The Lightning Rod M/M Blog

Too Many Charities?

With the number of US charities now past one million -- and counting -- I'm hearing more and more pundits and self-appointed watchdogs saying that there are too many of them.  "We've got 700 breast cancer related organizations in this country" said Trent Stamp of Charity Navigator to the New York Times recently.  "If there were less there might be more money for a cure."

Really?

Personally, I think that those who believe there are "too many" charities are mistaken.  Individal acts of charity are manifestations of "the better angels of our nature," as Lincoln put it.  But charitable organizations exist not only to organize our angels but also to experiment with them to determine which of the myraid possible combinations of organized good work work best.  That's work better done by thousands, not hundreds.  And a byproduct of all that activity is that it "pollinates" society's collective conciousness on the possibilities of doing good.  In other words, organized charities' most important contribution is not as "service providers" (though that's a nice side benefit) but rather as "incubators."  In fact, once they have raised our conciousness about an issue, and demonstrated a model successful enough to address that issue that a majority of us agree on, then it is probably time for them to dissolve and let the government run the model.   I'm serious. That's how alms houses morphed into Social Security and how charity hospitals morphed into Medicare. 

Too many charities?  That's like saying there are too many businesses, too many entreprueneers, too many dreamers.  Charities are not like factory-farmed vegetables, best planted uniformly and thus harvested "efficiently."  No.  Charities are more like wildflowers -- unruly, opportunistic, cross-pollinated, and mostly short-lived.  And beautiful.  Let millions bloom.

Penurious To The Point of Poverty

So it's come to this.  According to the Chronicle of Philanthropy and other observers, foundations increasingly won't make grants to sustain charity operations.  Many United Ways now take the same position.  They want to fund "programs" that have "metrics" to engender "measurable solutions" for "community problems."  But nobody wants to pay to keep the lights on.

The same dynamic operates at the individual giver level, too.  Donors equate "low overhead" with "program efficiency," even though the two usually have little in common.  And there are plenty of self-appointed "watchdogs" and "consumer advocates" around repeating the low overhead mantra as if it were gospel.

I'm not saying low overhead shouldn't be a goal.  I'm just saying that the nonprofit sector had better wake up and deal with this over-emphasis on program to the exclusion of operating expenses.  If the overhead doesn't get bought, the program doesn't get done.

This should be self-evident, especially to institutional funders like foundations and the United Way.  But they're like everybody else I guess.  Like the song says:  Everybody wants to go to heaven, but nobody wants to die.

OPM Strikes Back

You may have heard about Senator Charles Grasley's letter to President Bush regarding the new CFC regulations and numbering system.  The story was in the Chronicle of Philanthropy. Here is OPM's response.  Articulate and well-reasoned I think.  What do you think?

FOR IMMEDIATE RELEASE                                                                              CONTACT: Mike Orenstein

March 13, 2007                                                                          202-606-2402 or michael.orenstein@opm.gov

OPM Director Linda M. Springer’s Statement on the Combined Federal Campaign (CFC)

Washington, D.C.:

“As Director of the Office of Personnel Management (OPM) and administrator of the Combined Federal Campaign (CFC), I am today expressing my assurance that the CFC remains a program that Federal employees can support with confidence.

“OPM has taken steps to strengthen our ability to ensure CFC accountability.  Each charity which participates in the CFC must meet stringent eligibility and public accountability requirements.  A participating charity must:

1.     Certify and demonstrate that it is an IRS recognized 501(c)(3) tax-exempt public charity.  OPM compares applicants against an IRS database to verify this certification.

2.     Certify and demonstrate that it prepares and submits to the IRS a Form 990, the annual tax form for non-profits.

3.     Certify and demonstrate that it provides or conducts real services, benefits, assistance, or program activities in 15 or more different states or a foreign country over a three year period prior to the annual CFC for which it is applying.

4.     Certify and demonstrate that the organization is a human health and welfare organization.

5.     Certify and demonstrate that it accounts for its funds in accordance with generally accepted accounting principles (GAAP) and has an audit in accordance with generally accepted auditing standards (GAAS). A copy of the most recent annual audited financial statement must be included with the application for all national and international charities or those charities with over $250,000 in revenues.

6.     Compute the organization's percentage of total support and revenue spent on administrative and fundraising to determine an administrative and fundraising rate (AFR).

7.     Certify that the organization is directed by an active and responsible governing body with no material conflict of interest and a majority of which serve without compensation.

8.     Certify that the organization's fundraising practices prohibit the sale or lease of its CFC contributor lists.

9.     Certify that its publicity and promotional activities are based upon its actual program and operations, are truthful and non-deceptive, and make no exaggerated or misleading claims.

10.  Certify that contributions are effectively used for the announced purposes of the charitable organization.

11.  Certify that it is in compliance with all statutes, Executive Orders, and regulations restricting or prohibiting U.S. persons from engaging in transactions and dealings with countries, entities or individuals subject to economic sanctions administered by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC).

“Concerns have been raised about the elimination of the 25% administrative and fundraising rate (AFR) requirement.  In the past, numerous organizations have participated in the CFC with AFRs in excess of 25% with an accepted explanation and plan to reduce the AFR.

“OPM will continue to calculate AFRs for all participating charities and publish this information in the annual catalog, thereby allowing Federal employees to make informed decisions about how they contribute their money.  The transparency in this process enables employees to draw distinctions between the charities and their operational practices and promotes control over fundraising and administrative costs.

“Combined with the eleven requirements listed above, we believe that CFC charities are receiving appropriate scrutiny.

“Regarding the requirement of financial audits, the submission of financial data did not change for national and international applicants.   Local charities must meet these same standards, with a few exceptions.  For example, charities with less than $100,000 annual revenue do not need an audited financial statement but still must certify that they have adequate controls in place to ensure that funds are properly accounted for. Local charities with revenue between $100,000 and $250,000 must certify that they account for their funds in accordance with GAAS/GAAP procedures, but they do not need to submit the audit unless requested to do so by OPM or the local Local Federal Coordinating Committee (LFCC).

“And to those who express concern with the CFC’s replacement of its numbering system, the number of charitable organizations participating in the CFC continues to grow and we are simply running out of four-digit numbers.  The assignment of new, unique five-digit code numbers will also enable OPM to improve the efficiency and effectiveness of the CFC through the use of electronic giving technology.”

Who Owns The CFC Logo?

As I write this on March 6, 2007, the Combined Federal Campaign's training workshop for campaign managers and volunteer leaders is underway in a hotel in Seattle.  In the hotel lobby, outside the ballroom, attendees can visit with a number of commercial vendors exhibiting their wares -- all the awards and pins and doodads and whatnots so necessary to waging a successsful campaing, and all bearing the CFC campaign logo.  But there's a problem.  One of those vendors, Sales Service America, a subsidiary of United Way of America, claims that it owns the CFC logo and that if other vendors want to show it in their catalogs or on their websites they must first pay a license fee to United Way or face the wrath of United Way's high-powered lawyers.  The US Office of Personnel Management is aware of this situation.  Doesn't it strike you as odd that the government would accede to United Way's claim that it owns the logo and seal of a government program?  Who's in favor of a new CFC logo, one in the public domain?

Is UJC Changing Its Modus Operandi?

Thanks to Ira Kaminow at Just-Tzedakah for this heads-up on an article about United Jewish Communities appearing on the JTA web site entitled "Strategic-planning Model Spreads As Federations Seek To Grow Campaigns."

Some chapters of UJC are copying United Way of America's new approach (or is it the other way around), replacing the traditional "member charity allocations" system with an "outcome-based grants" system.   The result is to increase the decision-making power of the federation and reduce the decision-making power of the member charities. 

Readers of this blog may recall my objections to United Ways adopting this new model when they do so in conjunction with moves to disempower individal contributors' opportunities to give to the charities of their choice.  Moves such as restricting or eliminating donor option programs ("write-in gifts"), for example.  Full disclosure:  My client, Jewish Charities of America, takes the opposite approach, encouraging contributors to tell the federation which of the member charities should share in their gifts and how much for each.

So what do you think?  Is UJC on the right track?