The Lightning Rod M/M Blog

John Kelker Is A Thug

John Kelker, the President of United Way of Central Illinois, is a thug.  Go ahead.  Sue me, John.  Truth is the ultimate defense.

As reported in the February 26, 2009, issue of the Illinois Times, Kelker over the past several years has conducted a campaign to deny other charities their legally-entitled equal access to municipal employee workplace charity fund drives and replace them with what effectively constitutes a United Way-only campaign.  (http://illinoistimes.com/gyrobase/Content?oid=oid%3A9592).

He's done it by bold-faced lying to municipal leaders, promising to manage an "open" campaign in their workplaces and then showing up with United Way biased pledge cards and policies.  Example:  if a donor makes a gift to United Way there is no surcharge deducted and no minimum gift is required.  If the donor attempts to give to a non United Way charity, there is a $25 minimum requirement and a 15 percent "handling" fee.

It's just not credible that the leaders of the affected municipal campaigns would tolerate this prevarication and abuse of trust.  What possible reason would they have to go along with it?  Unless...  Unless.  You know. 

The State Attorney General should be taking a really close look at this. 

Patrick's To-Do List For President Obama

Everybody else is giving him unsolicited advice.  Why not me?

1.  Priority One:  Junk all the government PCs and replace them with MACs.  I'm totally serious about this.  Federal government IT is straight out of the stone age.  The campaign was won with MACs.  Want a smarter government?  Use a smarter computer.

2.  An unGodly amount of nonprofit capital is tied up in foundation endowments and investments.  Foundations seem to be more interested in perpetuating themselves in perpetuity than in making grants.  The current "five percent a year" rule just isn't fast enough in confering a public benefit commensurate with the tax deferment benefit.  Solve the "perpetual foundation" problem with legislation that requires a foundation to go out of business within 20 years of its founder's death.  Don't let someone purchase immortality with tax-deferred dollars.

3.  The GAO estimates that taxpayers "mis-report" their cash gifts to charity to the tune of $176 billion annually.  Mis-report?  Right.  How many people do you think claim less than they actually gave.  Sure, for gifts over $250 the charity is suppossed to issue a receipt, but what about gifts less than that amount?  Knowing that the chance of an IRS audit is slim, some people cheat.  Close this loophole.  Since a tax deduction for a donor results in additional income for the donor, shouldn't it be reported to the IRS by a third party like other income is?  Your employer sends Uncle Sam a W-2.  Your bank sends Uncle Sam your interest income.  Etc. etc.  Likewise, require that cash gifts be reported to the IRS by a third-party transmitter.  How could this be done without revealing to Uncle which charities you support, which would no doubt put a chill on giving?  Easy:  Encourage individual and family donor advised funds -- the "charitable checking accounts" of the philanthropic world.  With goverment encouragement, and perhaps a tax-benefit carrot or two, the finance industry would soon make DAFs as common as the common checking account.  By giving through your DAF, the government would have independent documentation of how much you gave but not whom you gave it to.  Marketed right, this idea would, I  believe, result in an increase in giving overall because DAFs by their very nature periodically remind and encourage one to give.      

4.  Prohibit public corporations from making charitable contributions.  This is shareholder theft of the basest sort.  Why should the company take your money and give it to somebody else?  That's the government's job.  If the CEO wants to write a fat check to the United Way, let him use his own money.  While you are at it -- and more to the point -- we need to overturn the legal theory that corporations are "people" and have citizen rights.  This monstrous travesty of legal logic is why corporations have more clout than the general public.

5.  Appoint a Charity Czar to do czar-like things.  I volunteer. 

The United Way Scandal That Just Won't Die

Today the United Way of Central Carolina (Charlotte) released a report on its internal investigation into how its former CEO, Gloria Pace King, managed to engineer a pension package so outrageously generous that she was fired when the details of the pension became public.  Yes, even though the UW Board's executive committee had signed off on the plan, when it became public they threw Ms. King under the bus.

Now, with this new report, they've thrown her under the bus again.  According to the report, published today in the Charlotte Observer, Ms. King manipulated details of her proposed pension payout to triple its value.  Basically, what the UW Board is saying is "she fooled us."

Right.  Under the bus again, Ms. King.

Meanwhile, the United Way of America is conducting a survey of all local United Ways to make sure the King pension story in an anomaly.  The UWA will no doubt conclude that the remuneration and retirement plans at other United Ways are reasonable and customary.  Guess how many nonprofit professionals outside of the United Way would agree with that assessment.

Charlotte NC United Way - What A Mess!

Kudos to Reporter Kerry Hall and her colleagues at the Charlotte Observer for their expose on one of the most mismanaged United Ways in the country.  That they had the journalistic courage to do so is good news.  The bad news is that the Charlotte United Way was just doing what United Way of America told it to do.  That doesn't bode well for the rest of the UW system, but don't say we didn't warn them.

Details of the newspaper's reports are available at www.charlotteobserver.com, but here's the gist of it.  Charlotte has a number of large corporations that haven't gotten the word that coerced giving to United Way is not OK.  United Way is (was) a sacred cow in this town.  Then, a few months back, somebody leaked the details of the incredibly generous pension plan given to the UW CEO, along with her equally magnanimous salary, and the pledge cards hit the fan. 

Next, the United Way board of directors, the same board that had authorized the pension payments, fired the CEO for accepting them.  (The excuse they gave was that with all the uproar over her salary and benefits she could no longer be effective.) 

So the Charlotte Observer started taking a closer look at United Way's numbers, and that's how they discovered a total lack of accountability and transparency within the United Way itself.  It turned out that the fastest growing "program" funding was spending on four mysterious UW inhouse programs.  This is money that would otherwise have been allocated to community charities.  United Way allocated the funds to itself instead.  Only problem was, nobody at UW, execs or board, could explain what these programs do or what the UW employees that were hired to work on them do.  On the face of it, they appear to be a complete waste of money.  Or, as some have suggested, perhaps they were shells used to disguise overhead administrative costs as program costs. 

As the newspaper pointed out, United Way is a stickler for vetting other charities' programs before it gives them your money but when it comes to their own programs it's a whole different story.  Who knew?

The tie-in with United Way of America?  The Charlotte UW was simply adopting the new operating paradigm UWA is pushing so hard -- increase UW infrastructure at the expense of outside charities and use the added capacity to "convene," "track trends in government funding," "study," and "advocate."  In other words, to turn United Way into a lobbying organization to push for more tax dollars for the social programs its "experts" favor.  Of course, the United Way system has no such policy expertise, but this approach will enable it to buy it.  The reason this is a good thing, UWA contends, is that it keeps the United Way "relevant" and "focused on the community" rather than being "a mere pass-through organization." 

As I've said before, United Way's arrogant hubris is unbelieveable.    

What is "Fat By Five"?

You've heard of the United Way program "Success By Six," but you probably haven't heard of the other program, "Fat By Five"?  Is it...

1.  United Way of America's new childhood nutrition initiative.

2.  United Way's 5-Year plan to increase United Way staff infrastructure five-fold.

3.  Code talk for the United Way system's incredibly overly-generous pensions for their top executives.

If you think you know the answer, reply to this post.

How Is The United Way Like Paulson's Bailout Plan?

Glad you asked.

1.  Give us billions of dollars.  Only we will decide how to spend it.  We can't tell you in advance how we'll spend it.  No second-guessing our decisions after we spend it.

2.  Do it now.  Don't wait. This is an emergency.  Our community is in crisis.

PS:  Don't ask us about the salaries of our top executives or about the generous golden parachute packages we've bought for them, courtesy of your previous gifts.

Why Not Full Disclosure About the United Way List To Public Sector Employees?

These days it's not uncommon for United Way campaign solicitation materials distributed to donors to not include any list of "United Way Member Charities."  Many United Ways no longer have "member" charities.  In any case, the "new United Way" paradigm is to encourage gifts to the United Way community fund and discourage gifts to individual charities.  Including a list of charities with the solicitation materials would only remind donors they have a choice.

But when it comes to at-work fund drives for public sector employees at the federal, state, and municipal level, the participating federated groups, including the United Way, are required to list their respective member charities in the campaign materials.  In the cases where the United Way has no members it nevertheless "certifies" charities that it has persuaded to apply for inclusion in the fund drives under United Way's name. 

Everyone turns a blind eye to the fact that these charities are not "members" in any commonly understand definition of the term.   When donors see the United Way list they presume those charities are somehow supported by or affiliated with the United Way.  They also presume that if they make a gift to United Way that money will be shared among the "members."  After all, that's the traditional federation model.

But nothing could be further from the truth.  United Way will not share any funds designated to it with these charities.  The only support United Way will give these charities is to pass along any gifts that have been designated by donors to these individual charities, and it will charge a 10, 15, or 20 percent service fee off the top for the privilege.

Isn't it time for this practice to be disclosed?  If a federation is not going to share gifts with the charities it lists under its name, shouldn't donors have right to know that?

Heart (less) West Michigan United Way

Heart of West Michigan United Way runs the funds distribution program for the Raymond James Investments company's United Way campaigns conducted around the country.  The company is a big United Way supporter, especially of the United Way of Tampa Bay, where the company has its headquarters.  Employees are strongly encouraged to support the United Way, but "write-in" gifts to individual charities are permitted so long as the gifts are to "organizations  whose primary mission focuses upon health and human service issues."

Guess who determines whether the intended recipient charity is a "health and human service" organization?  And guess who keeps the money if the charity is determined not to be a health and human service organization?

Last fall a Raymond James employee in Tampa Bay made a designated write-in gift to a charity the donor had supported for years.  In due course the Heart of West Michigan United Way contacted the charity and asked it to provide evidence that it met the health and human service criteria.  The charity did so.  A few weeks later the United Way wrote back, saying:  "After careful review, it has been decided that the PRIMARY mission of (charity) is not health and human services."

And what does this charity do that makes its PRIMARY mission NOT health and human service.  Wait for it...

It provides material support to orphanages and helps couples adopt orphans.

To add insult to injury, the United Way's letter pointed out that the charity's application had been reviewed by the Vice President of Resource Development -- in other words, by the executive responsible for bringing in money to the United Way.  Conflict of interest anyone?

There was no mention of an appeals process in the letter, but the charity appealed anyway and eventually prevailed.  The charity eventually got the gift, about six months after the donor had given it, with 10 percent taken off the top as United Way's "service" fee.

We asked the United Way in writing  whether the donor would have been notified had the charity not eventually prevailed and, if so, would the donor have had the option to have the gift refunded?  No response.  A month later we asked again.  What we got back was a fax of our request letter on which was a handwritten note that said:  "I've been busy."  We've heard nothing since.

Seven Questions Every Donor Should Ask United Way

Seven Questions Every Donor Should Ask United Way

1. How much money did you take in last year?  How much of that did you pay out in grants or distributions?  (The difference between those two numbers is the most accurate reflection of the United Way’s effectiveness.  You can’t rely on United Way’s self-reported number of its administrative and fund raising overhead percentage because they label much of their internal paper-shuffling as “program costs.”

2. If I earmark my gift to a specific United Way member charity, will United Way treat that gift as “first dollars” against the charity’s United Way allocation?  (This is a common practice. The United Way subtracts the amount of the donor’s gift from the amount of the grant it has pre-determined it will make to the charity.  Thus, the donor’s gift results in no net benefit to the charity.  Had that donor given to the charity directly, there would have been a net benefit.  This practice dis-empowers donors and insults their intelligence.)

3. Is this list of member charities I see in your brochure or on your web site really a list of members in the sense that if I make a gift to the United Way they will all share in that money?  (Don’t assume that the charities United Way presents are really “member” charities that are going to share in your generosity.  Sometimes the lists are just window dressing, such as United Way of the San Francisco Bay Area’s “community certified charities.”  None of these charities are necessarily going to get any United Way dollars, and few will.  Other times the lists are composed of so-called “community partners.”  These are charities that the United Way has made grants to in the past, but there is no guarantee they will get any money (i.e. your money) in the future.

4. If I earmark my at-work gift to a specific charity of my choice, how much of that money will United Way deduct before sending the remainder on to the charity?  Will this cost vary if I choose a charity not on United Way’s list as opposed to if I choose a charity that is on United Way’s list?  (This information should be disclosed up front on United Way campaign materials, but often it’s in the small print.)

5. If I earmark my at-work to a specific charity, will United Way honor my designation unconditionally or will United Way only honor the designation if it is to a charity United Way approves?  (The policy among United Ways to only “allow” designated gifts to “health and human care” charities is increasingly widespread.  There is no universal definition for this term – it can mean whatever the local United Way wants it to mean.  Charities are asked to “prove” their “health and human care” bona fides with documentation.  As a result, the recipient charity sometimes has to spend more to receive your gift than the amount you gave. 

6. If this United Way has a “health and human care” limitation on designated gifts, and you determine that the charity I chose didn’t meet that criteria, what will happen to my gift?  Will you return it to me or will you re-direct it to the United Way general fund?  Is that re-direct automatic, or will you re-direct only with my express permission?  (If United Way were a business or a government program instead of a sacred cow, people would be going to jail for this practice of re-directing designated gifts to the general fund.  Even in a best case scenario, where donors are notified of United Way’s decision, United Way has an unconscionable conflict of interest by putting itself in a position to benefit if it determines that the charity the donor intended to benefit doesn’t meet United Way’s criteria.)

7. How much of the United Way operating budget is spent on lobbying governments to provide more money to social welfare and entitlement programs – in other words, to raise my taxes.  (You probably won’t get a straight answer to this question, but you should understand that “networking” with government is now a key component of the “new United Way” program.  Basically, the United Way is trying to reinvent itself as “the community’s ombudsman” for public health, job creation, education, etc., joining a long, long list of other self-appointed “ombudsmen” at the public trough.)

The IRS Pushes For Nonprofit "Efficiency and Effectivenes."

As reported in the Chronicle of Philanthropy and elsewhere, Steven Miller, the commissioner of the IRS’s tax-exempt and government-entities division, has announced that the IRS intends to be “more aggressive” in monitoring the “efficiency and effectiveness” of tax-exempt organizations.  Fund-raising efficiency, compensation, and percentage of expenditures spent on programs are areas he has mentioned that need more oversight.

Good luck, Mr. Miller.  Your heart’s in the right place, but I fear you have set yourself a thankless task and probably an impossible one.  This is why:  Absent the most egregious cases of abuse of public trust, there is no consensus in the voluntary sector – or among the general public for that matter – as to what constitutes “efficiency and effectiveness” for charities.  Or how to measure it.  Or how to quantify it.  Or how to report it.  How can the IRS enforce policy when no one agrees what the policy should be?

Yes, I know it’s currently fashionable among nonprofit policy wonks to talk about “outcome-based measurement” and the like, but don’t be fooled by the jargon jockeys.  There is still no consensus, and for good reason.  “Efficient” and “effective” are adjectives inherently antithetical to the spirit of American philanthropy, as I’ll explain below.

Last year the IRS proposed that charities state up front on the Form 990 returns their fund-raising expenses as a percentage of total contributions, their compensation of top officials as a percentage of contributions, and the percentage of gifts received after paying their professional fundraisers.  The nonprofit community made such a fuss the Service had to drop the proposals. 

Why don’t charities want to publish these numbers?  It’s not because they are trying to hide inefficiencies or malfeasance.  It’s because they know that these numbers are just as likely to give a false impression of a charity’s “efficiency” as a true one.  And they fear that prospective contributors will misinterpret the numbers and forego giving as a result. 

Is that a well-founded fear?  Well, yes and no.  In our experience with at work employee charity fund drives, when prospective donors are told what the charities’ fund raising and administrative overhead percentages are, based on the 990 returns, that information does affect giving decisions.  Donors tend to choose the charities with the lowest overhead rates, even though this number has little or nothing to do with the “effectiveness” of a charity’s program.  Charities with just a few points higher rate are penalized, even though they may have superior operations.

But in those workplace drives where this information is not presented automatically, but is available to donors if they ask for it, the data is irrelevant to the selection pattern of charities by the donors.  Why?  Because the donors never ask for the information.

In my entire career I have never once been asked by a donor to provide a 990.  My federation clients go well beyond IRS-required disclosures in their 990 filings, and they post the returns publicly on their web sites.  In their annual reports, also posted, they go so far as to reveal the specific amount they raised for each member charity and how much each charity received after expenses, data their competitors never release. 

Total disclosure!  Good for them!  Except nobody visits those web pages.  All the traffic goes to the member charity human interest stories and the “click here to give” pages instead.   

That’s the irony here.  The IRS wants charities to report more and better information to the public in the interests of transparency.  The charities are concerned that if they do so the public will draw false assumptions from the data.  But the public doesn’t care about accessing the data.  All they can find in the statistics are reasons not to give.  Where’s the hopefulness and joy in that?

Voting with their feet, and their wallets, the public has shown they are willing to take the risk of making “inefficient” gifts rather than taking a “read carefully before you invest” approach to their philanthropy. 

And maybe that’s all for the good.  As I’ve said before on this blog, the most important contribution the voluntary sector makes to society is not program but experimentation.  The sector is vibrant not because is it well-organized and “efficient” but because it is adventurous and entrepreneurial.  Meaning it’s going to fail a lot, and post lousy numbers a lot, albeit with the best of intentions.

So I say, Go get ‘em, Mr. Miller.  Find the bad guys and take them down.  But in so doing, don’t make “effectiveness” and “efficiency” touchstones of public policy for the charity world.  For to do so risks getting…

“Organized charity, scrimped and
iced,
In the name of a cautious, statistical
Christ.”

--John Boyle O’Reilly