Blue Avocado Investigates

The latest nonprofit news and insight from our nation's capitol, by The Nonprofit Quarterly's Rick Cohen.

photo of Rick Cohen

Adding It All Up: Nonprofit CFO Study

Dilbert CFO cartoonThis survey of 906 nonprofit finance professionals reveals some surprises about these crucial-but-often-overlooked staff, looking at questions ranging from educational backgrounds, workload, board and CEO understanding of finance, and CEO compensation:

Nonprofit finance scandals make for eye-catching headlines: whether about misused public funds, egregiously high salaries, constituents not served, or reserves squandered. But while nonprofit finance scandals make the headlines, the people who manage the funds -- nonprofit finance professionals -- are largely overlooked. And while studies have looked at the tenures and experiences of executive directors (CEOs) and development directors, few have looked at the finance professionals in our nonprofits.

Despite the occasional and highly-publicized problem, the very fact that such problems make the news testifies to the infrequency of such occurrences. Nonprofits are relatively free of financial scandal and abuse, demonstrating both professional expertise and a strong sense of values. But today even the best-managed nonprofits are working not only to steward charitable funds, but to manage earned-income operations, to re-invent their business models, to strengthen the leadership functions of governance, and to maximize the use of funds for mission and values.

Finance professionals are at the core of these efforts.

This study was conducted . . .

Charity Raters Part I: Charting the Bad and the Bad

Wouldn't it be great if there were an objective rating system so that donors could choose the best nonprofits to donate to just as investors use rating agencies to pick the best companies to invest in? Don't answer; it's a rhetorical question. Here's what you need to know about some of the best-known charity rating organizations:

In this Part I of a two-part article, we take a fast look at six charity raters -- Charity Navigator, Charity Watch, Better Business Bureau, GuideStar, Combined Federal Campaign (CFC) and Great Nonprofits -- and who they rate and the criteria they use to rate them. In Part II in our next issue, we'll cover what you should do to manage your nonprofit's ratings, and what we should do collectively as the nonprofit community.

1. Charity Navigator is the heavyweight: the best known and the most often quoted. As a result, they are influential beyond just how they rate individual nonprofits.

Who they rate: About 6,000 of the largest U.S. 501(c)(3) nonprofits with revenue of more than $1 million including public support of more than $500,000

Rating types:

Donor-Advised Funds: Non-Transparent Tax Shelters for Good

Nonprofits are probably most familiar with donor-advised funds (DAFs) at community foundations: a donor gives, let's say, $1 million to a community foundation and gets a $1 million tax deduction that year. Over the next several years, the donor "advises" the foundation to pay out the $1 million in grants to various nonprofits that the donor selects. Donor-advised funds are also administered by commercial institutions such as Fidelity and Chase. Writer Jeff Angus took a closer look at DAFs for Blue Avocado:

In 2009, the last tax year that the IRS has available statistics, donor-advised funds (DAFs) represented a sharply growing share of a diminishing giving pie.  While the amount of total giving went down by 8%, the amount of giving to donor-advised funds went up by . . .

Vanguard Foundation Update: With Leader Pleading Guilty, "Truth and Reconciliation"?

The Vanguard Public Foundation was a high-profile, influential, progressive institution in San Francisco: the original "rich kids" foundation making grants to radical grassroots organizations and involving community members in grantmaking. As we chronicled in earlier Blue Avocado articles, Vanguard's ambitions coupled with absence of CEO oversight led to making the Foundation and many of its donors easy targets for a get-rich-quick scheme. Rick Cohen provides this update:

In all likelihood, within the next couple of months the former president and CEO of the Vanguard Public Foundation -- Hari Dillon -- will be sentenced for his self-admitted role in a small-scale version of a Bernie Madoff-like scam.

And around the same time, Mouli Cohen -- the persuasive businessman behind the scam -- will be sentenced as well. Just two weeks ago, he was convicted in U.S. District Court on 15 counts of wire fraud and 11 counts of money laundering (plus three counts of tax evasion). More than $30 million of foundation and donor money have disappeared.

As of now: Cohen is in jail and Dillon is facing jail; the Vanguard Foundation has closed its doors; there's talk of a grantee lawsuit (for awarded but unpaid grants); some activists are calling for a "tribunal" or a "truth and reconciliation process;" and progressive nonprofits are . . .

The Trouble with Turkey

If there's one day when socially conscious do-gooders can be excused for letting the cares of the world slip away in a haze of tryptophan, it's Thanksgiving. As major holidays go, Thanksgiving is remarkably worry-free, its main focus neither commercial nor ceremonial in nature. You don't have to come bearing gifts. You don't have to dress up. You don't have to stay up till midnight. Even religious worship is usually not de rigueur, unless you count prayer at dinner.

Honestly, unless you're the host, all you have to do on Thanksgiving is show up, watch football, and, well, eat. Right?

Ah, if only it were that easy.

Lucky 7: The Casino Industry and Philanthropy

In at least one state, casinos are required by law to give a portion of their profits to community foundations which, in turn, are required to grant it out as well as allowed to put a portion into their endowments . . . just one of the overlooked fundraising opportunities from casinos. Rick Cohen uses a fundraising framework to report on his investigation into the casino industry.

Casinos seem to have fool-proof systems for getting money out of their customers. Wouldn't it be nice if we had such a system for getting donations from the casinos?

The casino industry is huge: approximately 500 casinos earned $31.4 billion in gross gaming revenue (total dollars wagered minus the winnings distributed to bettors) in 2009. As a reference point, the roughly $35 billion in revenue earned by the retail sporting goods industry in the same year was diffused through a much larger group of 20,000 companies.

[An additional $2.1 billion is earned by charitable gaming, such as nonprofit bingo. In other words, we in the nonprofit sector are members of the casino industry. And note that these numbers don't include the mammoth industry of government-operated lotteries.]

Un-mapped territory

To understand casino giving, we contacted top experts in the casino industry and . . .

Grantseeker's Guide to Foundation Affinity Groups

Like the mysterious Freemasons and their Grand Lodges, foundation affinity groups feel open and warm to insiders, but to outsiders they seem to be secretive, cloistered societies with their own coded languages, titles, and hierarchies. Rick Cohen first tells us about the lodges -- er, affinity groups -- then gives practical advice on how to make this knowledge work for your nonprofit:

You can't be a member of a foundation affinity group unless you are on the staff or board of a foundation. Their conferences are forums where grantmakers discuss what they should be funding . . . but you can seldom go unless you're a foundation person.

Why should you care? Because knowing how to work within their circles is an important way to get insider information about foundations and to get your organization a positive profile among grantmakers . . . in short, to help you and your cause raise money from foundations.

First we'll discuss the different types of affinity groups, then give some specific tips on how to make the most of them for your nonprofit, including ways . . .

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