The Gift of Giving to Non-profits

As a development professional, I am passionate about my belief in the gift of giving to non-profit organizations. At this time of year, mailboxes are brimming with appeals from a variety of organizations, many groups who rely on fundraising dollars to support their worthwhile missions.

Aviv Centers for Living recently sent out an appeal that quoted the Talmud as saying, “One person’s candle is a light for many.” We took a walk down memory lane recalling that when the original founders of Aviv gathered in 1945, the world was a very different place. Gasoline cost about 15 cents a gallon. Elvis Presley debuted at age 10. Harry Truman was sworn in as the 33rd President of the United States as George and Barbara Bush wed and the United Nations was formed. While the darkness of World War II clouded the universe, a group of citizens gathered in Lynn to create light for seniors and founded the Jewish Convalescent Home, fondly called “the Home.”

Well over 66 years ago, while the world was a different place, the desire for good people to galvanize for grand purposes was just as important as it is today. As you prepare for the holidays, take a moment to look in your heart and make a donation to a non-profit organization. It may be the best gift you give this holiday season.

Volunteers: Friend or Friend?

One of my favorite volunteer board members - the chair of the development committee at a university I worked for - once said to the entire board, "Remember, WE volunteer board members are the fundraisers here. The staff is hear to help us do our jobs." This resonated for me because I started out in development as a volunteer for one of the large Jewish Federations. We (the volunteers) always understood that the task of asking for gifts was OUR responsibility, and that the campaign wouldn't be successful if we didn't do our jobs. Believe me, it was difficult, and took a lot of time; and we all had day jobs, too (mine was in the real estate business.)

By the time I was working at that university, development had changed - fundraising was much more in the hands of the professional staff, with limited support from the volunteers. That trend has continued, and the large size of the development staff at some institutions is evidence of it. But that volunteer chair still understood the power of the volunteer ask!

I still believe, as he does, that the best development work is done by volunteers. When a business person asks a peer to support an organization that he or she believes in, the ask is almost always successful. When a development staff person makes a similar ask, the result is not nearly as assured. Peers asking peers still works best! Perhaps it works even better today because it is not as common.

This is not to say that development staff isn't important. I still work in development, and believe that my work in cultivating and soliciting major prospective donors is crucial to the success of the organization I work for. But I also believe that when I can get the Board Chair, or another volunteer, in the room with the prospect, it is much more likely that we will get the gift we are seeking. Sometimes it takes a volunteer just to get the phone answered or the appointment set! Someone once said that when you get the right person doing the ask for the right project at the right time, magic happens. As a professional development officer, I aspire to succeeding at that task, and really try to find the "right person", knowing that it is sometimes me, but is much more often a volunteer!

It really pains me when I hear development staff members deriding volunteers as unskilled or "adding work" to "our already busy days." I am currently volunteering myself (yes, I sometimes take a "bus man's holiday") with an organization that has a half-time development officer who wouldn't be accomplishing nearly what she does if it weren't for a small group of volunteers dedicated to the success of the organization who are doing the hard work of developing strategies, cultivating, and soliciting major donors. I have never heard her complain about a volunteer!

Volunteers are our best friends in development. If you would like some help in figuring out the best ways to work with yours, give me a call.

Tax time?

Recently there has been some discussion in the media that one of the possible "fixes" to the Federal deficit crisis would be to reduce or eliminate the charitable tax deduction. Here's an article from the New York Times on this subject. The reaction from many in the nonprofit sector is nothing short of panic, and I wonder what's really driving that panic. It seems that many are afraid that their donors will stop giving if the charitable deduction goes away. I don't believe that will happen. Do you?

Nonprofit (501(c)3) organizations receive a number of benefits from the government: they pay no income tax on any income that is related to their charitable purpose; they pay no real estate taxes (in nearly all jurisdictions); in most jurisdictions, they pay no sales taxes (California is the biggest location where this isn't true - everyone pays sales taxes in California!); and contributions made to these organizations create a tax deduction for the donor. For the moment, only this last benefit seems to be in danger (and probably not much danger, at that). But why should we care?

The largest number of charitable gifts - the small ones - get no tax deduction because they are made by people who don't itemize their deductions, and therefore get no tax benefit from charitable gifts. And the bigger the gift, the more likely it is being made for other reasons than tax treatment. Charitable intent and a relationship with the organization, for example! I still believe that the main reason someone makes a gift to an organization is a belief in the mission of the organization (and that they were asked). It is possible that in some cases the size of the gift might be impacted by tax considerations - a tax savings could make a gift somewhat larger possible. But I would argue that this increase in size is marginal both for the donors and the organizations. If someone is making charitable gifts only for their tax-sheltering properties, I would also suggest that there are much more efficient ways to reduce one's taxes.

Note that I am not a financial planner; I am basing my statements on many years of working with philanthropists, and on anecdotal information. I haven't conducted a scientific study on this issue. However, indications from past changes in the deductibility of contributions (the amount of savings was reduced in 1986 and giving went up the following year) suggest that there will be minimal or no negative impact of a reduction or even elimination of the charitable tax deduction.

A word about estate planning and planned gifts: Estate planning often includes making provisions for charitable gifts. You probably know some of the terms: gift annuity, charitable remainder trust, charitable lead trust, etc. Much of the work of planned giving involves some amount of creating ways of making gifts and bequests that will reduce the amount of estate (and other) taxes that must be paid upon the death of the donor. These arrangements do, indeed, intertwine philanthropy with reducing taxes, but I believe that most of the time a planned gift gets made because the donor has a charitable intent and a relationship to the organization receiving the gift - not just because the gift reduces the tax bite. People with large estates work with advisers who help them minimize the taxes they must pay. Sometimes that minimization involves charity and sometimes it doesn't, but while the existence of the tax benefit might help increase the size of a charitable gift, it doesn't create it. The organization's mission and case for support, and the donor's charitable intent does.

If your organization is worried that your gifts will dry up because the charitable tax deduction goes away, I'm worried about your organization! If you don't have the faith that your mission is important and attractive to potential donors, we should talk. Perhaps I can help you better communicate what makes your mission compelling and reshape your case for support. There are hundreds of thousands of nonprofits in the U.S. My experience is the vast majority were created to fulfill a valid and compelling mission, and that mission is supportable by donors with or without a tax deduction!

Some things to think about...
What do you really know about the impact of the tax deduction on giving to your organization?
What is the ratio of donors in your data base who take the deduction to those who don't?
Can you run a report to find out?
What will you do proactively with what you learn?

Call me if I can help.

The Billionaires' Pledge

A lot has been written over the past couple of weeks about the request made by Warren Buffet and Bill and Melinda Gates to their peers that they each pledge to give away 50% of their fortunes before they die. Here's an article from the New York Times. Frankly, I'm not sure what this means.

Many of the people quoted as having made the pledge had already made arrangements to give away most of their money, and are just now announcing it. Even Mr. Buffet concedes, “It’s not like all or half of the money represented is added money, but some of it is added.” And I suspect that much of the money being given to charity will be given to charitable foundations. That's not necessarily a bad thing - it adds to the charitable assets available - but it doesn't immediately help nonprofit organizations, and it limits the amount available to those organizations in any given year.

Perhaps the most important factor in the pledge program is that it brings the idea of charitable giving to the front pages of newspapers for a couple of weeks. If this announcement encourages just a few people to give more philanthropy than they would have before, then it has done some good. And maybe that's all we can ask.

If you would like some ideas about how you can do some good, or if you are an organization looking for help in finding new donors, give me a call.

What does it mean to serve on a non-profit board?

There was a wonderful article in today's New York Times titled, "Trustees Find Board Seats Are Still Luxury Items." It carries a sub-title on the NYTimes.com website of "To Join the Met's Board, Have a Checkbook Handy." The sub-title is actually unfair. The article does talk about the importance of having board members who bring things other than money to the table.

However, the most important thing about the article, in my mind, is that it discusses openly the importance of having expectations understood when recruiting new board members for non-profit organizations. In particular, the article focuses on the importance of board members making financial commitments to the organizations on whose boards they serve. Two wonderful "cliches" are mentioned: "Give, Get, or Get Off," and "bring your Time, Talent, and Treasure," to the board. While both of these have been said over and over again, it doesn't hurt at all to remind our non-profit board members of their importance.

Board members who believe that "I give my time, so I don't have to give money," must be reminded that time alone is not enough. If for some reason they are not able to make a financial contribution, they must reach out to others for such commitments. If they are able to give and choose not to, they have no business serving on the board, and arrangements should be made for their removal!

The article also talks about the process of involving potential board members in the life of the organization before asking them to serve on the board. It is wonderful to have this reminder of the importance of building relationships - with our board members, as well as with our prospective donors - in the life of non-profit organizations. While the article is specifically written about the "premier" arts organizations in New York City, its themes are applicable to all non-profits.

Too many boards today forget these rules, and don't understand their most important roles in non-profit governance, setting policy and providing money (giving or getting!)

If you need help in reminding your board about it's role, or if you are a board member who wants to really help your organization, give me a call. Let's talk about ways to re-build the expectations of both your organization and your board.

How much should a non-profit executive be paid?

I've seen a number of articles and reports recently (this happens every time a new crop of 990s are filed) bemoaning the "huge" salaries paid to non-profit executives. Here in the Boston area, two of the recent "profligates" were the CEO of the Citi Center for Performing Arts and the President of Suffolk University. In both cases the reports in the 990s included deferred compensation of $1 million or more. In the case of the Citi Center, it was a large payment to the CEO's retirement account, paid as a bonus in recognition of many years of successful work. In the case of Suffolk, it was two years worth of extra contributions to the President's retirement account to, in the words of the board chair, make up for the fact that he "had been woefully underpaid' over his 52-year tenure at the school".

So what should we make of this? First, the media (and much of the populace) is fascinated by big salary numbers - the media wouldn't report on it if they didn't think it would sell newspapers or raise ratings for the TV news. Second, those big numbers at non-profits are seen by many as inappropriate. But are they?

It is not hard to argue that a university with a multi-million dollar budget should be run by someone with the skills it would take to run a multi-million dollar corporation. That doesn't require paying corporate-level salaries, but it does require coming close in order to attract high-quality talent. The same goes for non-profit hospitals and health systems, which tend to be even bigger and more complex than universities (and usually pay more, too.) On the other hand, should anyone working in a non-profit be paid more than the president of the United States? Since 2001, the "leader of the free world" has been paid $400,000 per year. Of course it could be argued that this is worth much more than anyone else's salary since it comes with a house, transportation (limos, helicopters, planes, etc.), expense accounts, and many other perks! That being said, a salary in the $400,000 to $600,000 per year for the CEO of a major non-profit is probably not unreasonable.

But what about the rest of the staff? One of the major complaints about development officers these days is that "they keep moving around." Unfortunately, often true. It's hard to really know an organization and all its parts in less than three years, and that happens to be the average tenure of a chief development officer. Why is that? Part of the reason is that salaries below the CEO level at most non-profits are very low. In addition, they rarely rise. In order to get more than a 2-3% raise in a non-profit organization, you generally need to leave for another position. Then the organization replaces you at a salary you would have stayed for - perhaps 10% more than you were being paid. This is unfortunate and short-sighted on the part of non-profit boards. It is also unlikely to change anytime soon. Too bad. Admittedly, there are other contributing reasons for the high turnover rate for development officers, but pay levels and little or no raises certainly play a part.

So, if you are interested in helping to stop turnover at your non-profit, give me a call. I'd be happy to help you analyze your situation and set up a system to help raise the funds needed to provide the raises to keep the staff!

Focus on mission

My son has just been accepted to a program that sends roughly 100 high school sophomores and juniors from our area to Israel each summer. The Youth to Israel (Y2I) program was created by the Robert I. Lappin Charitable Foundation, whose mission is very simple: "Helping to keep our children Jewish." The program has been in existence for over 40 years, and provides a fully subsidized trip to these students with no means test. The only requirements are that they live in the foundation's service area - one of 23 cities and towns on Boston's North Shore - and the teen must be Jewish and consider him/herself Jewish and be raised exclusively in the Jewish faith.

Until last year Y2I was funded entirely by the Lappin Foundation. Unfortunately, Lappin was one of the victims of the Madoff Ponzi scheme, and the Foundation was essentially wiped out. In other hands this could have led to the end of the program. However, Mr. Lappin is clearly not an average philanthropist. He committed himself to find the funding to keep the program in existence, and last summer 95 kids went to Israel, only six months after the Madoff scandal broke. This summer, Mr. Lappin was able to raise enough money to send to Israel all 99 teens who applied. Gifts have come from the Goldhirsh Family Foundation, the Jewish Federation of the North Shore, Oranim Educational initiatives (the partner organization that provides the tour program in Israel), and an anonymous donor, in addition to the Lappin Foundation's own $100,000 contribution. The total cost of the program is just over $500,000.

Why is this important? Because a local philanthropist refused to throw in the towel and kept focus on his mission. He knew he couldn't provide all the funding right now, and was willing to make the calls necessary to find the funding to maintain a program he is passionate about, and that he feels is crucial to the mission of his foundation. He has said his "long-term plan is to restore his assets to a point that will sufficiently endow the Foundation to a level that the annual income will totally or near totally fund Y2I." Here is the foundation's statement on the future of Y2I.

Mr. Lappin has recently been recognized by the Boston Globe as one of their "Bostonians of the Year." Their reasons have nothing to do with his foundation or the trip to Israel, and everything to do with his handling of his employees' 401K plan, which was also wiped out by Madoff. In short, Mr. Lappin made the employees whole from his remaining personal assets. It is very sad that this action is seen as something unusual in our society. Wouldn't it be wonderful if every business owner and every philanthropist were as true to their missions. At PhilanthropyGlobal we work with organizations and philanthropists. Let us know if you would like help in focusing your mission this clearly!

Eleemosynary

The "word of the day" the other day was eleemosynary. It has long been one of my favorite words. It means, "of, relating to, or supported by charity." Did you know that?

A few years ago in a foundation board meeting we were reviewing a by-laws change, and the attorney had put in a phrase about the eleemosynary purposes of our work. I was surprised that several of the board members had no idea what this meant, and they were delighted that I was able to explain that it means charitable or philanthropic, that is just what they were doing as members of the board. I guess the fact that the lawyer used it shouldn't have been a surprise. It is a direct derivative of the Latin "eleemosyna", meaning, as you might have guessed, charitable.

So, what have you done today that is eleemosynary? If you need help raising more money for your favorite eleemosynary organization, give me a call!