LA Philanthropy Watch

As noted in my previous post, the GGPNC board voted on June 1 to suspend all fund disbursements.  The timing was awkward, because a member of a community group was present to request a grant to support the 2010 Griffith Park Shakespeare Festival to be staged at the Griffith Park Old Zoo.  Independent Shakespeare Company, which received $5,000 from GGPNC in 2009, is seeking funding for this season’s production of Othello and Much Ado About Nothing.  Raising $125,000+ is not easy in the best of circumstances, but this is an especially tough year for nonprofits.

Budgeting and finances were an issue in the recent GGPNC election.  During the campaign, one newly elected member pledged frugality; another member of the Los Feliz Forward slate objected to specific spending priorities of the council.

Jessie Kornberg, the board’s secretary and a member of the Rules & Elections Committee, has experience as the executive director of a nonprofit organization.  Her critique of the board’s fiscal management focused on fundamental principles.  She pledged, during the campaign, to “bring my long-range planning expertise to bear on the GGPNC’s budget process to encourage an organized system for evaluating and awarding funding proposals.”

This is the approach followed by foundations in the nonprofit sector: there are funding guidelines, application forms, deadlines for submission, and a process (which is, in Max Weber’s terms, ‘rational’ and ‘efficient’) for making decisions.  The process, spelled out in writing, is readily accessible.  A nonprofit organization that seeks funding from a foundation knows how things work going in (whether or not its request ultimately receives an affirmative response).

In actual practice, relationships, past giving history, and other considerations all make the process less rational – and less fair – than it would be in an ideal world.  Because money is in short supply, and needs within the nonprofit sector are great, worthy institutions fail to get funding.  This may frustrate foundation decision-makers as well as nonprofits.  But having an established system for making decisions is a huge step in the right direction – rather than just winging it from month to month depending on who shows up with a request.

In the absence of a regular review procedure at GGPNC, the funding of community groups has been ad hoc.  Without structure and guidelines, the process is robbed of transparency and fairness, disadvantaging nonprofit and voluntary organizations in the neighborhood.  Haphazard decision-making hampers the board as well, rendering it incapable of doing any long-term planning.  There is no way to prevent the embarrassment of a worthy group appearing near the end of the fiscal year with a request, and finding that through lack of foresight there is no money left to allocate.

This is a situation ripe for reform.  I expect the new council majority to put in place “an organized system” for funding community groups.

Furthermore, as the Rules & Elections Committee has begun its work, I would anticipate creation of ‘rules of the road’ in a number of areas throughout the council’s operations.  The next several months promise to be eventful for the neighborhood council.  Folks interested in this process might want to attend tonight’s meeting of the governing board: 7:00 p.m.  at the Los Feliz Community Police Center (second floor of Citibank), 1965 North Hillhurst.

(Photo from Wikimedia Commons.)

Charity Navigator had a recent post about a donor who collected all the charitable solicitations he received by mail in one year (from December 1, 2008 through November 30, 2009): The total – from just 14 nonprofits – was 181 pieces of mail.  Each charity wrote him at least 8 times during the year; one organization sent him 24 appeals.

The post doesn’t advise us how often the donor responded with a check or credit card gift.

Here’s a link to a 4-minute video from Charitable Navigator on five steps you can take to limit the number of solicitations you receive.

A recent article in the Chronicle of Philanthropy (subscription required), “Are Charities Ready for Tough Times Ahead?” prompts San Francisco nonprofit attorney Gene Takagi to change the question slightly on his blog, “From a governance perspective, the question may be slightly altered to ask ‘Are Charity Boards Ready for Tough Times Ahead?’”

While the focus of Mr. Takagi’s post is not on fund raising, I was struck by the juxtaposition of his question and the answer given (to a related question about fund raising in tough times) on another blog:

A survey by The Agitator asked fundraisers to identify the “single biggest challenge your fundraising program faces in 2010,” which produced this result:  “Way ahead as the #1 challenge — expressed in a variety of ways — was getting Board  and senior executive buy-in, including direct participation, for more aggressive fundraising efforts.”

2010 is likely to be another challenging year for raising money.  To meet those challenges, fund raisers must form strong partnerships with their chief executives and the leadership of their boards of directors.  Everyone needs to be on the same page, embracing the same agenda.  Or, to change metaphors, everyone must be pulling in the same direction.

(Photo of Taylor Woodrow’s Teamwork Sculpture from Wikimedia Commons.)

“One hundred years after the birth of Saul Alinsky…,” note the authors of a paper presenting a pragmatic overview of fund raising, with a former community organizer in the White House and high-profile political attacks on community organizing groups, “… almost every American has at least heard of community organizing.”

The Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy and Marjorie Fine, director of the Linchpin Campaign (a project of the Center for Community Change) have teamed up to write a paper with tips and strategic perspective on fund raising for community organizers.

“Seizing the Moment: Frank Advice for Community Organizers Who Want to Raise More Money” [pdf] offers basic advice, which will be familiar to experienced fund raisers in the nonprofit community, with reference to the mission and activities of community organizing groups.    The points include a focus on building relationships with donors, prospecting to identify additional donors, communicating clearly – and with examples – the work of the organization, and listening to donors and program officers.

“Listen actively and with focus so that you can build bridges between their interests and yours.

The first time a donor or funder gives your organization money, it is an act of faith upon which trust will be built.”

Along with savvy tips and techniques, the paper includes a list of resources to help organizers raise money.  The NCRP offers free downloads of this and other recent publications.

(Image from Wikimedia Commons.)

“After years in the shadows, the everyday donor is emerging as philanthropy’s newest hero, the driver of a more down-to-earth approach to charity,” begins Stephanie Strom’s story in this morning’s New York Times (via Philanthropy Journal).

The story suggests that high-profile charities have come to understand the importance of modest givers – as opposed to “mega-donors” – and that newly formed charities are focusing on smaller donations.

The article quotes the Executive Director of the Robin Hood Foundation (described by Ms. Strom as “famous for annual benefits where billionaires routinely hand over $20 million”) attesting to the importance of small gifts and the President/CEO of Independent Sector, who says many charities are “making an effort to diversify their funding bases and not depend on a few large funders, whether they be foundations or individuals.”

The experience of small and mid-size nonprofit organizations – which represent most nonprofits in the sector – is far removed from the rarified world of billionaires and mega-gifts.  So a focus on modest gifting is nothing new.

Virtually every nonprofit, in my view, should have a major gifts program – or should be building the foundation from which to nurture and develop major gifts over time.  Annual donors of small gifts – $10, $25, $100, $250 – are the basis for a healthy fund raising program – which can serve as the foundation for a major gifts program.  Note, though, that for many organizations a major gift might be $2,500 or $1,000 or less.

Last month, in a post about Charity Navigator’s advice for giving wisely, I commented on the importance of annual giving, major gifts – and face to face fund raising.  For most nonprofits, this is fundamental – neither overlooked, nor forgotten.

A recent Harris poll reveals increasing numbers of Americans are finding ways to cut back on everyday spending.  For instance, 64% are purchasing more generic brands, 47% are packing lunches instead of buying them, and 43% are getting fewer haircuts.

Tom Belford at The Agitator (a popular blog that offers fund raising tips) zeros in on two cut backs: 34% are paring back their magazine subscriptions, while 21% have canceled their daily newspapers.  “In particular, cutting back on magazines strikes me as very analogous to cutting back on donations …”

He concludes, “The data, indicating that significant belt-tightening is still underway, indeed increasing a bit, suggests that fundraisers shouldn’t get TOO optimistic about 2010 prospects.”

This week the Los Angeles Times ran a story headlined, “Card clubs and other special interests give to Jerry Brown charities.”  I discussed the issue of ‘behested payments’ – philanthropic giving at the behest of an elected official – from the standpoint of a nonprofit organization and of a donor (who might lack charitable intent) earlier this week.  In this post  I will comment on this issue with a focus on Jerry Brown – the solicitor.

1. First, let’s acknowledge that Mr. Brown is a great volunteer.  He is committed to the organization(s), he understands the importance of fund raising, and he is prepared to step up and do it.  If every nonprofit board or committee member were prepared to rise to the occasion in this way, the world would be a different place.  (I say this as someone who has worked in partnership with volunteers for many years.)

And let’s acknowledge the strategic decision-making that is an essential element of any thoughtful solicitation plan: we select the volunteer (or executive) in the best position to make the ask.  Who has a relationship with the prospect?  Who might wield some influence over her/his decision?  Whose vision and judgment does s/he respect?  Who will the prospect find it harder to say ‘No’ to, or easier to give an affirmative response to?

For the two Oakland charter schools we have discussed, Jerry Brown was the go-to volunteer.  We don’t know how many folks said ‘No’ to him, but we know a number of individuals and institutions came through with major gifts at Brown’s behest.

2. But Mr. Brown is also the Attorney General of the State of California (and may be elected Governor within the year) – with jurisdiction over many matters of concern to the folks he solicited.  That leads to this predicament: these gifts pose obvious conflicts of interest.

In fact virtually all fund raising by elected officials raises conflicts of interest.  It doesn’t matter whether the money is to elect someone to office, to enact a proposition, or (as in this instance) to support a favorite charity.  One naturally feels gratitude (and perhaps some sense of obligation) upon receiving a gift; it would be natural for a donor to expect Mr. Brown at the least to “keep an open mind…” [see the Times article for the full quote] in any future conversations about matters of public policy … which leaves open the possibility of staking out a position amenable to the donor’s interests.

“It’s great to give, but are they giving because Jerry Brown is a great guy or because he’s attorney general?” asks Robert Stern, president of the Center for Governmental Studies in Los Angeles (as quoted in the Sacramento Bee’s CapitalAlert blog).  Mr. Stern also notes that such gifts cannot be banned.  The best we can do is to require disclosure, which is why we can find lists of behested payments at the Fair Political Practices Commission website.

With full disclosure – and much additional information – we are in a position to make judgments about behested payments and about the public officials who made the successful solicitations.  What considerations might we bring to bear on our judgments?

Via Google, it is simple enough to find any number of allegations of improper behavior related to elected officials’ relationships to nonprofit organizations.  I will not bother with the links, but the examples include: 501(c)(3) organizations that funded activities unrelated to any charitable purpose, including organizations that functioned as illegal conduits for money-laundering.  Nonprofits that provided income for a politician or spouse.  Nonprofits that funded activities to generate crowds and publicity to benefit the politician, including nonprofits conveniently named after him.

When we review the list of individuals or industries that have made ‘behested payments’ we make judgments about the nature of the charity involved and the political figure’s relationship to it.  We make judgments about the character of the public official and the measure of charitable intent we perceive.  We also – if we are vigilant – make judgments about any decisions the office holder makes that may benefit or disadvantage donors who responded with a behested payment.

Jerry Brown responded to the suggestion that behested payments might influence the performance of his official duties with these words, “I have an unimpeachable record of integrity.”

This brings to mind the words of the late Jesse Unruh, who said of legislators, “If you can’t take their money … and vote against them, you don’t belong here.“   (The whole quotation is more colorful – the legendary ‘Big Daddy’ of California politics was a colorful figure – but this excerpt makes my point clearly.)

Can Jerry Brown do that: make decisions and undertake activities opposed by special interests that have made gifts at his behest?  Perhaps.  I actually don’t think this is at all far-fetched.  His long political career has generated considerable attention and controversy, but has been remarkably free of the suggestion of scandal.  I see no reason to question his genuine commitment to the Oakland School for the Arts or the Oakland Military Institute.

For my part, I will keep in mind the Fair Political Practices Commission’s list of behested payments as I watch Mr. Brown’s decisions and activities as Attorney General.

(Photo by Steve Rhodes at Flickr.)

Yesterday’s Los Angeles Times – front page above the fold – featured a story (with the headline above) by Shane Goldmacher about California Attorney General Jerry Brown soliciting millions of dollars in donations for two charter schools (which Brown founded while Mayor of Oakland) from a number of special interests.  The list includes Southern California card clubs “some 400 miles away” (as the Times put it); other powerful, well-connected industries and individuals are also represented.  The haul has been more than $9 million since Brown (widely expected to be the Democratic nominee for Governor next year) became Attorney General.  His fund raising success was more modest when he was still Mayor of Oakland.

There is a whiff of the unsavory here because there is the appearance of currying favor with a powerful public official, rather being moved to give by a philanthropic spirit.  Here’s how the Times put it, quoting an anonymous source identified as the advisor of one of the deep-pocket donors:

“It looks altruistic rather than something that’s sheer, raw politics,” the advisor said. Groups are giving to Brown “with the hope that he will keep an open mind should you need to communicate with him in the future.”

The Times has access to this list  of donors because California’s Fair Political Practices Commission tracks “behested payments” – that is, philanthropic gifts to nonprofit institutions made at the behest of elected officials.  Here’s the link, if you’d like to check it out.

So is there anything wrong here?  Can we identify any unethical behavior?

1. First let us consider the situation from the standpoint of the two charter schools – Oakland School for the Arts and Oakland Military Institute College Preparatory Academy.

Have these institutions done anything wrong in accepting big gifts from these sources?  Is it wrong for a charter school to accept money from a source solicited by a statewide public official?  Last month (October 16) Mike Burns, discussing the charitable giving of New York Mayor Michael Bloomberg (re-elected yesterday), recalled the dictum, “the only thing wrong with tainted money is there ‘taint enough of it.”

In this case, I suppose ones view of gambling may determine whether one views the money as tainted.  I am interested in the question of behested payments by public officials, so let’s set aside the card clubs – and the casino operators and the winery – and focus on the other contributors mentioned in the Times account: Zenith Insurance, Pacific Gas & Electric, AT&T, Wal-Mart, Bank of America, the (for-profit) University of Phoenix, and Hollywood’s Steven Bing – was it wrong to take their cash?  (We’ll put aside the Annenberg Foundation, the LEF Foundation, and the Hearst Foundation – all also mentioned in the story.)

It’s not clear to me in any of these instances that the cash is tainted (or dirty or corrupted).  And, while the motives of the donors may be suspect, I do not believe that the institutions accepting the donations have compromised their institutional integrity, or fidelity to their missions, or any principles of nonprofit governance.

In my view, the institutions are guilty of no breach.  (I can think of instances where I might decide differently: if they had accepted money from gangsters, drug-runners, or terrorists, for instance; but not from Bank of America or Wal-Mart – even if a public official made the ask.)

2. Next, let us consider the donations from the point of view of the powerful players who made the gifts.  The anonymous advisor suggests that these donors are giving at the behest of the Attorney General (and possibly the next Governor) “with the hope that he will keep an open mind should you need to communicate with him in the future.”  In other words, in the vernacular, they’re buying access.

Their motives are suspect.  And perhaps because we have such a strong sense of this – regarding their motives as uncharitable, selfish, even socially harmful (since they may wish to influence the government to act against what we regard as the public interest) – that we hesitate to offer them praise for their giving (though we would expect the charter schools to express appreciation).

But their actions – making contributions for a good cause – are good.  Period.  In my view, the donors (in the absence of a concealed quid pro quo) have done nothing wrong – regardless of their motives in making these gifts.

The gifts will benefit the charter schools and their students.  Giving the money was a good thing.  There is no reason to fault this philanthropic giving to a pair of good causes.

3. And from the perspective of Attorney General Brown?

I’ll consider this question tomorrow.  This post is long enough already.  And, at least in my view, evaluating the case from the perspective of Mr. Brown is a bit more complicated.

By the way, in doing research on this issue, I found a link to an October 16 post on the Sacramento Bee’s CapitalAlert blog, which covered some of the same ground as the Times account.

(March 2008 photo from Wikimedia Commons.)

This week Sean Stannard-Channing linked to “Five Charity Myths Dispelled” on Charity Navigator’s website.  This sounded intriguing, so I clicked on it and found a crisp corrective to a number of ‘myths.’ Only then did I notice the date; this was featured more than 2 years ago – on July 1, 2007.

It is still a good guide to donors who would like to make wise decisions about giving.

I’d like to highlight the final myth, “Myth 5: A good way to support a charity is to participate in a special event or buy a special product.”

Charity Navigator conducted a study (yes, in 2007, but the findings are still sound) of more than 5,100 charities and discovered that, “on average, the charities we studied spent $1.33 to raise $1 in special events contributions, compared to an average overall fundraising rate of $.13 to raise $1.”  If you want to contribute to a good cause, don’t buy a ticket or a specially marked product at the supermarket, write a check.  Simple as that.

We can shift our perspective by 180 degrees and look at this as a guide for nonprofits seeking philanthropic dollars.  Special events, raffle tickets, auctions, and so on can be fun, can boost the morale of volunteers and staff, can increase the visibility of an organization, and can generate good will – as well as make money (sometimes a lot of it).   These are all good reasons to stage special events.

But as a rule, for most nonprofits, the annual fund is at the center of a healthy fund raising program.  Annual fund donors are not making a purchase, buying a ticket, or expecting a meal.  In most instances, they’re not seeking ‘premiums’ or ‘benefits.’  They are contributing to a cause they believe in.  A viable annual fund represents a reliable, consistent source of financial support – providing a measure of stability year to year.  And it is the foundation on which higher level development activities – such as introduction of a major giving program – are constructed.  The annual fund is also a foundation of campaign readiness – when an organization begins planning for a capital campaign or a campaign to fund a new program, infrastructure or technological innovations, professional training, an endowment, or any other special project.

Earlier this month I linked to a recent study on fund raising effectiveness, which concluded, “Donors to charitable organizations give more when they are asked in person and when someone they know makes the request…”  Todd Cohen commented at Inside Philanthropy, “Instead looking for quick-fix solutions for the financial crisis looming over the giving sector, nonprofits need to get back to basics and invest the time and effort needed to understand, cultivate and engage their givers and personally ask them for support.”

Face to face fund raising is the most effective. (And, with that, I have an opportunity to rerun the photograph that I ran with the October 13 post: consider this my version of Friday cat – and dog – blogging.)

In a page one story titled, “Sharing the Pain,” the Chronicle of Philanthropy’s Noelle Barton and Caroline Preston suggest – based on a survey of the 400 nonprofits that raise the most philanthropic dollars – that giving will drop sharply in 2009 and that 2010 will not be much better.  (Here is a free link to an abbreviated version of the article.)

Total charitable giving declined in 2008; in fact, Giving USA reported only the second decline in charitable giving since the foundation began doing annual surveys in 1955.  (I linked to this story in June.)  But the largest nonprofits, those with the most sophisticated and successful fund raising operations, fared better than smaller organizations last year: total contributions actually increased slightly at the top 400 nonprofits in 2008.

At this stage, however, things are looking less promising even for the elite 400 in 2009.  Institutions have redoubled their fund raising efforts as they scramble to reach more modest goals.  The Chronicle reports that the top nonprofits anticipate a median decline in giving of 9% this year.

Of the top 400 institutions profiled, 51 have headquarters in California; 15 are based in Los Angeles.  The fund raising results for the LA cohort varied widely among these organizations in 2008. Giving was up 25.2% at UCLA (which raised the most philanthropic dollars) and down 12.9% at USC (number 2 in LA). Contributions increased last year at just 5 of 15 Philanthropy 400 organizations in Los Angeles – by a whopping 439.7% at the Entertainment Industry Foundation!  Contributions declined (from 5.4% to 43.6%) at 9 top ranked organizations in LA.

Note: the Chronicle’s ranking is based on fiscal years ending in 2008; for LA-based organizations on the list, the end of the fiscal year ranged from June 30, 2008 to December 31, 2008 (with one exception, noted below).

To make this interesting, I have listed the 15 Los Angeles nonprofits on the Philanthropy 400 based on the percentage increase or decrease in fund raising they experienced in the past year.  In parentheses, I list their overall ranking on the Chronicle’s list (based on total dollars raised, not percentage of change).

Four Los Angeles institutions experienced increases in fund raising in 2008.  (EIF led the way; LACMA experienced the second greatest increase in fund raising; and so on.)

• Entertainment Industry Foundation (#118 on the Chronicle’s list of 400)
• Los Angeles County Museum of Art (#167)
• International Medical Corps (#400)
• University of California at Los Angeles (#32)

Philanthropic revenues were essentially flat at Childrens Hospital Los Angeles (#229) – technically up one-tenth of one percent.

Nine organizations experienced declines in fund raising; the first two organizations listed below declined less than 6%, while the last two declined by more than 40%:

• RAND Corporation (#371)
• Jewish Community Foundation (#241)
• KCET/Community Television of Southern California (#399)
• University of Southern California (#37)
• City of Hope (#198)
• Help the Children (#272)
• Cedars-Sinai Medical Center (#306)
• California Community Foundation (#157)
• California Institute of Technology (#206)

The Jewish Federation Council of Greater Los Angeles (#349 on the Chronicle’s list) is an anomaly; its ranking is based on the fiscal year ending on December 31, 2007.