Oregon Legislature Breaks Trust

The Oregon Legislature has voted to steal $1.8 million from the Oregon Cultural Trust to close a budget gap. The trust was established to fund the arts in Oregon, which traditionally has a parsimonious approach to arts funding.  

Problem is, these aren’t public funds, in the usual sense of the word. The Oregon Trust represents voluntary contributions made by individuals through direct gifts, for which donors receive a tax credit, and proceeds from special license plates, for which purchasers pay extra.

The Legislature has broken the trust—both literally and figuratively—by redirecting privately contributed funds to public coffers. Doug Stamm, President of the Meyer Memorial Trust, which made an initial gift to establish the Cultural Trust, was diplomatically low key about the diversion. But asked what would happen if another organization were to divert non-discretionary grant funds from MTT, Stamm said it would be the last grant they would see.

We annually contribute the maximum amount matched by the tax credit and feel robbed.

NP Sector personnel strategies during recession

During the Chronicle of Philanthropy’s on-line discussion on the recession and the non-profit sector, Richard Marker, principal at Marker Goldsmith Philanthropy, was asked about the agency management strategy of putting employees on contract. His advice, given my own experience, was excellent.

My own view is that it is a short term savings to reduce support for those you can still employ. It is better to fully invest in fewer employees than short change and antagonize many.

When I managed an organization during a recession, we quickly learned to get the bad news out of the way, reduce staff, and assure those who remained that it was our expectation that they would continue to have a job. The steady drip-drip-drip of bad news sets up uncertainty throughout the organization, damages morale, and virtually guarantees that you will lose your best people-those you most need during the bad period.

Chronicle experts peer into crystal ball

The Chronicle of Philanthropy hosted an online discussion, Outlook for 2009: What the Recession Will Mean for Your Organization. Among the findings:

• Foundations will focus on those with whom they have a relationship.
• Not all organizations will be affected in the same way, and many donors continue to give generously.
• Donations that depend on stock gifts will lag improvement in the market.

Also included, some great tips on strategies to survive and present your case.

ACLU blindsided by Madoff fraud

The ACLU told contributors today that two foundations that support its operations were victims of Bernard Madoff’s Ponzi scheme and have had to cease operations. “That means that $850,000 in support we were counting on from these foundations in 2009 simply won’t exist,” according to a letter sent out to donors by Alma Montclair, ACLU’s Director of Administration and Finance.

On Sunday, the New York Times reported that the Picower Foundation, ranked 71st-largest in the nation by the Council on Foundations, has joined the JEHT Foundation in being forced out of business by the Madoff scam. A number of Jewish charities, including Yashiva University, have been affected by the loss of promised grants.

Both had significant funds invested with Bernard L. Madoff, who was arrested by federal agents on December 12 and charged with running a $50 billion fraud scheme.

Conducting a capital campaign during a downturn

If you’re contemplating a “must-do” campaign, what do you do? If your case is strong and your donors are with you, I advise that you move forward. It will take you longer to reach your goal than it would have two years ago, your pyramid may be somewhat flatter, and you will have to visit more donors, but you can make it. (In most campaigns, there are always some who are not contacted due to volunteer fatigue; now you will have to see more of them, and that requires more volunteers.)

A regional hospital foundation officer tells me they are proceeding with five separate hospital campaigns in as many communities. Of 30 donor prospectives whom they re-interviewed, only one advised them to pull back.

So again, is your case strong? Is it for a facility or improvements taht your community badly needs? Are your volunteers committed? If so, this may be precisely the right time, because those with less urgent campaigns may be withdrawing.

Financial bail-out extends IRA rollover

The stabilization act just signed by the President extends through 2009 the provision whereby an owner of an IRA who is older than 70 1/2 can direct a distribution to a qualified non-profit of up to $100,000 without its being counted as taxable income. It does count toward the mandatory distribution. The donation must be made by the IRA directly and not pass through the hands of the donor first.

clipped from chronicle.com The U.S. Senate has attached a package of tax benefits to must-pass legislation to rescue the troubled financial sector, increasing the odds that the expired benefits could be renewed this year.The package newly added to the bailout bill, which the Senate is expected to take up later today, would extend for two years a tuition tax deduction, a research-and-development tax credit, and an IRA rollover for charitable contributions.

Foundations feel financial effect

The Chronicle of Philanthropy reports on a recent article in the NY Times on the effects of the collapse of two Wall Street investment banks and the takeover of AIG. (Registration required)

clipped from philanthropy.com Foundations Feel Wall Street�Fallout Several big foundations in New York are suffering from the recent collapse of Lehman Brothers and Bear Stearns and the government takeover of the American International Group, reports The New York Times. The Starr Foundation, which held 15.5 million shares of AIG in May, has seen its assets fall by at least $1-billion since the end of 2006. As a result, the grant maker says it will postpone some planned grants. The personal foundations of Bear Stearns executives have also taken losses, and the future of Lehman Brothers Foundation is in question now that Lehman Brothers is bankrupt.

Target National Index reports median revenue, donor drop

The Q2 National Index of Fundraising Performance has just been published by Target Analytics, a division of Blackbaud. Authors Helen Flannery, Rob Harris, and Carol Rhine report that “most of the organizations in the Index faced fundraising challenges” in the period through June 30, 2008. “Overal direct marketing donors and revenue both declined in Q2 … over the same period last year, and these declines were evident across most of the sectors in the index.” Once again, revenue per donor rose, but it most cases it wasn’t enough to overcome the donor decline and, therefore, revenue dropped.

Keep in mind that the period covered was only at the leading edge of the turmoil now roiling the nation’s economy. Are greater challenges in store? Read our earlier posts on how to deal with economic uncertainty.

Pastors to defy 501(c)(3) rules

NPR’s Barbara Bradley Hagerty reported on All Things Considered yesterday the commitment by more than 30 pastors to endorse political candidates this weekend. As the article reports, the issue is not whether religious leaders have a right to their own political views, but whether organizations that engage in political activity should enjoy the benefit of their tax exempt (and therefore taxpayer subsidized) status. As we commented in an earlier blog about political activity by 501(c)(3) organizations, we believe this activity threatens the entire bedrock of charitable tax status.

clipped from www.npr.org On Sunday, more than 30 pastors across the country are expected to preach a sermon that endorses or opposes a political candidate by name. This would be a flagrant violation of a law that bans tax-exempt organizations from involvement in political campaigns.

Misusing non profit status?

A controversy is swirling in the newspaper industry now about an anti-Muslim DVD being bundled into newspapers in election swing states around the country.

clipped from www.editorandpublisher.com The arrival of tens of millions of DVDs of a controversial film on doorsteps around the nation — but almost exclusively in election “swing states” — via newspaper home delivery continues this weekend, with explanatory articles and subscriber feedback appearing on some of the papers’ Web sites.The DVDs of the 60-minute film, made in 2005, and titled “Obsession: Radical Islam’s War Against the West,” arrived Saturday with, among other papers, the Charlotte Observer and the News & Observer in Raleigh, with delivery with the Miami Herald and other papers set for Sunday.

What has news critics so exorcised is the idea of newspapers such as the New York Times being used as a delivery system for anti-religious attacks apparently aimed at boosting the candidacy of one presidential candidate. (For more on the logic of this, go to the E&P article.)

[Update: the Oregonian distributed the same video in its issue of Sunday, September 28, which has caused a bit of a stir in this fairly progressive corner of the world. Publisher Fred Stickel styled it as a free speech matter and said he could find nothing in their ad guidelines to justify not distributing it.]

But what is of interest here is the that producer and distributor of the video, Clarion Fund, is a 501(c)(3) non profit. According to Clarion’s website, it is “a non-profit, non-partisan organization whose mission is to educate Americans about issues of national security. Our primary focus is on the most urgent threat of radical Islam. By utilizing the following three mediums, Clarion Fund is helping Americans understand that the mainstream media is not adequately conveying the reality of radical Islam.”

Under the guise of providing “education,” a variety of organizations have been established, using 501(c)(3) status, to push particular political agendas. Here in Oregon, the Center for Union Facts, a 501(c)(3) “educational and charitable non-profitan” orgnaization run by p.r. consultant and lobbyist Richard Berman, aired a flight of television spots this spring and summer attacking unions.

Blogger Chris Lowe tells me, “CUF is associated with another more recent outfit called the Employee Freedom Action Committee (EFAC), which is a main force in [a] campaign … targetting a number of pro-union U.S. Senate candidates this year. This 501(c)4 organization followed up the CUFs ads with a series advocating against “the Employee Free Choice Act” and asking viewers to “Call Jeff Merkeley [the Democratic senatorial candidate] and tell him” union members should have the right to vote.

The one-two punch essentially used a 501(c)(3) “educational” organization to prepare the ground for a series of attack ads from a 501(c)(4.)

What is wrong with all this is that it misuses tax-exempt non profit status for political purposes and thereby puts honest non profits at risk. Because when corrective legislation comes (as it will), it will put an additional regulatory burden on every 501(c)(3) — honest or sleazy.