April Fool's Day: Comic Relief for Nonprofits

Underpaid and overworked? Dealing with the Board member from hell? Can't face the thought of your upcoming fundraising event? Take a moment out of your day for some laughter with this year's nonprofit jokes:

   Izzy and Howard were brothers who had lived and worked in Brooklyn all their lives. Unfortunately, nothing good could be said about them - they ran a crooked business, they womanized, they didn't go to synagogue on Yom Kippur, they lied, and they cheated the poor. But they were also very very wealthy.
   When Izzy dies, Howard goes to Rabbi Bloom and said, "I will donate $100,000 to the synagogue if you will say at the funeral that my brother Izzy was a mensch (Yiddish for person of integrity and honor)."
   The Rabbi struggles long and hard with his conscience, spending a sleepless night thinking about what he'll say at the funeral.
   The morning comes.The Rabbi stands in front of the congregation and says, "This man was a complete scoundrel, a swindler, and a whoremonger. But, compared to his brother, he was a mensch."

   An Executive Director, a Development Director, and a Board Chair were adrift on a raft after their ship sank.
   The Board Chair looked at the Executive Director and said, "This is all your fault. You were steering the boat!"
   The Executive Director looked at the Development Director and said, "Oh no, it's all the Development Director's fault. You were in charge of the sails."
   The Development Director looked at the Board Chair and Executive Director and retorted, "It's both your faults."
   All three of them were devoured by sharks. It was the worst board/staff retreat ever and the organization never used that team building company again.

   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 nonprofit 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, out fell three million binder clips.
   "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…"

My father was a wonderful joke teller, so every time I tell or share a joke - including in this annual blog post - I feel I am honoring his memory. Here's one of his favorites: "Experience is when you make a mistake the second time, but you recognize it." As I have, I hope you'll pass these jokes forward to your staff, Board, colleagues, and friends.

What's Up With the Charitable Deduction?

President Obama's call for a limit to the charitable deduction and the subsequent massive protests by Republicans and mainstream nonprofits made me realize how little I truly knew about the history and mechanics of taxes. Here's what I learned:

• When was the charitable deduction first introduced? The first income tax (2% on income greater than $4,000) was instituted in 1861 to pay for the Civil War. A year later it was ruled unconstitutional. The 16th Amendment, approved in 1913, gave Congress the legal authority to collect income taxes. The highest rate was set at 7%, and only the top 10% of wealthy Americans had to pay. The charitable deduction followed in 1917. War was the impetus once again - in order to cover the costs of World War I, the top rate had been raised to 77%. The deduction was initiated to help the war effort by underwriting contributions to the War Chest and the Red Cross.

• How do charitable deductions work? For itemizers, the tax write-off is tied to your income tax bracket. Folks in the 2014 top 35% tax bracket get a tax savings of 35 cents for every donated dollar. If you're in the 35% bracket and earn $1,000, you'd be required to pay $350 in taxes (keeping $650). But if you make a charitable gift of $100, your taxable income goes down to $900, your gross tax bill (now $315) is reduced by $35 - and voila! your $100 donation only ends up costing you $65.

• How have charitable deductions changed over time? During World War II, income taxes went up again (top rate: 94%) and expanded such that 70% of Americans were required to file and pay. This meant more folks could take advantage of the charitable deduction. It also meant that more people had to deal with long complicated tax forms. So Congress came up with the standard deduction which lowers your taxable income by a fixed amount and makes filing easier - but doesn't allow you to write off charitable gifts.

• Do tax rates and the charitable deduction actually make a difference in the level of giving? Loud voices in mainstream philanthropy would say otherwise, but history does not support this position. In 1944 when the standard deduction was introduced, nonprofits lobbied heavily against it, insisting that it would the death of charitable giving - but it wasn't. In 1981, Congress dropped the top bracket from 70% to 40% - and charitable giving did not suffer. In 1992 and 2003, the top bracket was lowered first to 39% and then to 35%, and still charitable giving did not take a dive. In fact, statistics from Giving USA indicate that individual giving over the past 25 years has remained remarkably consistent.

• What motivates people to give? I know that for myself, the tax deduction is not a primary factor. I make thoughtful, focused gifts to organizations that I care about and know to be effective. If the charitable deduction were abolished tomorrow, I would do the same. And in my 40+ years of experience as a nonprofit Executive Director (and fundraiser), that was what I saw from donors. Folks give because they care, not because they can deduct.

How Are You Treating Your Staff? Some Thoughts on the Ethics of Nonprofit Compensation

Nonprofits are specifically formed to provide charitable benefit - to do good in this world, to work for positive change. So it's troubling to discover in my consulting practice how poorly employees are often treated, usually under the guise of economic constraints:

• Minimum wage: In the midst of the recent push to increase the minimum wage, numerous instances have surfaced where nonprofits have insisted they cannot afford to do so and asked for special dispensations. There is a deep disconnect between a charitable mission of making this world a better place and nonprofit staff who are paid wages that leave them at near-poverty level.
• Exempt vs. non-exempt: Non-exempt employees are entitled to overtime pay; exempt employees are not. With few exceptions, to be exempt an employee must be paid on a salary basis (under federal law as little as $23,600; for California $37,440), and perform exempt job duties (administrative, executive professional.) Do your exempt employees meet all of these standards? Does your nonprofit have exempt workers at low salary levels? Here's what President Obama had to say about this: "It doesn't make sense that in some cases this rule actually makes it possible for salaried workers to be paid less than the minimum wage. If you're working hard, you're barely making ends meet, you should be paid overtime. Period."
• Independent contractor vs. employee: You are required to withhold and/or pay income tax, Social Security and Medicare tax, and unemployment tax for employees but not for independent contractors. Here are some basic guidelines for determining status: Employees provide services that are a key aspect of the organization, which has the right to direct and control the worker. Independent contractors usually have their own offices, work for other organizations as well, and are paid a flat fee for a specific project. Note that the IRS does not consider a contract defining status to be a sufficient determinant. It's not ethical to label a key employee as an independent contractor just so you don't have to pay the cost of basic benefits - and it's also not legal.
• Part-time vs. full-time: You all know what "part-time" means in the real nonprofit world - it means dedicated, overworked program and administrative staff (usually defined as exempt) who put in many more hours than they paid for just to be able to get their work done.
• Income inequality: It's not only for-profit organizations that boast big disparities between salaries for executives and staff. Many nonprofits, particularly in the education and health care fields, have executives making thousands of dollars more than basic program and administrative employees. And I've seen this even in community nonprofits with budgets of $500,000 or less. Labeling employees as exempt, part-time, and/or independent contractors contributes to this gap.

Here's my plea - take the time to evaluate your compensation policies. Pay all your employees reasonable salaries, define staff hours that reflect how much time is needed to get the work done, and provide basic benefits. Along with doing your good work, consider doing the right thing by your staff.