credence to the idea that community benefit is of no value.

dkj

January 12, 2010 in Studies and Reports | Permalink | Comments (1) | TrackBack (0)