Nonprofit power brokers cry wolf

By Todd Cohen

The big players in the charitable sector are moaning and groaning again, this time over proposals by the Obama administration to trim the charitable tax deduction for wealthy Americans, and to raise their marginal income tax rates, proposals the big players say would damage nonprofits and their clients.

But new studies suggest the sector’s power brokers, as they tend to do, are overstating their case in an effort to protect the assets and interest of the big organizations and donors they represent.

Diana Aviv, president and CEO of Independent Sector, a trade group that counts big nonprofits and foundations among its members, told Congress this month that reducing the value of the charitable deduction for taxpayers earning over $200,000 a year would “blunt the impact of services across the sector,” and that reducing incentives to give would “hurt all charities and the people they serve.”

And the Council on Foundations, along with 148 foundations, told lawmakers the proposed cap on itemized deductions would have a “severe impact on charitable organizations and would greatly impede the work they do for the millions of Americans who rely on their vital programs and services.”

But a new study, conducted by the Center on Philanthropy at Indiana University and sponsored by Campbell & Company, concludes the proposals, by themselves and in the short-term, likely would result in a “relatively modest decline” in charitable giving.

A separate study, by Fidelity Charitable, finds that despite continuing economic challenges, American donors “remain committed to charitable giving” and are “planning ahead for it and giving even when there is no expectation or incentive to do so.”

And a third study, by Changing Our World, says that with state and federal funding shrinking, nonprofits should be retooling their finances and programs while also developing a culture of innovation that will help them adjust to future financial crises.

In peddling fear by claiming the Obama proposals will cripple fundraising throughout the nonprofit world, the big trade groups in the charitable marketplace are misusing and misleading small, community-based nonprofits and their clients that have been hit hard by an economy defiled by corporate greed.

Sadly, and shamelessly, those trade groups are using small nonprofits and their clients as a human shield to protect the wealth of the richest Americans, and the big philanthropies they create and support, at the expense of proposed social programs that aim to address the urgent needs of the same vulnerable populations the trade groups say their well-endowed patrons care about.

In a recent blog, Rick Cohen, national correspondent at The Nonprofit Quarterly, characterized the “dire warnings of a nonprofit catastrophe” by the nonprofit sector’s leadership as “hardly a ‘profile in courage’ moment” and “just embarrassing.”

Whenever they get a whiff of efforts to more tightly regulate big philanthropy, the big trade groups for nonprofits and foundations stomp their feet.

They act, Cohen, says, “sort of like a traditional old special interest.”

Several years ago, those trade groups squealed like stuck pigs over moves in Congress to better police the sector, which harbors its fair share of organizations hooked on wealth, power, excess and cronyism but remains virtually unregulated.

The findings from the study by Fidelity Charitable simply reflect the fact that true philanthropists, regardless of the size of their income, bank account or donation, give because they want to help people and places in need, not because they are looking for ways to save money on their taxes.

Instead of engaging in scare tactics that exaggerate the potential impact on nonprofits of proposed reductions in tax breaks for wealthy Americans, the sector’s leadership should be looking for ways to help nonprofits better adapt to a changing world and shrinking government support by developing new partnerships and revenue sources, better engaging donors, and helping donors see that their support will help address urgent social and global problems.

Civic engagement tied to economic resilience

By Todd Cohen

Volunteering may be good for the economy.

A new report by the National Conference on Citizenship says that states with higher levels of civic engagement are more resilient against unemployment.

The report looked at eight economic factors likely to predict unemployment since 2006, as well as five measures of civic engagement, including volunteering, attending public meetings, working with neighbors to address community problems, registering to vote, and voting.

States and localities with more civic engagement in 2006 saw less growth in unemployment between 2006 and 2010, the report says.

An increase of one point in volunteering, for example, was associated with 0.192 point less unemployment when the economic factors were controlled.

While the correlations do not prove that civic engagement lowers unemployment at the state level, and there are other explanations for those correlations, the report says, civic indicators strongly predicted unemployment change, while none of the economic factors were significantly related to employment change.

A possible explanation for those relationships is that “having stronger civic health helps states weather recessions better,” the report says, adding that research “supports the plausibility of this hypothesis.”

The report says research has found that participation in civil society “can develop skills, confidence, and habits that make individuals employable and strengthen the networks that help them to find jobs.”

Research also has found that people get jobs through social networks, and that participating in civil society spreads information and is strongly correlated with trust in other people, the report says.

And research has found that communities and political jurisdictions with stronger civil societies are “more likely to have good governments,” and that civic engagement can “encourage people to feel attached to their communities,” the report says.

“Investors may be more willing to create jobs locally if they trust other people and the local government, if they know about opportunities and can disseminate information efficiently, and if they feel that the local workforce is skilled,” it says. “All these factors correlate with civic engagement.”

A recent report by the Corporation for National and Community Service, and the National Conference on Citizenship, found that Americans continue to play and active role in civic life and to work with others to improve their communities.

Between 2008 and 2010, 62.7 million Americans, or 26.5 percent, volunteered with an organization, says the 2011 Civic Life in America Report, while 20 million, or 8.4 percent, worked with a neighbor to fix a community problem.

Volunteers are the lifeblood of the charitable marketplace, and are indispensable to the work of nonprofits and the effort to make our communities better places to live and work.

While the idea that volunteering and other forms of civic engagement are good for the economy may be “circumstantial, suggestive and far from conclusive,” as the National Conference on Citizenship concedes, that idea makes a lot of sense.

Either way, volunteering matters and makes a big difference in our communities.

Board role key to assessing impact

By Todd Cohen

Foundations are falling short, yet again, carrying out the work they also are demanding from nonprofits.

Nonprofits in recent years have faced escalating demand from foundations to measure the impact of their work.

That is a reasonable expectation because, by tracking and understanding the difference they make, nonprofits can figure out how to do an even better job while also showing funders the results they can expect from investing their dollars.

But while making that demand of nonprofits, foundations are not doing as much as they can to gauge their own impact.

So foundations are wasting a big opportunity to better understand and improve the effectiveness of the strategies they use to invest in their communities.

Among 173 CEOs of U.S. foundations making at least $5 million in grants a year who responded to a recent survey by the Center for Effective Philanthropy, over 60 percent say too few foundations understand their overall performance, and 56 percent say nonprofits should be held to higher standards of evidence to show the effectiveness of their work.

While foundations are doing more than they did a decade ago to assess their performance, the report by the Center says, “we still do not understand the degree to which foundations’ efforts to assess their effectiveness result in genuine changes that lead to heightened foundation impact.”

Over half the CEOs surveyed want their boards to be more involved in assessment, with nearly three in 10 saying the biggest obstacle to greater board involvement is a lack of understanding of the issues areas their foundations address.

“The challenge of how best to engage boards in the important work of performance assessment is not simply about involvement for the sake of involvement,” the report says.

“CEO’s who report impediments (other than resource allocation) to board involvement in assessment,” it says, “tend to believe that their boards have a less accurate understanding of the impact the foundation is having on the communities and fields in which it works.”

Assessment is important for nonprofits and foundations alike because it can serve as a guide to working smarter and, for nonprofits, as a tool to help secure the resources it needs.

To make assessment work, nonprofits and foundations need their boards to understand the value of assessment and to be engaged, strategically and in a meaningful way, in the job of making it work.

Assessment also can take significant time and resources.

So nonprofits should be building those costs into funding requests they make to foundations.

And foundations should be including those costs in the grants they make, while building into their own budgets the cost of assessing their own work.

Ultimately, assessment matters because it can help foundations and nonprofits better serve people and places in need.

Nonprofit leadership needed

By Todd Cohen

Nonprofits need to lead, and quickly.

At home and abroad, we face serious threats from multiple, cascading crises, including shattered economies and financial systems; toxic and gridlocked politics; poverty, disease and illiteracy; global terrorism; natural and ecological disasters; and, in the U.S., a culture infected with greed, blame and intolerance.

Missing in action in taking on those problems is leadership, a role that nonprofits can and must play.

Yet with the social and global needs they exist to address escalating rapidly, nonprofits themselves are stressed and increasingly broken by crises of their own over who will lead them, the role their organizations should play, and the business models they will need to survive and thrive.

The challenges facing nonprofits are huge, and meeting them will require leadership that is exceptional.

Nonprofits need leaders who can help rebuild their organizations; set a vision for what they aspire to accomplish; and identify and develop partners and supporters they will need to effectively take on community problems.

But nonprofits as organizations also need to be leaders.

In a speech last month at the annual conference of the N.C. Center for Nonprofits, James Joseph, former U.S. ambassador to South Africa and a former president of the Council on Foundations, urged nonprofits to help fill the void in the U.S. in moral leadership.

To do that, nonprofits need to shape a “post-crisis narrative” about the role they will play, get over their “fear of public life” by getting involved in policy work and public debate, and recognize that their assets consist of more than simply financial capital, said Joseph, a professor emeritus of the practice of public policy at Duke University.

The nonprofit sector is the “custodian of values and resources,” and the “conscience of our democracy,” he said, and should serve as an “independent moral voice” and develop messages to “build the national will” in addressing the urgent problems we face.

To be effective leaders for social and global change, however, nonprofits first need to get their own shops in order.

Also last month, at the first session of the second annual course offered by the Leadership Gift School, an initiative in Charlotte, N.C., to build the philanthropic culture of local nonprofits and the community, fundraising consultant Karla Williams told teams of staff executives and fundraisers from a dozen local nonprofits that leadership and philanthropy are “philosophically intertwined,” rooted in an innate desire to fix a problem or improve a cause.

So truly advancing a nonprofit’s mission requires a business model that integrates strategies for building the capacity of the organization and for serving the community.

That requires leaders who can build relationships and communicate, both within their own organizations and in their communities.

Leaders, whether individuals who lead organizations, or organizations that exercise moral leadership, can lead effectively if they can and will listen, share, include, think ahead, and take risks that make sense.

Leaders in the nonprofit sector must help develop and share the story of the community needs their organizations address.

They must develop partners and supporters who care about community and can work together to identify critical assets and resources, and put them to productive, innovative and collaborative use.

Sadly, many nonprofits lack true leaders and themselves fail to lead, stuck in the mindset that they and their causes are victims.

Instead, nonprofits need to look for ways to grow and partner, and to find the community assets they can use and share to make a difference.

At the Leadership Gift School, Williams cited Max De Pree, former CEO of Herman Miller and author of Leadership is an Art.

The first job of a leader, he said, is to “define reality,”

The second is to be a “servant.”

To successfully navigate today’s crises, nonprofits must step up and lead by telling the story of the urgent social and global problems we face, and serving their communities by shaping the vision, and developing the partnerships and resources, needed to fix those problems.

Fundraising should be about community

By Todd Cohen

To raise money in the deepening economic gloom, nonprofits need to work harder to better understand donors, educate them about urgent community needs, and help them see how supporting their organization will help address those needs.

And community problems are escalating as the broken economy hurts a growing number of people who then turn to nonprofits for help.

So in addition to rising costs, anxious donors and uncertainty about the best way to raise money, nonprofits also face growing demand for services.

Three recent reports suggest the fundraising climate will continue to be bleak, while two others suggest the best fundraising strategy will be to connect donors to community needs in ways that reflect a deeper knowledge of donors and their interests and values.

In June, Giving USA reported charitable giving grew slightly last year after dropping for two straight years, but that it still trails pre-recession levels.

And if its growth continues at last year’s pace, giving still could take five to six years to return to pre-recession levels, according to Patrick Rooney, executive director of the Center on Philanthropy at Indiana University, which prepared the report in partnership with the Giving USA Foundation.

The Philanthromax Atlas of Giving also reported last spring that while giving grew in April from the previous month and from April 2010, it would begin slowing in June and keep dropping throughout the year.

Finally, a recent study conducted by Campbell Rinker for Dunham+Company reported that nearly seven in 10 Americans would give less to charity in coming months, and one in 10 planned not to give until the economy begins to recover.

Now, two new studies suggest the kinds of approach nonprofits should take with donors.

The 2011 Fundraising Effectiveness Survey Report, an initiative of the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute, says nonprofits did a better job acquiring and keeping donors in 2010 but continued to lose money because they lost donors and secured gifts that were smaller than in 2009.

Andrew Watt, president and CEO of the Association of Fundraising Professionals says nonprofit lose nearly 60 percent of their donors each year and depend heavily on new donors, a dynamic that represents one of their biggest challenges.

Because it costs a lot less to keep and “inspire” existing donors than to find new donors, he says, “charities should focus on stewarding their current donors and reducing losses there.”

The other new report, by the Center for Effective Philanthropy, finds a “gap between rhetoric and reality” in the strategies community foundation use to work with donors, a gap that may be driven by competition for donors and may result in “a focus on donors as an end in itself rather than as a means to an end.”

In contrast, the report says, community-foundation CEOs who are strategic “seek to educate and inform donors, rather than being simply responsive to what donors prefer.”

One lesson from all these reports is that nonprofits should stop wasting time pandering to donors or treating them like automated teller machines, particularly in this grim economy, and instead should be working hard to get to know donors, help raise their awareness of community needs, and show them how supporting their organization can make a difference in helping to fix community problems.