Will smaller donors pull us through?

I had conversations with development professionals at three public radio stations today who told me that they will meet or exceed goal in their membership programs. One said that, although they are not crying poor on the air, they think many of their listeners sense that their funding is very brittle right now and are doing wht they can to help balance the scales.

I’ve seen this before. During the New England recession of 1989-1991, a multitude of small gifts helped to offset drops in corporate funding and large major gifts.  Well-rounded organizations have individual giving programs that provide a wide range of giving opportunities.

Target Index documents giving decline

Target Analytics has released its 2008 Q3 Index of National Fundraising Performance. (Keep in mind that the period covered was prior to the biggest one-day decline in the stock marketing during 2008.)

Index revenue declined a median -1.1% from the first three quarters of 2007 to the first three quarters of 2008. This continues a pattern of decline that began in the last edition of the index in Q2 2008, when revenue declined -2.4% from the first half of 2007 to the first half of 2008.

Relief and animal welfare causes gained ground. Target Analytics provides the most contemporary data on direct marketing results among major non profit organizations. (Full disclosure: our firm does the back-end analysis for Target’s public radio and most public television clients, but we are not involved in the National Index.)

It may NOT be just “the economy, stupid.”

Word came to me within the past few days of a non-profit organization that is deep financial distress and has had to lay off personnel and curtail operations. News reports cite the economy.

Well, the economy is not helping this organization, but it’s not the total cause of its problems, either. Rather, much of the damage is self-inflicted.

Within the past few years, the organization has curtailed much of its fundraising operation. Two of its top people have been encouraged to leave.

This organization has really cut costs. (I’m sure the board was pleased.) But its revenue–its NET revenue, mind you–has tanked. It is its own worst enemy.

As a colleague once remarked, I am no longer surprised by how often we shoot ourselves in the foot, but rather by the glee with which we reload to shoot ourselves in the other foot.

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.

NPR reports on financial fallout to nonprofits

One of the first efforts I’ve seen to look at the effect of the financial crisis on the nonprofit sector. Audio available shortly.

clipped from www.npr.org Assessing Impact Of Financial Crisis On Nonprofits All Things Considered, September 30, 2008 � The financial crisis is going to have an effect on many organizations that are not interested in making any money. Nonprofits rely on corporate donations and interest income from their endowments for special programs, operational support and long-term sustainability.

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.

The end of civilization as we know it…

….or has it already ended?

Young people responding to this post on Oregon Media Insiders do not understand what all the fuss is about.

clipped from www.nytimes.com Name-brand products make regular appearances on television shows, where they are typically written into a drama, comedy or reality program. “American Idol” viewers, for example, have come to expect to see a Coke cup in front of Simon Cowell as he dresses down contestants. But TV news? In recent weeks, anchors on the Fox affiliate in Las Vegas, KVVU, sit with cups of McDonald’s iced coffee on their desks during the news-and-lifestyle portion of their morning show. The anchors rarely touch the cups. Executives at the station, one of 12 owned by Meredith Corporation, say the six-month promotion is meant to shore up advertising revenue and, as they told the news staff, will not influence content.

How to handle bad news

The NY Times reports that two groups, Acorn and Points of Light Institute, discovered embezzlement. Points of Light Institute notified Federal authorities and put a statement on its website letting the public know about the problem. Acorn kept it quiet.

clipped from www.nytimes.com Acorn chose to treat the embezzlement of nearly $1 million eight years ago as an internal matter and did not even notify its board. After Points of Light noticed financial irregularities in early June, it took less than a month for management to alert federal prosecutors, although group officials say they have no clear idea yet what the financial impact may be.

The embezzlement was discovered in 2001 and not disclosed, the Times reported, because the family of the accused, Dale Rathke, the brother of Acorn’s then-CEO, agreed to restitution in exchange for confidentiality.

Points of Light is likely to emerge in fairly good shape, we believe, while Acorn will spend years trying to overcome the scandal. When confronted with a serious problem, a public organization does better if it comes clean with its donors and supporters and takes ameliorative action.