How green is my tuition?

Micro-lending has come to the American student financial aid market. GreenNote.com will syndicate student loans among individuals who wish to provide as little as $100 to college-bound students, in return for which the lenders will get a guaranteed return of nearly 7% (while the syndicator, presumably, gets the difference between the lender’s return and the borrower’s interest rate, unspecified in Green Note’s promotional materials). Even if the borrowers are paying only a few basis points above the lenders’ return, this seems an awfully expensive way to provide college money to students at a time when the discount rate is below 4%. Unless students are totally shut out of the college lending system as mediated by Sallie Mae, it’s not at all clear why they would turn to this electronicized (and commercialized) version of the old mutual-aid-society lending arrangement.

If the American banking system is actually collapsing, this is neither a good time to borrow money for college nor a good time to become an unsecured creditor to debtors without skills or degrees. If the American banking system is not collapsing, there should be sufficient guaranteed student loans available to attendees at most accredited institutions. The Nonprofiteer has no doubt that GreenNote.com will make money connecting small lenders to small borrowers, but she doubts strongly that this connection will make much of a contribution toward paying the average college student’s bills of more than $40,000 annually.

Not everything that comes dressed up as “e-commerce” and “micro-lending” actually makes any sense.

American Pie

This story about having juvenile offenders restore and operate classic American diners is lovely on a bunch of different levels: the metaphorical match between subject and object, both things that have been thrown away which are getting restored and returned to the mainstream; the fact that the young men are being taught skills they can really use that can really pay them (though the Nonprofiteer is driven to ask if there are any young women in the project); the cooperation of government, nonprofits and businesses in bringing it about; even its location in Rhode Island, which has quietly evolved as a foodie center as graduates of its culinary institutes refuse to leave. But the most beautiful aspect is the following quote from the man who runs the program:

You always meet people who want these kids to be locked away, and I respect their ill-informed opinion.

And this from the project’s community liaison! Apparently the Nonprofiteer isn’t the only person whose idea of educating people is to smack them in the face.

Habit creation, consumers and charity

An unexpected version of cooperation between for-profit companies and the public health establishment yields life-saving results in Ghana. What’s exciting about this project, in which the question put to the companies was “How do you change behavior?”, is that it suggests a whole series of possible cooperative efforts.

If Unilever et al. could help health officials determine why people pursued unhealthy habits–and, more important, how to prompt them to pursue healthy ones–why couldn’t we ask those consumer giants to help us figure out how to make a habit out of giving? Instead of tying charity to purchases–which teaches people that the only way to donate is to have twice as much money to spare as you’re willing to give–we could identify the triggers for genuine charity and figure out how to insert those into people’s daily lives.

The Nonprofiteer is often skeptical of the notion that foundations should invest in research about social problems rather than in their solution; in many cases, the solution is already available and research is beside the point. Likewise, she’s often moved to snort when she hears philanthropies describe themselves as “convenors” of all those who might have something useful to say about a problem, as though the act of bringing people together were all that might be required to spur them to useful action.

But we don’t actually know as much as we need to about how people give, which is likely to be nearly as important as why; and bringing together consumer companies (with their habit-forming expertise) with philanthropies and charities (with their sector-specific experience) might really produce a valuable new synthesis.

So who will take the lead in strengthening the sector by asking consumer companies to contribute their survey-research and marketing smarts to determine how people can be made more responsive to charitable appeals? Maybe the answer is different for different parts of the nonprofit sector–people give to the arts if they’re reminded of their importance to children, but to health-care based on threats to themselves–but just knowing that (instead of speculating) would be a huge boon to everyone–especially those of us whose livelihood depends on separating people from their money.

Foundation Friday: The public interest in private foundations

Here’s an eloquent and thoughtful response to the argument that Leona Helmsley’s private foundation for dogs is a private matter, appropriately shielded from public critique under the rubric Chacun a son gout.

As long as private foundations enable people to avoid taxes, it will always be appropriate for taxpayers to ask what those foundations are doing with what otherwise would be public money.

Dear Nonprofiteer, Can a church board shut out the congregation?

Dear Nonprofiteer,

The church to which I belong holds monthly board meetings to conduct church business. As a member of this community I wish to attend if for no other reason than to observe and better understand the issues and challenges that our face our congregation. I am told that our by-laws do not allow my attendance other than at yearly annual meetings which are more of a presentation of selected information than an actual meeting in any sense of the word. I have checked the by-laws and indeed they state in part: “Due to the confidential nature of some agenda items, Board Meetings are not open to the membership.”

While I don’t doubt that there are confidential items that are best handled in private, I feel this is a cop-out as any meeting can be organized so that there are public and private portions. After all we, the congregants, are the owners of the church, not the board which is currently operating as an ivory tower.

When I served on my Condo board we were structured in such a way that the first portion of the meeting was open to homeowners who could come and ask questions/make comments followed by the public portion of the meeting during which time they could stay and observe but not comment. While it sometimes made for long meetings it was an effective tool in allowing our stakeholders access to the board and the transparency proved to be vital.

As a stakeholder in my church, should I not be allowed the same access? Besides, aren’t there legal requirements that board meetings be open to their stakeholders (I think it’s called the Brown Act)?

Signed, Disenfranchised Congregant

Dear Disenfranchised:

You’ve raised two separate questions (at least two)–whether it’s a good idea for Board meetings to be open to church members, and whether it’s required by law or custom. Unfortunately, the answers to these questions point in two different directions.

The Brown Act is a California state statute requiring open meetings by local government bodies, which has served as a model for Open Meetings Acts around the country. Though nonprofits aren’t local governments, in any state the legislature or courts may choose to make applicable the open meetings act to the meetings of charity Boards of Directors; so the Nonprofiteer can’t say definitely that it doesn’t apply in the case you’ve described.

BUT. The First Amendment to the U.S. Constitution, which prohibits establishment of religion and guarantees the free exercise thereof, pretty well prevents most governmental bodies from inquiring closely into the operation of churches. The only way to maintain the separation of church and state is to keep the long arm of the law from reaching past the church door; so, even if some Brown Act-equivalent applied to other nonprofits in your state (such as your condo association), it couldn’t be applied to your church. No sane State Attorney General would even try.

So that means, as a member of the congregation, you’re pretty much on your own. The first place to look for assistance is the place you’ve already looked: the bylaws. Don’t be discouraged just because those bylaws say that Board meetings are closed; instead, see what they say about the bigger question, namely, who “owns” the church? Are members of the Board of Directors elected by the congregation, or is it a self-perpetuating Board? Can changes to the bylaws be made by the Board alone, or must they be approved by the congregation? The answers to these questions will tell you whether congregants are, in fact, members of the governing community, or whether you’re just guests at the feast.

If you [congregants] can fire the Board of Directors and/or amend the bylaws, it seems to follow that you can insist that the Board and the bylaws conform to your desire for open meetings–assuming that your personal position on this subject is also the position of a majority of your fellow-congregants. The Board should respond to reasoned discussion of the subject, but if it doesn’t, you simply vote the bastards out at the next scheduled opportunity.

If, however, the church Board is self-perpetuating, or appointed by a synod of your denomination, then you may be out of luck. In that case the church “belongs” to the people who set it up, and your only choice is to play by their rules or take your ball and go home.

None of this, of course, suggests that it’s actually a good idea for Board meetings to be closed at any kind of nonprofit agency, secular or religious. Sunshine, as the saying goes, is the best disinfectant, and most agency decisions should be suitable for examination in the light of day. There will certainly be confidential issues–especially personnel matters–that shouldn’t be discussed in an open meeting; but that’s a reason to go into occasional Executive Session (which Robert’s Rules of Order allows, whether or not the bylaws mention it), not a reason never to be in open session.

So: good practice is on your side, but the law won’t help you. The bylaws may, by demonstrating your ownership of the institution; but if they don’t, it may well be you don’t want to belong to a club that wouldn’t have you as a governing member.

Reflections on volunteering, from outside and in

As she tries to volunteer for the Obama campaign, the Nonprofiteer has developed more and more respect for theorists of volunteer management who argue that too many nonprofits treat volunteers as free labor and too few treat them as opportunities for community engagement. (For an eloquent statement of that position, please see Jennifer Woodill’s piece in the Spring issue of Nonprofit Quarterly.)

Yet she understands that from the standpoint of the campaign (or the nonprofit), the object is to get the job done, not to make volunteers feel good about themselves. So the challenge becomes persuading charity/campaign staff that including volunteers IS getting the job done.

One doesn’t want to go too far with this, that is, to the point of assigning busy-work just to keep volunteers happy. But at the same time nonprofits (and campaigns) should be alert to the fact that staff (and current volunteers) may be motivated to EXCLUDE prospective volunteers for reasons not of the agency’s but of their own. What are those reasons?

• It’s often easier at the beginning to do something than to train someone to do something, no matter how apt a pupil the trainee may be. Unless staff [and current volunteers] are recognized for their efforts as trainers and/or compensated for spending a certain amount of time on that task, including volunteers will always be the project that drops to the bottom of the list.
• Every institution has a finite amount of power, recognition and access to central decision-making, and every person brought into the institution is a potential rival for these goodies to every person who’s already there. Again, unless staff and current volunteers are somehow rewarded for being inclusionary, the natural rewards of being exclusionary will win out every time.

Serious grassroots critiques of current volunteer management approaches suggest that the charity/campaign’s principles of efficiency, resource development and control need to be replaced with more democratic principles. The Nonprofiteer disagrees: again, the task is to get the job done, and democracies are not always the most efficient systems for getting jobs done. (Lest you think that’s a slam on democracies, consider that inefficiency is what the Founders had in mind.)

But even the most efficient agency can benefit from effective deployment of volunteers, provided they’re allowed to get in. Examine your own agency for obstacles to use of volunteers, from a complete lack of a volunteer program to a staff member charged with their training who never actually schedules a volunteer orientation to an established volunteer who’s somehow never encountered a new volunteer’s resume containing any useful skills; and then figure out how senior staff and/or the Board’s human resources committee can straighten this out.

And while you’re at it, could you mention to the Obama campaign that the Nonprofiteer is pounding on the door?

Gasoline and poor people

In earlier postings the Nonprofiteer has been uncompromisingly hard-ass about the impact of the price of gas on volunteers and nonprofits; but this article in the Times is a salutary reminder that the impact is not really on them but on the clients they serve. Our best way of supporting these agencies is not with special gas-tax exemptions or mileage subsidies, though, but with plain old American cash in whatever amounts we can spare after paying our own bills.

It’s good for this country to have higher gas prices because nothing else will keep people from overusing gasoline. But the function of the third sector and the government is, as it has always been, to modify the effects of the free market on the needy (or, as it is written, to temper the wind to the shorn lamb); and til the government starts doing its job for the poor, those of us who care about charity will just have to do the job ourselves.

Don’t even get me started . . .

on Leona Helmsley’s will.

“I said the country was GOING to the dogs, not that you should GIVE it to the dogs!”

Happy Independence Day to all.

Dear Nonprofiteer, Why should charities be punished for being prudent?

Dear Nonprofiteer,

I received this in an e-mail newsletter from Chicago Non-Profit, a newish organization that aims to “connect Chicago’s charitable community.” I’m not familiar with AIP, but the wording that concerned me was the section I’ve highlighted below. I’ve been working with the board on developing a reserve that is sizable vis a vis the monthly operating costs of our organization. I believe it is both responsible and completely mission-driven to ensure that the organization can weather fiscal crises.

How do Charities Rate?

There are over 15,000 registered charities in and around Chicago. Cook County alone is home to over 10,000 of these charites – yet we continue to hear about a charity in the press every now and again that has abused people’s trust; often discouaging people from giving more to charites. Charities are not about to stop asking for money, however – so the question becomes how can we ensure we are giving money to a fiscally responsible charity?

Unfortunately, the non-profit industry is highly unregulated, offering few barriers to keep people from starting a charitable organization and raise money for a “good cause.” A great resource in arming yourself with some education about a charity, however, is the American Institute of Philanthropy (AIP). Located in Chicago, AIP’s founder Dan Borochoff has created a rating system that is easy to understand yet more complicated than some of the more well-known rating systems. Unlike other rating organizations, AIP does not charge non-profits to be rated. This helps to reduce the risk of a charity’s influence of skewing data. Additionally, AIP doen’t reward charities who sit on large fiscal reserves. Rather, AIP applauds and encourages charities to spend the money they’ve raised on programming – which are the reasons the charities were founded in the first place.

What are your thoughts?

Signed, Unreservedly Pro-Reserve

Dear Reserve:

The Nonprofiteer is familiar only in passing with AIP and other charity watchdogs; but she’s happy to report that AIP’s formal position statement on reserves is more nuanced than the report you received of it. It reads as follows:

CHARITIES WITH LARGE ASSET RESERVES
AIP strongly believes that your dollars are most urgently needed by charities that do not have large reserves of available assets. AIP therefore reduces the grade of any group that has available assets equal to three to five years of operating expenses. In AIP’s view, a reserve of less than three years is reasonable and does not affect a group’s grade.

These reductions in grades are based solely on the charities’ asset reserves as compared to budget. If you agree with these charities that reserves greater than three years’ budget are necessary to enhance their long-term stability, you may wish to disregard the lower grades that AIP assigns on the basis of high assets.

This seems like a reasonable perspective: except in special cases (of which none come to mind), a three-year reserve ought to be sufficient to enable an agency to weather a financial crisis. If it’s not, that must be because the agency has a completely nonfunctional financial model, in which case three years ought to be sufficient to discover that and amend the model, or else be compelled to go out of business.

Criticism of excessive reserves doesn’t in the slightest preclude what you’re doing, which is to come up with some multiple of your monthly operating expenses as an umbrella for a rainy day; but this not-so-subtlety apparently was lost on the newsletter editor, who preferred a snappy phrase like “programming…the reason charities were founded to begin with.”

There’s a complicated conversation to be had about the proper role of endowment in the life of charities. The Nonprofiteer herself is mostly anti-endowment, and has watched with glee as people have finally awakened to the fact that institutions sitting on billions of dollars are nonetheless asking college kids to wash dishes 20 hours a week to pay their tuition. But she also understands that endowments have a role to play in assuring the financial stability of institutions designed to last into the indefinite future, and it sounds like the people at AIP understand that, too. It’s a shame that the discussion–in lay publications, but also in our trade press, apparently–seems so often to be over-simplified into, “Naughty charities, hoarding money or spending it on overhead while the poor get poorer.”

That’s one reason the Nonprofiteer doesn’t spend much time investigating the charity watchdogs; she thinks their work, intentionally or un-, plays into the hands of those who think the Red Cross shouldn’t have a paid staff but should put every dollar it receives into this week’s disaster.

The other reason she pays relatively little attention to these groups is that she finds disproportionate the amount of effort necessary to assess the assessments they put forward. Each watchdog makes a set of decisions about what’s proper or im- in charity management, and by the time she’s compared this particular gang’s standards to her own she’s too worn out to give money to anyone.

Which may be the point; but she hopes not.

A few home truths about revenue

What a powerful article! in the Nonprofit Quarterly, from research conducted by the Nonprofit Finance Fund.  Its assessment of diversification of revenue services (two sources are better than one but three are not necessarily better than two) and of the impact of government funding (less “profitable” than other sources–apparently calling something a partnership, public-private or otherwise, doesn’t automatically make it a source of equal benefit to all participants) are both useful.  But most thought-provoking and valuable is the observation that buying a building is often a snare and a delusion and will leave most agencies suffering from a crippling shortage of liquidity for years to come.

Read and believe.