Tuesday, July 8, 2014

Where do LeBron James' Loyalties Lie? Look to his Foundation's Spending

It's hard to escape the constant discussion and conjecture about LeBron James' basketball future. While I have nothing serious to offer about that conversation, I will at least seek to address the question about his loyalty to Ohio. What better way to consider where loyalties lie than to follow the money trail, and The LeBron James Family Foundation gives us such an opportunity. Using the IRS Form 990 filings for the foundation since his departure from the Cleveland Cavaliers, I categorized each year's program expenditures based on their target recipient: national programs, state/local programs, or other unidentified targets. Although some targets cannot be identified from the public data, a pretty clear picture nonetheless emerges: while LeBron's skills may have been brought to South Beach in 2010, his charitable endeavors have remained and even become more focused in Ohio. The percentage breakdown for each year is summarized in the following figure.


Am I saying this is evidence of King James' possible basketball future? No, I have no idea about that. What I am saying, though, is that it's clear that wherever he plays basketball, his real loyalties remain in Ohio.

Wednesday, June 11, 2014

On the Criticism of the Gates Foundation

While the Bill and Melinda Gates Foundation has been subject to public and media criticism before, the recent uptick in critical coverage (starting with this article in the Washington Post) on its efforts to influence education policy are noteworthy. Also noteworthy is the fact that shortly after the round of criticism, the foundation's stance took a sudden turn, with a call for delay in implementing "Common Core" education standards.

The purpose of this post is not to add or refute criticisms of the Gates Foundation's priorities or policies (I will leave that to others).  Rather, it is an attempt to provide some perspective on these criticisms.  In a world where many nonprofits face consistent scrutiny and pressure, the Gates Foundation has actually largely avoided the public eye.  Perhaps the nonpartisan mission of the organization and giving attitude of the founders has something to do with this.  Nonetheless, the lack of criticism is striking.  To provide context, consider these 8 nonprofits in the public eye (3 of which are private foundations): ACLU Foundation; Ford Foundation; Gates Foundation; Heritage Foundation; Livestrong; NRA; Planned Parenthood; and the Walton Family Foundation.

The next figure shows each of these organization's total assets (in millions) as of their most recent Form 990 tax filing.


The message: Gates has much more potential influence than any of these thanks to its wealth, with more than 100 times the assets of ACLU, Heritage Foundation, Livestrong, NRA, or Planned Parenthood.  Yet, many of these are constantly criticized and second-guessed (some seemingly have entire cable channels devoted to critiquing them).  For a rough view of this level of scrutiny, consider the number of google hits for a search on each organization's name and "criticism". The next figure presents the results of this exercise.


The message: despite its size, Gates receives much less criticism than most of the others.  In other words, what is surprising is not the recent spate of criticism and scrutiny the Gates Foundation's policies have garnered, but that it has taken so long.  Those at the Gates Foundation should expect more in the way of scrutiny and criticism, not less, in the coming years.  Their size and potential influence make this virtually inevitable.

Wednesday, May 28, 2014

Is There a Life Cycle for Popular Charities?

Recent years have seen several charities rise quickly to the top of public awareness. It's anecdotal evidence, but it seems many of these popular charities follow a similar course: their rapid rise in popularity first brings quickly rising donations; next, over time the public's obsession turns into scrutiny; the scrutiny, in turn, breeds disenchantment with the organization and donations dry up.

The next chart demonstrates this point using four recent cases, plotting each organization's gifts, grants, & contributions as a percentage of that in their peak year. The pattern is remarkably similar though the underlying story of each is, of course, very different.
Gifts, Grants, & Contributions as a Percentage of Peak Amounts
Does this pattern signal an overly fickle public? Or, does it represent a public slow to examine an organization before supporting it? I'm not sure, but maybe it does signal to other charities that find themselves in the spotlight that just because the public is fully supportive doesn't mean they won't soon be harder to persuade.

Monday, May 19, 2014

Wounded Warrior Project Growth

The incredible growth of the Wounded Warrior Project in one chart:

Amounts come from each organization's IRS 990 filings, Schedule A Part II(A)(1)

Thursday, May 8, 2014

It's Getting Surreal in the Whole Foods Parking Lot

As I approached my local Whole Foods parking lot, I saw what is now becoming a familiar sight, a clothing donation bin. This time, my curiosity got the better of me, and I wondered what happens to these donations?


Monday, April 28, 2014

Do Actively Managed Endowment Funds Really Perform Better?

Perhaps you've seen the headline that is making rounds and has investment managers elated – actively managed endowment funds outperform their peers. The conclusion comes thanks to a study by the Commonfund Institute (available here) that examined data from the NACUBO-Commonfund Study of Endowments Dataset (covering 2006-2013).

While the conclusion is an intriguing one that runs counter to conventional wisdom about active vs. passive investment approaches, I don't think the conclusions are supported by the methodology. To elaborate on this, I will first explain what the study's approach was and then consider its flaws.

Wednesday, April 23, 2014

A Second Look at Zuckerberg's Philanthropy

After two consecutive years of substantial gifts to the Silicon Valley Community Foundation (SVCF) by Mark Zuckerberg & Priscilla Chan (hereafter, Z&C), many were ready to announce a new wave of philanthropy where the wealthy put their resources to use more quickly than the traditional private foundation route. As I discussed at the time, there is much still to be known about their gifts to determine the extent of the departure from tradition. In recent weeks, however, the pendulum appears to have shifted the other way, with Mark Benioff dismissing gifts by Z&C as little more than a tax writeoff.

While I still contend that time will tell how transformative the Z&C approach is, some early data is suggestive of their gifts being very similar to gifts to a private foundation (and further away from a standard public charity or even the average donor advised fund).

Consider the spectrum of possibilities: at one end is the expectation that all donations are immediately put to use, while at the other is the Benioff contention that the donations are not being put to use at all. The question is where in this spectrum do the Z&C gifts lie?

The short answer is we don't yet know. But, that won't stop me from making a few educated guesses based on available data.

Here are 3 benchmarks to consider:
1. What do private foundations payout on average?
2. What do other donor advised funds (DAFs) payout on average?
3. What does the SVCF payout on average absent the Z&C gifts?

The next figure compares the 2013 payout rate at SVCF with the three benchmarks.


The figure suggests that the Z&C gifts have pushed SVCF away from the higher DAF payouts to behave more like a private foundation in terms of payout rates. And, as long as we're doing back-of-the-envelope calculations, one can even try to roughly infer the specific payout rate of the Z&C gifts in 2013. Take the average SVCF payout rate from 2008-2012 and apply it to the other assets under management in 2013 (approx. $2.728 bil). Compare that figure ($344 mil) to the actual payouts ($367 mil) to get an estimate of Z&C-related payouts ($23 mil) -- this represents about 2.4% of the value of the Z&C gift given at the end of 2012, a relatively low payout rate.

Taken together, the early evidence suggests that the new philanthropy ushered in by Z&C is much like the old philanthropy. But, as more information arrives on the evolution of grants and approaches of SVCF and its funds, much more can be said.

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Now, the fine print on the data:
1. The private foundation average (mean) comes from the most recent year of foundation payout data (2009) from the Foundation Center.
2. The DAF average comes from the Nonprofit Trust's 2013 Donor Advised Fund Report.
3. The SVCF payout figures come from the grants to assets under management (at year end) derived from their annual financial reports. The 2012 assets under management was reduced by the estimated amount of the Z&C gift since that gift was made at year-end and not available as a grant.
4. The estimated SVCF payout figure from 2013 is derived from their 2013 factsheet, with the 2013 assets again adjusted by the estimated amount of the Z&C gift at year-end.