posted on: Tuesday, July 14, 2009

Gary Snyder

Some random thoughts:

• Is the sacred self-regulation mantra gone forever in favor of the endorsement of the charity sector leadership endorsing stronger government intervention?

• Are the “accountability and transparency” efforts of GuideStar now being picked up by the IRS?

• Why is the IRS monitoring and giving training programs to charities when there is a large network of organizations (IS, Board Source, state associations, more) that are doing the same?

• Is the IRS being “helpful” and “watchful” going to eliminate the taint on charitable sector?

• In view of record malfeasance, why are the state regulatory bodies’ efforts being so poorly funded?

• Where are the efforts to instill confidence to a sector that has diminishing trust by donors?

• Has the upsurge in charitable organization applications for tax-exempt status served the sector well?

• Has the vast amount of money spent on board training shown any benefit?

• Why does the IRS say that no regulation fits all organizations, but proposes regulations that are to fit all charities?

• Why does everyone embrace empirical evidence but so few are gathering it?

• Why does everyone talk about dialog within philanthropic sector and large sections are not at the negotiating table or even consulted?

• Is the federal government’s belief that an active and independent board is the best defense against the misuse of charitable assets as well as bad press valid? What is the staff’s role in that regard?

• Why is there such an uproar when there are suggestions about how old and tired approaches should be changed?

• Is strategic planning a good activity, or expenditure, when the results frequently sit on the shelf?

Not sure what to think...

Gary R. Snyder is the author of Nonprofits: On the Brink. He is a frequent lecturer and author of articles in numerous publications and blogs. His email is http://gary.r.snyder@gmail.com; website: http://www.garyrsnyder.com/, phone: 248.324.3700.

posted on: Thursday, November 13, 2008

By Aaron Dorfman

According to an article published on October 23, 2008 in the New York Times, former chairman of the Federal Reserve Alan Greenspan “admitted on Thursday that he ‘made a mistake’ in trusting that free markets could regulate themselves without government oversight.”

If there is a silver lining to the current economic crisis, it is the new consensus emerging that government regulation, in proper proportions, is absolutely necessary. The lesson is applicable to all sectors, not just in the country’s financial industry.

NCRP has long held the position that self-regulation is insufficient, and that proper amounts of government oversight and regulation are needed to ensure that philanthropy and nonprofits are accountable to the public and serve the common good. It seems likely that those who do not share this view will have a tougher time making their case in the coming months and years, given how deregulation has been thoroughly discredited in the financial sector.

On November 7th, I debated Heather Higgins, president of The Randolph Foundation, at the Philanthropy Roundtable’s annual conference in Naples, Florida. The session description was as follows:

Public Accountability for Private Foundations: What Is the Role of Government in Policing Our Boardrooms? What kind of public accountability is appropriate for private foundations? Is favorable tax treatment for foundations a “tax subsidy,” or, as one Congressman put it, an “earmark”? Are foundation assets “the public’s money”? Should foundations be subject to political direction in how they govern themselves and where they give away their money? Or should foundations remain private organizations, and, so long as they use their assets for genuinely charitable purposes, should they be free to make their own governance and charitable decisions, with minimal regulation and requirements for disclosure?

The debate, in front of approximately 200 foundation leaders, was spirited and thought-provoking. Ms. Higgins and I found some common ground, but we also had profound disagreement in some areas. The Chronicle of Philanthropy wrote up a short summary of the debate.

As I said in my remarks: “Foundation dollars are partially public dollars, and the public is therefore entitled to know that its contributions are being used wisely. In a free society, all people should enjoy full liberty to donate to whatever causes they choose. But that doesn’t mean the government should subsidize all types of spending or giving. The subsidies provided to foundations create a strong rationale for proper regulation of philanthropy.” The full text of my opening remarks for the debate can be found by clicking here. I argued for three regulatory changes that are needed to prevent abuses of philanthropy for personal gain and to improve the practice of grantmaking in this country.

posted on: Wednesday, October 22, 2008

Donors As Beneficiaries
By Gary Snyder


A recent article brings to our attention, once again, that corporate citizens and other donors are generously giving to charities that benefit political insiders and ostensibly, themselves.. The New York Times cites among others, the support for the symphony orchestra in Johnston, Pa, the beloved charity of Representative John Murtha.

There is typically a close relationship between the contributor and the politician. In this case, the major sponsors to the Congressman’s charity are two giant defense contractors ---General Dynamics and Northrop Grumman. Murtha’s Congressional committee hands out lucrative defense contracts.

There are other types of relationships. Representative Joe Barton, a Texan established a charitable foundation and hands out grants within his district. An influential member of the Committee on Energy and Commerce, the Joe Barton Family Foundation has a big donor, a major nuclear energy company, Exelon Corporation. The congressman’s daughter-in-law is the executive director of the foundation.

Over the years, we’ve seen U.S. Representative Alan Mollohan use donors and federal dollars--- at least $202 million--- to fund five nonprofits in Mollohan’s district, most of which were under his control. House Majority Leader Steny Hoyer has joined in steps to clean up pork barrel spending…apparently everybody else’s. The congressman has tucked $96 million worth of pet projects into next year's federal budget, including $450,000 for a campaign donor's foundation. Hoyer inserted into a 2008 education-spending bill for InTune Foundation Group, who’s Web site describes it as a music-education nonprofit group.
We’ve seen this practice at all levels of government. For example, Pennsylvania State Senator Vincent J. Fumo use of money from a nonprofit for personal and political purposes with some $17 million is in question.

Another example is Gov. Arnold Schwarzenegger, of California, who set up a little-known nonprofit group that has paid for many of his international trips. Donations paid for his and aides' journeys to Israel, China, Japan, Canada and Europe on trips, described by the governor's office as trade missions, costing hundreds of thousands of dollars. Schwarzenegger solicited the $435,000 in gifts for the protocol foundation at a fundraiser. Only after ongoing inquiries did the Governor revealed for the first time the names of donors to the secretive nonprofit group.

The practice of unregulated contributions is pervasive. The one bad deed deserves another axiom seems to apply to the cozy relationship between politicos and their corporate and lobbying donors and benefactors. This seedy practice certainly needs further scrutiny.


Gary R. Snyder is the author of Nonprofits: On the Brink. His email is gary.r.snyder@gmail.com; website: www.garyrsnyder.com, phone: 248.324.3700.

posted on: Thursday, August 21, 2008

by Niki Jagpal

Word: ‘Caucus’

Function: noun

Definition:

a) a closed meeting of a group of persons belonging to the same political party or faction usually to select candidates or to decide on policy;
b) a group of people united to promote an agreed-upon cause

On August 19, 2008, the Chronicle of Philanthropy (subscription required) reported that Sens. Charles Schumer (D-N.Y.) and Richard Burr (R-N.C.) created a Senate Philanthropy Caucus (SPC) “to look at ways to help foundations and charities.”

Schumer and Burr sent out a letter late last month ”strongly encouraging” their colleagues in the Senate to participate in the SPC. The letter highlights the important contributions institutional philanthropy has made to benefit broadly U.S. society. A critical observation made in the dear colleague letter is the enormous increase in foundation giving (estimated at $42.9 billion and reflecting a collective ten percent increase in giving by the U.S.’s 72,000 foundations compared to 2006). The letter notes a crucial role that nonprofits play in the communities they serve: “the knowledge and social and economic benefits that accrue to communities with strong nonprofits…almost defy quantification.”

The SPC complements the House-level Congressional Philanthropy Caucus (HPC) co-chaired by Rep. Robin Haynes (R-NC) and the late Rep. Stephanie Tubbs Jones (D-OH). The House-level caucus was formed in the spring of 2007, following the Council on Foundations-sponsored annual Foundations on the Hill lobbying event in March 2007. As the Examiner reported then, one point of agreement between foundation executives and members of Congress was the need for Congress to better understand what foundations do.

The formation of the SPC is a positive sign for the U.S. charitable sector, indicating sustained interest in philanthropy and the nonprofit sector at Congress. But as the Chronicle noted, to date the HPC comprising 44 members has held one official meeting. In attendance? One Council on Foundation’s representative who gave an overview to some 20 Congressional aides and two House members. The topic? How foundations work. Viewed from the outside? Not particularly impressive.

The congressional philanthropy caucuses are positive developments and offer potentially powerful alliance between the government and the nonprofit sectors. More specifically, the explicit links among policy, communities and philanthropy are encouraging. For far too long, foundations and nonprofits alike have shied away from the historic roles of advocacy, civic engagement and community organizing in increasing access to the policy process and promoting participatory democracy.

But are philanthropy and nonprofits getting heightened Congressional attention because government is offloading its social responsibilities? Yes, the U.S. civil society sector has made lasting and positive contributions to communities; but philanthropy would do well to remember that it is the government’s role to provide basic services to its citizens during times of hardship and need, to create a more level playing field and to encourage a transparent, inclusive and truly participatory democracy. Takeaway lesson for foundations? It isn’t just Congress that needs to be educated about what you do; the public and your grantees also need to better understand what you do and do not do (do = = fund) because foundation dollars are partially public dollars as a result of the foregone tax revenue from foundations’ tax exempt status.

Discussing the newly revised IRS form 990 at the Georgetown University Law Center in April this year, Steven Miller, commissioner of the Tax Exempt and Government Entities Division of the IRS, noted that the IRS would be “more aggressive” in monitoring the “efficiency and effectiveness” of charitable organizations, even though such monitoring is not expressly within the agency’s jurisdiction. Why not revise the 990 PF form to include the same accountability and governance data? This would build Congressional and public trust and knowledge of foundations but no revisions to the PF form appear imminent.

I’m hopeful that the Congressional Philanthropy Caucuses will fall under Merriam-Webster’s definition ‘b’ above and function as a group united around a common cause. But the roles of government, philanthropy and nonprofits must be clearly delineated to avoid government shirking its public responsibilities and foisting them onto the civil society sector instead. And we would all benefit from knowing more about what exactly it is that foundations do.

Niki Jagpal is research director at the National Committee for Responsive Philanthropy (NCRP).

By NCRP

NCRP expresses its deepest condolences to Rep. Stephanie Tubbs Jones’s family, friends and colleagues at this tragic time of her sudden passing away. As the first African American female representative to serve on the House Ways and Means Committee and a lifelong advocate of voting rights and election protection, her loss will be deeply felt by Ohioans and all those committed to advancing participatory democracy. The philanthropic community mourns the loss of her leadership as co-chair of the House Philanthropy Caucus. NCRP wishes her family and all those who knew and worked with her peace and strength in coping with this significant loss.

posted on: Wednesday, June 25, 2008

by Gary Snyder

Kudos to The Robert Wood Johnson Foundation joining the Center for Creative Leadership by launched a national program to train the next generation of nonprofit leaders. Its focus is to boost the skills and capabilities of early-to mid-level professionals working in health and health-related organizations in nine U.S. communities.

Health care is one of the largest segments in the nonprofit world. Based on Nonprofit Imperative, my monthly e-newsletter, it is certainly one sector that needs attention. As a former hospital administrator, I can attest that there are substantial weaknesses in the staffing skills, but more importantly, its governance. Healthcare institutions are very complex organizations. Reimbursement and other financial matters are very unique and require a skill set on the part of staff and board that is atypical to any other nonprofit.

Because of the heavy involvement of government in regulating the institutions, another set of unique skills is needed. Depending upon the size of the institution and the staffing complement, financial and regulatory issues could easily consume an inordinate amount staff.

Unknown to most of the general public, healthcare has a small margin in which to work. With recent changes, the revenues over expenses are increasingly narrowing. This presents problems relating to acquiring capital and maintaining cutting edge technology. It’s a tough challenge!

This new program is, hopefully, a thoughtful response to a critical need within the overall charitable world. A lack of leadership in the nonprofit sector has resulted in a growing number of abuses and poor practices.

A study reported in the New York Times showed that an estimated cost of fraud was $40 billion or 13 percent of the $300 billion donated. Other studies have similar results.

With these egregious offenders getting growing press coverage, the public’s confidence in our charitable organizations is diminishing. Harris Interactive Polls, for 2005 and 2006, have indicated that barely one-tenth of those surveyed believe that charities do a very good job spending money wisely.

There is a growing perception that all nonprofits lack accountability. Without trust, the backbone of our charitable organizations cannot be preserved, therefore compromising contributions.

In most instances, healthcare organizations have minimal standards to which they must adhere. If other nonprofits do not subscribe to a set of principles and practices that are generally acceptable to the public, the Internal Revenue Service, Congress, and state attorneys’ general will force adherence to a new regulatory code.

While I applaud the RWJ Foundation/Center for Creative Leaderships plans, the linchpin for success is going to be the content of the program and the degree to which it will change current practice.

I wish them well.

Gary Snyder is the author of Nonprofits: On the Brink (iUniverse, February, 2006) and articles in numerous publications. He is also a board member of NCRP. His email: gary.r.snyder@gmail.com; website: www.garyrsnyder.com; phone: 248.324.3700.

posted on: Wednesday, April 30, 2008

by Yna Moore

The debate over California's AB 624 legislation continues. The bill would require the state's largest foundations to disclose diversity information regarding their board, staff, grantees and vendors.

Many foundations and their trade associations have strongly opposed the bill, arguing that their decision to fund an organization is based solely on their likelihood of achieving the most impact.

However, “improving the societal impact of foundations and improving their support for diverse communities need not be mutually exclusive propositions,” said Aaron Dorfman in a recent posting on this issue. “In fact, there is growing evidence that diversity and effectiveness go hand in hand.”

In a recent commentary on the Chronicle of Philanthropy (Foundations Should Be Required to Disclose Data on Charity, May 1), Pablo Eisenberg[1] notes that despite being “poorly crafted,” the legislation’s purpose—to require foundations to disclose race and gender information of their boards and grantees—is fundamentally sound. The bill will “provide the public and the foundations, at least in California, with a more accurate picture of the extent of diversity at foundations and their grantees,” said Eisenberg. “Armed with this information, as well as their growing awareness of the problem, foundations hopefully will begin to take much more seriously their responsibility for adequately supporting what has now become the majority of Americans.”

In a separate article (California’s Legislation Won’t Achieve True Diversity At Foundations), Mark Rosenman argues for foundations to truly reflect on their missions and how they translate this into practice. Beyond the numbers, the issue of diversity is about redistribution of power among foundations and nonprofits.

In an earlier post on this blog, Pete Manzo suggests that we’ll need better information than what AB 624 mandates to improve how philanthropy responds to the needs of underserved communities. He proposes a system that allows us to view where foundation dollars are going, the demographic attributes of those places, and information on the subsets of people being served by those grants.

Do you think it’s necessary to have legislation like AB 624 requiring foundation disclosure of diversity information? Why or why not? Do you think AB 624 is an effective way to channel more foundation funding to nonprofits serving communities of color and other marginalized groups? If not, how might this legislation be improved (assuming that you think legislation is needed)? Are there other ways to go about measuring and disclosing more accurately and effectively the current state of diversity in foundation practices and grantmaking? Tell us what you think!


[1] Pablo Eisenberg is a co-founder and former board chair of the National Committee for Responsive Philanthropy.

Yna Moore is communications director at the National Committee for Responsive Philanthropy.

posted on: Friday, April 25, 2008

by Niki Jagpal

This week Project Streamline, a joint effort of grantmaking and receiving organizations to improve reporting and application procedures, released a new report Drowning in Paperwork, Distracted From Purpose. The report identifies ten ways that current application and reporting systems inhibit nonprofit effectiveness including insufficient net grants and lack of trust between nonprofits and funders. The report makes four recommendations for grantmakers based on the study’s findings.

Project Streamline’s report comes at an opportune time; a recent article in the Chronicle of Philanthropy (subscription required) highlights efforts by the Internal Revenue System (IRS) to increase the effectiveness and efficiency of charitable organizations. Steven T. Miller is the current commissioner of the IRS’s tax-exempt and government-entities division. As the Chronicle notes, he made a series of remarks at a conference on tax-exempt organizations convened by Georgetown University Law Center Continuing Legal Education Department this week. One strategy Miller suggests is for the IRS to “create and enforce a standard to ensure that organizations spend in line with their resources.” While monitoring is not currently the purview of the IRS, Miller said that the IRS would be “more aggressive” in keeping a watch over the “efficiency and effectiveness” of charitable organizations.

If nonprofits are to be truly empowered to achieve their missions by focusing on effectiveness and efficiency, it is clear that cumbersome application and reporting procedures have to be addressed. But the process of grant applications and reports is only part of the solution; as Miller states “[…] every charity should be make responsible and appropriate use of its resources to achieve its charitable purposes. That is what the tax-exempt subsidy is for.” [emphasis added]

Moreover, while the Chronicle article and Miller’s remarks discuss revisions to the IRS’s 990 form, the publicly available informational tax returns filed by nonprofit grant recipients, the same standard of effectiveness and efficiency ought to apply to the form 990-PF, the IRS’s tax form filed by private foundations. While efforts to include “efficiency indicators” in the revised 990 forms failed, the new forms will include questions about nonprofit governance and management policies. Miller sees the link between increased transparency and enforcement: “the question is no longer whether the IRS has a role to play in [governance] but rather what that role will be.”

Project Streamline’s work is commendable and adds value to sector-wide attempts to improve the grantmaker-grantee relationship. Now, imagine what the charitable sector would look like if we had simple criteria on the 990 PF forms for measuring philanthropic management and governance to support Miller’s vision of more effective and efficient charitable organizations?

Niki Jagpal is the research director at NCRP.