Wednesday, January 14, 2015

Reconciling Claims About Spending by the Red Cross

As part of their examination of the American Red Cross' response to Superstorm Sandy and Hurricane Isaac, NPR and ProPublica noted a discrepancy between claims by the organization about its spending and what the financial statements bear out. In particular, it was noted that even though it incurs substantial fundraising costs, the Red Cross often repeats the claim that "91 cents of every dollar that's donated goes to our services." Of all the criticisms of the organization, this one seems to have gained the most traction, even leading to calls for additional oversight and demands for answers from Sen. Chuck Grassley. In what follows, I seek to provide a simple reconciliation that supports the view that the claims made by the Red Cross are true but at the same time inaccurate. To do so, I make use of the 2013 fiscal year financial statements for the organization.

Wednesday, December 17, 2014

Nonprofit Financial Trends for 2014 & 2015

Perhaps against my better judgment, I made several predictions in this blog one year ago for what I thought may transpire in 2014. Here goes an assessment of their accuracy.

1. The Tax Deduction for Charitable Contributions would Remain Unchanged
Ok, this one was pretty easy. Despite several efforts for serious reform, in the end, nothing notable was undertaken. Talk of new tax reform has begun anew, and my best bet is that this prediction will hold once again in 2015.

2. Efforts to Expand Lending by Nonprofits to Americans in Need would Take Hold
This prediction was largely wrong. True, cash transfers and lending have expanded in small bursts in the US, but nothing that would constitute a sweeping change of charities' approaches to poverty. And while I suggested payday and other short-term lending would be an area ripe for nonprofits' help, a push for the US Postal Service to fill this void seems to have gained more traction. This one may take some time.

3. Increased Efforts to Regulate Charity Telemarketing would be Implemented
This was also largely a bust. True, several state attorneys general have sought to expand rules to limit abuses, but nothing sweeping has been undertaken yet. This prediction too may need time, though much uncertainty remains.

4. Donor Advised Funds would Face Added Requirements
No doubt that this one was wrong, at least for 2014. I thought that the notion that private foundations can meet their own distribution requirements by giving to Donor Advised Funds would force a change, but that seems unlikely. However, the massive expansion of money in Donor Advised Funds has brought the issue to the forefront and with recent critiques in The New Yorker and ProPublica, the push for regulation is likely to gain steam.

5. Legal Challenges Will Require Churches to File Form 990s
I suspected one of the two big legal challenges to the policy that churches are exempt from filing their financial statements with the IRS would succeed. One (the American Atheists' suit) has been dismissed; the other (the Freedom from Religion Foundation's suit), has made it further by surviving a motion to dismiss but is still in early stages. This too may take some time to resolve.

In sum, my predictions were mostly off in terms of having notable resolution in 2014. However, several show signs of coming to fruition, so they may hold more promise as predictions for the coming years. Thus, meet my 2015 predictions, same as my 2014 predictions.

Sunday, December 7, 2014

Best Nonprofit Reads of 2014

Below are my favorite nonprofit articles this year, based on my biased interpretation of a biased sample.

This was undoubtedly a hard piece to write. The Red Cross is perhaps the most trusted charity in the US, and any effort to expose its flaws takes courage. The piece was fair and well-executed, and if it is taken as it should be, it will also lead to changes in the way the Red Cross operates going forward.
Every year, the NFL's nonprofit status comes into question, and this year was no exception; in fact, the voices appeared much louder this year. With all the writing complaining about the NFL using its nonprofit status as a tax dodge, this piece distinguished itself by considering the facts, even if they are less salacious. Weissman deftly explains how the NFL's nonprofit status came about and why it is unwarranted, while also recognizing that very little (if any) taxes are avoided by it.

This was a tough choice, only because Al Cantor and Ray Madoff have both written convincingly about the problems of donor-advised funds. So, I went with the most recent incarnation – it's best to view this as representative of the collective work of Cantor and Madoff in explaining the glaring issues with permitting donor-advised funds to continue unregulated. With more money finding its way into donor-advised funds, permitting tax deductions now for the promise of future charitable distributions, the problem will only escalate in years to come.
When it comes to providing pushback against conventional wisdom, Bill Schambra never disappoints. In this case, the target is the nonprofit management trend of strategic philanthropy. Schambra convincingly argues that strategic philanthropy, like innovative performance measurement trends among for-profits before it, suffers from a false sense of having all the answers. I view the piece as more than that in that it underscores the importance of skepticism for any new trends, especially those claiming to drastically change the management landscape.
It seems like everyone had something to say about the ice bucket challenge, and its unprecedented success. The articles ranged from advice on how others can replicate the viral reach of the challenge to shock-value critiques of the challenge (which seemed more about getting clicks than anything else). I found both of these extremes unconvincing to say the least. I would put Dan Pallotta's piece in another category – a means to use the success of the challenge to provide context for one's broader views on charity. Whatever you happen to think of Dan Pallotta's world view, you also have to admit this piece is a well-written and well-argued defense of it.

Monday, November 24, 2014

Ohio State vs. Michigan - How Do They Compare in Charitable Giving?

The Ohio State - Michigan rivalry is in full effect here in Columbus. To honor the rivalry, I thought I would see how the two schools stack up when it comes to charitable giving. Here's the tale of the tape...

(1) Statewide comparison

(2) Local comparison

And the winner is...The Ohio State University (not that I'm biased).

Thursday, November 20, 2014

The Clinton Foundation's 2013 Financial Statments

The Bill, Hillary & Chelsea Clinton Foundation (the Clinton Foundation) has now released its 2013 financial reports to the public.  Given the substantial public interest in all things Clinton, I thought I would discuss a few observations from these financials.

Tuesday, October 21, 2014

Do Donor Advised Funds Create a Double-Counting Problem?

Consider these headlines from the past week:

What do these headlines and the many more like them have in common? Yes, they show an important donation to a critical need. Beyond that, though, they also are technically incorrect. Why do I say this? What some (but not all) of the articles mention in the details is that the gift is not exactly from Zuckerberg and Chan, but rather from their donor-advised fund at the Silicon Valley Community Foundation. Seeing as how all of these news outlets also publicized their initial gifts to the donor-advised fund in the first place, this seems to me like double-counting (or in this case, double-publicizing) of donations. I say this not as a criticism of Zuckerberg and Chan (they deserve any publicity they get for their generosity, which is by any measure extreme) nor as a critique of journalists covering this news. Rather, I say it to highlight the inherent contradictions of donor-advised funds (DAFs).

Wednesday, October 8, 2014

Reconciling Views of Spending by the Wounded Warrior Project

As its popularity and size have grown, the Wounded Warrior Project (WWP) has seen added scrutiny, particularly of its finances. In response to accusations that it does not spend enough of its funds on helping wounded veterans, WWP has consistently stressed that in 2013 "80 percent of total expenditures went to provide services and programs for wounded service members and their families". At the same time, other outlets like ProPublica and the National Center for Charitable Statistics report data indicating the number is closer to 75 percent, whereas Charity Navigator and the Center for Investigative Reporting put the figure at around 55 percent.

In this post, my goal is not to consider whether WWP is spending its money appropriately or even which figure is the one that you should use. Rather, the goal is more modest – to provide a reconciliation of these figures so people can at least get a feel for what they represent.