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Posts from the ‘Charitable Giving’ Category

#342 – Why the Decrease in Charitable Giving need NOT be a [Major] Concern – But…

June 20th, 2019

Richard Marker

The Giving USA report confirms what everyone thought it would – giving is down, about 1.7% That is indeed real money and affirms what the non-profit advocates and philanthropy sector warned would happen with the tax changes that went into effect last year.

There are plenty of articles analyzing those numbers, and they are real. And the dollars are real. And they matter a lot to many non-profit organizations, especially smaller ones that are typically undercapitalized from the get-go. They truly need every penny.

Why, then, is the reduction in charitable giving not my [major] concern?

There have been blips in charitable giving every single time there has been any change in the tax code or tax rates. Sometimes those changes have boosted charitable giving and sometimes they have depressed it. But, over time, charitable giving seems to revert to a mean. In other words, tax changes have served to influence when something is given more than if. If one looks at a long-term giving pattern, it is far too early to know how significant the non- itemization will be for givers of modest amounts. My own prediction is that there will be a gradual return to the mean since Americans seem to have internalized giving as a normal thing to do.

But, that doesn’t mean that there are no red flags, and I believe that those red flags are far more significant than the short-term drop in giving:

1. Despite the claim of a healthy economy, middle and lower middle-class incomes have not yet come close to replacing the buying power those earners had a generation ago. Fewer have reliable health insurance, employer sponsored retirement plans, job security, and can afford college tuitions. Even incremental and long overdue wage increases don’t come close to closing that gap. The amazing thing is that voluntary charitable giving is keeping pace at all [other than by the very wealthy whose proportional wealth has skyrocketed and should be ashamed of themselves if they haven’t increased their giving as disproportionately.]

2. The deep-seated distrust of institutions is cataclysmic. Nonprofits may fare better than some other institutions, but they are not exempt from this distrust. One still hears too many people believing that non-profit people are either lazy and inefficient or that they are secretly making a profit off others’ largesse – or both. All of this distrust has profound and frightening implications for civil society as a whole. Of course, it impacts charitable giving but more so, it erodes the fragile network that allows civic engagement and community organizations to provide such an important role.

3. Even if charitable giving were to rise, it may lead us to a false sense that all would be well. It wouldn’t be. The charitable sector cannot be expected to replace public funding for health care, education, retirement, food safety, children’s nutrition – and so much more. Under the horrendous rhetoric that taxes are bad so cutting them is good, we are paying the price of taxpayers no longer paying for what we should be paying for. Until we reverse that terrible governing [or, more accurately, anti-governing] principle, and develop a more rational, fair, and responsible system of taxes that people feel are appropriate, reliance on the voluntary sector will be a fool’s mission. That is not to suggest that there will not always be a role for the voluntary sector but that this increasing reliance on voluntarism to do what an underfunded government doesn’t won’t get us out of this mess.

Taxes are a reflection of where we think public funding should be. Most of us care about more than roads and bridges [would that they were properly maintained]. And we care about more than police and fire and EMT folks [even when they sometimes need some serious equity training]. I believe that the vast majority of us care about the health of our food and our children and our air and our water and our old age…..

When we recognize that being a responsible member of any society requires that we pay our fair share for those things, and we pay for those through a fair and reasonable tax system, we can begin to return to our question of charitable deductibility and voluntary contributions. When that happens, I will be first in line.

Until then, count me among those who are advocating, as loudly and persuasively as I know how, to build a society and government that honors the needs of all with integrity and dignity.

I will continue to be an active volunteer and to put my charitable money there as well, but the shortfall in that as reported by Giving USA isn’t the grievance that anguishes me. Irresponsible, shortsighted, dystopian public policy is.

#325 How Much Is That Overhead Again? – A Thought Before “Giving Tuesday”

November 23rd, 2018

Richard Marker

I guess it was inevitable. We were attending a wonderful and illuminating dinner learning about a cutting edge and courageous program in one of the world’s most famous trouble spots. It was a low-keyed fundraiser, but more so, an opportunity for opinion makers to learn that positive developments are possible even amidst wrenching political settings.

The event was held in the palatial home of someone who had originally come from that part of the world and has become quite successful in the USA. Those of us who attended were moved and motivated by the presentations, and that is saying something since this was not a group comprised of naifs.

As the MC was bringing the evening to a close, one of the attendees shouted from her seat that she had a very important question and insisted that she have an opportunity to ask it.

“What is your overhead?” she shouted.

As it happens, the answer was very reassuring to this obvious skeptic, but it was such an unfortunate way to end the evening.

So, at the risk of revisiting a topic that those of us in the philanthropy world have addressed for years, a few observations:

• “Overhead” is a very problematic and misleading term. It implies that there are costs totally unrelated to the project. I prefer the term “infrastructure”. The term makes it clear that no project or program exists independent of the organizational context in which it sits. Someone has to turn on the lights, clean the floors, hire and supervise the staff, account for the finances, and so much more. Most [but not all] of us on the funder side know this and fully recognize that it is counterproductive to fund a program without assuring its likelihood of success. That requires support for the infrastructure. [In another place we can have a discussion about how to determine what that amount might be.]

• If we already know this, why did this potential contributor feel that her question was so important that the evening could not conclude without her asking about “overhead.” [It was noteworthy that the presenters barely alluded to the financing of this project; there could have been so many more relevant financial questions.]

We in our field deserve some of the blame. A few years ago, as information about non-profits became democratized, the rating organizations tried to develop tools for decision-making. Percentage of “overhead” seemed an easy one. After all, it was a seemingly objective number and would raise red flags to phony or exorbitant fundraisers. The problem of course, is that not every project is equal and not every organization is at the same stage of development. Most important, though, it implicitly reinforced a concept that those who were not delivering direct service are simply superfluous flab.

Those of us in the field know that, a few years ago, the primary rating organizations issued their own mea culpa on this. They realized that they had done an inadequate job of conveying what questions should be addressed before looking at fundraising ratios and, to their credit, and to our field’s benefit, they have worked hard since to make sure that the now readily available financial data is only one important indicator of the value and worth of a project or organization.

• The force of the question that evening demonstrated that we still have a long way to go. Philanthropic giving has not only become democratized through on-line fundraising and access to organizational tax returns and financial information. It has also become unmediated. The average donor or funder has the option to make direct contributions, a mostly healthy development, but most haven’t taken the kinds of seminars or courses that we and many others offer to learn how to make decisions. That evening reinforced for me that our role as philanthropoids and philanthropy educators must not be restricted to the cognoscenti. We need to be better about showing how good decisions can be informed and responsible. And we need to do so in accessible ways: the appeal of the “overhead” percentage metric is that it is quick and supposedly “objective”. If we are going to provide more useful decision-making tools, we need to do so in ways that are also accessible without forcing a level of due diligence that might paralyze a well-meaning and caring donor.

All of this is particularly important as we approach “Giving Tuesday” and end of the year solicitations. There are many wonderful and deserving causes out there, and, sad to say, some who are, to put it kindly, phonies. One should ask questions before writing that check or using that credit card. Make sure the organization you want to fund is legitimate and is not one that just sounds like one that is. For most, that means making sure that it has legal 501(c)3 status. Make sure that it is an organization whose mission and program is one that aligns with your own priorities. All of us can get caught up in emotional giving, but we don’t want to look back and say, “why did I do that?” And it is certainly relevant to look to see what criteria an organization chooses to demonstrate its success [Hint: how much you can give each day isn’t a very good criterion; what actual changes they are bringing about is.]

At this time of year, unless you are prepared to spend time doing real significant research, stick with proven non-profits. They may or may not be the most efficient, or the most cutting edge, but there is a pretty strong likelihood that your money will go to what you want it to go for.

For those who want to learn how to dig deeper, January or February is a much better time to learn how. And will lead make next year’s giving season that much more gratifying.

#319 What About Non-Givers? Why Be Philanthropic?

September 15th, 2018

Richard Marker

This has been one of the most challenging pieces I’ve chosen to write. It emerges from hearing the same question too often recently and not having an easy answer.

What is the question? How can we persuade someone to be philanthropic if they don’t choose to be?

First, the context: For well over 20 years, most of my talks and writings have been about philanthropy. Depending on the audience, they might address emerging trends, or philanthro-ethics, or best practices, or decision-making in families and foundations, or any of a myriad of other related matters.

On the whole, my peer group and my audiences are funders. As funders, we are already committed to giving money, but not always sure about how or what will be the most impactful, or what will engage successor generations. That is where I come in – helping to make good, informed, and appropriate decisions. Until recently, I don’t recall ever being asked the question: how do we persuade someone to give?

Let me be clear. In the past, fundraisers have often asked me a related, but ultimately a different question: how do we influence or persuade funders? They are sure that my understanding of the thinking process of philanthropists and foundations will give them the magic code to unlock untold riches for their projects. [By coincidence, as I am writing this, I see that Guidestar has just published some advice for fundraisers from funders and SSIR has published an extended piece on altruism.] However, questions the fundraisers raise are built on the same starting assumption as my own – they want to appeal to those committed to being funders, not to those who don’t or won’t..

However, over the last few years, I have been asked to speak to more and more groups of investment and wealth managers, family office directors, and others whose field and expertise is more specifically on the money-making side and not the philanthropy spending side. It is an interesting contrast with my peer group where philanthropy is about giving money away. Put simplistically, money managers pay their bills based on money under management; philanthropy is money out the door. Their starting point and their bottom lines are different than the questions funders ask me. [Yes, I know that to give money, you must have it and I am not dismissing the importance of good investment decisions – but, except for impact and values-based investments, they are essentially a different set of questions.]

As I have become more visible in these settings, a number of wealth mangers have sought opportunities to speak to me privately about their clients. Most of the issues they raise are not surprising; family conflicts, succession uncertainties, determining how much is enough…. But some quite explicitly ask me how they can convince their few miserly clients to be philanthropic.

If the studies are correct, I suspect that many of these people are not hearing the full story from their clients. After all, even though the data shows some improvement, it appears that investors don’t think highly of the philanthropy advice they get from their wealth advisors. Some, as said above, are concerned that the wealth advisor is simply looking for another vehicle under management, but more likely they don’t think that their wealth advisors are very attuned to the practice of being a funder.

In addition, not everyone does or wants to do philanthropy in the American institutional style. Around the world, millions of people are generous, altruistic, and philanthropic, but they don’t express those behaviors in the vocabulary or structures the way the American philanthropic sector does. Some people do nothing, I am sure, but my experience tells me that that is very rare.

Nevertheless, I am sure that some percentage of their clients really are averse to being philanthropic by any definition, and the questions do come from a genuine belief that they should.. How then should one answer?

Let me quickly point out, as I have in the past, that avoiding taxes is a very inappropriate bottom line reason for someone to give. If lower taxes is one result of a healthy thought out philanthropy strategy, no problem, but to eliminate taxes as a goal is unlikely to be persuasive and, as I have written previously, morally wrong. Further, every study of which I am aware reinforces this perspective. When funders are asked about why they give, tax deductibility is usually # 4 or 5 on the list. [It may play an important role in how one structures a philanthropic gift but not whether to make one.] But none of these studies talk about a more basic underlying issue of why one should give in the first place.

As I mentioned above, research shows that being altruistic, the very act of giving, makes one happier. [viz., Jenny Santi’s “The Giving Way to Happiness.”] Philanthropic generosity is present in every society. Giving helps one go beyond oneself and serves to make us players in making the world, or at least someone’s world, a little better. This may begin to give us a clue to an answer, but this work shows how people feel when they are altruistic, not whether they can be persuaded to become so. They don’t answer the question these wealth advisors ask: How can they persuade their hoarders to share?

Some wealth advisors ask me to do what they haven’t been able to do – to talk to their clients directly about philanthropy. When that happens, unexpected things often come up. Many wealthy folks welcome the opportunity to talk to someone who doesn’t have hands in their pockets. Over the years, I have learned about ultra-high net worth families that are really angry at the advice that their famous private bank was giving; in other cases, I have been told of much deeper pockets than revealed even to their long-term wealth advisors. I have met with art collectors who have more difficulty deciding about the ultimate distribution of their art collection than how to endow their offspring; and many more. However, none has ever asked me to convince them to be a giver – only how to be.

Perhaps, though, the impact investment developments of these last few years may give us a clue to a possible answer I have been asked for my independent analysis of whether values based/impact investments are a fad or a movement. [I should underscore that I have no expertise as an investment advisor – only in helping people understand in non-jargon-y or self-interested ways what it all might mean to them.]

It is this last point that may lead to a possible answer to the question of why be philanthropic. How? Every investment has some implicit set of values: What we spend our money on is rarely neutral: we choose what we eat, what we wear, where we live, with whom we socialize, and so much more, based on some underlying value system. Not everyone makes those choices with self-awareness, but many of us do. Why not unpack our personal financial values system? Lots of folks aren’t so thrilled when they realize that their personal investments endorse environmental degradation, or underage child exploitation, or self-aggrandizing and excessive executive pay. Even choosing to say that financial returns matter more than where those returns come from is itself a decision.

Modern investment theory calls for some sort of balance in our portfolios – a.k.a. the prudent investment approach. Thus, by definition, something is going to earn less or more than another part of the portfolio. So, if that is true, there is nothing wrong with making values-based decisions on one’s investments. [Sure, some ESG [Environment/Social/Governance] or Socially Responsible Funds underperform, but many more outperform their benchmarks. It is no secret that some of the largest investment companies are seeing ESG standards as preconditions for long term results.]

Money itself may be value free, but where and how we use it and keep it isn’t. If so, why not consider having at least some of it reflect values one cares about? Asking the question this way may or may not lead to philanthropic giving, but it is likely to lead to more self-awareness of the underlying values of what one does with one’s money.

The final possible answer is that not everyone is ready to think about matters of mortality, the disposition of their estate or resources, or the needs of others at the time we decide to discuss it with them. Sometimes we simply must be there when that moment does come and to be open to understanding what people share at that time. We may well discover that our friends, family, and clients have been more self-reflective and philanthropically open than we ever imagined.

#302 What Wealth Advisors Should Learn from the Philanthropy World

February 26th, 2018

Richard Marker

If you are a wealth advisor [or relationship manager, or any of a myriad of other titles for managing other people’s investments], you have seen the studies. Year after year, they consistently show that your clients may be pleased with the investment service you give them, but, as a rule, they don’t believe you are up to speed with your philanthropy advising. Moreover, they consistently show a disconnect between your self-perceptions and those of your clients.

There are numerous explanations:

1. For many, the simple answer is that it isn’t your job. Your job is to maximize value in a trusted relationship with your client. You make them as much money as you can according to a predetermined risk factor and anticipated longevity. Your compensation is based on money under management. [we’ll return to this point in a moment.]

You have no objection to philanthropy as an objective, and indeed are delighted when wealthy clients establish foundations or trusts so you can provide investment services to those entities, a win-win solution. Thus, you gladly have a “philanthropy” conversation, but all too typically as an investment vehicle.

But ultimately philanthropy is not an investment vehicle but represents money out the door for social good. It isn’t what you are trained or paid to do so it doesn’t occupy a lot of planning time. You may discuss the idea of philanthropy, especially vis a vis taxes [see #2] but your expertise rarely extends to how to spend the money to accomplish a social good. Clients who want a constructive conversation on philanthropy are often disappointed because, for them, philanthropy is what good they might do with the money they have made, not how they invest it.

2. Many wealth advisors do discuss philanthropic vehicles, but all too often only as a tax reduction or avoidance strategy. Where your clients spend it isn’t your concern, but properly structured, philanthropy can certainly reduce the tax burden. Indeed, l have heard multiple wealth advisors brag how they can use philanthropy to get their clients’ taxes down to $0. [Long time readers know how I feel about that!]

Studies have consistently shown, though, that tax savings is not a primary motivator for being philanthropic or altruistic. Taxes and tax savings may influence the specifics of how one structures ones giving, but if one isn’t altruistic or generous, it won’t be any more – or less – satisfying than any other tax reduction vehicle. But those who do want to be altruistic ultimately have a different set of concerns and questions, and whether to set up a trust or a private foundation or a DAF or even an LLC may be real solutions, but only as long as they are solutions to the real questions a client wishes answered. Yes, the vehicles matter, but they satisfy clients only if they reflect the values they want conveyed through them.

Philanthropy is ultimately not about maximizing value but maximizing values. So, as many very well-intentioned wealth advisors and trust attorneys do, simply asking about philanthropic interests and presenting structural alternatives without a deep understanding how philanthropy works is not satisfying to a client.

3. The next challenge is a very legitimate legal and structural issue. You are required to define who is your client and have a legally defined trusted relationship with that client. Often, though, philanthropic planning is a multi-generational matter. Even if the client is the only one expressing interest to you, without understanding the functional dynamics of a family, a perfectly legal and efficient solution may be far from efficacious and even counterproductive down the road.

Don’t misunderstand. I am well aware that many of you do try hard to establish relationships with the others in a family, some very successfully. But even then, most members of the family know to whom you are ultimately responsible and can sense your primary loyalty. [After a lot of years in this business, I can report that there are many foundations and trusts that handcuff or disempower or even antagonize surviving family members because the founder’s attorney did what was legally required but strategically flawed.]

This structural dilemma matters because only a very few people of wealth ever look beyond their wealth advisor or estate attorney for philanthropy advice. As one who speaks frequently at conferences for family offices and wealth managers, I regularly find myself meeting those of wealth or their advisors who express surprise that there are those of us whose expertise is philanthropy per se, and not money managers who happen to specialize in managing philanthropic assets.

Which brings me to the two key takeaways of this piece:

4. What do philanthropy advisors do – and how wealth advisors can collaborate with them?

Philanthropy advisors help their clients [individuals, foundations, families, and other entitles that distribute money] make good, informed, and ethical decisions. A philanthropy advisor can help determine what a funder’s goals and values are, whom they want involved in their decision or legacy, what style of giving is most consistent and meaningful, and what impact they want their giving to have, and for whom. Some advisors are “full service” – supporting every stage in the process including decision making and back office support; others are specialists in one or another area along the continuum such as strategy or family systems or evaluation or are specialists in a particular content area.

Very rarely do philanthropy advisors manage a client’s money.

Therefore, philanthropy advisors are rarely your competitors. On the contrary, they can be partners or collaborators who can help you do your job better. That collaboration can work so the services provided to a client can be seamless.

Most philanthropy advisors define a “client” as the entire family or the entire foundation. It is quite common that, to do their job, a philanthropy advisor may need to challenge the stated priorities and assumptions of the “founder”. It may not always be comfortable – for the founder or the other professionals, but it may be the optimal long-term way to go.

Experience has taught me to add a caveat to wealth advisors: philanthropy advisors are usually at the end of the financial food chain and rarely are they a source of investment business for wealth mangers. The reason for collaboration is not to get new business but to serve your clients’ full range of needs and interests more effectively.

5. What can wealth advisors learn about their investment approaches from the philanthropy world?

For well over a decade, the philanthropy/foundation world has been absorbed by the idea of “impact.” Why spend money, however well intentioned, if at the end of the day it doesn’t reduce poverty or illness or illiteracy or homelessness…? Results matter.

A derivative corollary to that is that there can and should be an alignment between how one spends one’s money and how one earns it. If one wishes to reduce illness or pollution, it is surely very dubious that investments in fossil fuels or tobacco make very much sense.

In the philanthropy sphere, this is not new. It has been discussed and finely honed for quite a while, and there are robust answers at every philanthropy, family office, and investment conference. There is now a maturity of the field, a growing range of credible options, and a conviction that impact and values-based investing need not be an outlier in any viable philanthropy investment strategy.

Here is the emerging news: What works for funders and foundations can work for individual investors as well. Many, especially but not restricted to younger funders, are beginning to ask about values-based funds or approaches beyond the philanthropy realm. Far too many money managers still think of these approaches as financial compromises or outside of mainstream investing. If a money manager resists, you may be sure that others are eager for the business. [In our own case, we made it clear to a money manager with whom we were working that that we were prepared to change because she tried to dissuade us from values-based investing. She studied up, learned a bunch of things that surprised her, and withdrew her objections.]

Those of us in the philanthropy sector have been at this for over a decade. Impact investment isn’t a panacea, and not every approach is a slam dunk, but alignment of values and investment should be a no brainer for every investor. And if you are a wealth advisor and need help understanding how this can work for your clients, I know a lot of folks in the philanthropy sector who would be happy to help.

Afterward:

A number of readers have asked for more specific recommendations how wealth advisors and philanthropy advisors can collaborate. Please contact us directly for a “how-to” list of several proven ways..

#296 After the Tax Overhaul: Grading our Sector

December 21st, 2017

Richard Marker

Most Americans know in their hearts that Congress passed a scam under the guise of tax overhaul. Since the bill was written behind closed doors up until the moment it was passed, with no hearings or public review, all any of us could do was express our concern about what should or shouldn’t be in it. I suspect that very few of us will be thrilled when the details come out. But what we know so far is that very few of us should take much pleasure even if taxes for some go down for a bit.

Why do I say that?

The entire assumption that tax reduction is a cherished goal in any society is bizarre. Taxes are what pay for public services that we want or need, and in almost every case are better provided by a responsible government. Most of us who are not science deniers want to breathe clean air, drink healthy water, eat food that we can trust. Most of us want to travel in safe cars, buses, planes, and trains. Most of us want Congress to respect our decades long contract to respect our defined benefit plan called social security, and would like to be assured that dealing with health needs won’t bankrupt us even in our old age. Most of us want an education system that educates us effectively and fairly regardless of our zip code and ethnic or racial background. Most of us want to know that we have a just judiciary, a trained foreign service, treaties that others can trust, and a military that can protect us with a clear moral standard.

Most of us, I suspect, even want a Legislative Branch and an Executive Branch that understands and endorses all of these things, although I guess I should not expect miracles on that one.

The tax overhaul does none of these things. In fact, it is predicated on two things: that cutting taxes as a goal supersedes all other goals [especially of course for the very wealthy who shouldn’t have to shoulder a tax burden they can easily afford]. And that in order to do so, we can reduce or eliminate public commitment to achieve any of the above goals that define every other modern nation.

Most of the analyses of the sham vision for America only look at the tax burden. And most independent analyses reveal that even the taxes for most people, even if they drop modestly for now, will rise no later than 8 years from now – sooner for others and immediately for some. But that is only part of the story. If health insurance costs rise, it effects our personal bottom line even if it is not through a tax. If people die or get ill because of removal of government guaranteed protections, who will pay for the additional burdens on families? If there are no assurances of fairness in the workplace or schools or on our streets, what resources will remain to correct inequity and those lost communal resources? And much, much more.

Our taxes may go down a little; our net standard of living will deteriorate a lot.

Now – none of this rant is new info, but it needed to be said to get to the next part of this post. Whom do they think will pick up the slack? Economists have almost unanimously said that the trickle-down theory is bogus. And besides, there is no incentive for the private sector to be better employers or even feel the need to hire more people at a time of increased automation and on-line commerce.

That leaves the voluntary sector, otherwise known as the non-profit or non-government or public interest sector. And voluntary is the key word. Americans have a history of generosity, and our tax system has historically rewarded that generosity. History has also shown that tax changes have only a short-term impact on that generosity – short term up or short term down, but over the long haul, giving reverts to a mean.

If that history proves correct, we are in even bigger trouble. Because the burden of a large complex society will fall to those voluntarily funded [professionally directed] organizations. Who will compensate for a reduction in educational funding? Who will provide sustenance to the newly homeless and unemployed and uninsured?

Does anyone really believe that, as good and broad as that sector is, it can pick up the massive slack of government reduction? Does anyone really believe that voluntary giving will increase 3 or 4-fold to even begin to make a dent in that new donut hole of financial vulnerability created by the tax cut scam? The demands on this sector will make those of recent recessions pale.

And this, finally, is where I grade our sector in the run-up to the vote.

I don’t think we did so well. [I am in this sector – mostly on the funding side – so I have to include myself in this accountability.

There were some on the funder side [e.g., NCRP and the Forum to mention only a couple of which I am aware] who spoke eloquently about the impact on people and not the impact on taxation of potential changes in the law. In my mind, they got it – and spoke to the underlying issues. To be fair, I am sure that many other groups also did but I simply didn’t see their public advocacy statements.

However, the overriding attention of the philanthropy support world focused on two things: keeping the Johnson Amendment [a topic for another time] and holding on to tax deductibility for charitable donations. Both of these are worthy goals that I support, but they missed an essential point.]

When the foundation world takes a lead role in advocating for tax deductibility – without a clear articulated vision of other societal needs, it sounds like any other industry group’s self-promotion. We, I hope, are different from the NRA and the Fossil Fuel lobbyists whose lobbying effort are not related to a larger vision for society but for their own self-serving agenda regardless of the negative consequences on society as a whole. I would hope that those of us in the philanthropy world are better than that. We don’t do philanthropy and support wonderful and striving nonprofits just because it is in our interest, we do it because what we support can make a difference to millions of people. At the end of the day, our sector should care about our impact more than our institutions.

But most of the statements that I saw, and received in my in-box, were for advocacy efforts for continuing tax deductibility, with little about the totality of the impact on society as a whole. The sound-bites sounded like another bennie for rich people who wanted to make sure they kept another one of their deductions. Not the best optics for a sector that really does care.

Now, I know that many will take umbrage at this characterization, that the organizations did provide research that shows the financial impact on fundraising. But I have been concerned about these optics for a long time because our sector is not an independent one. We are constantly in a dynamic, if virtual, dialogue with public policy, not independent of it.

Advocacy for charitable deductibility should be tied in with a larger vision of why this sector exists at all, of the pervasive inequity in the social weal and our national policies that reinforce that inequity, of what taxes should in fact support, and how, bottom line, to assure that all citizens are treated fairly and have the necessary means to live respectively and with dignity.

I have devoted most of my professional life to this sector. I believe that it is necessary and reflects something good about every society that supports a thriving voluntary sector. But I don’t believe that our sector should replace public support for basic human needs, and that is what this tax bill implies. I know that most in the philanthropy world agree – I only wish we had said that as loudly as we advocated for deductibility of our contributions.

#283 – How to Endear Yourself to a Funder… Not!

June 15th, 2017

Richard Marker

This week alone, I attended four different events where both funders and organizational leaders were present. I report this so that no one [except, perhaps, those few about whom I am writing] will be able to figure out who this is about or even at which events what I am about to describe occurred.

Putting funders and organizational leaders in the same room has wonderful benefits. For funders to make good decisions, we need to find settings, other than grant proposals and site visits, to learn what is going on. Moreover, being in a larger setting makes it easier to get a sense of field wide developments, compare different methodologies and approaches, and contrast what are still innovations with evidence based projects, and all of this independent of the pressing need to make funding decisions.

Such settings also create the opportunity for direct communication. The very chance for informal and corridor connection can enable safe interchange and allow the development of authentic “relationships” based on common interests. When a funder/potential grantee only meet in the context of submitting or considering a grant, that is, by definition, an uneven and loaded relationship. When meetings happen outside of that lopsided interaction, it is always possible that a different kind of shared experience can emerge.

At the same time, that intimacy has a risk. It means that those who want funds feel that they now have direct access and can make their pitch without the structured gateways of a grant request. There is, alas, the potential for a trespass; for someone who wants funding, it too often unleashes the worst fundraising instincts.

These examples from this week:

• A funder spoke on a panel and, in his/her presentation spoke about how uncomfortable s/he is often made by those who want funds from the family foundation. S/he made explicitly clear that they do not accept unsolicited proposals and had trepidations about even sitting on the panel because of the experience of being overwhelmed by folks asking for money. Sure, enough, immediately afterwards, people lined up to tell their story and to give proposals as if the public words were simply teases. [The speaker told me privately afterwards that it reinforced why he/she typically turns down these kinds of requests to speak.]

• Someone whom I had never met approached me. The very first – and only -words he said “are you a funder? I only want to meet funders.” How do you think I replied?

• I was talking to an old friend who happens to be the CEO of a prominent foundation. While we were speaking, someone who heads a ngo/nfp approached, interrupted and immediately launched into a very aggressive pitch about why the foundation should be funding them. The foundation CEO kept trying to end the conversation and walked away. The petitioner didn’t stop and kept following her/him.

Those of us on the funding side are well acquainted with all of this. We know that we are walking dollar or euro signs. We know that anytime we walk into a room, someone or several someones will find an occasion to say “hmm, let me tell you about my organization/project/cause…” In my case, because I advise and teach many funders and foundations, they often go further and ask if I can give them a list of people they can approach – or to whom I can introduce them.

We are used to this and those of us who have been in this field for a long time learn different ways of dealing with it. It goes with the territory. But…

It never endears the petitioner to us. It never develops the pseudo relationship the fund-seeker desires. And the likelihood of it ever yielding funding is so minuscule that it is surely not worth the effort.

There are many, many legitimate needs in this world. And, sadly, the list grows and the needs grow. Most of those who deliver services and therefore ask for funds are working tirelessly to address those needs. Most are correct that they need more support.

For many, they look at the net worth of a funder or the corpus of a foundation and say to themselves that those funders can certainly afford to give money to their cause or organization.

Funders agree that there are many more legitimate needs than any funder can or should fund. Most, though, have given serious thought to our priorities and determined where we can use our resources most effectively, and in ways consistent with our own values and priorities. That is hard work. And it can be painful to not fund something that cries out for funding. Those seeking funds may not agree with our priorities and wish that we would change our minds. [When I was CEO of a foundation, there were many times when those who didn’t get funded would call angrily to request or even demand a meeting with the board to reconsider. They were convinced that the decision was because no one told their story properly.]

Please take funders at our words: we know our role and the vast majority of us try to play fair, are sympathetic and caring, and want to use precious resources wisely and thoughtfully. Not taking us at our word or respecting our guidelines or violating our space doesn’t help your cause, and doesn’t make us more sympathetic.

We know it is hard. But please, take a deep breath and think about how you are coming across. Those moments of possible connection that may lead to relationship don’t happen all the time; try not to blow them.

Transparency and Tax Exemption for Religious Institutions in the USA

February 3rd, 2017

Richard Marker

Despite the opening paragraph, this post is not about politics; it is of relevance to philanthropy.

This week, at the annual national Prayer Breakfast, the current president issued a strong statement advocating the repeal of a limitation on political lobbying from the pulpit. That particular issue is not one I feel super strongly about, but it does, en passant, elicit thoughts about a philanthropy matter about which I do.

The facts: #1. Non-profit organizations in the USA are exempt from paying taxes on their income. #2. Some non-profits, typically referred to by their tax category as 501 c3 organizations, have an additional advantage: their donors can deduct their contributions to those organizations in their own tax filing.

All of these organizations are required to file tax returns that are available to the public – nowadays mostly through Guidestar. You and I can look at the tax returns to decide if the money is being well spent, and tax authorities can determine if the money is being raised and spent legally. Indeed, a few years ago, the 990 form itself was revised to allow more clarity and transparency on matters of interest to both funders and tax authorities. Transparency matters – as it should. Each of us can choose to study those returns, and each of us can decide if any of the information contained in those public forms should inform our funding decisions.

There is one exception to the accountability rules. Religious Institutions have a third benefit not available to any other organization: #1. they need not pay taxes on income, #2. they can offer tax deduction to donors, AND #3, they need not file any tax return at all. In other words, churches and synagogues and temples and mosques and any other self-defined religious institution can do business however they wish with no regular accountability for audits or tax returns or affirmation of its financial activities.

The ostensible reason for this exemption is the separation of faith and state. I am a firm believer in this separation and affirm that it is a core Constitutional guarantee, and an American value since 1776. And, full disclosure, for part of my career I worked for an organization that had that benefit. Yet I have come to believe that this specific application of the Church-State separation is no longer appropriate.

Religious institutions continue to be a huge financial sector in the USA, and funders/members/adherents should have the same access to information about how their money is spent that donors to any other tax exempt organization should have. However, many religious institutions do not want the onus of preparing taxes, nor do they want to be interwoven into a public tax system; they therefore do not file any public record of their finances. [BTW, currently they are permitted to do so, just not required to do so.]

Therefore, I would propose a modification of the law to allow a choice: Religious institutions can choose to opt in to the rules applicable to transparency and accountability relevant to all 501c3 such as filing an annual 990, or they may choose to remain outside the system as at present.

Organizations that choose to opt in will be permitted to offer donors the tax deductibility, benefit #2 mentioned above. If a religious organization chooses not to, that will continue to be their right, and they would retain their tax-exempt status as at present, but they would no longer be able to offer tax deductibility to their donors and contributors.

Let me reiterate: In no way does this proposal allow or encourage state intervention or encroachment in the religious matters of any organizations beyond that required today. It is an historic quirk that provided this unique transparency exemption. That time, I believe, has passed.

I am sure that there are objections I don’t fathom [I am equally sure that respondents will make sure I learn of them.]. I have no idea what percentage of religious institutions would choose which option. But at a time when we demand transparency, ethics, and accountability in the non-profit sector as a whole, there is no real reason to exempt this huge sub-sector from the financial ground rules governing the rest.

New Year’s Eve Procrastinators and New Year’s Strategists

January 2nd, 2017

Richard Marker

Whew! The end of the year solicitation onslaught is over. It is safe to look at your email again – and even to open some of your snail mail. If an end of the year contribution was on your agenda, you have made sure it was paypal-ed or stamped by Saturday evening. Time to return to more contemplative and plan-ful philanthropy.

I am not an expert in fundraising at all but I have to assume that all of those solicitations work – at least for some. Do they persuade people who otherwise wouldn’t give or just provide that last-minute oomph to procrastinators? I am not sure.

What I do know is that around this time of year, because of what I do professionally, people often ask me why people give. If I listen to the question carefully, I usually see that there is an underlying bias by the person who asks: some are absolutely sure that a “tax deduction” is the driver. Others are convinced that guilt is a prime motivator. Fewer want to credit pure altruism. This year, a lot of folks believe that political fears are yielding more advocacy funding than ever. Social pressure to “give back” is often suggested, raising the question whether those funders would give at all if their peers weren’t giving as well. Among younger funders, “making a difference” surely is a major motivator. And, let’s not forget the insights from our friend and colleague, Jenny Santi, whose research demonstrated that giving can be a source of happiness.

Fortunately, our role is never to persuade someone to give; everyone with whom we work is already a “giver.” Our role is only to help them make good, ethical, and wise decisions. However, what we do know about giving motivation is that reductionism – that is looking for a single motivator – is wrong. No one’s philanthropic behavior can be reduced to a single cause. We are all complex beings, all of us, and it belittles the significance of philanthropy to try to reduce any individual’s giving to only one rationale.

However, when we work with funders and foundations, all of these reasons do come into play – not in whether to give but in making decisions where and how to give. When giving itself is no longer the question, knowing what will prove gratifying is. Sometimes that will determine recipients; more often it will determine how a grant or gift or contract is structured, what intended outcomes are to be, and what relationship a funder or foundation wishes to have with recipients of their funds.

In this context, self-awareness matters a lot, especially if there are family or board decisions. Knowing why one is drawn to or is averse to a particular request may have nothing to do with the legitimacy of the request or even how compelling it is, but everything to do with whether that proposal will align with our giving culture or style. And that culture or style is very much influenced by underlying values and attitudes toward the proper role of philanthropy or government, what we think is the essential nature of human beings, one’s relationship to peer groups, and more. None of these is necessarily more legitimate than another, but knowing what comprises our own drivers, and understanding the complex motivations of those around our giving table may make all the difference in how we end up feeling about the funding decisions we make.

And, as clients and students of ours can attest, that applies whether our giving reflects New Year’s Eve procrastination or New Year strategies.

Would That Be Such a Bad Thing? A Philanthro-ethics Question

April 17th, 2016

Richard Marker

In retrospect, I wonder why no one ever asked me before. The question – in the context of a course on grantmaking strategies – was: what would be so terrible if a funder overfunded a non-profit?

In my advisory work and in my teaching, I spend a lot of time helping funders “right-size” their grantmaking. To take just a few examples:

1. A NFP/NGO requested $x. The funder’s immediate assumption is all grant requests are bloated and funds half the requested amount.
2. A NFP/NGO sends a project request: The funder suggests that they should do it for less – with little regard to what it might actually cost to create a successful project.
3. The funder requires that the grantee do an evaluation of their program/project. The grantee [as too often happens] plugs in a percentage figure to satisfy the grant requirement, with neither side understanding that a reasonable evaluation simply cannot be done for that amount.
4. A funder is committed to a particular field of service and funds a program at a multi-service organization. The funder refuses to provide any infrastructure support [often mislabeled as “overhead”].
5. A funder has an [often unstated] expectation of publishing the results or that the new project continue beyond the length of the grants, but doesn’t fund capacity expansion that this nfp needs to keep this data or to raise the sustainability funds.
6. A start-up or early stage project submits a proposal for a wonderfully exciting project, but naively understates the real financial needs for the project to have even a reasonable chance of success. The funder funds the request, fully aware that it is an underfunded project.

Recognize any? While not every funder is guilty of these, enough are that it warrants significant discussion in a best practices workshop.

Some best practice rebuttals, seriatim:

1. Only funders can establish an atmosphere allowing openness and honesty about real numbers and expectations. If we as funders have the reputation of always reducing a request by a certain amount, it doesn’t encourage the openness to determine what the real numbers are. [Note to grantseekers: even if the onus is on the funder to set the tone, you are not exempt. There is a radical difference between legitimate rounding up and exaggerated hyperbole in telling your story.] 2. Organizations are often so hungry for funds that they will say yes even to grants that are clearly inadequate to achieve success. Often the nfp/ngo’s are well aware that, in accepting this money, they are almost certainly guaranteeing mediocrity, but they feel, they dare not say no to a funder. Indeed, underfunding does no one a favor: as funders, don’t we want what we fund to bring us credit and to be known for excellence, not mediocrity? Of course, not every project succeeds even when it has adequate funding, but a failure shouldn’t be because our funding approach has made that inevitable.
3. Evaluation, impact measures, outcome metrics are all the rage. Not a bad thing. Sadly, though, in too many cases, neither the funder nor the nfp really understands what program evaluation means, what useful results would be, and what kind of financial and human resources are necessary to get there. I have sat in far too many foundation proposal review meetings where the evaluation requirement is clearly a plugged number. If we want reasonable evaluations, we need to learn what they are, and what they cost – and then fund them.
4. So much has been written about the overhead myth that I will simply emphasize what should now be obvious. No organization can support a quality project or program without a strong organizational infrastructure. These dollars are critical, not irrelevant. It is reasonable to discuss what infrastructure costs are applicable to a particular funded project, but not to consider any and all such costs as simply padding.
5. You are beginning to see a theme: We as funders need to clarify what our expectations are and fund accordingly and appropriately. For many very strapped organizations with limited tech support, publishable data is elusive, or beyond the capacity of an overworked staff. For a project to outlive our funding, we need to structure our grant in careful collaboration from the very beginning.
6. This situation applies across the board, but is particularly acute among early stage nfp’s. The idea is terrific [or you wouldn’t be considering funding in the first place] but you are well aware that the submitted budget is far below what is really needed. If this were a venture capital project with comparable appeal, the funder would be all-in, with insistence on involvement, and provide funds needed to get to the next stage. Unfortunately, that same perspective seems to dissipate when it is an nfp. The founder of this great idea may very well be intimidated by the fundraising and underprices his proposal simply because of naiveté. There are times like these that a funder may choose to give more than requested, with an accompanying offer to provide welcome advice on organizational growth.

The underlying principle in all of this is that philanthropic grantmaking is not a negotiation but an investment in the success of an idea, a project, a program, or an organization. There is no doubt that, given the power imbalance, most nfp/ngo’s will take whatever we offer, but that doesn’t make that a winning negotiation. Indeed if we underfund or under support, no one wins. Our role in most cases is to “right-size” our funding, to give these projects the greatest chance to succeed. [See #2 above.]

It was in the context of this discussion that a participant asked an intriguing question. Now comfortably on the funder side, she began her post PhD career in the human service sector. She recalled movingly how stressed the organization and its staff were on a daily basis with barely enough funds to keep the doors open. Would it really have been “wasted” money if a funder didn’t simply “right-size” but chose to give more? Would that be bad philanthropy? Does it reveal sloppiness on the part of the funder? Would it spoil the non-profit? Would it erode the carefully honed discipline urging genuine information sharing between funders and grantees?

Or, perhaps, it is a sign that a funder recognizes how stretched so many nfp’s/ngo’s really are and this bit of unanticipated generosity makes a huge statement about the importance of their work.

Something to think about.

New Year’s Hangover…From All Those Solicitations?

January 1st, 2016

Richard Marker

Happy New Year. Some frolicked with throngs until the wee hours; others had a quiet evening. And most did something somewhere in between. The New Year has begun.

If you are like most of us, the new year greets us with melancholy and ambivalences: wishes and optimism for new opportunities and reminders of missed opportunities and personal losses in the one just concluded. Under the pressure of those ambivalences, we make all sorts of well-intentioned resolutions. And for many of us, most of them are “decisions and revisions which a minute will reverse.” [t. s. eliot]

The political and non-profit fundraising industry counts on that to raise lots of end of year funds. Were any of us immune to the incredible onslaught of solicitations – reminding us that we have only 2 days, or 2 hours, remaining to make that gift before the year ends.

You cannot blame them. All of these non-profits and political candidates count on voluntary discretionary support, and why not do everything possible to get you to make a gift? I am not a fund-raiser and don’t know much about fundraising, but I have to assume that these last minute solicitations must actually work or they wouldn’t do it.

I am, though, an educator of and advisor to those who give. And for most of us, last minute reactive giving leads to very non-strategic and too often mindless philanthropy.

That doesn’t mean that the 11th hour contribution is necessarily money wasted. There are many legitimate and worthy causes and candidates and it isn’t always irresponsible to give to the ones who make the strongest case or play on your emotions at those pre-midnight moments when one wants to close our metaphoric and financial books on the year.

But it certainly doesn’t represent the best of strategic and intentional philanthropy for most of us. Why?

• The reminders that most organizations give about in-time tax deductions is accurate but not particularly relevant for most. Most US citizens don’t itemize their charitable deductions, or if they do, don’t give so much that it makes much of a difference in taxable income. Those who do itemize and give at sufficient levels that it does make a difference have probably already planned their giving well before December 31.
• Only a small percentage of earners don’t know how much they will have earned for the year until December. Most of us make roughly the same amount of money each month throughout the year. Therefore giving throughout the year allows for our philanthropy to be part of more careful financial planning for us, and, no less important, is more beneficial to recipient organizations so they don’t rely on a frantic end of year campaign. Perhaps if more people gave this way, fewer organizations would indulge in end-of-year frenzy.
• Giving under psychological or social pressure means that you may be less informed in your choices. There are so many sources of accurate and useful information available to everyone these days so a giving strategy should not be a discipline only of the wealthy. All of us make decisions every single day: what do we say no to, even if only by ignoring requests that come by phone or in the mail. And most of us do give something – whether in a pew collection plate, or to a sidewalk Santa, or through a payroll deduction, or by a neighbor’s girl scout cookie request, or at the supermarket register asking us to round-up for the hungry. How much money one has needn’t matter, but if we are going to give something, shouldn’t that giving reflect personal or family values? There are many very valid and legitimate giving approaches one can make. Once we have thought about it and discussed it with other family members, it is much easier to decide ahead of time what we are going to say yes and no to.

There should always be space for compassion in our giving. No one can anticipate every flood, tornado, or human-caused tragedy; a giving strategy should certainly leave room for the unanticipated. It is fully human and humane to be spontaneous when faced with suffering and need. But we do our philanthropy better, and are less befuddled by all of those solicitations, when we do our planning in January, on our own time, and not in the last week of December, on someone else’s schedule.

Happy New Year.