Tuesday, September 24, 2019

Ethical Fundraising

The ethics of fundraising have been in the news lately due to Jeffrey Epstein and his gifts to major nonprofits that knew about his reprehensible behavior. So it seems appropriate to talk about how nonprofits can and should fundraise in a responsible manner

Here are a few basic lessons for you:

Never accept a donation from Jeffrey Epstein – or anyone like him. Period.

Never let the size of a donation blind you to inappropriate quid pro quos. When I was the ED of small nonprofit community center, I had a well-to-do businessman approach me about a gift that would have funded our organization for six months. In return, he asked a “small” favor – that I publicly endorse his very controversial application to the local planning department. I said no. You should too.

Never accept a donation that is meant to fund a donor’s specific pet project. By this I don’t mean a gift to support a program you already do. My example – another wealthy donor “generously” offered a gift that was specifically and only for a one-time project of hers. This would have allowed her to have fun, get staff support for free, and receive a tax deduction.

Always respect a donor’s request for anonymity. One of the very worst things you can do is reveal the name of a donor who does not wish to be named. Only the ED (and possibly a Board member who has been a primary contact) should know the donor’s name and amount of donation. Maintaining this over time can be tricky, especially through staff changes, so be sure you have a system in place to pass information on to a new ED (and no one else). And if a donor puts their money into a blind trust, the name cannot be shared at all.

Always maintain confidentiality. When I left my longtime ED job, I was immediately pursued by the ED of a local nonprofit who wanted recruit me for their Development Committee – clearly hoping I would share information about donors. I laughed in her face and said absolutely not. Make sure you have a clear confidentiality policy in place for staff – and for your Board members.

Always thank your donors promptly and correctly. Get it right – name, salutation, how they want to be contacted, how often they wanted to be contacted. And if you make a mistake – I certainly did, and you will to – immediately apologize and rectify the error.

One final personal story: my father died of Alzheimer’s. And the way I knew something was amiss was when I discovered he had donated $5,000 in three months time to the Ayn Rand Society (he was a lifelong Democrat), Father Joe’s Home for Christian Boys (we’re Jewish), as well as numerous other well-known nonprofits. He thought he was paying bills; each time he wrote a check, they sent him more solicitations. Phone calls, letters, even a threatening missive written by my lawyer didn’t put an end to this. Finally, I simply stopped letting him get his mail (and he loved getting the mail). Don’t do this, ever.

Do the right thing – it’s better for your nonprofit, for the world, and your soul.

Tuesday, July 23, 2019

Nonprofits Behaving Badly: Immigrant Children's Centers

The controversy over the treatment of immigrant children continues. And some of it centers around immigrant children’s facilities run by 501(c)(3) nonprofit organizations. 

The language of this crisis is also controversial. Are the children immigrants or migrants? I have chosen to use immigrants, as the definition of migrant - someone who moves from place to place in order to find work or better living conditions – doesn’t fit. And then there’s detention center vs. children’s shelter (the latter preferred by the Department of Health and Human Services/HHS). I’ve gone with the neutral word “center.”

Here's some context: Customs and Border Patrol (CBP) detention centers are part of law enforcement through the Department of Homeland Security (DHS). Immigrant children's centers are under the jurisdiction of HHS and required to comply with state regulations (CBP facilities are not). CBP shelters are specifically designated for short-term detention. Under U.S. law, once DHS learns that an unaccompanied child is in its custody, the child must be transferred to HHS custody within 72 hours. 

There are numerous nonprofits receiving federal funds for children's centers, but Southwest Key Programs is the biggie. It houses over one-third of all unaccompanied immigrant children in detention. This has proved to be quite lucrative - the organization has an annual HHS contract of about $460 million, and it has collected more than $1.5 billion in federal funding since 2008.The Austin-based charity operates 24 permanent facilities in Texas, Arizona and California. One of those is Casa Padre, the nation’s largest, which houses more than 1,400 minors in a former Walmart featuring a massive mural of Donald Trump. 

Southwest Key has been cited repeatedly by state health authorities for infractions including improper handling of food, unsanitary bathrooms, inappropriate behavior by employees, insufficient medical treatment for detainees, and child sexual abuse. The agency was forced to close one Arizona shelter because staffers were accused of physical abuse, and two others that weren't doing employee background checks.

Not only that - its founder and longtime President Juan Sanchez resigned in March amid scrutiny over the nearly $3.6 million in compensation he received during 2017 ($1.4 million in salary, the remainder in dubious payments from life insurance and retirement policies). Six other officers, including their Chief Financial Advisor and Vice President (Sanchez’ wife) also earned more than $1 million.

According to Marcus Owens, former head of the IRS nonprofit division, these salaries are extraordinary even for a large charity. CharityWatch president Daniel Borochoff said Sanchez's salary was the fifth-highest CEO salary among the more than 600 charities his organization ranks. The head of the American Red Cross (a multi-billion dollar charity) receives a $600,000 salary to run an organization that is ten times larger.

Just a quick reminder about the legal definition of a nonprofit: to be tax-exempt under the IRS code, an organization must be organized and operated exclusively for exempt charitable purposes (including relief of the poor, the distressed, or the underprivileged) and none of its earnings can be used to enrich any private shareholder or individual. This reprehensible behavior by Southwest Key leaders takes the “non” out of nonprofit.

Southwest Key is currently being investigated by the Justice Department  for financial malfeasance. Yet despite this investigation plus hundreds of violations recorded at its centers across the state in the past few years, Southwest Key’s shelters are expanding (along with the number of children in detention), and the nonprofit is slated to receive $458 million from the federal government this year. According to Interim ED Joella Brooks, Southwest Key has hired a new chief financial officer, reexamined pay incentives, and the organization is trying to steer itself in a different direction. 

Let’s hope so - but I'm not holding my breath.

Monday, June 3, 2019

When Things Look Bleak, It’s Time to Bring Out the Jokes

I was thinking about writing a blog post on the potential IRS investigation into the NRA’s nonprofit status, or the campaign to close Planned Parenthood clinics, or the big nonprofits that are operating immigrant detention centers. But instead, it seemed like time to bring out the jokes again.

So here you go:

A doctor, a lawyer, and a fundraiser arrive at the Pearly Gates. St. Peter tells them they each get one wish before entering Heaven. The doctor asks for a million dollars, St. Peter grants the wish, and the doctor enters Heaven. This generosity did not go unnoticed by the lawyer, who proceeds to ask for a billion dollars. St. Peter grants his wish, and the lawyer enters Heaven. Then St. Peter asks the fundraiser what she would like. She quickly replies, "If it's not too much trouble, could I please get the business cards of the two people who entered heaven just ahead of me?"

Staff at a nonprofit come to work to find that their office has been broken into and many things stolen.“ Oh, no,” says the ED, “we got a check for a major donation at the event last night. I hope the thieves didn’t get it.” ”No worries,” says the Finance Director, “I stashed it where no one would ever look in a million years,” and comes back with the check. “Where did you put it?” the ED asked. “In a copy of our strategic plan.”

A nonprofit’s Board Chair, Treasurer, and Executive Director are captured by terrorists and condemned to death by firing squad. Each is granted one wish before dying. The Board Chair says he wants to embark on a lengthy, intense process to develop a new strategic plan. The Treasurer says it’s time for the organization to have a complete financial audit. And the ED says, "Shoot me first."

A Development Director found a magic lamp, and rubbed it. Presto! A genie appeared and offered the Development Director one wish. Not wanting to be greedy, she said, "I wish for one million dollars to support my organization." "Done," said the genie. "Come to your office tomorrow, and it will be there.” The next day she arrived at the office, and when she opened the door, three million binder clips fell out. "What the hell?" she said to the genie. "I asked for one million dollars! "Yes," said the genie, "but you didn't say it couldn't be in-kind…"

The ED of a nonprofit community center was faced with the prospect of asking folks at the annual fundraiser to come up with more money than expected. He asked the musician for the evening to be sure to play some inspirational music after his speech. So after the ED announced, "Friends, we are in great financial difficulty – any of you who can pledge $500 or more, please stand up," the pianist played The Star Spangled Banner

An angel appears at a nonprofit board meeting and tells the ED that in return for her unselfish and exemplary behavior, the will be rewarded with her choice of infinite wealth, wisdom, or beauty. Without hesitating, the ED selects infinite wisdom. “Done,” says the angel, and disappears in a cloud of smoke. Now, all heads turns toward the ED, who sits surrounded by a faint halo. A board member whispers, “Say something.” The ED replies, “I should have taken the money.”

We may be in the midst of a constitutional crisis, but a few jokes and some big laughs can help us all in these times. I hope it does so for all of you.