The Nonprofiteer

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The new Nonprofiteer site has gone live (at last) at www.nonprofiteer.net.  Please update your bookmarks, subscriptions, RSS feeds and everything else that connects you to the blog.

To subscribe at the new site, by the way, please click on the words "Blog Info" in the upper right-hand corner of the page.  "Blog info" also contains a link which will permit those of you who are bloggers yourselves to add The Nonprofiteer to your blog roll.

Ah, the pleasures of technology!  Publication of actual useful information about nonprofits will resume on Monday.

A brief holiday, and a change of address

The Nonprofiteer is off on spring break for the next week; publication will resume Monday, April 14.

In the interim, if you've bookmarked this site or if you're a subscriber (as she fervently hopes!), please update the Nonprofiteer's address to www.nonprofiteer.net.  The blog is changing hosts, and the old typepad address is now defunct.  Please update your bookmarks and syndicators.

Thanks, and happy spring!

Foundation Friday: "Who pays?" isn't always the relevant question

The story about the lung cancer study paid for by cigarette manufacturers seems to be a familiar one about undue influence by funders, with a familiar moral: "Don't take money from those wicked tobacco companies!"  But in fact, as our brother blogger (and actual brother) at The Reality-Based Community points out, the real scandal lies in the fact that the author holds a patent on the machine whose virtues the study claims to prove, a fact she failed to disclose and one which would raise questions about the results even if they'd been paid for by Saint Peter.

Often the debate among charities about whose money is acceptable suggests the exchange in Gone With The Wind between Scarlett and Melanie when bordello madam Belle Watling offers a generous contribution to the Confederate hospital: "Oh, we don't want her money," says Scarlett.  The Nonprofiteer, though otherwise a Scarlett partisan, sides with Melanie on this one: accept the donation and honor the donor, whether or not you approve of how he made his fortune.  She doesn't notice anyone disdaining Gates Foundation money just because a big chunk of it came from violating the antitrust laws.  As Belle herself says, "You might as well take my money, Miz Wilkes. It's good money even if it is mine."

Dear Nonprofiteer, How Close is Too Close?

Dear Nonprofiteer,

I am a member of a very small art guild which gained 501(c)(3) status about 3 years ago.  We use funds raised by shows and card sales for local school art programs, to fund a monthly art walk, and to otherwise promote art in our small beach town.

Last year, two guild officers started a for-profit art gallery in town.  Some guild members are wondering about conflict of interest and possible loss of nonprofit status.  So far, we have held guild meetings in the gallery (no cost involved to anyone) and are planning a joint art show this summer.  The guild stands to gain financially from the show because the opportunity for sales commissions is improved and some costs are avoided.  The artists participating in the show stand to gain because their work will hang longer and in a better setting than the public town space we used in the past.  The gallery forgoes a portion of its commission for part of the show so the guild can get its traditional sales commission.  I don't see a financial benefit to the gallery.  The officers have not taken any actions in their nonprofit guild roles to cause guild funds to be used for gallery benefit, and we are documenting why the gallery is the only workable place to have our judged show this year.

Are we endangering the nonprofit status of the guild by such activities with the gallery?  Where can we find guidance on this issue?

Signed, Aboveboard Above All

Dear Aboveboard:

Nothing you've said suggests that the guild is being used to conceal gallery profits, which is the IRS's chief concern in examining nonprofit returns.  As the agency says on its Website, "Misuse [of tax-exempt organizations] includes arrangements to improperly shield income or assets from taxation, attempts by donors to maintain control over donated assets or income from donated property and overvaluation of contributed property."  Holding an event at a Board member's place of business doesn't fall into any of these categories.

So it's not your 501(c)(3) status the Nonprofiteer would worry about based on the relationship you describe, but your ability to operate your nonprofit in service of its mission independent of any other considerations.  You say that the gallery-owning Board members haven't "taken any actions in their nonprofit guild roles to cause guild funds to be used for gallery benefit," but that formulation strikes the Nonprofiteer as a bit legalistic.  The reality is, as members of the guild board they're in a position to decide where the guild holds its show; they've made that decision in a way that will drive traffic to their for-profit business.  Unless they're recusing themselves from all these decisions, the decisions are inherently corrupt because the people making them have a conflict of interest.

So the issue isn't where you hold your Board meetings (Board members routinely donate office space for their agencies' meetings), or even where you hold your events (Board members likewise often donate space for those); it's who decides.  The best possible location may actually be the gallery, and it may actually be in the guild's best interest to conduct its show jointly with the gallery; but no one with a financial interest in the gallery can possibly decide that on an impartial basis.

You don't say how big your Board is, but the Nonprofiteer suspects it's tiny and that regular or permanent recusal of two members is impossible.  That leaves you with only two choices: immediate expansion of your Board by the addition of members who have no pecuniary interest in the guild's work, or immediate agreement by the existing Board to undertake no further cooperative efforts with the gallery.

Look, all business donors contribute to charities because they want the favorable publicity that generates, and they're more than entitled to have it.   And Board members' donations are as praise- and publicity-worthy as anyone else's.  But every nonprofit has to evaluate every donation, or offer of sponsorship or partnership, to see whether what it's getting (donation) is worth what it's giving (positive publicity); and that evaluation can't be made properly by a group that includes the prospective donor--and certainly not by a small group that includes two prospective donors. 

In any case, unless your little tiny organization already has universal public awareness and acceptance, you don't want to risk having the guild be confused in the public mind with a for-profit gallery.  That confusion--which no amount of "documentation" will erase--will make it hard to raise money from individuals, perhaps from foundations, and certainly from other community businesses; it suggests a "sugar-daddy" relationship in which the gallery is paying the guild's bills.

As for sources of information, the IRS now provides an on-line version of its workshop on keeping your 501(c)(3) shiny and bright.  The "Charities and Exempt Organizations" section of the IRS Website is full of advice about what the agency considers appropriate, abusive, amoral, actionable, et alia.  And for more about conflict of interest, please take a look at this earlier post.  And this one.

Big Dollars for a Small Change?

If you'd like to reduce your donors' complaints about how frequently you ask them for money (and thereby, perhaps, increase the amount of money they actually give you), consider making this small change: convert your nonprofit's finances from a fiscal- to a calendar-year basis.   Why?  Because very few individuals operate their lives, or plan their charitable contributions, on the basis of your fiscal year: when they give you money in May, they don't expect you to ask them again in September, and they're justifiably annoyed when you do.

You, by contrast, are justifiably annoyed at their complaints, because you know that May is the end of one year and September is almost midway into another.  Unless you're keeping track of donations the same way your donor is, it's easy for them to feel unappreciated and you to feel deprived.

So unless every April 29 or June 29 or September 29 you're giving an absolutely kick-ass Fiscal New Year's Eve party (and raising an absolutely kick-ass amount of money on it), consider shifting over to calendar-year accounting.  It will be a single year's chore (a fact your accountant won't let you forget), but it will pay dividends in donor satisfaction for years to come.

Racism, Social Welfare and Government Intervention

Here's a powerful--and painful--review of the true costs of racism.  This summary begins with an examination of a recent study showing that Americans' reluctance to support public welfare programs is attributable in large part to a view among white people that such programs mostly benefit nonwhite people.  Other studies show these attitudes infecting the nonprofit community, with white churches reducing their involvement in charitable outreach as nonwhites increase their representation in the churches' neighborhoods.

But, as Senator Obama made clear in his speech, racism isn't static (thank God); and, as the researchers found, racism isn't everything: they attribute half of Europe's consistent support for public welfare programs to the existence of strong Social Democratic political parties, supported by labor and small farmers.  (You know: kind of like American Democrats, only with backbone.) 

The research is a salutary reminder--necessary after years of relentless neo-con rhetoric about how the government is the problem and the private sector the solution--that the only way to make sure everyone gets taken care of is to use the mechanism that belongs to everyone.  Not to mention that anytime we're NOT using that mechanism to make sure everyone gets taken care of, some profiteer will be using it to make sure HE gets taken care of.   

Information (online) about volunteering online

Our colleagues north of the border at Macdonald Youth Services in Winnipeg offer guidance about how to work with volunteers at remote locations.  Online Volunteer Program Developer Randy Tyler writes,

Considering the challenge to recruit sufficient face-to-face volunteers coupled with the lack of online volunteering resources available, our leading and trusted 78 year-old registered charitable Canadian organization, Macdonald Youth Services (MYS), recently launched three best practices virtual volunteer program development resources, based on our 10 years of pioneering work in this space. . . .

Our "About Online Volunteering - Information Non-Profit Organizations Can Use" Blog and Podcast can be accessed from:  http://www.mys.ca/aov . . . .

"The Global Directory of Web Sites that List Online Volunteer Opportunities" allows any non-profit organization to easily locate Web sites where they can list (post) their online volunteer opportunities....[at] www.mys.ca/directory.

Noting that "Working with online volunteers usually involves the exchange of files, often exceeding e-mail attachment limits," Tyler and his online volunteer crew have also produced a listing of 17 free Web-based file exchange services. For each file transfer service, the name, Web address, maximum file upload size, monthly transfer limit, maximum storage, allowable file storage time and user requirements have been provided.  You can download it as a PDF file from http://www.mys.ca/aov.

Tyler writes, "I am still amazed at the kindness of these strangers who contribute to an organization they will never see. Remarkably, some of our committed and talented online volunteers have been involved with us for as long as eight years." 

The Nonprofiteer is even more amazed; and yet why should she be?  People volunteer to connect with and experience community, and people--young people especially--increasingly connect with one another on-line.  If it doesn't feel like the "community" with which the Nonprofiteer is familiar, well, neither did her feminist consciousness-raising sessions feel much like her mother's League of Women Voters meetings.  Both were nonetheless valid.

Never mind how: as E.M. Forster advised, "Only connect."

Foundation Friday: Giving With One Hand, Taking Away With the Other

A program officer with a community foundation brings the following to our attention, with the observation, "This just blew my mind… they REQUIRE their grantees to donate a portion of their awards directly back to them!  This may be legal, but is it ethical?!?"

Here's the questionable practice:

ProLiteracy is entering the thirteenth year of the National Book Scholarship Fund, a project that supplies books and materials to local adult basic education and literacy programs. The resources available through NBSF are from New Readers Press, the publishing division of ProLiteracy.

Programs providing direct service in the areas of basic literacy, adult basic education, English-as-a-second-language, and family literacy will be considered for support. NBSF grants are made in the form of the New Readers Press materials requested in the grant proposal. Grants typically average $500 to $2,000 each but can vary depending on the needs of the applicant organization.

Programs awarded a grant must provide a cash contribution to ProLiteracy equal to 20 percent of the grant award. These funds are used to defray the costs of NBSF program administration. Organizational members of ProLiteracy must provide a cash contribution equal to 10 percent of the grant award.

So you (charity) will buy x amount of my product, while I (foundation) jack up the list price of the product and pretend that the difference between what you paid and what I listed is a donation.  Of course this isn't ethical; and if the sole asset of the foundation is this product which it's turning into cash, the IRS will probably be very interested.

This is the second time in her career the Nonprofiteer has encountered what seems to her to be an obvious scam connected to literacy programs.  Maybe the people who have these ideas are under the impression that literacy program officers can't read, either.

Dear Nonprofiteer, Is This A Dangerous Liaison?

Dear Nonprofiteer:

My problem seems small and particular from where I'm standing, but I think it might be of general interest.  I write from a small independent artsy college.  Which art we practice, I'm sure you don't need to know.  We do fine.  Charge a lot of tuition, bring in more than enough revenue to meet our needs, keep the students happy enough, satisfy the accreditors.  I have tenure and I can work on the side too.

Some of my colleagues want to start up an independent committee to serve as liaison to the Board of Trustees.  We'd be elected, a group of three, and we'd attend Board meetings twice a year.  Our president and CEO, High-Hat Hattie, has the Board wrapped around her little finger.  All they know, they learned from her.  High-Hat Hattie doesn't love the idea of a liaison committee but will succumb if we push. 

I don't necessarily want to disabuse the Board of anything, but if I (and others) can get their ear, maybe I could make the institution better.  Should we go ahead?  Or leave well enough alone?

Signed, Secure but Questing

Dear Secure:

You seem in a perfect position to take on this assignment: you can't be fired (ain't tenure grand?) and the worst that can happen is a couple of unpleasant meetings followed by resignation from the committee.  Whereas the best that can happen is (1) you can educate the Board about the institution, education they're currently receiving from a single source you deem unreliable; and (2) you can get educated about the Board's work for the institution, and possibly help communicate to your faculty colleagues the rationale for Board decisions.

If the Board is better-educated, it will work better on behalf of the college.  This is more an article of faith than something the Nonprofiteer can document; but she believes it nonetheless.  Specifically, she believes that governors of an institution who become aware of all the things it could do if it had more resources are more inclined to help secure those resources.  Your college may "do fine," but perhaps it could do better--admit more students who can't pay your tuition, say, or provide a broader or deeper curriculum--with more money.  And if money is what you want/need at a nonprofit, there's no substitute for firing up the Board.

You don't have to think of your role as "disabusing the Board of anything" but simply as offering, in your person, a statement of what the institution does, how well it does it, and how much better it could be done with a little additional assist from the Trustees.  If, in the course of this statement, a Trustee raises questions about Hattie and what she's been doing all this time--well, that's what the Army refers to as "collateral damage."

And don't underestimate the value of your learning about the constraints Hattie and the Board face as they govern the college.  Maybe those constraints are primarily self-inflicted--the Board is too small, too timid, too lazy, or Hattie is too maternalistic, too comfortable, too controlling--but if so, you'll be able to make a difference soon enough.  ("Why don't we recruit Ms. Rolling-In-It whose daughter graduated from here last year?")  And if not, you'll be better satisfied with the college and better positioned to spread that satisfaction around the faculty once you've seen what the Board and Hattie are grappling with.

Just one word of caution (which you clearly don't need but your committee colleagues may): the liaison committee should not be involved in personnel issues, that is, should not serve as a channel for the grievances of individual employees (faculty or staff).  If Hattie is generally unreasonable about personnel, that's something that can be gently inserted into general conversations about staffing or compensation; but individuals who have a problem with her should solve it individually (or grieve to the union, if you have one) and not through you. 

Of capital markets and women's health

The Nonprofiteer had remembered this as an announcement that the Calvert Foundation had given $10 million to Catholic Health Initiatives, and was preparing a protesting broadside having to do with the refusal of Catholic hospitals to provide reproductive health services.  But it turns out to be an announcement that Catholic Health Initiatives has invested $10 million in an investment product offered by the Calvert Foundation, which in turn "channels capital to underserved communities." 

An interesting effort to create a much-needed capital market.  The Nonprofiteer is torn: wanting the investment to turn out well so that other wealthy nonprofits (e.g. universities) are encouraged to put capital at the disposal of their poorer brethren, and wanting it to turn out badly to punish the Catholic health-care system on behalf of all the women whose health is regularly sacrificed on the altar of its concern for spermatazoa, embryos and fetuses.  Readers may take their pick.

CATHOLIC HEALTH INITIATIVES MAKES $10 MILLION INVESTMENT IN CALVERT FOUNDATION’S COMMUNITY INVESTMENT NOTES

Major Initiative Will Promote Healthy Communities in U.S. and Around the World; Investment is Single Largest from Faith-Based Group in Groundbreaking Program.

BETHESDA, MD. and  DENVER, CO.//March 13, 2008//Catholic Health Initiatives, the nation’s second-largest faith-based health care system, is making a $10 million investment in Calvert Social Investment Foundation (Calvert Foundation) Community Investment Notes....

“Our focus has always been on providing the best health care available – especially to underserved communities,” said Kevin Lofton, president and chief executive officer of Catholic Health Initiatives. “We have been promoting the social good since our formation more than a decade ago by investing in organizations, such as the Calvert Foundation,that are committed to building healthy communities. This investment is especially appropriate for us because it is a major step toward helping to provide sustainable solutions to fighting poverty and improving the health of disadvantaged populations.”

Shari Berenbach, executive director of the Calvert Foundation, said, “I would like to congratulate Catholic Health Initiatives on using their leadership role to make a real difference not only in the lives of people in the communities in which they work, but also in developing countries, where microfinance truly helps families pull themselves out of poverty. CHI is truly taking a localized approach to supporting the poor here in the U.S. and around the globe.”

Catholic Health Initiatives follows on the heels of previous Community Investment Note investments by other health care systems, including Trinity Health and Catholic Healthcare West....

The investment by Catholic Health Initiatives is a major boost for Calvert Foundation, which, in the wake of the investment, has over $175 million in assets.  To date, this is the largest investment by a faith-based organization in the Community Investment Note program....

Catholic Health Initiatives’ investment is in Calvert Foundation’s flagship product, the Community Investment Note, a high-impact, fixed income investment that channels affordable capital to underserved communities and markets, providing economic opportunities where they are needed most. Calvert Foundation offers custom targeted portfolios for larger investors that align with their mission and desire for maximum social impact....

CONTACT: Patrick Mitchell, for Calvert Foundation, (703) 276-3266, or pmitchell@hastingsgroup.com; or Michael Romano, for Catholic Health Initiatives, 303-383-2720, or michaelromano@catholichealth.net