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75 posts categorized "Regulation/Oversight"

Seven Charitable Foundation Rules: Myth and Reality

July 10, 2015

Myth-vs-FactFederal statutes and regulations that apply to charitable foundations are complex and frequently misunderstood. To add to the confusion, they often are counterintuitive. Here are just a few examples of rules governing foundation grantmaking that I, on numerous occasions, have found to be misconstrued or misunderstood:

Myth No. 1: Foundations are only permitted to support 501(c)(3) organizations.

Reality: As long as foundations comply with certain legal requirements, they are permitted to make grants for charitable purposes to a range of organizations and entities. For example, if the foundation undertakes a preliminary inquiry, both the grantor and the grantee commit in writing to comply with reporting requirements, and the prospective grant recipient commits in writing that the funds will be expended for charitable purposes, the foundation can legally make grants for charitable purposes to government agencies and even for-profit corporations.

Myth No. 2: Foundations are not permitted to support the development, publication, or distribution of materials that comment on positions taken by candidates in election campaigns or on positive or negative features of pending legislation.

Reality: Foundations are permitted to provide financial support to organizations for the preparation of voter information guides and educational materials about proposed legislation and other issues of public interest. Voter information guides must refer to each candidate's views on a cross-section of issues and include a fair and unbiased analysis of other positions. Educational materials supported by foundation dollars must present all sides of the issue in question and be sufficiently balanced to enable readers or listeners to form their own opinions. Foundations are not permitted to reveal their own positions or preferences with respect to an issue in such materials.

Myth No. 3: Foundations are required to receive and retain a grantee organization's written acknowledgement for any gift in excess of $250.

Reality: The $250 written acknowledgment rule applies to payers of income tax such as individuals and for-profit corporations, but not to foundations — which are exempt from income taxes. So long as a foundation retains proof of the support it has given to a grantee organization (such as a canceled check), it need not seek or retain that grantee organization's written acknowledgment of a gift.

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5 Questions for...Vic De Luca, President, Jesse Smith Noyes Foundation

June 23, 2015

The Jesse Smith Noyes Foundation was established in 1947 by Charles Noyes, a real estate developer in Manhattan, in honor of his wife, Jessie Smith, herself a women's suffrage and civil rights activist. Initially, Noyes set up the foundation to provide scholarships, with half earmarked for non-white students. In the 1990s, the family decided to change course and began to provide funding more directly to organizations working on issues in which they had an interest. Today, most of its support goes to grassroots organizations and movements in the United States working "to change environmental, social, economic, and political conditions to bring about a more just, equitable, and sustainable world."

Recently, PND chatted with Vic De Luca, who joined the foundation in 1991 and has been its president since 2000, about its donor-advised campaign, a new initiative aimed at convincing donors to make more timely allocations from their donor-advised funds.

Headshot_vic-de-lucaPhilanthropy News Digest: The Noyes Foundation recently launched a campaign around the timely distribution of monies from donor-advised funds. Why is the distribution of funds from DAFs suddenly an issue?

Vic De Luca: Donor-advised funds have been around a long time, administered in many cases by community foundations, but they started to become really popular among donors in the 1990s after mutual fund companies like Fidelity and Vanguard began to offer them, and by the early 2000s their popularity was off the charts. One of the reasons for their popularity is that contributions to a donor-advised fund qualify for an immediate tax deduction, while donors have complete say over how those tax-advantaged dollars are allocated. In other words, you're allowed to transfer funds from your own personal account at Fidelity or Vanguard to a public charity, and then at some point in the future you get to "advise" that public charity as to where those dollars should go. It's a simple process. You just contact the fund-holder, answer some questions, and make a contribution; it can be a one-time contribution, or you can choose to contribute on a regular basis. And you can make disbursements from the fund at any time, or not at all.

PND: What part of that equation does your campaign address?

VDL: We're not saying donor-advised funds are good or bad; we're saying the current system is broken, in that it allows an individual donor to take an immed­iate tax deduction but does not insist on a corresponding responsibility to put those dollars to work for public benefit in a timely fashion, which is something we'd like to see. We think donors should be encouraged to give, and what we're trying to do is to say to individuals who have donor-advised funds, "Look, you've made your contribution to this public charity, you've gotten your tax deduction, don't let that money sit there, let's put it to good use." We think the money sitting in donor-advised funds is an untapped resource that could and should be used to deal with some of the pressing problems of the day. And we can help donors who share our social justice concerns do that.

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Weekend Link Roundup (May 30-31, 2015)

May 31, 2015

Seppblatter_lipssealedAfter a hiatus for college graduations on consecutive weekends, the weekend crew is back with its roundup of noteworthy items from and about the social sectorFor more links to great content from and about the social sector, follow us on Twitter at @pndblog....

Civic Tech

In a guest post on Beth Kanter's blog, Anne Whatley, a consultant with Network Impact, shares key takeaways from a new guide that provides metrics and methods for measuring the success of your civic tech initiatives.

Climate Change

"The war on coal is not just political rhetoric, or a paranoid fantasy concocted by rapacious polluters. It's real and it's relentless." writes Michael Grunwald in Politico. Driven by a team of nearly two hundred litigators and organizers, deep-pocketed donors like Michael Bloomberg, and "unlikely allies from the business world," the Beyond Coal campaign over the past five years "has killed a coal-fired power plant every ten days...[and] quietly transformed the U.S. electric grid and the global climate debate."

Community Improvement/Development

In remarks at the Mackinac Policy Conference of the Detroit Regional Chamber of Commerce last week, Kresge Foundation president Rip Rapson outlined six areas where Kresge is likely to make future investments in Detroit.


On the Markets for Good blog, Kelly Brown, director of the D5 Coalition, argues that philanthropy can lean learn lessons from the business sector about the link between diversity and success.


Telling your nonprofit's story so it resonates with donors and other stakeholders is easier than you might think, Network for Good's Iris Sutcliffe writes, if you keep the five Cs in mind.

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Weekend Link Roundup (September 27-28, 2014)

September 28, 2014

Hk_protests_07011Our weekly roundup of noteworthy items from and about the nonprofit sector....


A new report from Jennifer Erickson and her colleagues at the Center for American Progress explores the "middle-class squeeze" -- the double-barreled phenomenon of stagnant income and rising costs that has eroded middle-class Americans' standard of living over the last decade or so.

Technology has been one of the factors behind stagnating middle class incomes. But in this Q&A with Eric Brynjolfsson, a professor of management science at MIT’s Sloan School of Management, Nobel laureate Robert Shiller and Jeremy Howard, a research scientist at the University of San Francisco, suggest that the exponential advance of machine learning will further exacerbate inequality and may lead to the end of paid employment for most of us.


It's pretty much become conventional wisdom: Education is the antidote to racial inequality. But an analysis of the Fed's recently released 2013 Survey of Consumer Finances by Demos' Matt Bruenig finds that "white families are much wealthier than black and Hispanic families at every education level....[and] that all white families, even those at the lowest education level, have a higher median wealth than all black and Hispanic families, even those at the highest education level."

Cassie Walker Burke, an assistant managing editor at Crain's Chicago Business, has a good, balanced piece in Politico Magazine about the "Kalamazoo Promise" -- an initiative conceived and funded by philanthropists in that Michigan city "to pay for college for any student who attended the Kalamazoo schools from kindergarten on and then attended a public college in Michigan.

"[M]any public school leaders work with counter-productive assumptions about the readiness, interest and even the basic capacity of regular people to understand the changes our systems need to keep up with the times," writes Nicholas Donohue, president/CEO of the Nellie Mae Education Foundation, on the Center for Effective Philanthropy blog. And that's a shame, Donohue adds, because direct community engagement just may be the key to advancing meaningful education reform.

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Trust and Corruption

March 03, 2014

(Mark Rosenman is emeritus professor at Union Institute & University and a frequent contributor to PhilanTopic. He lives in Washington, D.C., from where he drew many of the examples of the national problems cited below.)

Rosenman_headshotSelf-serving and dishonest actions in both the public and private sectors are severely testing the trust and confidence of Americans. That's a problem for government, for courts and the criminal justice system, for corporations and business leaders, and, yes, for the nonprofit sector.

It's a much more significant problem, however, for the larger society. Are we destined to slide further toward the pernicious levels of corruption so prevalent in other parts of the world? Can the already strained fabric of American society hold as growing numbers of public, private, and charity officials scramble to profit, legally and otherwise, from their positions? What happens when the fundamental American belief in fairness is undermined by declining confidence in the institutions we all rely on?

Make no mistake, confidence in our institutions is declining. Since the early 1970s, those of us who have a "great deal" or "quite a lot" of confidence in our institutions, including banks, newspapers, and the medical establishment, has fallen dramatically – in some cases by more than 50 percent. Confidence in religion, the Supreme Court, schools, organized labor, and the presidency has fallen by 25 percent or more, while fewer than 25 percent of us have a "great deal" or "quite a lot" of confidence in big business.

Charitable organizations don't fare so well, either. Following a precipitous drop more than ten years ago, a recent survey found that over a third of Americans have "not too much" or no confidence in nonprofits. Meanwhile, Congress's approval rating has fallen to an all-time low of 10 percent.

Interestingly, the few institutions that have shown gains in public confidence include the military and the police and criminal justice system. But while the military is the most respected of American institutions, a series of recent incidents is beginning to take a toll. They include a scandal involving two Navy officers and a senior agent with the Naval Criminal Investigative Service, and a series of misconduct charges leveled at senior military officers for abusing their positions and accepting illegal gifts. His confidence shaken, Secretary of Defense Chuck Hagel has demanded a broader investigation.

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Bipartisan Senate Group Declares Support for Charitable Deduction

January 28, 2014

Charitable-donationsLast week, the PND news team ("News team, assemble!") picked up an item from the Chronicle of Philanthropy which suggested that the charitable deduction will be preserved in its current from by the 113th Congress.

More support for that idea arrived a day later, when 33 members of the U.S. Senate — 17 Republicans and 16 Democrats — signed a letter authored by Senators Ron Wyden (D-OR) and John Thune (R-SD) calling for the protection of the "full value and scope”" of the deduction. Addressed to Senators Max Baucus (D-MT) and Orrin Hatch (R-UT), chair and ranking member, respectively, of the Senate Finance Committee, the letter applauds the "uniqueness" of the charitable deduction and notes that it "is the only provision [in the tax code] that encourages taxpayers to give away a portion of their income for the benefit of others. For this reason," the letter continues,

it is not a loophole but a lifeline for millions of Americans in need. Analysis has repeatedly shown that proposals to cut, cap, or limit the charitable deduction could cause charitable donations to decline by billions of dollars annually. Worse yet, weakening the charitable deduction would most hurt the adults and children who receive vital charitable services from organizations like soup kitchens, after-school programs, and medical research projects, just to name a few. In many cases, the government would be required to step in and fund those services now being provided through private generosity. Accordingly, preserving the charitable deduction is also prudent as a matter of broader fiscal policy.

Indeed, charitable giving is an integral part of our society. In 2012 alone, Americans donated more than $300 billion to charitable organizations and itemized giving accounted for nearly $229 billion, according to Giving USA. The organizations that received those donations then leveraged their contributions through volunteers and other in-kind aid to generate $1.1 trillion in jobs and services, employing nearly 10 percent of America's workforce.

We believe the federal government must affirm its long-standing dedication to encouraging private acts of charity and compassion, especially when our charities and the people they serve are facing so many challenges.

As you contemplate a comprehensive tax refrom bill, we understand that all tax expenditures must be reviewed and considered. However, in this context, we ask that you keep our views on this important tax deduction in mind.

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The Brave New World of Good

October 08, 2013

"O wonder!
How many goodly creatures are there here!
How beauteous mankind is! O brave new world,
That has such people in't."
(William Shakespeare)

"Most human beings have an almost infinite capacity for taking things for granted."
(Aldous Huxley)

Globe-handsWelcome to the Brave New World of Good. Once almost the exclusive province of nonprofit organizations and the philanthropic foundations that fund them, today the terrain of good is disputed by social entrepreneurs, social enterprises, impact investors, big business, governments, and geeks. Their tools of choice are markets, open data, innovation, hackathons, and disruption. They cross borders, social classes, and paradigms with the swipe of a touch screen. We seem poised to unleash a whole new era of social and environmental progress, accompanied by unimagined economic prosperity.

As a brand, good is unassailably brilliant. Who could be against it? It is virtually impossible to write an even mildly skeptical blog post about good without sounding well, bad -- or at least a bit old-fashioned. For the record, I firmly believe there is much in the brave new world of good that is helping us find our way out of the tired and often failed models of progress and change on which we have for too long relied. Still, there are assumptions worth questioning and questions worth answering to ensure that the good we seek is the good that can be achieved.


The potential of markets to scale good is undeniable. The most successful nonprofit and foundation efforts can only be replicated in multiple locations, while markets routinely attain regional, national, or even global scale. But even "philanthropic investment firms" like Omidyar Network, which was born out of eBay-inspired market zeal, have added outright grants to nonprofits as an essential part of their change strategy. Perfect markets exist only in economic theory. In the real world, avarice, corruption, politics, and power conspire to exclude minorities of all descriptions from their share of market rewards. Social policy and philanthropy, for all their faults, persist precisely because market booms benefit too few and market busts hurt too many.

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Weekend Link Roundup (September 28-29, 2013)

September 29, 2013

Ty-mattson-breaking-bad-02Our weekly roundup of new and noteworthy posts from and about the nonprofit sector....

Civil Society

How are market forces, public policies, and digital technologies changing nonprofit organizations, philanthropy, and associational life at the heart of civil society? That's one of the questions the Project on Philanthropy, Policy, and Technology at Stanford's Center on Philanthropy and Civil Society set out to answer last year through a series of monthly charettes. Now, the fruits of those conversations (and a lot of good, hard thinking) have been captured in a series of reports issued by the Digital Civil Society Lab at Stanford PACS. Written by Lucy Bernholz, Chiara Cordelli, and Rob Reich, the reports -- The Emergence of Digital Civil Society (42 pgaes, PDF); Social Economy Policy Forecast 2013: Project on Philanthropy, Policy, and Technology (38 pages, PDF); Good Fences: The Importance of Institutional Boundaries in the New Social Economy (18 pages, PDF); and The Shifting Ground Beneath Us: Framing Nonprofit Policy for the Next Century (30 pages, PDF) -- are thought-provoking, deeply researched, and a pleasure to read. They're also available as free downloads from the Stanford PACS site.

Responding to Dan Pallotta's hugely popular TED Talk -- and echoing some of the conclusions arrived at by Bernholz, Reich, and Cordelli in their Recode Good work -- Ashoka's Valeria Budinich suggests that one of the most important points made by Pallotta in his talk (and first book) is a point everyone chooses to ignore: Philanthropy's moral foundations -- and the resulting legal and policy framework in which it operates -- have remained largely unchanged since the 1700s.

Climate Change

The most exhaustively researched climate report in history is out -- and, as environmental journalist Richard Schiffman explains in The Atlantic, its findings are grim.

For those as troubled by the findings of the report as Schiffman is, the UN Foundation's Kathy Calvin has some words of encouragement.

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Silence Isn’t Golden

July 09, 2013

(Mark Rosenman is an emeritus professor at the Union Institute & University and directs Caring to Change, an initiative that seeks to improve how foundations serve the public. In his last post, he urged PhilanTopic readers to assess how they value the things they value.)

Rosenman_headshotConfronted by headlines about truly questionable practices at a few dozen charities, the response of too many nonprofit leaders has been to bury their heads in the sand and try to pull the hole in after them. What these leaders fail to appreciate is that silence in response to scandalous behavior is neither golden nor in their best interests.

By now, most of you have seen the carefully researched list compiled by the Center for Investigative Reporting, in partnership with the Tampa Bay Times and CNN, of "America's 50 worst charities" -- tax-exempt organizations that "channel most of the money they raise to professional solicitors, mimic other charities' names, deceive donors on telemarketing calls, divert money and contracts to people with ties to their organizations, and use accounting tricks to inflate the amount they report spending on their missions."

Yet, despite overwhelming evidence of self-dealing by these groups and their closely associated entities, key leadership organizations in the sector, including Independent Sector, have responded to requests for comment from the press by declaring that they didn't have enough information to make a judgment, while others have defended outrageous fundraising percentages diverted to what the California Association of Nonprofits' Jan Masaoka labels the "philanthropic-consultant industrial complex."

When it comes to nonprofits, these kinds of abuses are nothing new, and neither is the timidity of nonprofit leaders in condemning them. Their silence in the past has greeted media coverage of huge salaries paid to charity officials, outlandish benefits, self-dealing within boards, tax gimmicks for donors, and malfeasance in program operations. Unfortunately, the cost of that silence is something we all bear.

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Protect Charitable Deductions for Stronger Communities

June 18, 2013

(Jen Klaassens is vice president of programs at the Wasie Foundation, which supports scholarship programs for students of Polish ancestry at colleges and universities in Minnesota and make grants to nonprofit charitable organizations in a number of areas.)

Headshot_jen_klaassensCongress is threatening to eliminate the charitable deduction as we know it -- at the expense of millions of people in need. Specifically, lawmakers on both sides of the aisle are talking about imposing a cap or limit on the value of the charitable tax deduction as part of a bigger effort to raise additional revenue and/or "simplify" the tax code.

The charitable deduction is a unique element of the federal tax code that encourages Americans to selflessly invest in their communities. Capping or limiting the deduction is not the solution to current budget concerns.

Philanthropy spurs innovation, aids the most vulnerable, provides relief in crises, supports education and health, advances cures and scientific breakthroughs, enhances the arts, and makes investments that fuel economic growth. For every $1 a donor receives in tax relief, communities garner as much as $3 in benefits. It is highly unlikely government could find a more effective way to leverage private investment in vital community services.

The charitable deduction works. It encourages Americans to give a portion of their income to charitable causes without getting anything back, benefiting communities across the country as well as the larger economy. In many cases, donors also experience a sense of well-being from helping. Limiting or capping the deduction will reduce charitable giving, which will hurt Americans most in need. Nonprofits already struggling to balance increased demands for services with reduced income need more support, not less.

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Foundations and the 'New Normal': A Q&A With Bradford K. Smith, President, Foundation Center

June 10, 2013

(The following Q&A with Foundation Center president Bradford Smith appears as part of a special feature on "Philanthropy in a changing world economy" in the June 2013 issue of Alliance magazine. It is reprinted here, with minor revisions, courtesy of Caroline and her team.)

Headshot_brad-smith2Caroline Hartnell: To what extent are U.S. foundations changing in response to austerity?

Bradford K. Smith: I started this job two weeks after Lehman collapsed. On my first day in the office, we had a press call about what foundations were doing about the economic crisis. I put down the phone and walked down the hall to our research department and said, "Quick, I need a statistic," and they came up with a really good one. Foundation giving for the previous year, 2007, was around $45 billion -- about 6 per cent of the first stimulus package announced by the federal government. So one thing the crisis really showed up was the scale of foundation resources. When the economy gets into serious trouble, it takes government to try to keep it from collapsing. Foundation dollars alone aren't enough to solve problems. That made foundations think more about how they can leverage money from each other, how they can collaborate with other sectors rather than trying to do it themselves.

A second interesting thing is that foundation giving held up quite well during the recession. One reason is that U.S. foundations calculate their mandatory payout on a rolling three-year average of the value of their assets, which cushions them from big market swings. It also held up well because foundations actually went beyond the federally mandated payout rate of 5 percent.

CH: The recession has changed things for the foreseeable future. Do you think U.S. foundations see this as a "new normal" and are rethinking their role?

BKS: I think most of them are adjusting to the idea that long-term expectations for returns on investment need to be reduced. 2012 was a good year in the financial markets, but nobody really expects that it will go back to the boom years when, as one foundation investment manager put it, for a number of years "all we had to do was get out of bed in the morning and we could make a 20 percent return on our endowment."

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Weekend Link Roundup (June 1-2, 2013)

June 02, 2013

Summer_funOur weekly roundup of new and noteworthy posts from and about the nonprofit sector....


Guest blogging on the Inside Philanthropy blog, Katherine McLane, vice president for communications and external affairs at the Livestrong Foundation, explains how the organization plans to move on from the doping scandal involving its founder, international cycling star and cancer survivor Lance Armstrong. "None of us anticipated the rapid and radical changes that are now the new normal," writes McLane. "But we're dusting ourselves off and keeping the focus where it should be: helping people with cancer...."

Community Improvement/Development

The folks at the Philanthropy Potluck blog give a shoutout to MCF member the Bush Foundation, which has launched two new grant programs designed to "enable, inspire, and reward community innovation" in Minnesota, North Dakota, South Dakota and the twenty-three Native nations that share the same geography.


On the Chronicle of Philanthropy blog, Carol Weisman, an international consultant who specializes in fundraising, governance, and volunteerism, shares some advice about "what to do when donors say 'no' or 'I'm not sure'."

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(Long) Weekend Link Roundup (May 25-26, 2013)

May 24, 2013

2013_05_MemorialDayOur weekly roundup of new and noteworthy posts from and about the nonprofit sector....

Advocacy founder and CEO Ben Rattray proudly announces that the organization, a certified B-corp, recently raised $15 million in investment capital through its first outside financing round, with the bulk of the funds provided by Omidyar Network. Rattray, who has said the organization will never go public, plans to use the investment to build tools that "more effectively empower hundreds of millions of people around the world;...enable people to build long-term movements on our platform; [and] personalize each user’s experience to better connect people to the issues and organizations they care most about....'


On her Getting Attention blog, Nancy Schwartz shares a few tips from Amy Sample Ward and Allyson Kapin's new book Social Change Anytime Everywhere for nonprofits looking to improve their next multichannel campaign.

Community Improvement/Development

Ed Skloot, director of the Center for Strategic Philanthropy and Civil Society at Duke University, announces the publication of a new installment in a series of "occasional essays" written by thought leaders in the sector. In Changing the Game (48 pages, PDF), Boston Foundation president/CEO Paul Grogan reflects on the state of philanthropy and "the compelling strengths of community foundations as seen from his perch." Among other things, Grogan, who has served as president of the Boston Foundation for more than a decade, explains how "contemporary community foundations can become more agile, energized, relevant, and not least, consequential in their communities."

And on the CNN site, John Bare, vice president of the Arthur M. Blank Family Foundation and executive-in-residence at Georgia Tech's Institute for Leadership and Entrepreneurship, looks at how foundations, the Hudson-Webber Foundation among them, are rethinking their giving in Detroit to achieve maximum impact.

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Trouble at the IRS: What Were They Thinking?

May 16, 2013

(David Jacobs is director of foundation information management at the Foundation Center. In his last post for PhilanTopic, he blogged about an Open Data Master Class presented by the World Bank.)

Irs-auditLike many Americans, I was shocked to learn last week that the Internal Revenue Service had targeted conservative and Tea Party organizations applying for 501(c)(4) tax exempt status for additional review prior to last year's elections. And like many Americans, my shock turned to disgust this week as additional details -- including the alleged leaking of confidential donor information -- emerged, showing the scandal to be more serious than initially disclosed.

Regardless of whether you believe what happened in Cincinnati was an act of political malfeasance or just a case of monumental governmental ineptitude, the fact that it did happen should be sending shockwaves through the nonprofit sector. One of the bedrock principals of organized philanthropy and nonprofit advocacy in America is the idea that such activity should be tax advantaged, regardless of cause or political orientation, and that, when it comes to the nonprofit sector, the IRS should always operate in a fair and impartial manner. The thought that that might not be the case in every instance should bother and disturb all Americans.

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Weekend Link Roundup (April 13-14, 2013)

April 14, 2013

Lincoln_shotOur weekly roundup of new and noteworthy posts from and about the nonprofit sector....


Future Fundraising Now blogger Jeff Brooks says to forget about donor fatigue; what's really happening is fundraiser fatigue.


This might be "shaping up as the year of crowdfunding medical needs," writes Lucy Bernholz on her Philanthropy 2173 blog. "These medical crowdfunding site are fascinating to me. In many ways, they are returning us to the time before national health services and social security, when turning to one's community for financial assistance with medical needs or college costs was the norm."


Over at Forbes, Jessica Joseph, associate director of innovation at the Rockefeller Foundation, explains how social impact bonds "went from concept to execution faster than any other social innovation [in years]."

That may be, writes Kyle McKay, a policy analyst with the Maryland General Assembly, on the Stanford Social Innovation Review blog. But while SIBs are interesting as "endeavors in financial creativity," their risks for cash-strapped governments and nonprofits may outweigh their benefits.

The Social Progress Index launched this week, and Ben Baumberg, a lecturer in sociology and social policy at the University of Kent in the UK, has some really interesting thoughts about what the folks behind the index have done well -- and could do better.

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Quote of the Week

  • "We live at a time of the greatest development progress among the global poor in the history of the world...."

    — Steven Radelet, economist and author (The Great Surge: The Ascent of the Developing World )

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