The Lightning Rod M/M Blog

Another "Only Inside The Beltway" Idea

If you think "inside the beltway" mentality is confined to politicians and bureaucrats, consider this tale...

It happened like it always does. 

In the 1980s all the national CFC federations would get together in Washington once a quarter to meet informally with the CFC managers at the US Office of Personnel Management (OPM) to trade ideas, observations, and information.  It was a collegial group.

Then, in the 1990's one of the federation representatives to the group (one of my former clients, I'm embarrassed to say) sold his peers the bad idea of "visualizing our mission" and "securing the resources" to fund that vision.

All of which quickly led to:

*     Rules for "membership" in the "committee" (now grandly named the National Combined Federal Campaign Committee, although in fact it had and has no official CFC status)

*    Mission creep (in addition to meeting with OPM the members would conduct CFC "market research," publish a web site, and produce the annual CFC film, among other things)

*    Membership creep (the committee would be open to representatives outside of the national federations)

*    And, of course, a dues assessment system to fund all this important work. 

Within a year or two it became apparent that nobody on the committee knew a thing about market research, web sites, or making films.  In any case, these things were already being accomplished by OPM and CFCs in the field.  Not being able to justify the expense, federations began leaving the committee, and it dwindled in size to just a third of the national CFC federations.  Most of the federations remaining stopped sending their senior executives to the meetings, and OPM put less importance on working with the committee.

All of which, in a rational world, would have led to the committee's unmourned demise.  But wait.  Kalman Stein of EarthShare has proposed that the CFC levy a tax on contributions that would raise about $278,000 to fund the committee.  (The present committee budget is about $70,000). 

Let me get this straight, Kal.  You want the Federal Government to deduct fees from CFC contributions and send the money to a self-appointed, non-official group representing a tiny fraction of CFC participating charities so this group can continue to produce useless programs to justify its existence.  And you are serious about this.

Only inside the beltway.

 

Back In The Day: A Trend Wave

"Back in the day."  That phrase is popping up everywhere.  Especially in print and especially in first person writing like columns and blogs.  I've seen it in the New York Times, the Washington Post, the San Francisco Chronicle, and even in the sailing magazine Latitude 38.   I've been seeing it everywhere, and so have you.  But the interesting thing is this:  Six months ago this phrase was nowhere to be seen.

"Back in the day" is a perfect example of a trend wave.  Trend wave is a concept we teach in our Workplace Campaign 101 training.  A trend wave is not the same as a trend.  Trends are forseeable and their life cycles are predictable.  Trend waves are more analogous to rogue waves in the ocean.  They are unexpected and unpredictable.

Almost every year we experience a trend wave in the Combined Federal Campaign and other workplace charity drives that offer donor freedom of choice.  A significant number of contributors unexpectedly select a charity or a class of charities that you would not have expected them to select given previous years' results, and they do so for no obvious or discernible reason.  Usually within a campaign season or two that support diminishes or even evaporates altogether.

Trend waves are one reason why an individual charity's workplace campaign income can fluctuate wildly from year to year.  Just when it looked like smooth sailing, a trend wave comes along and capsizes your boat.  Or speeds you to safe harbor.  Luck of the draw.

Should Charities Get The Vote?

Charities lobbying government for attention and support is nothing new.  Indeed, such activity is an important part of the nonprofit sector's work.  But the charity/government connection seems to be morphing into a charity/politics connection.  Time Magazine reports that charities are actively seeking "face time" with the presidential candidates.  Bill Gates is spending $60 million for "Ed in 08" to put education issues on the candidates' platforms, and the Chronicle of Philanthropy reports that numerous foundations are taking similar steps to get their issues traction in the upcoming elections.  Some pundits worry that this activity at the campaign level gets dangerously close to violating the "don't advocate for any political party or candidate" rule.  Not me.  I say revoke that law. 

Charities are affected by who gets elected,because those who get elected make the laws that affect charities.  Government regulation of nonprofits at all levels is increasing and proposals are afoot to have government policy affect which charities givers choose to support and how much charities must spend. 

It is entirely appropriate, therefore, for charities to ask candidates to declare their positions on the issues that affect them, but since the real issue is "who gets elected" that is not enough.  It's time we eliminated the restriction that nonprofit groups must not advocate for any political party or candidate.  Give nonprofit corporations the same rights to affect politics as for-profit corporations have.  Nonprofits have just as much at stake.  Let them endorse, let them organize, and -- most importantly -- let them send money.  When the various interest groups within the nonprofit sector start forming their own PACs, watch the candidates beat a path to their doors.

Of course it's not going to happen.  But maybe it should.

 

FASB 157 Heads Up

In case you missed it, here's a friendly heads up that the Financial Accounting Standards Board, the organization that develops "generally accepted accounting principles," has issued new guidance regarding how your CPA should report the "fair market value" of your organization's assets and liabilities in your financial statements.   It is effective for financial statements for fiscal years beginning after November 15, 2007.

FASB 157 requires your CPA to determine "fair market value" (FMV) of your assets and liabilities rather than "book value."  It specifies three methods to determine FMV and requires the financial statements to disclose which method was used.  This shouldn't be a problem if your organization owns publicly registered securities, but determining the FMV of other non-cash assets, such as real estate, collectibles, closely-held stock, etc. can present lots of challenges to determine value.  That , in turn, could lead to an increase in your CPA fees.

If your organization does in fact have such assets or liabilities, I suggest talking to your CPA sooner rather than later so you are prepared to mitigate the potential impact of 157 on your audit expenses.

Contest: Design The Logo For The Untied (Not A Typo) Way

Our newest pro bono client is an advocacy organization whose mission is to encourage and empower on-the-job givers to donate directly to the charities of their choice.  Hence  the name:  United Workers for the Untied Way (UWUW).  It was formed to counter the move now afoot within the United Way system to scale back or eliminate donor choice and return to the bad old days when a workplace gift went to United Way only -- no designating it to an individual charity, thank you very much.

UWUW needs a logo.  So I'm asking readers of this blog to submit suggestions.  The ideal logo would be suggestive of the United Way logo but revamping it to make a statement (and not infringe on United Way's copyright).  You recall the United Way logo -- an anorexic Pillsbury Dough Boy standing under a rainbow.  How can we twist that?  Have fun!      

Kaiser Permanente - Case In Point

If you follow this blog, or if you've attended the Independent Charities of America "Workplace 101" seminar, you know that more and more major companies are adopting the "non-federation/donor-choice/pay-direct/3rd party administrator" model for their employee workplace fund drives.  With this approach individual employees are empowered to select virtually any charity, church, or school to receive their payroll contributions.  Employee choice is not limited to the member charities of charitable federations (e.g. United Way or Independent Charities of America), and federations do not control access to the fund drive.  The "charities list," if there even is one, is generally a compilation of all the organizations employees have donated to in the past.  (Another method often used is to augment the employees' list with membership lists uploaded by federations.  For example, these lists are provided by Independent Charities of America and Local Independent Charities of America to Union Bank of California and other companies).  The employee gifts are sent directly to the designated organizations; that is, they are not distributed via the charitable federation the organization may belong to.   The company contracts with an independent 3rd party to confirm the recipient organizations' charitable status and to transmit the gift funds.

The Kaiser Permanente (Northern California) has used this model for two years now.   Yesterday Kaiser's campaign manager shared this bit of information with us:  Only eight days into this year's campaign and already 812 different nonprofit organizations have been selected by Kaiser employee-givers.  The majority of those are local schools and churches.  This selection spread is typical -- when you give employees freedom of choice in giving they will use it -- and it illustrates why it is so important for charities to remind their constituents and previous givers in the fall that the charities are available to receive gifts from employee at-work charitable fund drives.  Proactive PR is far more productive in raising money from this pool of funds than any other technique.  Letters, post cards, newsletters, etc. should include this message.

That proactive PR should also include asking contributors from all fund raising venues to reveal where they work and how to reach them by (personal) email.   Early contact to  achieve "top of mind" status is essential when employee givers have virtually unlimited choices.  It can also increase employer matching gifts.  Kaiser, for example, matches its employees' gifts up to $100 for the first 2,000 employee-givers.  Other companies, like Hewlitt-Packard, have similar policies. 

Is Harvard A Charity?

In yesterday's edition of the Los Angeles Times Robert Reich, who was Secretary of Labor under President Clinton, proposed the following:  If a charitable donation goes to an institution or agency set up to help the poor, the donor should get the full tax deduction.  If the donation goes to any other nonprofit, the donor would only get to deduct half the contribution.

The broader idea is that gifts to institutions that do not provide a "public benefit" or that cater to the wealthy elite  should not merit an underwriting from the  public at large in the form of foregone taxes on that money.  A gift to the Salvation Army deserves a deduction; a gift to Harvard does not.

I have great respect for Mr. Reich.  His recently published book, "Supercapitalism: The Transformation of Business, Democracy, and Everyday Life," is on my to-buy list today. 

But this idea that some charitable gifts are more "worthy" than others is a non-starter for anyone who cares about donor freedom of choice.  Unfortunately, it is being talked up by numerous social policy wonks around the country and even in Congress.   

The problem, of course, is who decides if a nonprofit is "meritorious" enough?  The IRS?  Congress?  Sure, most of us could argue that helping the poor, who need assistance, is more important than helping Harvard, with its $30 billion endowment.  But why is helping the poor more important than, say, rescuing stray animals?  Or funding medical research?   Or cleaning up a creek?

Even if we expend the idea of "public benefit" to include the above examples, what happens when the money goes to a "public benefit institution" but doesn't get spent on a public benefit.  My favorite example is money going to United Way which then spends it on public service announcements reminding us to talk to our children.  This is a "public benefit?"

Yes, it might be great if the wealthy were more generous to the poor and less generous to the arts, but I suspect meddling in the giver decision-making process would result in less money to both the poor and to the arts.  Like they say, the devil is in the details, and the path to hell is paved with good intentions.

The real question is whether, as a matter of public policy, gifts to nonprofits should be tax-deductible at all.  Who wants to tackle that one?    

United Way To Other Charitable Federations: "We Are The Deciders"

Here's yet another example United Way's arrogant, short-sighted, treat-givers-like-sheep "Take Back The United Way" movement -- the systematic effort to eliminate giver choice in employee workplace charitable fund drives and replace it with the United Way being the sole decision-maker for determining which charities get the money.

This one's from Illinois, a hot spot of the movement.  Illinois has a law that requires municipal employee fund drives, like cities, counties, or school districts to allow all the charitable federated groups the state recognizes to participate.  For example, if a county government lets United Way participate in its employee fund drive it has to let Independent Charities of America participate, too, as well as the other federated groups the state recognizes.  As a result, most of these campaigns are jointly managed by the federations, with one of them being selected to take the "coordination" role. 

In Lake County that coordinator is the local United Way.  Here's an email from the coordinator to the other participating federations, followed by one federation's response:

Hi,

I am the United Way coordinator for the Lake County Federated Campaign for this year.   

To help save the cost of printing a large volume of booklets this year we are trying something different this year which we feel will help all federations.  This year we are going to print on the back of the pledge card a listing all the federations with their number and logo. If an individual wants to designate to a specific agency within the federation they will have the option to pledge on line with a searchable database with all agencies or they can go to their team leaders who will have a printed booklet with the federations and agencies in it. 

Our thoughts on this were that the employee does not need to go any further than their pledge card to donate to a federation.  As a federation we of course would like to have the monies come to the federation directly so we can put the dollars to the most needed places. 

I hope this is in agreement with all of you.  Hopefully all federations will see more income directly to them. 

We still need your list of agencies for the online pledge and to print a minimal number of booklets for the team captains and departments.  I would like these as soon as possible so we can start getting what we need printed and setup on the web.

Any questions please feel free to contact me.  We are planning the campaign to run from October 2nd through October 19th.

A Response:

Community Shares of Illinois is STRONGLY opposed to the changes you are proposing.  The campaign materials should be about giving donors the opportunity to choose the charities they wish to support not so that "federations will see more income directly to them."  That may be what United Way wants, but we are committed to giving donors more control over where their dollars are directed.

In terms of costs,  I believe that the charities can provide a donor guide that includes all of  the state certified charities at little or no cost to the campaign.  The materials you are proposing are both biased to United Way and unfair to the donors in that it makes it difficult for donors to find out which charities they have the right to choose from. 

Thanks for the opportunity to comment on your suggestions.

I have no idea whether this coordinator is a true believer in the all-money-to-the-federations philosophy or if she was merely following orders.  Probably both.  But it's one thing to give donors an opportunity to direct their gifts to an institution to re-distribute among charities as the institution sees fit.  It's quite another to propose a system that is deliberately designed to make it harder for a donor to exercise his or her own choice of which charities to support. 

This United Way proposal is analogous to your being given an election ballot that only lists the political parties, not their respective candidates.  You have to go online if you want to select which candidates get your votes, or go to a campaign official to get a special form.  Sound like a good idea to you?

Earth To United Way:  You are not smarter than the people, and your choices are not somehow inherently better than their choices.  Get over yourself.   

The New CFC Regulations Affect Your Cash Flow

Many of our member charities are noticing discrepancies in their monthly distributions from their CFC federations that can't be explained by changes in their gross pledges compared to previous years.  Namely, less money is coming in the door than expected  Why?

The answer is in the new CFC regulations.  Under the previous regulations, local CFC campaigns with revenues of $1,000,000 or more were required to make monthly distributions of gifts received.   Under the new regulations, campaigns of any size may opt to distribute on a quarterly rather than on a monthly basis.  The important word here is "opt."  Campaigns are not required to announce in advance whether they have chosen monthly or quarterly distribution schedules.  And when the new regulations went into effect this spring, not a single campaign did so.  In fact, most campaigns didn't decide until May 1 or later which schededule they would adopt.  Compounding the problem, in the short term, the two largest CFCs -- DC and Overseas -- botched their first distributions for the Fall 2006 campaign, resulting in lower distribution amounts than would otherwise have been available.

It doesn't take a rocket scientist to figure out that paying out a lump sum at the end of three months versus paying out monthly is going to raise bad news cash flow issues for CFC charities.  But don't blame your CFC federation.  Federations have no say in the matter.  They can't control how fast the campaigns send the money to them.  All they can do is get the money they do get in out to you as fast and accurately as possible.  And Independent Charities of America and its sister CFC federations do an excellent job of that, as OPM's Office of CFC Operations has publicly noted in praise.

Uneven cash flow from workplace campaigns is a problem that's going to get worse over time.  Corporate campaigns and many municipal campaigns are already on a quarterly schedule.  I expect the majority of local CFCs that haven't already done so to eventually switch from montly to quarterly distributions.  It's just an economic reality that it costs money to transmit money; it's cheaper for the campaigns to do it quarterly.

We have always counseled our member charities to not rely on CFC or other workplace income for liquidity because of the wild swings that can happen in workplace revenue from year to year.  With quarterly payments a reality, heeding this advise is more important than ever.            

Should You "Pre-Certify" With The United Way?

I've heard that some local United Ways are requiring annual "pre-certification" paperwork from charities that wish to "remain eligible" to receive donor choice ("write-in") gifts from contributors in UW corporate campaigns.  I'd like to hear from you if your organization has received any such applications.  If you receive any pre-certifications, I recommend you complete and return them.  I'll explain why below.

The idea behind pre-certification is that United Way will only accept write-in gifts to charities that it has "pre-certified" before its fall campaign begins.  To get said certification a charity must apply annually using a form provided by the local United Way with includes various affirmations (e.g. anti-terrorism compliance), contact information, a copy of the applicant's IRS 501(c)(3) determination letter, and perhaps an ACH authorization form and a voided check.

Obviously, this process reduces the administrative burden on United Way of processing donor option gifts.  It reduces the number of charities UW has to send remittances to, and it streamlines the process of making the remittances it does send.  Of course, it also takes the donor's choice out of "donor choice."  "You may give to the charity you like, just as long as it's one of these." 

If you have received a pre-certification application from a United Way, it's because at some point a workplace donor made a write-in gift to your organization that was processed by that United Way.  That's how come the United Way has your name and address.  Is it worth the trouble to complete and return the appplication?  The answer is yes.  Somehow, some way, that United Way is going to publish that list of "certified" charities.  Some donors will be offended that the charity they'd prefer to give to is not included on the list, but others will just shrug their shoulders and find someone on the list to give to.  You want to be on that list.  Remember one of our Golden Rules of Workplace Campaigning:  You have to be present to win.

Again, if you receive any pre-certification requests, please share them with me.  Thanks.