Year-End Nonprofit News Roundup

Here’s an update on some key nonprofit issues I have written about in the past year. 

There’s bad news…

Child Detention Centers: New government data shows that an unprecedented 69,550 migrant children were held in government custody over the past year. That's more than in any other country, despite the U.S. government's acknowledgement this puts children at risk of long-term physical and emotional damage. And even after Congress approved a $4.5 billion border aid package, many children continue to sleep in cold cells without proper clothing or food.

Abortion Rights: The Trump Administration established new rules stipulating that recipients of federal funding cannot refer patients to abortion providers. This effectively defunded Planned Parenthood, while making a huge pot of $60 million a year suddenly available to the anti-abortion movement's so-called crisis pregnancy centers. These centers mislead women, provide limited services, and essentially exist to coerce pregnant women into carrying pregnancies to term. In addition, most are supported by religious institutions that also oppose the use of contraceptives as a matter of “staying true to the standards set forth in the Bible for sexual behavior.”

And this...

National Rifle Association: So many scandals have emerged in regard to the NRA that it’s hard to know where to start. First there were revelations that CEO Wayne LaPierre spent hundreds of thousands of dollars on clothing and travel, and that the organization considered buying him a multimillion-dollar estate. Marion Hammer, a past NRA Board  president and current ED of an NRA affiliate, took out below-market value loans to refinance and purchase homes, which likely violate IRS guidelines. And eighteen board members received thousands of dollars from the NRA in the past three years for various services. According to nonprofit tax attorney Daniel Kurtz, "Most groups lean on board members to give money, not for board members to get money." The NRA currently faces several investigations including one into its finances by New York’s attorney general, and a congressional probe into its potential ties to Russia. 

And my absolutely favorite good news...

Trump Foundation: I am thrilled to report that The Trump Foundation is no more, per final decisions in the New York court case. The Foundation was ordered to pay $2 million in damages for misuse of funds - a remarkable and unprecedented rebuke to a sitting president. This money, along with the remaining $1.8 million left in foundation funds, has been split between eight charities: Army Emergency Fund, Children’s Aid Society, Citymeals-on-Wheels, Martha’s Table, United Negro College Fund, United Way of National Capital Area, U.S. Holocaust Museum, and Give An Hour. And Trump has agreed to special supervision if he ever returns to charity work in New York. According to Attorney General Letitia James, “My office will continue to fight for accountability because no one is above the law – not a businessman, not a candidate for office, and not even the president of the United States.”

Wishing you all a happy holiday season, and hoping for a better year for the country in 2020.

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.

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.

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.

Nonprofits Behaving Badly: U.S. Soccer Federation

This past week, the U.S. women’s soccer team (USWNT) filed a gender discrimination class action lawsuit against the U.S. Soccer Federation (USSF), a 501c3 nonprofit organization dedicated to “helping develop world-class players, coaches, and National Teams that inspire a nation.”

The USSF is the governing body for American soccer. Its home page motto is “one nation, one team.” But there are actually two national teams, and they are not created equally. They play the same game, on the same size field, under the same rules. The men’s team (USMT) didn’t even qualify for the most recent World Cup and has never won a championship. Yet the men got performance bonuses of $5,350,000 for losing in the 2014 Cup Round of 16. The USWNT got paid $1,725,000 for winning the 2015 Women’s World Cup. 

The lawsuit outlines violations of the Equal Pay Act and Title VII of the Civil Rights Act of 1964, both of which prohibit employers from discrimination based on gender. Grievances include pay, bonus money distribution, field conditions, travel conditions, and overall treatment in comparison to the men. According to player Megan Raphinhoe, “we feel a responsibility not only to stand up for what we know we deserve as athletes, but also what we know is right – on behalf of our teammates, future teammates, fellow women athletes and women all around the world.”

One week after the suit was filed, the Federation issued a statement saying it was “surprised” at the legal action, claiming they have done everything they can to invest in women’s soccer. And yet the USSF has admitted to paying its female players less than the male players, claiming they do not deserve to be paid equally. The women receive far less than men for games played, wins, wins against internationally ranked teams, and making the country’s World Cup Roster. They play more games annually. They are frequently forced to play on substandard fields. This despite the fact that the USWNT has been ranked #1 in the world for the last eleven years, winning three World Cup tournaments and four Olympic gold medals. The men are ranked #25, and have never won an international tournament.

Full disclosure: I am an obsessed soccer fan. And I have been playing in a regular Sunday morning pick-up game for over 25 years (we call it the Church of Soccer). I stumbled onto the game when my kids were playing youth soccer. I had wanted to play when I was in high school, but it wasn’t allowed – girls were forced to play field hockey, which I hated. So as an adult, over many Sundays, I learned the game, making lots of mistakes, but loving every minute of it. My kids played (actually out-played) with me, until they left home.

The game is a virtual melting pot, with players from Germany, Mexico, Palestine, France, El Salvador, England, and Peru. But I am usually the only female on the field. Often, young families walk by, and I can see the moms pointing me out to their daughters. It makes me proud to know that in some small way, I am a role model to these girls, just as the incredible women on the USWNT are. They deserve better. And the USSF, as a nonprofit organization, should be forced to fulfill its mission in an equitable and fair manner.

By the way, the 2019 Women’s World Cup starts on May 12. I hope you’ll join me in rooting for the team, both in winning the lawsuit and the World Cup.

Five Fundraising Tips for 2019

There’s no rest for nonprofits; raising money is a full-time, year-round, all-staff job these days. So here are my top five tips as you launch into 2019:

• Ask more: I am constantly surprised at how many nonprofits continue to do just one fundraising campaign per year – and insist that their supporters will be pissed if they get asked more often. Yet research consistently shows that asking more does not turn off supporters. At the very least you should aim to both double and diversify your asking. Along with a full-on campaign (including snail mail, phone calls, one-on-one meetings), do more email asks. Consider pitching monthly donations, scholarship funds, capital improvements. And be sure to hit the peak giving days - Giving Tuesday, and December 31.

• Ask strategically: This means collecting data constantly, and using it wisely. Your database should not only include the obvious – name, mailing address, email, phone numbers, and giving history – but much more: proper salutations, volunteer activity, whether folks want to be anonymous, how they like to be contacted, who has contacted them in the past, whether they have attended your sponsored events (and which ones), particular interests in your programs. This information will allow you to focus your asks and to maintain continuity if/when there are staff changes.

• Make it easy: Have you ever actually checked to see whether it’s quick and easy for folks to donate to your organization online (the preferred method these days)? When you search via Google, is it easy to find your website? Is the donate button prominent? When you go to the donation page, is it easy to navigate? Are folks given choices of how to donate? Do they have to create an account to do so (one extra step can turn donors off)? Have your Board and staff test all of this out on their various mobile phones, iPads, and computers by making quick small donations. And fix anything that’s not working.

• Stay in touch: Don’t make your fundraising campaign letter, email, and/or call the only time you contact your donors. Send them emails about a particularly successful program. Invite them to special events. Ask them to get involved through an ad hoc committee, an online survey, or a fun volunteer opportunity. All of this builds and strengthens your relationships with donors.

• Thank promptly: I can’t say it enough – the number one reason folks stop donating is because they were not thanked. When you are asking them for a donation, always thank them first for their previous generous support. Host an annual donor appreciation event. And get those personalized thank you letters (or emails) out within ten days.

Back to basics: remember that the main reason people give is because they are asked – and that folks feel good when they donate to nonprofits that do good work.  

Donor Advised Funds: Ethics & Issues

There's been a lot of buzz about donor-advised funds (DAFs) lately.

For the uninitiated, DAFs are investment funds for charitable donations. You deposit money, get an instant tax deduction, avoid capital gains tax on appreciated assets, get a reduction in your gross estate - and then use that money to fund charities of choice over time. DAFs are set up and managed through commercial funds (Vanguard, Schwab, Fidelity), community foundations, and comment funds (such as Jewish Federations).

Here's the buzz (with 2017 Giving USA stats):

• Contributions to DAFs have increased significantly as a share of total giving over the past decade (10.2% in 2017). 
• The number of DAFS increased by an astonishing 60%.
• Grants from DAFs totaled $19 billion, increased 20%, outpaced contribution growth, and were 40% of total funds granted through all foundations.
• Contributions to DAFs are at an all-time high.
• DAF assets saw phenomenal growth of 27.3%.
• DAF grant payout has been 20-22% for the past 5 years, higher than that of conventional foundations.
• A significant proportion of these new DAFs are modestly funded ($5,000 and under).

Here are the issues for the nonprofit sector:

• DAFs are completely private; there is no legal or IRS requirement for any public accounting or public grant process. So, unless you know someone, or your local community foundation connects you, there is no way to even make your case for a grant.
• DAF donors can remain completely anonymous and unrevealed. If so, you don't have the wherewithal to build relationships or cultivate repeat donations.

Here are some cautionary tales:

• John and Laura Arnold made a $120,000 grant to the Police Special Grants Fund under the Baltimore Community Foundation to be used for a massive secret community surveillance project. The CEO and the Board didn’t know about it (nor did the community).
• The Jewish Community Foundation of Los Angeles made a series of grants to Canary Mission on the advice of a DAF donor. Canary Mission spies on students, professors, and organizations it believes are spreading anti-Israel and anti-Semitic ideologies, publishes lists meant to harm job prospects, and shares these lists with Israeli security officials.
• Three groups that promote anti-Arab, anti-Muslim rhetoric, and conspiracy theories received money through DAFs held by the San Francisco Jewish Federation. 
• Tech billionaires Nicholas Woodman (GoPro) and Jack Dorsey (Square/Twitter) established DAFs through the Silicon Valley Foundation to great public acclaim. All were funded with significant gifts of appreciated stock. We haven’t heard a word since about either of these supposed charitable funds.

And here are the basic legal and ethical issues:

• As 501(c)(3) nonprofits, sponsoring organizations have a legal and ethical duty to assure that grants made are consonant with their missions.
• At the same time, federations and community foundations have become deeply reliant for assets and fee income from DAFs. 
• They also fear losing business to commercial firms that impose no ideological restrictions on the grants they will approve. 
• Yet oversight has frequently been minimal, even through IRS rules state that, “once the donor makes the contribution, the sponsoring organization has legal control over it. The donor retains advisory privileges with respect to distribution of funds.” 

Here's my take: As citizens, we need to hold our community foundations accountable - and those organizations need to be vigilant in abiding by their core principles, rather than financial needs. As nonprofits, we need to acknowledge that DAFs are here to stay; our job is to do our homework to the best of our ability in connecting with DAF donors to make our case - and to assure them of public anonymity should they desire it. As donors, we need to use this tool in a principled manner, not just for tax benefits - and pledge to actually contribute all of those funds each year to nonprofits that do good work.

The bottom line: DAFs have become a key factor in nonprofit funding, and we need to monitor them - and work with them.