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.

Wednesday, September 10, 2014

Livestrong's 2013 Financial Statements

Though much of the media spotlight on Livestrong has faded since the ignominious departure of Lance Armstrong, it remains an important charity focused on improving the lives of those with cancer. Since its rise was largely precipitated by positive publicity, however, many (including myself) have wondered what its future will hold. With the release of the organization's 2013 financial statements this week, we finally get a first real glimpse of how the Lance Armstrong scandals have affected the organization. Here are a few noteworthy items:

1. Livestrong's revenues dropped substantially after Lance Armstrong's January 2013 public confession, with total revenues down by 40.5% in 2013
  • Total contributions were down 25.8% (despite an over $6 million gift from Movember)
  • Royalties & licensing fees were down 58.9%
  • Special events (net) revenues were down 77.8%
  • Program merchandise and services sales (net) were down 84.7%
2. Livestrong's expenses were also curtailed but to a lesser degree, with total expenses reduced by 20.1%.
  • Salaries, wages, & benefits were down 6.4%
  • Legal and professional fees were down 18.9%
  • Advertising was down 2.8%
  • Grants were down 32.9%
  • Public awareness expenses were down 58.3%
  • Other expenses were down 15.4%
3. Despite the net loss of $6.9 million in 2013, the organization still maintained a net asset balance at the beginning of 2014 equal to $99.7 million, $64.7 million of which was unrestricted and undesignated. This suggests the organization could continue such losses for some time without running out of unrestricted funds. With the recent announcement that Livestrong has pledged $50 million to the University of Texas, however, something has to give.  That news portends a very thin financial cushion remaining – time will tell whether that pledge signaled a new financial strength for the organization or an effort to unwind its net assets and scale down continuing operations.

Wednesday, September 3, 2014

After the Ice Bucket Challenge: What to Look for in the ALS Association Financials

As the viral fundraising success of the Ice Bucket Challenge winds down, many have shifted their focus to inquire about how the ALS Association will make use of the windfall. For an organization that began the year with $20 million in net assets, the infusion of $100+ million of unrestricted cash represents a serious opportunity. Though there will be much speculation in the interim, I suspect our first real glimpse of their chosen strategy will come with the release of their next financial statements (year ended 1/31/15). Here I briefly describe what to look for.

Monday, August 18, 2014

Thoughts on the Criticisms of the Ice Bucket Challenge

The Ice Bucket Challenge, a grassroots social media effort to raise funds and awareness for ALS, has spread beyond anyone's expectations. And with popularity comes criticism. I have heard and read the criticism and, to be honest, find it largely unconvincing. Below I will discuss each of the primary critiques.

1. Dumping ice over one's head has nothing to do with ALS.
This critique takes many forms, but the gist is that we don't learn anything from watching people dump ice over their heads. The thing is that more traditional ways of getting people to learn about ALS are expensive, in part because ALS is not (or at least was not) at the center of the public view -- last year, attempts to educate the public about ALS consumed 32% of the ALS Association's expenses. True, you don't learn about ALS from the exercise, but it has led people to seek out information about ALS. As Adweek notes, searches about ALS are up since the challenge started (and more so than searches for the Ice Bucket Challenge itself). A look at Google Trends reveals a similar feature: public curiosity about ALS is way up and more prevalent than curiosity about the Ice Bucket Challenge.

2. The Ice Bucket Challenge is Slacktivism and Doesn't Help the Cause.
This was an early critique, that most people were just posting videos and not actually doing anything to help. It is exemplified by this Huffington Post article. Data has already debunked this one. Sure, not everyone is donating, but a lot of people are.  As of August 18, the ALS Association had raised $15.6 million in donations from 307,598 new donors since the Ice Bucket Challenge began, and both figures are sure to rise. For some context, note that unrestricted contributions to the ALS Association from the general public accounted for $5.8 million for the entire fiscal year 2013.

3. The Ice Bucket Challenge is Taking Funds from other Organizations.
In contrast to the previous one, this complaint is basically that the Ice Bucket Challenge is raising too much money.  The concern, as expressed by William MacAskill in Quartz, is a bit more subtle in that it argues that people giving as a result of the challenge are less motivated to give elsewhere. Rooted in the notion of "moral licensing", the idea is that people feel good about their gift to the cause and thus feel less of a need to do other good things. Besides presenting a rather depressing "zero-sum" view of kindness and charity, it also is applying an experimental result in one setting with the presumption it works in this one. I, for one, know that my giving to other organizations has not been affected by my giving in the Ice Bucket Challenge, and I suspect others feel the same. Even if it is true, it is worth noting that ALS is not a disease that typically lends itself to an enthusiastic public response and for which fundraising is otherwise very hard. So, if it is taking some from other, more visible, causes who will surely return to the center of public view, perhaps that's an acceptable tradeoff.

4. The Ice Bucket Challenge Wastes Water.
Yes, some have even complained that it is a waste of water. Sure, I guess that water is not being used for drinking, but we do plenty of things with water that are not necessary. I would find this view convincing only if those espousing it were protesting water parks and swimming pools too.

In short, I know the persistent ice bucket videos filling your newsfeed can be annoying. However, they are resulting in positive things in the fight against ALS. And, not to worry, in a couple of weeks your newsfeed will return to being filled with arguments about politics and quizzes about which Game of Thrones character you are.

Tuesday, July 29, 2014

Financing of the Noah's Ark Theme Park

For some time, Answers in Genesis (AiG), the group behind the Creation Museum, has had its sights set on establishing a theme park focused around a replica of Noah's Ark.  Originally viewed as a $172.5 million project, the park's plans have been revamped to entail a $73 million initial phase due to slower than expected funding. It is this first phase that has recently been submitted for approval of tourism sales tax rebates from the state of Kentucky. Given this background, I thought I would share a few thoughts about the project's finances, thoughts that are admittedly limited due to the paucity of publicly-available information. I have no interest in speaking about the underlying religious and scientific debates or whether tourism tax rebates are appropriate, but instead will stick to the accounting as it pertains to the project's funding...

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.

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.

Wednesday, April 2, 2014

What Happened to the Promise Keepers?

Remember The Promise Keepers? The organization was a religious, cultural, and even political phenomenon in the late 1990s and early 2000s. Now, as it launches another major endeavor, the organization seems to have lost its hold on the public zeitgeist. Though financial statements cannot tell the entire story of an organization and its trajectory, they are often informative. And, as they like to say, a few pictures are worth a few thousands words. With this in mind, below are presented four financial indicators for the organization since 2001, along with trendlines ...

(Amounts reflect gifts, grants, and contributions received from the Form 990 Support Schedule)
(Amounts reflect total assets from the Form 990 Balance Sheet)
(Amounts reflect compensation from trustees, officers, or key employees from the Form 990 list)
(Amounts reflect Other Salaries and Wages from the Form 990 Statement of Functional Expenses)

Monday, March 24, 2014

Lady Gaga's Charity Finances - It's Complicated

Media reports have swirled in recent weeks, skewering Lady Gaga's Born this Way Foundation for spending millions while only devoting "$5,000 to charity." Though it makes for a shocking headline, it turns out to be more complicated than that. Here are a few observations from a brief review the foundation's 2012 financial statements.
  • The claim that only $5,000 went to charity comes from the fact that the organization only provided grants of $5,000 to other organizations/individuals. However, the foundation never claimed to be in the business of providing grants, so this is surely an unfair benchmark. (What does the organization do, you ask? They are focused on developing youth programs and outreach to promote bravery, self-acceptance, and inclusiveness.)
  • The salacious media claims are bolstered by the fact that a large portion of their expenses were for legal fees ($406,552), consulting ($300,000), and web development/social media ($50,000). Seeing as how 2012 was the first full year of the organization, however, substantial startup and development costs shouldn't be too surprising. I'm not saying the money was well spent (I can't assess that), but it's possible.
  • Media coverage implies that the organization is wasting the funds donated by the general public, but it has been noted elsewhere that Lady Gaga herself provided much of the startup funding.
  • To the extent that the financial filings contain red flags, I would say it has more to do with management practices than any particular dollar amounts. As of the end of 2012, the organization listed 5 directors, 2 of which were considered "independent." A review of the directors reveals that 3 are relatives of Lady Gaga, while the two independent directors were the CEO and COO of Lady Gaga's management company. This hardly instills confidence that the organization is being run efficiently and independently.

Does all of this mean that the organization has been given a bad rap and is doing nothing wrong? Not necessarily, but if there is financial mismanagement, it is certainly not as extreme as the reports make it sound. That said, the organization would probably be wise to put in more independent oversight in its board to to give more assurances to a now-skeptical public.

Wednesday, March 19, 2014

Financial Trends of the Creation Museum

Answers in Genesis, the nonprofit that runs the well-known and highly-controversial Creation Museum, has seen its share of the spotlight in recent months, with a highly-publicized debate between Bill Nye and its CEO (Ken Ham) followed soon after by an announcement that construction of its new project, a Noah's ark-themed amusement park, would soon begin. Interestingly, much of the discussion of the organization and its efforts have centered around its finances, in particular its ability to generate sufficient funds for its latest endeavor.

I will not speculate about whether the organization has the financial ability to build and sustain its new project. Quite simply, too little information about that project's funding has been made available to say much of anything. However, all the publicity about the organization and its growth have led me to wonder about its broader financial picture. As the following figure shows, the trends don't quite match the media hype.

Answers in Genesis Annual Financial Performance
(Note: the data comes from the annual IRS Form 990 filings for Answers in Genesis from the inception of the Creation Museum until the most year made publicly available)

In short, no matter what benchmark one uses for revenues and/or profitability, the organization's finances exhibit a remarkably consistent (though not precipitous) decline. What, if anything, this portends for the new theme park I don't know for certain, but it's fair to say the finances don't alone demonstrate a mandate for the organization to expand.

Tuesday, March 11, 2014

The (Unfair) Demonization of PGA Tournament Charities

Many of the tournaments on the PGA tour are organized as 501(c)(3) charities. Both the PGA and the tournaments themselves have faced substantial criticism in recent months for the apparent lack of charity from these tournaments. This criticism has surfaced in a variety of arenas but reached a peak when covered by ESPN/ABC as part of their "Outside the Lines" series. To summarize the concern, ESPN and the nonprofit rating agency Charity Navigator noted that the PGA tournament charities have, on average, only given 16% of their expenses to charitable causes, far below the level of 65% recommended by Charity Navigator. Due to such low percentages, Charity Navigator rated every PGA tournament as receiving zero stars, its lowest rating.  Ken Berger, president of Charity Navigator summarized the outrage: "The lion's share of the money is going to big prizes, cash prizes for athletes and all the promotion around it, so it's really pathetic, actually...[e]very single taxpayer in this country ultimately is bearing the burden of having to pay the taxes for this wildly inefficient organization that's giving so little to charity." My question: is it really as bad as they say?

Tuesday, February 11, 2014

The Do-not-call List and Charity Telemarketing

As I have discussed here before, the national do-not-call registry exempts charities (and those who call on their behalf). This exemption may keep doors open for nonprofits seeking to raise money, but it has also opened the door for substantial criticism of the sector as a whole due to the inefficient telemarketing practices of a few. In this post, I'll step away from the efficacy of the nonprofit exemption to look more broadly on the effect the do-not-call list has had on nonprofit fundraising.

Tuesday, February 4, 2014

Should the Nonprofit Sector be Asking out of its Do-Not-Call Registry Exemption?

I realize nonprofits are reluctant to cut off avenues for fundraising, but do the powers-that-be in the sector ever consider that...

Perhaps the nonprofit sector should be asking out of its exemption to the do-not-call registry. Sure, it may mean some funds are missed out on, but it may also mean that the sector is better protected against telemarketing practices that can undermine its reputation.

Monday, January 27, 2014

Five Myths about the NFL's Nonprofit Status

As the Super Bowl approaches, the National Football League (NFL) finds itself in the spotlight. Inevitably, this spotlight leads to various rumors and outrage about the NFL's nonprofit status. Here I will discuss five key myths that are helping to spark the outrage (see the most recent Form 990 of the NFL here for more). In doing so, I should state that I am not trying to defend the nonprofit status of the NFL but merely to point out that perhaps it is more innocuous than it may first sound.

Wednesday, January 22, 2014

Sharing Retirement Risks and the Future of Nonprofit Pensions

The story of the Minnesota Orchestra is perhaps one of the most watched disputes between an arts organization and its employees in recent memory, but certainly not the only one. As reported in the Nonprofit Quarterly, this 15-month long lockout has finally reached an end. One interesting tidbit in the agreement to end the lockout is a deal to share revenues -- not ticket revenues, but endowment income. This interesting agreement makes one wonder whether we will see more of this in the future, particularly since many nonprofits have both (a) relatively large permanent endowments and (b) underfunded pensions that are placing a strain on finances.

Wednesday, January 8, 2014

Time Will Tell What Zuckerberg's Gifts Mean for the Future of Philanthropy

A bright spot in American philanthropy over the past two years has been the generous donations made by Mark Zuckerberg to the Silicon Valley Community Foundation (SVCF).  A gift of Facebook stock in 2012 whose value at the time was around $500 million has soared to $986 million (according to The Chronicle of Philanthropy) was recently matched by another gift of stock at the end of 2013, also worth around $986 million.  Many (myself included) have lauded the Zuckerbergs not just for their generosity but also for their potential to change the way wealthy give. Rather than setting aside their wealth in a private foundation to slowly trickle to charitable endeavors, the Zuckerbergs have instead given to a community foundation, a move that has the potential to make a more immediate impact. Before one concludes that is the case, however, it is worth noting that the ways in which their donation is being used have not been disclosed.  And, if the reporting by The Chronicle of Philanthropy is correct, SCVF has not made large efforts to divest their interest in Facebook stock let alone distribute it in grants.  In other words, this gift has the potential to be very different from the usual route of setting up a private foundation, but it also has the potential of being a de facto private foundation administered by SVCF (except one not subject to 5% distribution constraints since it is not technically a private foundation).

A few things to keep an eye on in the coming months to see whether this is truly a "game changing" gift, an establishment of a de facto private foundation, or something in between.
  • Zuckerberg's gift at the end of 2012 was largely responsible for a 43% increase in net assets for SVCF at the end of 2012 (from $1.866 billion to $2.661 billion).  During 2012, SVCF awarded $294 million in grants; will we see a 40%+ increase in grants when 2013's results are released, reflecting the impact of the first gift?
  • Zuckerberg's gift at the end of 2012 led to 20% of SVCFs investment balance being held in one company's common stock (safe to say that's Facebook) -- not exactly a well-diversified portfolio. If SVCF is continuing to hold all of the donated stock rather than seeking a more diversified portfolio, this could mean that up to 45% of its holdings would be in one company's common stock at the end of 2013.