Don’t Be a Fundraising Dinosaur: 5 Big Ideas to Adopt Right Now

Don’t Be a Fundraising Dinosaur: 5 Big Ideas to Adopt Right Now

Happy Holidays!

Thanks to an invitation proffered by Stoller Foundation, Executive Service Corps of Houston enjoyed learning about Capacity Building at the Houston Grantmakers Forum yesterday. Capacity building is a term frequently bandied about that the group agreed can mean anything from building the capacity of individual donors to group capacity building to community capacity building (i.e. how is the agency meeting community needs). Kudos for the subject matter!

It was helpful to hear how the nonprofit consulting industry is faring at year-end from veteran agency representatives, Cynthia Nunn, President and CEO, Center for Nonprofit Management, Dallas, Matt Kouri, President and Executive Director, Greenlights for Nonprofit Success, Austin, and Dr. Will Brown, Associate Professor and Director, Bush School of Government and Public Service, Texas A&M University, as well as hostess, Ronnie Hagerty, VP, Community Relations, United Way Houston.  Times are difficult for nonprofits as has been reported throughout the year by Chronicle of Philanthropy and Nonprofit Times.  Funding has remained steady or increased only slightly with little hope of change. The fiscal cliff debate will affect how donations will be deducted and the thought strikes fear in charities who are reliant on donations for survival.

The sector is composed of optimists, and we frequently put the best face out to keep morale and income up. It is time for further assistance, however, according to these specialists and their peer, ESCH, from grant makers to help fund the education and training needed to make the nonprofits more self-sufficient and sustainable. Without vocal leadership from the funders, agencies will continue the same "bad" habits that keep them coming back for funding that might be avoided.  Grantors need to follow-up on requests to assure board diversification, strategic planning and funding diversification. Budget reductions and creative collaborations are embraced by leading nonprofits to strengthen the organization's core and keep the body healthy. Grantmakers have an opportunity to offer guidance to and assistance through these various resources and locally, we would add University of Houston David Underwood Nonprofit Leadership Alliance and Rice University's Center for Philanthropy & Nonprofit Leadership, as well as Association for Fundraising Professionals, as educational resources.

This will take creativity, dedication and hard work from both sides to be ready to find ways to evaluate mission achievement and improve reporting so that funding justifications can be more easily made. We run the risk of losing some of the more needed charities, often too mission-focused, that do not take the time to plan and adequately review.

ESCH applauds and respects those funders who help keep nonprofit boards "feet to the fire" and focused on best management practices. We, like all of you, are striving to improve our bottom line of mission success. It is our challenge to help you become more successful and report on those of you who are as a result of working with our professionals. In doing so, we must become more relevant, flexible, responsive, consistent and educated about our own nonprofit community. If you have suggestions, please do not hesitate to share them. We are listening.

September 6, 2012

Chase Community Giving Kicks Off Voting for 2012 Program

196 Charities Will Receive a Share in $5 Million in Grants

New York, September 6, 2012 - Chase announced today the launch of the voting period for the 2012 Chase Community Giving program, which will determine the allocation of $5 million in Chase grants to 196 charities selected by Facebook users and Chase online customers.

The voting period will begin today, September 6 and last through September 19 and is open to the public at Facebook.com/ChaseCommunityGiving and for Chase customers at Chase.com/ChaseGiving. Chase will donate the $5 million to the 196 charities who receive the most votes, with awards as follows:

• $250,000 to the charity receiving the most votes;
• $100,000 to each of the next ten runner-up charities;
• $50,000 to each of the next thirty-five runner-up charities;
• $20,000 to each of the next fifty runner-up charities;
• $10,000 to each of the next one hundred runner-up charities;

In June, Chase customers and employees came together to nominate the nearly 30,000 charities who make up the pool of participants for the 2012 program. All eligible nominated charities had the opportunity to receive an equal share in an additional $2.5 million grant by accepting their nomination by August 30th. Eligible nominated charities that did not accept their nomination by August 30th can still participate in the voting period.

To be eligible for the 2012 program, nominated charities must be a registered 501^©(3) public charity with annual operating expenses below $10 million and meet other requirements as described in the program's rules. The $7.5 million in grants is in addition to the firm's regular philanthropic giving. JPMorgan Chase donates more than $150 million annually to charitable causes.

"Voting with Chase Community Giving helps to energize the vast number of supporters of so many great causes," said Kimberly B. Davis, president of the JPMorgan Chase Foundation. "At Chase, we are excited to lead local and national causes in finding a voice and raising awareness and critical funding for their work in communities."

For more information on the program, please visit Facebook.com/ChaseCommunityGiving.

About Chase
Chase is the U.S. consumer and commercial banking business of JPMorgan Chase & Co. (NYSE: JPM), a leading global financial services firm with assets of $2.3 trillion and operations in more than 60 countries. Chase serves more than 50 million consumers and small businesses through more than 5,500 bank branches, 17,500 ATMs, credit cards, mortgage offices, and online and mobile banking as well as through relationships with auto dealerships. More information about Chase is available at www.chase.com.

About Chase Community Giving
Chase Community Giving was introduced in 2009 as a new way forward for giving. It's a program that lets fans of Chase Community Giving, and now Chase customers, vote to help determine where Chase donates millions of dollars. Since the program's inception, nearly 3.5 million Facebook users have "liked" Chase Community Giving. In total, millions of people have helped Chase donate over $20 million to over 500 charities in 41 states, Washington D.C. and Puerto Rico. Chase Community Giving is part of JPMorgan Chase's annual giving, which totaled more than $200 million last year.

Next Big Generation of Donors

Now entering the fundraising arena: the next big generation of donors. In the US, they will be ages 55-75.   
by Tom Ahern from Texas Nonprofits.

------

It was a simple question.

"What do you think is the average age of a U.S. donor?" I asked Jeff Brooks.

Jeff's job is to write successful fundraising packages for brand-name charities. He works at a national direct mail house, as one of two creative directors. He has access to lots of data. He has decades of high-level experience. If anyone would know about age, it would be Jeff. 

"I think saying 65 and up," he answered, "is about as accurate as possible for an across-the-board number."

There's a professional reason you want to know your typical donor's average age, when you're creating donor communications such as appeals, newsletters, and websites. And that reason is.... 

To write persuasive copy, you need to see the person you're writing to ... in your head.

As the late, very great George Smith advised, every communication with donors should sound like conversation. Not a speech. Not an essay.Not a sales brochure. Just a talk, between two friendly people concerned about something important.

Well, as it happens, I can easily envision what someone 65 looks like. All I need is a mirror. I am 64.

And you know who else is just beginning to turn 65?

The baby boom generation: people born between 1946 and 1964, during the procreative orgy that exploded after World War Two. In that conflict, 60 million died. The subsequent baby boom produced 76 million new humans in the United States alone.

Now those same newborns are aging into their prime charitable years.

"Involuntary lapsing" ... a.k.a., death

Successful marketing communications - donor or otherwise - all begin with an analysis of the interests and psychological triggers likely to be present in the target audience. That's how you sell. You speak to the interests and psychological needs of your audience. 

You're not thinking, "What do I want to say?"

You're thinking, "What does my target audience want and need to hear?"

Which means, as a copywriter, I need to know your age.

Age definitely matters. You as a 20-something ... are different than you as a 40-something ... are different than you as a 60-something ... are different than you as an 80-something. 

Jeff Brooks did allow that average donor age "varies by organization and sector." But this was for sure: "One thing we've seen is that charitable giving as a sustained lifestyle-type activity is not meaningfully found until around age 55." I quickly checked my own behavior as a donor. He was right, at least about me. 

"The behavior picks up steam in the following years," said Jeff, "gets truly meaningful around 65, keeps growing, then starts to drop some time after 75.

"The drop-off at the upper end is caused by 'involuntary lapsing.'"

I.e., death.

Ages 55-75: that's a 20-year window of high returns. Focus on baby boomers now.  

There are younger donors ... just not in America

Jeff had a postscript: "The smart thing to do is to increase your 55-65 donors. They have higher average gifts and long life expectancy, which gives them the best long-term value. If we could get all the misguided energy for finding 'young donors' aimed at this group, it would be a very good thing."

Amen, brother. At least in America.

Outside America, there are LOADS of younger donors giving to charity ... in Australia, the UK, Germany; pretty much globally. But not so much in the United States, for one obvious reason. We haven't embraced street fundraising.

It works like this: the donor, acquired in a street encounter with a bonded representative of a charity, agrees to make an automatic gift every month, from her credit card or bank account.

"Street" fundraising - or "face to face" fundraising, as it is known outside the US - has cracked one of the fundraising industry's toughest barriers.

It's acquired  the elusive "younger donor."

Street fundraising only attracts the young. Pedestrians in their 40s and above shun it. Street fundraising is peer-to-peer fundraising, practiced on an especially dewy demographic. In fact, the young and attractive professional crews who raise money on the streets are trained to ignore older walkers. (Trust me: we don't mind.) 

Younger donors are flighty, though.

"One thing I learned about street fundraising that was fascinating," Jeff Brooks remarked. "They keep the donors longer if they don't cultivate them at all. Any kind of feedback - thank-you messages, newsletters, whatever - just remind these fickle donors to cancel the revolving credit card charge."

News reporters deride street fundraising as "chugging," short for "charity mugging." Catcall all you want: in expert hands, it's extraordinarily effective at bringing in big bucks for brand-name charities.

In Australia, more than a third of the charity collected each year comes from what's called Down Under "regular giving," otherwise known as monthly giving or sustainer giving.

And much of that regular/monthly/sustainer giving begins on the streets of a city when a personable young chugger smiles and intercepts an equally young passerby, to ask, "Would you be willing to help a child in need?"

Nonprofit Harnesses Older Professionals Willing to Share Experience

From NonProfit Quarterly, June 5, 2012; Source: BusinessWeek

Armed with the desire to make the world a better place, many people who are approaching retirement are looking for ways to feel good about their work, and get paid for it, too. The nonprofit ReServe pairs professionals 55 and older with nonprofit groups or public agencies that can use their skills—at a discount. Over the past seven years, nearly 1,500 “ReServists” have been placed in a broad range of positions, including college mentors, bookkeepers, writers, teachers, paralegals, administrative assistants, doctors and nurses.

ReServists are saving nonprofits dollars. According to Janice Chu, the coordinator of the ReServe program for 17 New York City agencies, “We could never afford these social workers, these retired accountants. They’re such an asset with their years and years of experience.” New York City hosts the original and largest ReServe operation, but the nonprofit has branches in Westchester County, N.Y.; Newark, N.J.; Balitmore, Md., Miami, Fla. and southeast Wisconsin. On average, individuals who work with ReServe work about 15 hours a week at a $10 wage with no health benefits. According to Linda Breton, ReServe’s director of affiliate relations, “The stipend means everybody has skin in the game. A volunteer can say, ‘It’s a crummy day, I don’t think I’ll go in.’ A professional doesn’t do that.”

Breton says ReServe has more people than it can place. “Recruiting retired professionals has proven to be very easy. They’re passionate about something and they want to give back.” However, getting nonprofits to post positions is a bit more difficult. “Lots of them can’t afford people even at $10 an hour,” says Breton.

Reminiscent of AmeriCorps, VISTA and other types of service organizations, ReServe is providing a market for older individuals who would like to continue working as well as nonprofits that need highly experienced and skilled people but cannot afford the price tags associated with such labor. This “match matching” is an innovative strategy to bridge the talent gap. However, questions remain as to whether nonprofits are ready (structurally), willing (culturally) or able (financially) to host such employees.

Posted by Kathy Sullivan, CFRE & ESCH Consultant

The Nonprofit Leadership Deficit

The Nonprofit Leadership Deficit: The Case for Nonprofit Training and Retaining

The following is an excerpt from a sobering report from The Bridgespan Group on the coming nonprofit leadership deficit over the next decade.  The bottom line projection is that nearly 80,000 new senior managers will be needed in the nonprofit sector by 2016. 

If raising funds for programs in these tough economic times is not challenge enough, the task of re-educating donors, boards and fundraising professionals on the need to invest more in attracting, retaining and training current and future leadership (a.ka. overhead) is one of the underlying conclusions of this report.

“The leadership deficit looms as the

greatest challenge facing nonprofits

over the next ten years.”

                                              Thomas J. Tierney

Except from the Executive Summary Report “The Bridgespan Group recently carried out an extensive study of the leadership requirements of nonprofits with revenues greater than $250,000 (excluding hospitals and institutions of higher education). We found that:

·         Over the next decade, these organizations will need to attract and develop some 640,000 new senior managers—the equivalent of 2.4 times the number currently employed.

·         If the sector were to experience significant consolidation and lower-than forecast turnover rates, this number might fall as low as 330,000. On the other hand, given historic trends, the total need could well increase to more than one million.

·         By 2016, these organizations will need almost 80,000 new senior managers per year.”

“The projected leadership deficit results from both constrained supply and increasing demand. The key factors include the growing number of nonprofit organizations, the retirement of managers from the vast baby-boomer generation, movement of existing nonprofit managers into different roles within or outside the sector, and the growth in the size of nonprofits.”

“Addressing the leadership deficit requires, first and foremost, that all participants in the nonprofit sector—from boards and current managers to foundations and individual and corporate donors—recognize the enormity of the problem and make it a top priority. Three difficult but critical imperatives will need to be addressed:

• Invest in leadership capacity. Skilled management is the single most important determinant of organizational success. Nonprofits must invest in building skilled management teams—even if that means directing a greater proportion of funding to overhead. Philanthropy must deliver the operating support required, and boards must reinforce the importance of building management capacity and quality.

• Refine management rewards to retain and attract top talent. To recruit more and better leaders, organizations will have to structure more competitive management packages, particularly in light of the push to hold managers to higher performance standards. The greatest rewards of nonprofit careers will always be intangible, but more attractive compensation is critical in times of labor shortages.

• Expand recruiting horizons and foster individual career mobility.

Nonprofits traditionally tend to hire from a small circle of acquaintances. That practice is no longer sustainable. Recruitment efforts will need to expand to new pools of potential leadership talent, including baby-boomers who wish to continue working, mid-life career changers seeking greater social impact, and the young. At the same time, the sector will need to strengthen and expand its mechanisms for attracting and developing managers and enabling talent to flow freely throughout the sector.

The leadership deficit looms as the greatest challenge facing nonprofits over the next ten years. We can use our unprecedented wealth to strengthen the sector’s capacity to meet society’s escalating demands; or we can allow its leadership deficit—with its debilitating consequences—to widen. We are at a crossroads. The choice is ours.”

Commentary from Geoffrey Canada, President and CEO of Harlem Children’s Zone, Inc.

A number of successful nonprofit leaders responded to this wake-up call including Geoffrey Canada, President and CEO of Harlem Children’s Zone, Inc.  Mr. Canada understands what it takes to plan for the future and make difficult decisions to ensure you get there. 

Concerning the leadership deficit he says, “We will have to go out of our way to provide (young talented program people) with opportunities and experiences that they would not organically get in their present positions. We need to expose them to areas such as development, budgeting and working with trustees; and to provide workshops where they can begin to stretch their skill set.”

View the entire report, The Nonprofit Sector's Leadership Deficit, and all commentaries.

Posted by Kathy Sullivan, CFRE, ESCH Consultant

Administrative Costs Can Be the Worst Way to Judge a Charity

Administrative Costs can be the worst way to judge a charity

Though low administrative costs could indicate prudence and sound judgment at a charity, it could just as easily indicate inadequate staffing, insufficient salaries or, shall we say, fudging.

Donating to charity is a worthy action. But which charity? Would it surprise you to know that the criterion that is most often used to decide that question is also the most unreliable? Would it surprise you more to know that many charities are aware of how flawed the criterion is and play it like a violin?

A few months ago a friend of mine who runs an international relief agency phoned me complaining about another charity.

"Do you know what they're doing?" he fumed. "They're buying medicine in Canada for 10 cents a pill and booking the American retail cost of the medicine as an in-kind contribution. Do you know the retail value? Seven bucks a pill. They're padding their in-kind contributions by millions of dollars."

I hung up a little perplexed at first. It wasn't like the organization was buying pills for a dime and selling them for $7; it was were giving them away. Outside of inflating their donations for bragging rights, I couldn't see the harm. Then it hit me.

I went to the organization's website and there it was, one click off the home page: Nearly 90% of its donations in 2011 went directly to the group's programs. Its administrative costs? Just 5% of the budget. But if the agency was inflating in-kind contributions, it could hike the value of its donations to make its administrative costs seem smaller.

Why would it do that? Because low administrative costs are the holy grail in judging how well a nonprofit does its work. It's not the only thing responsible raters look at, but it's the shorthand. The best of the best in one Top 20 list last year, for example, was a charity that spent nothing, nada — 0.0%, as the list put it — on administration. Too bad that, as a measure of value, low administrative costs are unscientific and meaningless.

Don't get me wrong. Low administrative costs could indicate prudence and sound judgment at a charity, but they could just as easily indicate inadequate staffing, insufficient salaries or, shall we say, fudging. Moreover, administrative costs aren't the primary measurement of for-profit excellence. Are McDonald's admin costs lower than Wendy's? Apple's lower than Microsoft's?

Why then do we continue to buy such a boneheaded yardstick to measure nonprofit organizations?

Daniel Kahneman, the Nobel Prize-winning economist, in his brilliant new book "Thinking Fast and Slow," calls it substitution. Each of us, Kahneman writes, has in effect two systems of thinking — an intuitive system that we rely on for quick answers, hunches and gut reactions, and a rational, statistics-driven intellectual system. As superior as the rational system may seem, it has a flaw: It's lazy, and it will defer to the intuitive system whenever it can, especially if the intuitive answer comes cloaked in seemingly scientific justification.

On top of that, our intuitive thinking system also hates hard work, Kahneman says, and if figuring out the answer to a problem is too difficult or complex, we often simply substitute a different, easier answer for the hard work, and we may not even be aware we are doing so.

It is really hard to judge the merits of most nonprofit organizations programmatically. Are people smarter, healthier, do they drive better, get fewer divorces or smoke less as a direct result of a nonprofit organization's intervention? These are the questions we should be asking, and there are many who are trying to do just that every day, internally in nonprofits and in universities and research centers across the country.

But our intuitive thinking system wants an answer now, and because we are intuitively inclined to believe that the nonprofit sector is filled with soft, amateurish executives, we latch on to the pseudo-science of administrative costs as a measure of excellence. It's hogwash; there is absolutely no way of telling that an organization with 5% administrative costs is superior to one with 20% costs based on that criterion alone. In fact, the exact opposite may be true.

Using administrative overhead as a mark of excellence will be a hard habit to break, however. According to the National Center for Charitable Statistics: "For better or worse, the percentage of total expenses going to program costs is the most common measure of nonprofit organizational efficiency. Focus group research has found that donors expect worthy organizations to have low fundraising and administrative costs. Consequently, nonprofits frequently tout their low overhead ratios in their mailings to the donors." Or on their websites.

There are a lot of great reasons to donate to a charity — competent staff, involved and committed board and volunteers, a well-defined and engaged constituency, and a track record of past success. When you find the right nonprofit, honor it with your time and treasure. But let's bury the substitute easy answer of administrative costs. That's no way to choose a charity.

Jack Shakely, President emeritus of the California Community Foundation 

April 30,2012

9 Ways Board Members Can Raise Money Without Fundraising

9 Ways Board Members Can Raise Money Without Fundraising

Philanthropy Funding Government Work? There’s a Foundation for That—Several, Actually

By Rick Cohen, NonProfit Quarterly, April 13, 2012  (from WSJ article)

Amidst the multiple ingenious forms of philanthropy in this country, who would have ever thought that the Central Intelligence Agency had its own philanthropic arm? The CIA isn’t alone. Other federal agencies have created or spurred the creation of philanthropic offshoots that serve as mechanisms for accessing private, charitable capital. They function a little like the private foundation arms of public or state universities. Some public universities claim to be hamstrung by their dependence on state government appropriations and oversight, unable to compete with private universities for charitable donations, so they have created 501(c)(3) philanthropic arms to raise money for programs and activities that supplement what the universities can do with their public funds—for example, funding new programs or supplementing the salaries of university execs or, often, football coaches. The fact that they are 501(c)(3)s makes their fundraising less than fully transparent, leading to tugs of war between the universities and state legislators and the press, both of which are interested in which donors are paying for what. Several federal government agencies, from the CDC and the FDA to NASA and the CIA, are employing a similar strategy—one that we suspect many people are not aware of and one which raises several interesting questions about the role of private philanthropic dollars supporting U.S. government programs.

The CDC’s Foundation

The National Foundation for the Centers for Disease Control & Prevention, commonly referred to as the CDC foundation, provides additional capital to recognized national and international health issues that have broad recognition and support, but require additional private capital to make significant progress. It would seem like the CDC benefits quite directly from the Foundation’s ability to target resources to specific high priority CDC program initiatives. The Foundation’s latest Form 990 indicates that its total revenues plunged from $57.6 million in FY2009 to just less than $23 million in FY2010. It appears that the CDC Foundation was hardly immune to the philanthropic recession that hit the nation’s nonprofits between 2009 and 2010.  Nonetheless, it still managed to spend resources on initiatives such as the Bloomberg Initiative to Reduce Tobacco Use ($7.3 million in FY2010), the Meta-Leadership Summits for Preparedness ($1.7 million), and a program of disease surveillance and response in Cameroon, the Democratic Republic of the Congo, and the Central African Republic ($2.8 million).

Major foundation sources for the CDC Foundation included the Bloomberg Family Foundation ($10.2 million in 2009), the Doris Duke Charitable Foundation ($5.8 million between 2005 and 2010), the Robert Wood Johnson Foundation ($24.2 million from 2004 to 2011), as well as seven-figure grant totals from the Woodruff Foundation, the Marcus Foundation, the John S. and James L. Knight Foundation, the Ellison Medical Foundation and the Avon Foundation for Women. Not unexpectedly, the Foundation has also received $28.1 million between 2003 and 2010 from the Bill & Melinda Gates Foundation. In fact, part of the Bloomberg money is targeted for specific collaboration with Gates. Gates has also granted another $10.5 million to the CDC directly, $8.6 million of which came in 2009 and 2010—unconstrained by questions surrounding providing direct funding to a government agency.

The CIA’s Foundation

The Central Intelligence Agency’s foundation, In-Q-Tel, serves as a venture capital tool to promote technology development for the CIA, functioning in a way that a government agency might not be able to do. By matching private investors and research institutes, In-Q-Tel provides unique private sector to private sector support for technologies that can presumably be delivered or sold to the CIA. According to its 2010 Form 990, In-Q-Tel “identifies and partners with companies to help deliver solutions to the Central Intelligence Agency and the broader U.S. intelligence community (IC) to further their missions.” There is nothing like In-Q-Tel in the nonprofit sector, and its history, [LINK=http://www.iqt.org/about-iqt/history.html]in its own words[/LINK], is worth reading.

Unlike the CDC Foundation, In-Q-Tel’s revenues grew from $50.4 million in the year ending in March of 2009 to $56.4 million in 2010. That sum helps pay for hefty salaries—over $800,000 in salary and benefits for the CEO and over $700,000 for the EVP and “managing partner.” Annual trustee compensation at In-Q-Tel is typically between $35,000 and $37,500 for board members (except for Jami Miscik, the president of Kissinger Associates, who took only $17,500).

In its Form 990, In-Q-Tel makes it clear that it does not disclose its financials to the public, so where does the oversight of In-Q-Tel come from? The 990 states that “IQT receives regular oversight from the CIA and other client agencies, who keep Congress informed of the company’s activities.” Of course, the activities of the CIA don’t get the public, transparent scrutiny accorded to other agencies. On the other hand, rather than funding the CIA, it seems that In-Q-Tel is, in a way, a venture capital firm for the CIA’s unique technology needs. According to the 990, “IQT’s strategic investment model gives it the agility—often lacking within traditional government contracting approaches—to find nurture entrepreneurs and companies that can provide a supply chain of innovation which enables the IC to benefit from technology advances.” IQT claims to have “cultivated a network of more than 200 venture capital firms” and leveraged $1.5 billion to support technology development for the CIA.

 These are just two of the many government agency foundations already in existence. There are many more. The United States Space Foundation, for example, supports the National Aeronautics and Space Administration (NASA) with a mission of advancing “space-related endeavors to inspire, enable, and propel humanity.” And if Sen. Daniel Inouye (D-Hawaii) can attract support for his proposal, a new government agency foundation may soon be born.

Is a Foundation for FEMA Next?

On March 15, 2012, Inouye introduced legislation to create a nonprofit foundation for the Federal Emergency Management Administration (FEMA). The bill would establish the Preparedness and Resilience Foundation, a private, nonfederal, nongovernmental, nonprofit entity which would raise private funds to support activities such as fellowships for government and tribal officials to work with FEMA, research on disaster relief, government forums, conferences, data collection, and writing and publishing books. The potential attractiveness of the Foundation to FEMA is that, as the bill states, it would allow the FEMA administrator to accept donations or gifts from the Foundation “for the purpose of aiding or facilitating the work of FEMA” and would also allow FEMA to accept “voluntary services” provided by the Foundation—that is, services provided by the Foundation to carry out FEMA program activities.

Unlike In-Q-Tel, Inouye’s plan for the foundation affiliate of FEMA explicitly prohibits compensation—other than incidental expenses—for foundation trustees. Inouye’s bill had no cosponsors, last we looked at the Library of Congress website. On the floor of the Senate, Inouye described the FEMA entity as “a philanthropic intermediary between the Federal Emergency Management Agency, FEMA, and the private sector.”

Inouye has crafted a proposal that wisely avoids the problems created by state university foundations that try to use their 501(c)(3) status to circumvent public disclosure and scrutiny. The bill clearly calls for disclosure by requiring the publication of an annual report from the Foundation detailing the source and amounts of all real and personal property gifts and all donations of money. Some of us believe that disclosure will not scare away donors, particularly if they are contributing to disaster relief services rather than million dollar football coach salaries. Ultimately, Inouye’s core argument is that “the lack of appropriate mechanisms make it difficult for FEMA to receive disaster related funds from private sector entities” and he has stated that the plan would follow the model of the CDC Foundation described above.

However, Inouye’s proposed foundation doesn’t seem to be quite as clear in its mission. Unlike the CDC, for example, FEMA has been subject to pretty strident criticism from political leaders of both parties. Although the agency is much different from its troubled state in the immediate aftermath of Hurricane Katrina, there are politicians who find much to criticize in FEMA’s operations and its part in the nation’s homeland security apparatus. Appropriations for FEMA are never an easy task, especially in a budget environment of sharp cutbacks.

Also, the proposed Preparedness and Resilience Foundation seems like it could, more than other government-affiliated foundations, compete with nonprofit disaster relief and recovery entities for difficult-to-find private philanthropic capital—the very nonprofit partners that FEMA counts on to deliver crucial emergency assistance. FEMA actually works closely with nonprofit partners in disaster relief and reconstruction. According to https://www.fema.gov/library/file, FEMA sees “the nation’s vast network of business, industry, academia, trade associations, and other non-governmental organizations as equal—and equally responsible—partners in every phase from preparedness to response and recovery to mitigation.” FEMA’s budget includes grant funding for public-private partnerships, which is fine unless FEMA’s own fundraising (through this proposed nonprofit affiliate) ends up competing with its intended partners—partners that don’t have FEMA-like direct access to federal appropriations. It remains to be seen whether the FEMA foundation will come to pass, but the proposal, and the workings of other federal government agency foundations, raise important questions about the relationship between the private philanthropy and the U.S. government.

Foundations Funding Government: Oddities or New Budgetary Strategy

Are these “federal nonprofits” simply charitable oddities and anomalies or harbingers of a strategy of fiscally strapped federal agencies to find monies that they can’t get from the federal budget? Like the Gates Foundation’s direct grants to the Centers for Disease Control, there is no reason why philanthropy could not and should not think of government as a potential beneficiary of its largesse. To the extent that government agencies or the nonprofits government agencies create service a public purpose, they might be considered just as worthy of foundation support as any other not-for-profit entity created to advance the public welfare.

However, there is a reason why the nonprofit sector exists as something other than an appendage of government. With the help of philanthropy, nonprofits come up with new ideas and approaches that government can emulate and replicate. With the help of philanthropy, nonprofits advocate for the government services and programs our society needs. But nonprofits and the foundations that back nonprofits act as a supplement, not a substitute, for government programs and government expenditures. If it were otherwise, philanthropy becomes little more than a source for plugging government budget gaps.

Moreover, if government becomes attuned to the notion that philanthropy can and should take the place of decreasing government revenues, these relatively small government foundations serving the CDC, the CIA, and FEMA will be followed by others, even though the supposedly immense assets of private and public foundations do not add up to more than a few days of government expenditures. The appetite of government agencies for access to philanthropic capital might turn from immense to insatiable as federal budget deficit challenges multiply in the future. If government foundations end up competing with the nonprofits that now serve as partners with government in the design and delivery of programs, the competitive playing field will be hugely tilted against the nonprofit sector—particularly when donors to government foundations might be able to earn access, face-time, and improved relations with decision-makers and legislators.

With the CDC Foundation functioning much like a quasi-public or nonprofit entity, it may be an anomaly. Created in part due to the intelligence community’s need for constant technological innovation—and secrecy—In-Q-Tel might also be an anomaly. But if Congress takes up Sen. Inouye’s proposal and seriously considers the creation of a FEMA foundation to raise private monies for FEMA-related activities, that will be a sign of some concern for nonprofits.

Posted by Kathy Sullivan, CFRE & ESCH Consultant