PhilanTopic

Protect Charitable Deductions for Stronger Communities

(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.)

Congress 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.

The Wasie Foundation, part of the Foundations on the Hill Florida delegation, is actively reaching out to members of Congress and encouraging them to preserve the charitable deduction so as to ensure a thriving charitable sector that has adequate resources to address needs in our communities and invest in the mounting challenges confronting society. Foundations on the Hill consists of thousands of grantmaking foundations that have come together around a single message: there is an inextricable link between thriving communities and charitable giving.

Here are a few statistics: nonprofit organizations put $1.1 trillion into the economy every year in the form of human services; 1 in 10 Americans work for a nonprofit, and the sector accounts for 13.7 million jobs; and a significant majority of Americans (67 percent) are opposed to capping or limiting the charitable deductions, while 62 percent say they would likely reduce their charitable giving by a significant amount (25 percent or more) if the deduction is capped or limited.

The message is clear: Americans want to protect the charitable deduction. We urge Congress to maintain the deduction in its current form and protect the critical role philanthropy plays in strengthening our economy and communities.

-- Jen Klaassens

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

(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.)

Caroline 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."

CH: What will that mean for foundations? Spending down part of their assets? Trying to get the mandatory 5 per cent figure changed?

BKS: I don’t think foundations will try to get that changed. They've fought hard, during strong years in the stock market, to maintain the 5 percent level.

But with declining assets, going above 5 percent in the years following the crisis means that they've been spending their assets. In order to maintain the value of those assets, they'll have to give less or do better on their investments in the future. We did some research on whether or not more foundations have made the decision to spend down, and the answer is not really.

The decision to spend down or exist in perpetuity is less a strategic one than a question of donor attitude. Sixty percent of U.S. foundations are family foundations, so many decisions are about expectations of family involvement in the future. We found that the largest group was those who have left it open for future generations to make that decision. Does this mean that families in the "open" group are also open to the possibility that they might not exist forever? At the very darkest point of the recession, there was some soul searching among foundations about the fact that if their assets declined enough and they maintained their grantmaking at the same level, the result would be either to spend themselves out of existence or to resign themselves to being smaller foundations. But we haven't seen evidence of a conscious decision to adopt a spend-down approach because of the recession.

Some of these foundations have been around a long time: Rockefeller and Carnegie are celebrating a hundred years, Ford is celebrating seventy-five years, and they've seen a lot of bad markets. The Ford Foundation suffered such a decline in the value of its assets in the 1970s that it took until the mid-1990s to recover. But that didn’t change Ford's view of perpetuity. What it changed was the amount of resources it had available to achieve its mission.

CH: You mentioned that foundations have adjusted the way they work. Can you give an example?

BKS: Approaches to grantmaking have changed. There is more interest in providing general operating support. The Weingart Foundation, for instance, a large foundation that funds primarily in Southern California, responded to the recession by adopting the provision of general operating support as a strategy. When the crisis was at its worst, the best thing it could do to help nonprofits was to make sure they could pay the bills, pay their staff, and do the work they're supposed to do.

The other thing we saw was greater willingness by foundations to make program-related investments -- PRIs -- where they make subsidized loans to nonprofits for activities that produce income, which might in turn provide a monetary return for the foundation. During the recession, a number of foundations joked that their best returning assets were those PRIs. There was something like a 2 percent interest rate on some of those loans and the nonprofits were paying that back, whereas foundations were losing 17, 25, sometimes 30 percent on their stock market investments.

That was one reason why interest in PRIs increased. The other was that, in a situation where endowments were declining, it was a way to extend the use of foundation resources beyond their grantmaking, because PRIs come out of foundations' equity.

Related to that, the recession gave a push to mission-related investing, which some people call impact investing, which also uses the equity part of a foundation portfolio. This is different from socially conscious investing, which is basically trying to make sure there is nothing toxic in your portfolio. Omidyar Network provides a good example of this. As part of their work on mobile technology, they made an equity investment in a Mexican telecommunications services provider, Micel (formerly Finestrella), to enable access to smartphones and affordable mobile Internet for those without bank accounts or credit cards.  Mobile phones are increasingly seen as a means to deliver essential services and empower low-income consumers to make informed decisions. But if you don’t have mobile access, you can't have mobile delivery of anything, and you probably wouldn't fund a nonprofit to expand cellphone access. So, although it's still a minority, I think more foundations are looking seriously at how they can use their endowment to do this kind of thing.

CH: What about renegotiation of relationships with different sectors, for example between foundations and the state.

BKS: There is a lot more interest in public-private partnership at all levels, though it is tempered a bit by foundations' wariness about being stuck with the bill. In the U.S. and Europe, there has been a tendency among governments, local and national, as their revenues have declined, to say, "We'll stop funding, for example, the arts and we'll get foundations to do it." There was even a case in California where foundations were written into a state budget. They were cutting back their spending, and they put a plug on the revenue side called "foundations."

Still, there is more interest in partnership. In cities like Detroit and parts of Ohio and Pennsylvania, the old Rust Belt region where steel and automotive manufacturing used to dominate, you see foundations stepping in and trying to work with government. Again there is a certain reluctance, because foundations don't feel they could ever be a substitute for a viable public education system, for example.

But some foundations have taken the lead on re-envisioning certain cities. Detroit, for example, is never going to be the city it was -- the epicenter of automobile manufacturing and the birthplace of organized labor -- so the Kresge Foundation, the Skillman Foundation, and others in the region have tried to re-envision it. I think it's a good use of foundation resources because they can work without electoral or market pressure. It also brings into play another strength of foundations, which is their ability to convene. In Detroit, there is now public-private collaboration called Detroit Future City involving corporations, community groups, state officials, and foundations.

CH: Are foundations also collaborating more with each other and with the corporate sector?

BKS: There has always been some collaboration with companies, particularly on economic development and job issues. But you're also seeing more collaboration around technological innovation, especially with companies like Google that see themselves in some way as contributors to the public good. There's more of an appetite for foundations to collaborate with each other. It's not an easy thing to do: the costs are high, partly because of the individual nature of foundations, which means that each has a unique information system. They might not even see the possibility of collaboration, because it's difficult for them to see that they’re working for the same thing.

CH: Do you think these changes are a stopgap until the crisis passes, or are they being consciously adopted as a long-term strategy?

BKS: I think they are likely to continue because the economic crisis altered the resource base available to the private sector, the public sector, and philanthropy. But there are other factors. Technology is making it much easier to get information and collaborate. Impact investing is taking off because there are more vehicles for foundations that want to do it. The typical argument against impact investing used to be that there weren't enough investments for foundations to put money into. Now there are special investment funds, a whole body of literature, groups working on this. I think it's fair to say that although the recession induced some rethinking of the philanthropy industry, these changes are not just a result of the bottom falling out of the economy.

CH: So you don't agree with some of our editorial board members who have said that foundations have put their heads in the sand rather than rethink their strategy?

BKS: Obviously, the foundation world is varied, with a small number of richly endowed foundations and a sea of very small ones. What's more, there's a sort of demographic replacement as some wind up and new ones are founded. So there are new ideas coming in all the time, and I believe there is more thinking going on in philanthropy than people give it credit for.

CH: Do you see the rethinking and changes that have come out of the recession as by and large positive?

BKS: I think so. You're not going to see a radical transformation of philanthropy -- it's not the kind of field that radically transforms itself -- but we are seeing change that's important. Growing inequality is a phenomenon in the U.S. as well as everywhere else.

CH: What are foundations doing about that?

BKS: From the end of 2008 to 2010 we were able to track about $550 million worth of grants made by U.S. foundations to address the recession. A lot of it was service provision for emergency situations, like people losing their homes. What we didn't see much is grantmaking focused on the nature of the financial and economic system itself, looking at why the crisis happened and what we can do to try to make sure it doesn't happen again -- though there are one or two exceptions. The Sloan Foundation in New York has done work in this area and is now supporting a project to create a unique identifying system for all parties to financial transactions. When Lehman Brothers collapsed and the regulators had to liquidate it, it turned out to be seven thousand different corporations, all over the world. So this would create a fast way to uniquely identify all parties to financial transactions and then link them back say to Lehman or Goldman Sachs. I think the MacArthur Foundation and the Hewlett Foundation are interested in working on the challenges posed to democracy by inequality, but it's a relatively small amount of work.

Philanthropy of the kind we're talking about -- and that Alliance tends to write about -- comes from big money, from accumulated wealth. At some point, the person or family or company that owns that wealth decides to put it toward public benefit. So it would be surprising if philanthropy came up with a new economic system all on its own.

What is interesting is the growing support for social entrepreneurship, which in some ways is a challenge to the structure of the economy. There are social problems that all these years of foundation funding and aid programs have not been able to solve, and maybe we can solve them through social entrepreneurship. A lot of it is technology-driven and there is a lot of energy and creativity in that space. For instance, there are interesting things happening around payment systems that allow people in remote parts of the world to work and get paid through their mobile devices, so people who were outside the economy can become part of it. Whether this will fundamentally address inequality is another matter, and no amount of innovation will allow us to duck the big question of what kind of world we want to create.

I was talking earlier to the president of a foundation that funds universities, and the whole notion of residential education is being challenged, first because it's expensive to house students on a campus, and second, because more and more people want to take classes online. A lot of what we assume about institutions is being reinvented. This is happening partly because of the economic crisis but also because of changes in information and technology.

-- Caroline Hartnell

Weekend Link Roundup (June 1-2, 2013)

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

Communications/Marketing

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.

Fundraising

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'."

Grantmaking

On the GrantCraft blog, Rosien Herweijer shares links to a handful of "visual summaries" for grantmakers in Spanish, French, Italian, and Turkish.

Leadership Development

"What if, instead of barreling ahead, relentlessly focused on keeping their organizations afloat (until they burn out trying), effective nonprofit leaders started delegating more and more responsibility to staff -- at once paving the way for a next generation of leaders, and freeing themselves to think about their own leadership in more expansive ways?" asks Stefan Lanfer, knowledge officer at the Boston-based Barr Foundation. "And what would emerge if, at the same time, a critical mass of these great leaders become a great network?" These are the questions the foundation set out to explore in creating the Barr Fellowship, a network of nonprofit leaders whose stories of personal, organizational, and city transformation are now featured in three short films: Reflection and Rejuvenation, The Power of Disruption, and Social Capital & Emergence.

Regulation/Oversight

As the Internal Revenue Service continues to deal with political the mess created by its exempt organizations office in Cincinnati, Lucy Bernholz suggests on her Philanthropy 2173 blog that the real issue has more to do with the money flowing into political campaigns and less to do with "incompetence and mismanagement" at the IRS. "For this there are two...solutions," adds Bernholz.

[F]irst, fund candidates and parties directly and require full disclosure of all such gifts. This is was what campaign finance looked like before Watergate revealed the cracks in the system and we responded by taking the first steps to today's broken system. The second...is to provide public money for campaigns and not allow private gifts above a certain percentage. This is what Larry Lessig has been promoting with Rootstrikers. It's appealing, but even Lessig recognizes it's very slim chances of happening under current conditions (which is why he's also calling for a Constitutional convention).

There is a third way that has nothing to do with stopping the flow of money in, but instead focuses on the flow of money out. Most of the dollars raised go to broadcasting candidates’ messages. If we made air time (television and radio) free to candidates and campaigns, limited the length of campaigns to a certain period of time and gave everyone the same amount of airtime (on those publicly owned, privately leased airwaves of ours) we’d kill the beast of demand and supply would wither in response....

Social Media

According to analyst Mary Meeker's annual review of Internet trends, mobile usage globally will continue to grow rapidly over the next twelve months, writes Katya Andresen on her Non-Profit Marketing blog. According to Andresen, Meeker also predicts that multimedia content will continue to dominate on the Net, that social media usage will continue to grow, and that organizations will discover "it’s nearly impossible not to have full transparency -- whether that’s coming from your organization or those talking about you."

That's it for now. What did we miss? Drop us a line at rnm@foundationcenter.org. And have a good week!

--The Editors

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

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

Advocacy

Change.org 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....'

Communications/Marketing

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.

Education

For anyone who spends time training others, Beth Kanter has a fascinating post on her blog about "learning design." In her post, Kanter shares a few principles from Sharon Bowman's Using Brain Science to Make Science Stick that you'll want to incorporate into your next training session:

• Movement is better than sitting.
• Having participants talk is better than listening.
• Images are better than words.
• Writing is better than reading.
• Shorter is better than longer.
• Different delivery options are better than the same old.

Impact/Effectiveness

Our colleagues over at the Transparency Talk blog share a transparency-focused call to action from Hallie Preskill, managing director at FSG Philanthropy Advisors, that was included in the D5 coalition's annual State of the Work report (34 pages, PDF). In her article, Preskill notes that while she is excited to hear that foundations are paying lip service to the idea of being more transparent, she has yet to see "much evidence that many are truly embracing th[e] idea of transparency when it comes to sharing evaluation findings and other types of grantmaking data." Although "there are many reasons organizations may be hesitant about sharing evaluation results," adds Preskill,

a true learning organization will understand that with any good evaluation, there are important insights and lessons that deserve to be shared both internally and externally. A learning organization also knows that a good evaluation must start with sound data on who the organization is trying to impact and the contexts in which they operate, including data related to demographics.

This doesn't mean foundations have to publicize mean scores, quotes from those interviewed, or volumes of evaluation findings. Instead, it means being committed to collecting relevant, credible, and useful information that is strategically informative; being open to sharing what was learned from engaging in the evaluation process in ways that that help others think about their own work more critically; growing and adapting their practices to be more effective; and finding ways to achieve greater social impact. When evaluation and research activities and findings are made transparent, they can be a powerful catalyst for facilitating individual, group, organization, community, and field learning.

Philanthropy

On the Philanthropy Potluck blog, MCF communications associate Susan Stehling shares a few highlights from Practices That Matter (34 pages, PDF), a new report from the Grants Managers Network and Project Streamline that provides, among other things, a number of tips designed to help grantmakers improve their application and grantee reporting processes.

Commenting on the release of a new set of fact sheets in his organization's Philanthropic Landscape series, NCRP executive director Aaron Dorfman sees "hopeful signs that more foundations are giving in ways that benefit those that need philanthropic support the most," before adding that "only time will tell [whether] the...trends will hold."

Regulation/Oversight

The disclosure last week that the Internal Revenue Service had subjected to extra scrutiny a hundred and thirty or so groups applying for tax-exempt status as "social welfare" organizations because they had "tea party," "patriot," or some other politically charged word or phrase in their name certainly created a stir. But before we tear up the tax code and get rid of the IRS, write ProPublica's Kim Barker and Justin Elliott, let's keep in mind six facts that seem to have been lost in the scandal:

• Social welfare nonprofits are supposed to have social welfare, and not politics, as their “primary” purpose.
• Donors to social welfare nonprofits are anonymous for a reason.
• The Supreme Court’s Citizens United decision meant that corporations could pay for political ads, anonymously, using social welfare nonprofits.
• Social welfare nonprofits do not actually have to apply to the IRS for recognition as tax-exempt organizations.
• Most of the money spent on elections by social welfare nonprofits supports Republicans.
• Some social welfare groups promised in their applications, under penalty of perjury, that they wouldn’t get involved in elections. Then they did just that.

Social Media

And in the middle of writing a new book, tentatively titled Our Biggest Small Towns, Allison Fine wonders whether digital acts of kindness are making society as a whole kinder and more generous. What do you think? Share your thoughts here or in the comments section below.

That's it for now. What did we miss? Drop us a line at rnm@foundationcenter.org. And have a good week!

--The Editors

Trouble at the IRS: What Were They Thinking?

(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.)

Like 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.

Some apologists for the agency have tried to rationalize its actions by placing them in the context of the Citizens United decision:

The danger of this frame is that it will discourage the IRS from fully investigating all nonprofit groups spending money to influence elections. And it will distract from the core problem behind the IRS's mess: the post-Citizens United explosion of undisclosed electoral spending.

Before the Supreme Court's decision in Citizens United, only a limited number of nonprofit 501(c)(4) groups could spend money to influence elections -- those who did not take contributions from corporations or unions. But Citizens United lifted restrictions on corporate spending in elections, setting the stage for individuals and companies to funnel unlimited money through all corporations, including (c)(4)s and super PACs in an effort to help elect the candidates of their choice.

While no one questions the propriety of fairly vetting any organization applying for tax-exempt status, let's not get sidetracked and pretend that the issue here is beleaguered workers at the IRS who, in a presidential election year, found themselves swamped by new applications:

It's not like the IRS needs a way to flag the new groups that were created in the wake of the Citizens United decision. They have all the information they need to do that without any special filter. They can search for the date of the application. If what you're concerned about is that most of the new groups being created are in fact thinly disguised electioneering vehicles, then what you want to do is take a random sample of the new groups, review them, and see what percentage turn out to be self-dealing or otherwise engaged in inappropriate behavior.

Instead, the IRS method for dealing with the volume was to take an unrandom sample. And how did they decide that you deserved extra scrutiny? Because you had "tea party" or "patriot" in your name. Since the Tea Party was a brand-new movement in 2010, they couldn't possibly have had any data indicating that such groups were more likely to be doing something improper. So how exactly did they come up with this filter? There is no answer that does not ultimately resolve to "political bias."

One of the reasons I have chosen to devote myself to nonprofits and the nonprofit sector is because I see philanthropy and nonprofit advocacy to be quintessentially American activities. What could be more American, after all, than people gravitating to an issue or problem that concerns them and choosing to work to solve it by starting a nonprofit organization or making a donation to an organization that already exists for that purpose? Which is why I am deeply troubled by the thought that other people, including civil servants at one of the most powerful agencies in the federal government, value that freedom much less highly than I do.

While I realize the Tea Party isn't the most sympathetic or popular movement around, I hope that leaders of the nonprofit sector will speak out to condemn what happened in Cincinnati as strongly as they surely would if the IRS had decided to subject groups with words such as "progressive," "marriage equality," or "pro-choice reform" in their names to additional scrutiny.

What do you think? Were the actions of the IRS a case of political bias or just government ineptitude? And what shold the nonprofits and the sector do to let the Obama administration know that the agency's actions are unacceptable?

-- David Jacobs

Weekend Link Roundup (April 13-14, 2013)

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

Fundraising

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

Health

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."

Impact/Effectiveness

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.

Journalism

The Nonprofit Quarterly's Rick Cohen recaps a panel discussion from the Council on Foundations' annual conference that looked at the future of journalism and why it matters to philanthropy. "[I]f there was an overwhelming message [from] the panel," writes Cohen, "it was [the Center for Investigative Reporting's Robert] Rosenthal's contention that funders have to understand a new generation of journalists motivated by creative ways of storytelling."

Philanthropy

In a nice profile on the Bridgespan Group's Give Smart site, actor, philanthropist, and Parkinson's sufferer Michael J. Fox shares four key lessons he has learned from his philanthropic work: involve beneficiaries in guiding your philanthropy; pinpoint the role your philanthropy can play in adding value to existing efforts; bring expertise in-house and use it to drive change; be pragmatic and urgent in your drive to get results.

Regulation/Oversight

GuideStar president and CEO Jacob Harold says the provision included in the White House's FY2014 budget that all nonprofits file their tax forms digitally and that the government make that data available in structured machine-readable form is a potential game-changer. "The nonprofit sector (and GuideStar in particular) has had to invest immense resources in aggregating, organizing, and presenting financial information from the Form 990," writes Harold. And the changes in the 2014 budget

could free up those resources and let us focus on a set of even more important questions: What are nonprofits accomplishing in their communities? What can we learn from their stakeholders? How can the nonprofit community work with government and business for a better world?"

There's no doubt that if these changes pass, they will erode some parts of GuideStar's business model. That's OK. In fact, that's great. The world is changing quickly, and we're ready for it...."

Social Media

On her About.com blog, Joanne Fritz announces the winners of the 2013 DoGooder Video Awards.

And Beth Kanter has some advice for senior nonprofit leaders looking to make time in their busy schedules for online media. Among other things, writes Kanter, they need to get started with small steps, understand the benefits of their efforts to their organizations as well as professionally, and be able to connect any online social activity to what they're already doing.

That's it for now. What did we miss? Drop us a line at rnm@foundationcenter.org. And have a good week!

-- The Editors

Weekend Link Roundup (April 6-7, 2013)

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

Advocacy

On NCRP's Keeping a Close Eye blog, Rosenberg Foundation president Tim Silard discusses the foundation's recent decision to increase its payout this year to 6.1 percent to help advance immigration reform. "Our hope," writes Silard, "is that this major step by a mid-sized foundation can go a long way toward encouraging more of us in philanthropy to stretch our funding even further...to respond to this unique window of opportunity."

Communications

In a post on the Council on Foundation's Re: Philanthropy blog, Rita Soronen, president and CEO of the Dave Thomas Foundation for Adoption, reminds us why storytelling matters. Indeed, it is "at the heart of all emotions," writes Soronen. "And nonprofits simply must use communications -- storytelling -- as a very important tactic to steward current donors and secure new funders."

Fundraising

Jeff Brooks, author of the Fundraiser's Guide to Irresistible Communications, explains that fundraising is "a two-way conversation" and if you don't know that, you're missing an opportunity to engage your donors in a real way.

Impact/Effectiveness

Center for Effective Philanthropy president Phil Buchanan considers the role of foundations in the emerging impact investing space. Writes Buchanan:

In many of the accounts heralding impact investing as the potential solution to the world's ills, foundations, with their more than $300 billion in assets, are featured prominently. They are portrayed as leaders, or likely leaders, in this new realm....

Clearly, there are some major foundations that have taken significant and important steps into impact investing, such as the W.K. Kellogg Foundation (see CEO Sterling Speirn's excellent post on Kellogg’s experience for the CEP Blog) and the Greater Cincinnati Foundation. But, beyond a handful of much discussed examples, it is unclear how much of the talk about impact investing is just that -- talk -- and how much is reflected in actual practice....

Buchanan goes on to explain that he has heard "many foundation CEOs and board members eschew the idea that they'd ever seek anything other than maximum returns for their foundations' endowments." To that end, Buchanan writes, more research needs to be done "to bring the prevalence of this practice into focus."

Can't get enough of the impact/metrics debate? The Nonprofit Quarterly kicks it up a notch with a great point/counterpoint debate featuring an entertaining post ("Charity Navigator 3.0: The Empirical Empire’s Death Star?") by William Schambra, director of the Hudson Institute's Bradley Center for Philanthropy and Civic Renewal, and an equally sharp rebuttal ("Debating the Realities of Ranking Charities") from CN's own Ken Berger.

International Development

Ariel Schwartz, a senior editor at Fast Company's Co.Exist operation, looks at four ideas that Melinda Gates believes will drive the next wave of advances for people in the developing world: M-Pesa, a mobile money system; Digital Green, an organization that helps farmers in India and South Asia create educational videos for other farmers; contraception education and access; and local development.

Nonprofit Management

On the Valcourt Group blog, Jim Jewell looks at seven reasons why nonprofits often fail or flounder.

Regulation/Oversight

The Charitable Giving Coalition (CGC), a group of sixty nonprofits that includes the Association of Fundraising Professionals and Independent Sector, has launched a new Web site, ProtectGiving.org, to help preserve and protect the charitable tax deduction in its current form. Visitors to the site will find a variety of resources (reports, fact sheet, FAQ) designed to raise awareness about the importance of charitable giving in America, examples of the impact nonprofits make in our communities, and a "Take Action" section that includes talking points, a message and media guide, and op-ed and elected official letter templates.

Social Entrepreneurship

Writing on the Gates Foundation's Impatient Optimists blog, GOOD magazine's Mary Slosson announces the launch of the Global Citizenship Project, which will offer five global innovators each a "pop-up fellowship to elevate and expand their work in order to create more equitable and successful neighborhoods."

Social Media

Beth Kanter urges nonprofit leaders to embrace social media -- and "the benefits of effective social media integration that personalizes your organization’s brand with the voice of its leader" -- by making time for Twitter, Facebook, Instagram, and other tools on a regular basis. As a start, Kanter suggests that execs and senior managers start by asking their communications teams:

• What do you spend time doing now that you could do better via social?
• What other executive directors that you respect, follow, or feel inspired by are using social creatively?
• What are your strengths and preferences and what is the best match in terms of social channels?
• How will social improve things you already KNOW and value

Citing the experience of Udi Ofer, executive director of the New Jersey chapter of the American Civil Liberties Union, Kanter points out that Twitter not only enables Ofer to comment "on his organization's most important cases and issues," but also to display his human side and inject "warmth into the organization."

That's it for now. What did we miss? Drop us a line at rnm@foundationcenter.org. And have a good week!

-- The Editors

Board Compensation in Grantmaking Foundations: Reasonable and Necessary?

(Mark Hager is associate professor of nonprofit studies in the School of Community Resources and Development at Arizona State University. This post originally appeared on the Foundation Center's Transparency Talk blog.)

Tradition dictates that board members work for free in most quarters of the nonprofit sector, but that isn't necessarily true for grantmaking foundations, especially independent ones. In a new paper (free access until late March) published in Public Integrity, the ethics journal sponsored by the American Society of Public Administration, Elizabeth Boris and I consider the question of what varieties of grantmaking foundations compensate their board members for governance duties. It reboots and reframes an earlier analysis conducted by the Urban Institute, the Foundation Center, and GuideStar.

In the paper, we point to several interesting examples, including a very large foundation's generous policy of trustee compensation spelled out in its organizing documents, another with seven-figure annual compensation paid to a bank to act as a very part time "institutional trustee," and another that underwent IRS investigation for eye-popping compensation that essentially amounted to trustees looting a charitable trust. These cases aren't typical, but they are part of the big picture of how work gets done in grantmaking foundations and how much insiders get paid to do it. In more typical cases, foundations might have justifiable reasons to compensate board members, including to ensure representation from beneficiary populations or to extend health insurance benefits to family founders. It's the extreme cases, however, that threaten to color all of philanthropy.

Compensation for governance duties is perfectly legal, so long as it falls under the IRS' broad standard of "reasonable and necessary." The practice is pretty rare in community foundations, partly due to the fact that they rely so heavily on public contributions and are therefore subject to public scrutiny. It also appears to be fairly rare in corporate foundations, but that may largely be due to the fact that many corporate foundation trustees get paid as corporate executives, making their compensation invisible on the foundation side. About one in five independent foundations, however, appear to report compensation of their board members for governance duties, as reported on Form 990-PF.

The practice is always concentrated in larger foundations. Of the ten thousand largest U.S. foundations that are the subject of the study, more than half compensate no one, including any staff. Most foundations are small and get their work done by family volunteers. Foundations that compensate staff members are more likely to compensate their board members. However, for the typical foundation, board compensation levels are eminently reasonable. The median individual board member compensation in independent foundations is only about $8,000. That's not an indication of a rampant problem.

However, a few bad apples always threaten to spoil the bunch. The median may be $8,000, but the mean was $15,700 due to a number of well-compensated apples. When a board member's one-year compensation reaches $200,000 (this happens), or a bank trustee is compensated $1,000,000 to spend a few hours a month managing investments (noted above), or aggregate board compensation in a given foundation exceeds its grants in a given year (this happens, too), we might rightly ask whether compensation has exceeded what is "reasonable and necessary." At the same time, $1,000 here and $100,000 there adds up to real money, to the tune of more than $100 million paid out to foundation board members in any given year. People hear that and start asking why that money isn't being allocated to community nonprofits instead.

Who is going to check to see whether board compensation is reasonable and necessary? For many organizations in the nonprofit sector, the general public is the first regulator. Service providers and advocates, especially those that rely on public contributions, reign in compensation and overhead costs due to public pressure. This is not the case with independent foundations, however, since they are not beholden to public contributions. Since the general public has no skin in the private foundation game, the public tends to ignore them.

A second regulator candidate, then, is government. Certainly, the IRS can prosecute private foundations that exceed the vague "reasonable and necessary" standard. Thing is, they don't, at least not very often. For one thing, identification of board member compensation is very difficult on Form 990-PF. For 2008, the IRS revamped Form 990 for public charities so that compensated individuals are identified as board members or employees. No similar revamp happened to Form 990-PF, where administrative and governance duties are conflated. Picking out board members working on governance duties is tricky; board compensation must be inferred from titles or numbers of hours worked, if reported. So, board compensation is not always obvious on the federal form. And even when unreasonable or unnecessary compensation appears evident, the IRS is often unwilling to take on community elites with deep pockets.

The third regulator, maybe, is private foundation executives and board members themselves. That's one of the ideas underlying the Foundation Center's Glasspockets initiative: private foundations will regulate themselves as their practices become more transparent. Private foundations certainly do not need to eradicate the practice of compensating board members for governance duties. However, when outliers cause observers (like me) to raise their eyebrows, the whole field can get painted as out-of-touch with community needs. Maybe Glasspockets can plant a stake in the ground on this issue to encourage foundation leaders themselves to openly disclose this information as a best practice. Voluntary and widespread disclosure of board member compensation, venues for discussion, and bright lights on questionable practices can help stem criticism of compensation that may or may not be "reasonable and necessary" for carrying out the exempt purposes of grantmaking foundations.

Everyone benefits when somebody, somehow, enforces the "reasonable and necessary" standard. Grantmaking foundations will keep better faith with their local communities. Regulators will be able to concentrate on more worthy offenses. And nonprofits will benefit from resources that are otherwise diverted into trustee pockets. Win, win, win.

-- Mark Hager

Let's Think Smarter About the Charitable Tax Deduction

Jan Masaoka is CEO of the California Association of Nonprofits (CalNonprofits), publisher of Blue Avocado, and author of The Best of the Board Café, Nonprofit Sustainability (with Jeanne Bell and Steve Zimmerman) and The Nonprofit's Guide to Human Resources.

On New Year's Day, lawmakers in Washington finally agreed to disagree and passed a bill to avert the so-called fiscal cliff. But with the federal government looking at another trillion-dollar deficit and record levels of debt, no idea for balancing federal expenditures and revenue will be off the table for long.

For many nonprofits, keeping the charitable tax deduction off the table is the issue. But while the issue itself may seem straightfoward, there are more nuances and choices to it than meet the eye. There are many ways, for example, to increase taxes that would not have a directly negative impact on nonprofits -- which, after all, are a huge part of the safety net for the poor, the elderly, the unemployed, and many others.

The deal made to avoid the fiscal cliff left the charitable tax deduction untouched for the most part -- and for the time being. To be clear: neither eliminating the deduction nor reducing the deductibility rate was discussed; the administration's proposal would have lowered the current cap on the deductibility of charitable gifts from 35 percent to 28 percent of one's income. The one tiny change passed was the reinstatement of the Clinton-era Pease Amendment, which will raise taxes on some of the wealthiest donors by perhaps $2,000 each.

However, the intensity of the debate served to highlight some thought-provoking issues for those of us in the nonprofit and philanthropic communities, especially as the potential for revisiting the charitable deduction (and other tax breaks) looms large.

Some nonprofits are conflicted about the charitable deduction: on the one hand, nonprofits benefit from donations that often are influenced by their tax-deductible status; on the other, many of these same nonprofits support higher taxes for the wealthiest in our society. Indeed, a reduction in the charitable deduction does two contradictory things for nonprofits: it reduces the financial incentive for people to give, and it also brings in more tax revenue -- revenue that could be used to fund nonprofit services.

Of note, the current deduction formula affords greater tax relief to higher-income individuals than to lower-income individuals, for three reasons:

• Higher-income individuals are more likely to itemize;
• Because it's applied to taxable income, the deduction helps higher-income individuals more since their marginal tax rates are higher; and
• The cap only affects individuals who donate a third or more of their taxable income. (Lower-income individuals are unlikely to be able to give away such a large percentage of their income.)

Other proposals, such as establishing a "floor" for the charitable deduction (a minimum percentage of adjusted gross income by which charitable contributions could qualify for deduction), could be more equitable and arguably could raise more tax revenue while having little or no impact on charitable giving. We should also look at ideas for extending the charitable tax deduction to non-itemizers, changing the formulas on deductions for donated stock, and making the estate tax more of an incentive for bequests. 

All of us at the California Association of Nonprofits encourage our colleagues in the nonprofit sector to advance the longer-term conversation about the charitable deduction as it relates to the balance between sector sustainability, equitable taxation, and fiscal responsibility.

But while we all must work to protect the deduction, we cannot allow the main message from the nonprofit sector to be only about tax breaks. We feel strongly that the Bush tax cuts of 2001 and 2003 have been harmful to our economy and our communities, while benefiting very few Americans. In the fiscal cliff deal, current marginal tax rates were extended indefinitely for individuals earning less than $400,000 and couples earning less than $450,000 -- approximately 98 percent of all U.S. taxpayers. While the revenue that will be realized by raising rates on the highest-earning 2 percent of taxpayers is less than what President Obama originally proposed, it's a step in the right direction for equitably increasing tax revenue as part of a longer process to bring the federal budget into balance.

We believe the responsible position is to support the charitable deduction and to support policies that result in increased revenue. In order to do that, we all will need to consider additional options as a new Congress begins to craft policy around these important issues.

-- Jan Masaoka

“Beep, Beep”: The Sound of Philanthropy and the Social Economy in 2013

(Bradford K. Smith is president of the Foundation Center.)

"We will change what we do with and without institutions, and we will change how our institutions (funders, nonprofits, and others) work." So predicts self-described philanthropy wonk Lucy Bernholz in Philanthropy and the Social Economy: Blueprint 2013, a must-read roadmap available for the first time as a GrantCraft publication. "Beep, beep." Wile E. Coyote (me, nonprofit executive) has just been left holding a burning stick of dynamite while the Road Runner (Lucy, blogger extraordinaire) races headlong onto her next prediction. That is the true value of Blueprint 2013 for those who are busy running the institutions that make up the "social economy": Lucy has seen the future for us, and now we must struggle to adapt, respond, and innovate. The data- and technology-driven future she envisions is both exhilarating and a bit unsettling, but one thing is clear: the Silicon Valley credo is fast approaching the staid world of philanthropy: "Disrupt yourself or be disrupted."

The vast majority of today's social sector leaders grew up in a world where foundations were the funders and nonprofits were the doers. Blueprint 2013 lays out a vision of a social economy inhabited not only by traditional nonprofits, but also by social businesses, socially responsible corporations, peer networks, and institutional forms not yet invented. Donors in this economy have choices between well-known forms of charitable giving (like creating a foundation), impact investing, and political giving to bring out the change they desire.

Running throughout the social economy is the lifeblood of data. In 2012 alone:

• GuideStar and the Nonprofit Finance Fund released an online tool for comparing the financial health of nonprofits;
• 15 of the largest U.S. foundations teamed with the Foundation Center to launch the "Reporting Commitment," making their grants data available in open, machine readable form; and
• the China Foundation Center started rating more than 2,000 Chinese "foundations" with an elaborate Transparency Index.

These are but a few of the examples included in Blueprint 2013 to illustrate how "new data-driven insights will become a first step, an input, into the practical work of decision-making." Lucy notes that the "next step in using social economy data is for community organizations and funders to join in this ethos of using, sharing, comparing, and contrasting data and tools."

While fast-developing technology makes it easier by the minute to collect, access, analyze, and visualize data, unresolved issues loom on the horizon. "Nonprofits in the future will be defined by how they use their data for public good while protecting the personal privacy rights of all who contribute that data." Data use, ownership, and access rules will be as definitional for the social economy in the 21st century as the charitable deduction was for nonprofits in the 20th century. Blueprint 2013 urges the social sector to take the lead in setting standards for collecting, using, storing, and sharing individual data in ways that thread the needle between personal control and social good. The Worldwide Initiative for Grantmaker Support (WINGS), a federation of some hundred and forty philanthropy support organizations around the world is doing just that by promoting a global philanthropy data charter much like that already adopted in the field of health.

Not all of Lucy’s predictions are about the shimmering world of data and technology. Something everyone in our sector cares about -- the charitable deduction -- is also on her radar: "They (Congress) will set lower limits for charitable deductions." Others -- "Civic crowdfunding will grow and may exacerbate inequality" -- require serious debate and reflection. But among the rich density of Blueprint 2013, the most interesting thought comes toward the end in a section entitled "Glimpses of the Future": "We still need to think about what purposes we want served and what the right mix is of institutional and financial systems to accomplish those goals." Lucy laments that a narrow focus on maintaining the tax deductibility of charitable gifts will crowd out a much-needed and broader discussion about "the most effective ways to provide incentives for private involvement on behalf of the public benefit."

In this regard, perhaps philanthropy and the broader social sector cannot escape the largest question facing our global community -- what kind of world do we want? Data, technology, institutional forms, and regulation are tools to be used to create a better world. While no one expects a return to the failed welfare states of the 20th century, we still need a destination. Otherwise all of our networking, crowdsourcing, analytics, social entrepreneurship, and innovation will occur in a vacuum where change, though sometimes inspiring, will ultimately be retail. Aspiring to something greater requires the kind of thought and questioning contained in Blueprint 2013: a roadmap filled with tantalizing glimpses of where we might be able to reach. As the fuse grows shorter, defining the destination is our responsibility.

-- Brad Smith

[Infographic] Nonprofits’ Impact on the Economy

Our infographic of the week, courtesy the Rebecca Gordon Group, delves into a topic that has been much-discussed this election season: nonprofits' impact on the economy.

 

According to the National Center for Charitable Statistics, the nonprofit sector contributes 5.5 percent of the nation's entire GDP, or $751 billion worth of output, and employed, as of 2009, 13.5 million individuals, or approximately 10 percent of the country's workforce.

(Independent Sector has a fact sheet on its Web site that lays out the sector's impact in much greater detail.)

Now, some would argue that statistics like these overstate the sector's impact, in that they fail to capture the extent to which the sector relies on tax-advantaged wealth transfers and the difference, in terms of the multiplier effect, between transfer payments and earned income. What's your take on that distinction? And, as we head into an election that could significantly reset the way the nonprofit sector is treated in the federal tax code, how would you characterize the sector's impact on the economy?

Share your thoughts in the comments section below...

Weekend Link Roundup (October 13-14, 2012)

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

Communications/Marketing

In a guest post on the Communication Network blog, Hattaway Communication's Doug Hattaway shares a couple of insights based on psychology and neuroscience into how people make decisions:

Insight 1: Two mental systems work together to drive decision-making and behavior. Effective communications influence both intuition and cognition -- encouraging instant intuitive judgments and enabling fluent cognitive reasoning.

Insight 2: People are more likely to trust information that they easily understand. "Fluency" theory holds that if people readily comprehend an idea or information, they are more likely to believe it. Being easy-to-understand obviously doesn't mean the information is more reliable, but people are more likely to perceive it as true. Hattaway's advice for nonprofit communicators: "It's smart to dumb things down."

In a post on her Non-Profit Marketing blog, Network for Good's Katya Andresen shares seven tips designed to improve the stories that nonprofits tell about their impact, the people they help, and their generous supporters.

Disaster Relief

Eye-opening article by Deborah Sontag in the New York Times about Yéle Haiti, the charity created by Haitian-American hip hop artist Wyclef Jean in the wake of the January 2010 earthquake to help the people of that impoverished country.

Journalism/Media

Fasten your seat belts. With funding from the Open Society Foundations, the Reuters Institute for Journalism has released a report, "Ten Years That Shook the Media World," which shows "that even after more than a decade of often dramatic turmoil in the media sector, we are only at the beginning of a longer transitional period."

Philanthropy

Over at the Nonprofit Quarterly, Simone Joyaux looks at what has changed -- and mostly what hasn't -- about social justice philanthropy in the eight years since she first addressed the topic in her newsletter.

Regulation

While open to the "notion that non-charitable tax-exempt organizations should have to pay property taxes," The Nonprofiteer takes issue with the city council in Scranton (PA), which threatened to withhold approval of zoning changes from tax-exempt property owners unless they made "voluntary" payments in lieu of taxation (PILOTS). "Let's not torture the concept of 'voluntary'," she writes, "by suggesting that a payment extorted in return for rezoning is somehow a free-will contribution to the public fisc."

And on her Philanthropy 2173 blog, Lucy Bernholz asks readers to answer the following question: "What would affect donors' behavior more, changes in the tax deductions associated with their giving or rules requiring greater transparency about their giving?" What do you think? Share your thoughts in the comments section below.

Social Entrepreneurship

Earlier in the week, serial social entrepreneur Robert Egger, the founder of DC Central Kitchen, Fresh Start Catering, the Campus Kitchen Project, and CForward, announced that after twenty-five years at the helm of DCCK, he was "moving on." To retirement? Not likely. No, Egger is "returning to the city of my roots -- Los Angeles -- to launch the L.A. Kitchen in 2013." As the always enthusiastic Egger writes on his personal blog, the new endeavor

will roar into an incredible vacuum in America. Our first goal is to recover millions of pounds of California’s abundant fruits and vegetables. The traditional model moves perishable foods through the system (from farm to food bank/kitchens to pantry to people) at a brisk pace to avoid spoilage. We want and use these precious commodities to fuel a job training program that will produce nutritionally dense salads, snacks and vegetarian/vegan meals. But we also want to develop inter-generational volunteer opportunities so that, working side by side, we can prep, package and freeze millions of pounds of produce and fruit, which will allow our partners to distribute portion controlled product that can be used in a more purposeful way, at a more focused pace.

We will also explore social enterprise through a new business we will launch named Strong Food. Like the name says, it isn't about sustenance, it's about helping people stay strong, vital and engaged.

We will also explore large scale urban composting, showing how every part of a plant can be used to build stronger bodies and healthier communities.

Most of all, I want to delve deeply into the issue of aging in America. L.A. Kitchen will be at the very forefront of supporting a new era of inclusion and health for our elders. I don't want to feed to old; I want to help redefine aging in America. And I want to show the role that food and a dynamic nonprofit organization can play in keeping our elders engaged, healthy, vital and active....

We wish Bob the best of luck in these, and all future, endeavors!

Social Media

In the most recent installment of her Social Good podcast series, Allison Fine chats with filmmaker Marc Erlbaum about his use of crowdfunding platform Indiegogo to raise $150,000 and crowdsource stories about the meaning of life for his next film project.

On LinkedIn, Charles Best, founder and CEO of DonorsChoose.org, asks for help in developing a mobile strategy for his organization. "We know that mobile is important," writes Best. "We agree that mobile devices are becoming many people's primary way to connect to the Internet. We see that the percentage of site visitors coming to us from mobile devices is steadily increasing. We know we have to do something, but we're not sure what." Has your organization had success with mobile? Share your experience with Best and others in the comments section below.

Women & Girls

Thursday was International Day of the Girl, and, as Beth Kanter notes on her blog, the launch of the "Because I Am a Girl" campaign by the Plan, one of oldest and largest children's development organizations in the world. Why a campaign to raise awareness about the importance of educating girls? Because, as Kanter writes, "Globally, one in three girls around the world is denied an education by the daily realities of poverty, violence and discrimination. Every day, girls are taken out of school, married far too young, and subjected to violence in school. Not only is this unjust, it's also a huge waste of potential with serious global consequences...."

That's it for now. What did we miss? Drop us a line at rnm@foundationcenter.org. And have a great week!

-- The Editors

 

Clinton Announces Revisions to Tax Regulations to Support Civil Society Worldwide

Small but interesting announcement timed to coincide with the annual meeting of the Clinton Global Initiative and the opening of the 67th session of the UN general assembly:

In conjunction with a meeting of the State Department's new Global Philanthropy Working Group -- the sixth and newest pillar of the department's Strategic Dialogue with Civil Society initiative -- Secretary of State Hillary Rodham Clinton has announced Treasury Department and IRS guidance "aimed at lowering the legal barriers and administrative costs associated with cross-border philanthropy in support of civil society worldwide."

According to a statement issued by State, the proposed revisions to "equivalency determinations" -- i.e., the process by which a U.S. grantmaker evaluates whether an intended foreign grantee is the equivalent of a U.S. public charity -- allows foundations to rely on a broader range of professional tax advisors when making such determinations. It's hoped that "this will make professional tax advice in this area easier to obtain, significantly reduce the administrative costs of foundation grantmaking to foreign civil society groups, and ensure that accurate determinations regarding foreign grantees are made."

For the last year or so, Tech Soup Global, in partnership with the Council on Foundations, has been working on an equivalency determination information repository (EDIR) service called NGOsource. To learn more, click here.

 

Campaign Finance and Charities

(Mark Rosenman, a Washington-based scholar-activist and director of Caring to Change, a D.C.-based effort to promote foundation grantmaking for the common good, is a frequent contributor to PhilanTopic. In his last post, he looked at the potential impact of the Romney/Ryan platform on nonprofits.)

Charities depend on people's trust and on the public's support for their existence. Unfortunately, much of that goodwill is being eroded by the behavior of some nonprofit organizations in the 2012 presidential race.

First, it's important to understand that there are lots of different kinds of organizations that are granted tax-exempt status by the IRS. They range from industry associations and what are called "social welfare organizations" to the charitable and faith-based groups we usually think of when we hear the term "nonprofit." Only donors to the latter, however, receive a tax deduction for their charitable donations.

For years, most social welfare organizations operated in service to a particular charitable concern and the broader community. The main difference between these organizations and charities is that the former are granted extensive powers to lobby government -- although those activities may not include "direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office." As my grandmother used to say, that's all gone to hell in a handbasket since the Supreme Court handed down its landmark Citizens United decision in 2010 -- and that hurts charities.

A lot has been written about the partisan political abuses perpetrated by what are known as (c)4 groups (that's the IRS designation for social welfare groups; charities are classified as [c]3s). Indeed, in this election cycle, (c)4s are using the secrecy afforded them by law -- (c)4s do not need to make public the names of those who fund them -- as never before to pour millions of dollars into vitriolic presidential ad campaigns intended to influence voters.

A side effect of the decidedly nasty and often deceitful ads run by these groups -- and the press attention paid to these abusive practices -- is that real nonprofits are being tarred with the same brush. Most people don't distinguish between (c)4s and charities. As a result, the good work of the latter, work that is dependent on public support, is being tarnished by cynical political operatives and agendas.

Of course, the corrupting influence of money in politics has long been a problem for charities. Among other things, they are at a grievous disadvantage when it comes to advocating for the common good with legislators and chief executives who too often are beholden to private interests. Sadly, instead of honoring "one person, one vote," our democratic system now rewards big bucks with outsized influence.

Charities and legitimate social welfare organizations should be able to advocate and lobby for their clients, their communities, and their causes. And we need to accept that sometimes it may be difficult to distinguish between nonprofits working for the public interest and those serving pecuniary and partisan purposes. Yet, charities cannot allow the ongoing corruption of social welfare nonprofit status to go unchallenged.

To help protect themselves against such corruption while continuing to push for a more democratic society, charities of all types need to work together to moderate the influence of money in politics. They can do this by calling for timely, energetic investigations of (c)4 groups that violate strictures on partisan political activity, as the IRS seems belatedly to be doing with Crossroads GPS, a (c)4 group established by Republican political operative Karl Rove.

Charities also should join in calling for much greater transparency with respect to political contributions, regardless of the tax status of the organizational vehicles used to encourage and bundle those contributions. And they must work to support legislation and other policies that help restore the voice of ordinary people in our political process while curbing the influence of billionaire donors.

Nothing less than the continued health of the charitable sector -- and our democracy -- is at stake.

-- Mark Rosenman

Weekend Link Roundup (April 21-22, 2012)

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

Civil Society

In the Encyclopaedia of Informal Education, writer, activist, and sometime PhilanTopic contributor Michael Edwards bemoans the lack of clarity around the term civil society and attempts to restore some precision to the debate over its meaning. In the process, he reminds us that "Recognizing that civil society does indeed mean different things to different people is one of the keys to moving forward, because it moves us beyond false universals and entrenched thinking."

Communications/Marketing

On her Non-Profit Marketing blog, Katya Andresen shares four trends, including the growing popularity of peer networks, likely to shake up nonprofit marketing. "People listen to each other more than us, so we need to stop viewing social media as another form of getting our message out," writes Andresen. "Its primary value is that it allows other people to get the message out, for us."

Entrepreneurship

On the Kauffman Foundation's Growthology log, Dane Stangler looks at the evolution of entrepreneurship and how the very definition of the word entrepreneur has broadened over the years. Writes Stangler: "In its original use by Jean-Baptiste Say, it was someone who undertook economic activities and capitalized on arbitrage opportunities. Joseph Schumpeter ushered in the modern way in which people typically use the term by equating it with newness -- new products, services, combinations, business models, etc. Israel Kirzner saw entrepreneurs as those who targeted and eliminated disequilibria in the economy (for Schumpeter, entrepreneurs created those disequilibria)." Today, however, "the word has come to be so overused as to potentially lose a great deal of meaning...."

Environment

In a guest post on the Knight Blog, Shannon Dosemagen, director of community engagement at the Public Laboratory for Open Technology and Science, a 2011 Knight News Challenge winner, explains how the decision by Google to license community-created aerial maps from the lab's archive could lead to better policy and replace commercial and government data as a recognized representation of sites of civic and environmental concern.

Higher Education

The New York Times' Room for Debate series takes up the question of whether wealthy colleges deserve their tax breaks, with contributions from economist Sandy Baum; Michael McPherson, president of the Spencer Foundation; the American Entreprise Institute's Frederick Hess; Barbara Gitenstein, president of the College of New Jersey; Andrew Coulson, director of the Center for Educational Freedom at the Cato Institute; Osamudia James, an associate professor of law at the University of Miami; and Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce.

International Affairs/Development

About.com's Joanne Fritz reminds readers who are thinking about doing a little "voluntourism" this summer to use common sense and follow these tips from the Center for Responsible Travel.

Philanthropy

On his Inside Philanthropy blog, Todd Cohen offers his take on some of the investment strategies that have emerged in recent years to scale up or expand proven nonprofit programs.

Regulation/Oversight

Idealist researcher/blogger Putnam Barber reminds nonprofit organizations, many of which do not have to file their Form 990s until May 15, to make sure they have answers to three important questions:

• When is our filing deadline?
• What do we need to know to be sure we stay current with all the rules and regulations?
• Who is going to file our Form 990-N?

Social Entrepreneurship

Over at Dowser, J. Gregory Dees, a professor in the Fuqua School of Business at Duke University and creator of the first course in social entrepreneurship in the U.S., challenges New York Times' columnist David Brooks' characterization of social entrepreneurship as something young people do to "avoid political participation and...[tackle the] 'corruption, venality, and disorder head-on'." Writes Dees:

Social entrepreneurs do not discourage political participation -- they invent new mechanisms for achieving the public good. Quite often solutions to problems require not just mobilizing political support but actually demonstrating how to solve problems that have confounded others.... Social entrepreneurs serve as society"s "learning laboratory," developing, testing, and refining new approaches to problems in ways that government agencies, with all their budgetary, bureaucratic, legislative, jurisdictional, and political constraints cannot do. These innovators represent the kind of decentralized problem solving that Nobel laureate Douglass North identifies as essential for any society to achieve what he calls "adaptive efficiency," the ability to adjust and thrive in the face of new challenges and shifting problems....

Social Media

On her blog, Allison Fine weighs in on the value of a Facebook "like." Writes Fine:

The notion of creating a direct equation of how much it cost to get one person to like a Facebook page and how much that person bought or gave as a result might satisfy the bean counters, but misses the larger point of why social media are so much more powerful than broadcast media. If you’re just looking for one, or ten, or one hundred thousand stand alone customers or donors, then there is no extra value in using social media. You could have just sent out a direct mail piece for that. The value in using social media is that every person, every like, comes with their own network that can be activated in an instant, and at no additional cost, for the organization. And that value, the value of having an army of your most ardent fans, affects far more than the development department....

Transparency

On the Foundation Center's Transparency Talk blog, Mark Hager, associate professor of nonprofit studies at Arizona State University's School of Community Resources and Development, explains how students in his Theory and Practice of Philanthropy course are using Glasspockets indicators to evaluate private foundations and "reflect critically on the value of transparency and how well the Glass Pockets assessment captures the concept." In the coming weeks, Hager will share thoughts from the student who "presented the most interesting observations about foundations, transparency, and the 'Who Has Glass Pockets' indicators." Stay tuned.

That's it for now. What did we miss? Drop us a line at rnm@foundationcenter.org. And have a great week!

-- The Editors