TOUGH TIMES

Tough times?

Sure. Getting hit the hardest – even before this current mess - are human service agencies. As treasurer and president-designate of Women’s Prison Association, I really see how perilous the situation is in New York – regardless of how the election turns out.

I’d like to invite you and one guest* to be with us December 4th at the Yale Club in New York – to meet our exciting panel and to participate fully in our program:

Are Charitable Dollars Really Getting Where they’re Needed Most?

Details are in the attached invitation. Sorry for the technology but if you’d like to come, please paste the link below into your browser and then RSVP directly to the e-mail address shown there (and please copy me if you would). If you have any questions please feel free to call me at 212 889 2244.

I hope to see you there. All good wishes and thanks.

*We will wait list any additional people you might wish to bring. Please let us have their name(s) as well.

file:///C:/Documents%20and%20Settings/Henry%20Goldstein/My%20Documents/MyFiles1/Giving%20USA%20Fdn/Gurin%20Forum/Invitation%20to%20Gurin%20Forum.doc

Dollars to Dollops, Din to Discipline

Through the din of recent events comes a bright note worth cheering about and telling donors about. Who among us isn’t a little bit guilty of looking for our benefits however they may come? On page 303 of the 451-page bailout bill signed last Friday by President Bush was a two-year extension of the IRA Rollover provision. See “(3) TREATMENT OF CONTRIBUTIONS TO ELIGIBLE RETIREMENT PLANS.” The full text of the Senate bill can be found here.

And speaking of the din, by all measures we are now indeed striding forward into a recession. Take heart. In such times, best practices become our future foundation for survival and success.

We encourage everyone to stick to a discipline of connecting well with donors and prospects to see you through. In forty years of giving data collected by Giving USA through multiple recessions and economic slowdowns, giving has always trended up. Hard to believe? According to the latest issue of Spotlight, the Giving USA newsletter, during the years from 1967 to 2007 -- which saw some big challenges -- “Total giving has increased in current dollars in every year but one....” (A tax law change in 1986 prompted people to “give early,” and skewed the pattern for 1987.) “In current dollars, before adjusting for inflation, giving has increased an average of 8.4 percent in years without a recession. In years with a recession, giving has increased 6.2 percent (also in current dollars). The average rate of change [emphasis is mine] in giving during a recession is a drop of 1 percent...without a recession, [the average rate of change is an increase of] 4.3 percent.”

The moral: Focus on stewardship -- recognition, information about how the donor’s gift made a difference, site visits. Focus on authentic relationship development. Focus on strategic positioning. No matter what is going on in the markets, people still want to find ways to make a difference, to help their communities, to keep beauty, ideas and wonder in the world, to save our beleaguered planet so that we may continue to live here.

Look at this: Today’s San Francisco Chronicle, announced an upgrade of a gift from Lorry I. Lokey, the founder of Business Wire, to $75 million from $33 million to help build a stem-cell institute at Stanford. Mr. Lokey got interested in response to a clear need -- just as the tech bubble was bursting in 2001.
-- Marilyn Bancel

Update ...

As reported in today's New York Times it turns out Starr Foundation had divested much of its AIG stock but in May still had 15.5 million shares of its corpus parked there. So instead of losing 90% of its 3.3 billion value (in 2006) it lost only two-thirds! All commitments will be honored according to foundation president Florence Davis. A tough break for many charities around the country but especially in New York which was particularly favored in Starr's grantmaking.

The piece goes on to note that many other foundations funded with Wall Street excess wealth are now having to downsize but because of its size Starr really sticks out.

The market continues to gyrate and charities are understandably nervous. This morning the letter below came across my desk:

"Dear Colleagues:

When I was growing up on Long Island, we would go on school trips to the United Nations. I can still recall the awe with which I entered the building as a young child. Looking down from the balcony of the General Assembly Hall, I considered myself in the "inner sanctum," where major international events — most vividly, the vote on the creation of Israel — took place. So you can imagine in a week that began with a rally to protest the appearance of Iran’s president at the General Assembly, I was deeply moved to sit on the assembly floor as President Shimon Peres spoke. It felt like he was returning something good to this inner sanctum.

President Peres approached the podium shortly after Hamid Karzai, president of the Islamic Republic of Afghanistan. President Karzai spoke of the huge challenges facing the international community and explicitly recognized the need for Israel to live in peace and security. President Peres followed, communicating the readiness of the people and government of Israel to reach peace with its neighbors. He concluded with wishes for the Jewish New Year, placing a yarmulke on his head, and invoking a prayer in Hebrew from our tradition. As the hall broke into loud applause, several people shared the same sentiment: What a privilege to witness this moment — the president of Israel, a Nobel Laureate, speaking in Hebrew on the 60th anniversary of Israel before the very body that created the Jewish state.

It was a similar feeling of privilege that infused Alan "Ace" and Kathryn Greenberg’s home on Thursday evening when our major donors came together to launch our 2009 Annual Campaign, as they have for the last 22 years. Guest-speaker, Governor David Paterson, surveyed the challenges facing New Yorkers and was eloquent in extolling the leadership role of UJA-Federation.

We are framing this year’s campaign as one "for those who can," recognizing that while virtually everyone has been impacted by the tumultuous economic events that continue to unfold — and some will not be able to make gifts or will have to reduce them — most of our major donors still can. Anticipating the difficult campaign ahead, campaign chairs Howard Milstein and Linda Mirels proposed, and the Executive Committee authorized, that increases leading up to the Greenberg event will be placed in a matching challenge fund to encourage new and increased giving.

While every dollar has not yet been counted, I am pleased to report that the philanthropic leadership of the New York Jewish community pledged $43 million to UJA-Federation’s 2009 Annual Campaign, surpassing last year’s record-setting level by $2 million! The challenge fund raised close to $3 million. In one evening, 110 people came together and proclaimed, "Despite this economic environment, we are among the most privileged men and women on the planet, and we are certainly the most privileged generation of Jews." The recognition of blessings filled the room, together with appreciation of the indispensable role of UJA-Federation and its network of agencies, particularly during these times.

Colleagues, this will be a challenging year. My hope is that each of us, and those close to us, will enjoy a year of health and will be able to stay connected to the blessings of life, which are, at the end of the day, the most important assets we have.

Shanah Tovah to you and your families. May this be a year of peace for Israel, our people, and for all men and women throughout the world.

Shabbat Shalom

John"

I have no sermon to preach - except that your passion for a cause will show you the way!

Star(r)light ...

In my view The Starr Foundation has been one of the best in New York. Its management is highly competent, it is open to new ideas and people coming in; it is one of the few major foundations who will make operating grants rather than limiting itself to capital (makes those grants as well) or specific projects. It is no-nonsense. A program officer there once told me "we are here to give away money and I am always on the lookout for good things to give money to." That you don't hear much. What you get is "you don't fit our priorities," i.e. foundation-speak.

Starr is the giving arm of AIG.

Oh oh.

The foundation got its start-up money from the estate of Cornelius V. Starr, an insurance magnate who developed the Asia market before WW II - and thereafter was funded with AIG stock. NPR and Bloomberg news reported on Monday that AIG stock was once 90% of its portfolio. Starr's president Florence Davis noted that Starr had sold two-thirds of its AIG holdings between 2006-2008. But exactly what the foundation's corpus is right now is unclear because the sale of price of AIG stock fluctuated and we don't know what investments replaced it, or what they may have earned and she didn't say. But she did promise that present commitments would be honored.

Starr's tax return for 2006 (Form 990) is the latest posted on Guidestar and showed the fair market value of assets at over $3.3 billion. Assuming a yearly 5% payout, the norm, yields grants over $150 million. Close enough. In 2005 they granted out $162 million.

If Starr was 90%invested in AIG stock in 2006 - the year of their last tax filing - that would have reduced the corpus to $330 million and cut grants to about $15 million - about the size of many of the family foundations I work with. How much did they actually lose? AIG stock traded at $3.93 at noon EDT today. Ouch.

In the past Maurice (Hank) Greenberg the former CEO of AIG essentially controlled the foundation. For example he had to sign off personally on an eight-figure gift to an Oram client a few years ago and also gave the nod each time on several seven-figure grants to another one. He may have stepped away but we really don't know. He is certainly otherwise occupied.

Everything here you could have pieced together elsewhere. With one difference: Starr has been a real leader in philanthropy, and a great example for how - on the good side - foundations should behave.

It's easy to stay angry at AIG. But join me in hoisting one for Starr and for hoping they'll come back - bigger and stronger than ever - with the most diversified portfolio we've ever seen!

Tear Down That Wall (Street)!

As of 2:40pm Eastern the Dow Jones is tanking yet again, down 204 points - on the heels of the worst week on Wall Street since the Great Depression. It's a great time to announce a multibillion dollar campaign! And last week, the day the Dow dropped over 400 points, or the day after when it put 400 points back - whatever - U. C. Berkeley did just that - kicking off a $5 billion campaign - with almost $2 billion already committed.

Do they know something we don't? Actually not. Even affluent people can lose out in a tough economy because they spend or invest right up to, and over, their affluence. But those with accreted wealth spread their investments around. They are the people who are Berkeley's best prospects as they would be and are in any serious philanthropic venture.

Is the collapse of Wall Street as we knew it, or discerning Governor Palin's view of the Laffer curve relevant to anything? British painter Damien Hirst sold $200 million worth of art at auction last week, no problem. The Sunday New York Times events page pictured folks all gussied up- preening at openings here, galas there, business as usual, with serious money raised.

I've had two meetings today with charities. We talked about meeting budgets by raising money - and not about the economy which, like the weather, we can do nothing about.

Goldman, Sachs has survived. Treasury secretary Henry Paulson was their CEO. Separate, unrelated facts. Profit remains privatized. Congress is about to socialize Wall Street's losses but not health care. President Bush - well what about him?

Up your meds and take a look at the new Giving USA Foundation's "Spotlight" publication by copying and pasting this into your browser. file:///C:/Documents%20and%20Settings/Henry%20Goldstein/My%20Documents/MyFiles1/Giving%20Institute/SPOTLIGHT/Spotlight%20%233%202008_Final.pdf

(United) Way To Go!

Is United Way (finally) getting it right?

The old formula was distribution driven: collect money on behalf of a number of UW accredited human service agencies and then distribute it across the board according to a formula, saving employers and employees(who were enrolled through payroll deductions at work) from selecting and vetting the beneficiaries directly.

Over time a number of things happened:

- Big manufacturing had the largest employee groups. Most of those jobs went away.

- Charities like Planned Parenthood, groups serving the abject poor and the hardest to reach; grass roots organizations and others whose missions were broader than or combined more than human services alone (education, arts in the community, immigration, HIV-AIDS etc.) were generally left out of United Way and as the government's combined federal campaign grew in importance (state and federal employees being another large work force component - jobs that couldn't be outsourced for the most part)successfully challenged the UW throttle hold on work place solicitation.

- Like the Red Cross the UW brand was compromised by multiple scandals at national and local levels. It didn't help that the Red Cross - a major UW beneficiary - was decomposing before our very eyes.

- UW developed a major gifts competency over time through establishing the popular De Tocqueville societies at United Way around the country for donors at $10,000 and up. Traditionally UW eschewed major gifts from individuals asserting that such solicitations should better be left to their member agencies who were in fact least capable of generating them. The unintended consequence of this really good idea has been that many major donors wanted to designate their gifts, a proposition long resisted by UW because it wanted to have the distribution power.

No doubt other societal influences played in. But the welcome result is that UW around the country has recognized that it had to do its business a new way if charitable dollars were going to get where they are needed most. Three weeks ago a big story in the Chronicle of Philanthropy headlined the new approach: prioritizing giving to "focus on helping young people, increasing financial stability for poor families and preventing domestic abuse."

The story goes on to underscore that "such scenarios are playing out across the country as United Ways make changes that are altering the fund raising landscape." New York City and the San Francisco Bay Area are two places where big changes are on the drawing boards.

These new initiatives are not without serious challenges. Cherry-picking among programs within nonprofit agencies, United Ways deciding on their own what the priorities should be, and most of all faced with raising new money over the old - because the basic UW safety net must still be kept in good repair in a struggling economy - make for a tough script.

But I believe this is absolutely the right thing for United Way to do because for a long time now I have been wondering if charitable dollars are really getting where they're needed most. I have prevailed on Giving USA Foundation to sponsor a discussion on this and in the next blog I'll tell you about the Gurin Forum we're doing in New York in December.

Their (Red) Cross To Bear

"The Red Cross is struggling with how to pay
for aid to storm victims."

-- Wall Street Journal, 5 September

I'm sure they are.

Having squandered the brand, having lost the confidence of many philanthropically inclined folks, having demonstrated incompetence at the highest levels (board and top management) having run with neither transparency nor accountability - why should they expect the public to pony up?

The Red Cross logo is probably the best known icon in the world; for years all they had to do was flash the cross if they needed money -or even if they didn't and through United Way participation* or direct chapter based solicitation the American public responded - with money and blood, literally.

Many US and international charities see their contribution revenues spike during crises like floods, earthquakes, war, forest fires, etc. only to see their fund raising bottom out in between. So the Red Cross's strategy was to raise as much money as possible at the peak, salt away as much as possible in reserve for later catastrophes, and pay out for the current appeal as moderately as possible. That actually is not a bad plan. The problem is that they failed - consistently - to tell their donors this. They now tell the truth. At least in the small print. Some of the time.

The red Cross's lack of candor brought more scrutiny and surfaced serious management problems at both the national and chapter levels. At the national CEOs turned over rapidly. A made-for-the-tabloids sex scandal knocked off the former head of the IRS who had just been hired; and his predecessor, an accomplished naval executive, couldn't hack it with the board. Questions kept coming up about the security of the blood supply, the Red Cross's ability to turn fast in a crisis, and ongoing misunderstanding about where the money went.

The Red Cross is now in make-over mode and the jury's out. But in my view the best they will do is paper over their problems. The Red Cross began as one of just a few federally chartered organizations, a good idea at the time. But federalism brought with it the right of the president to appoint a number of board members who, like other presidential appointments of either party, did not necessarily rise to a level of much quality. Like many ambassadorships or other federal sinecures an appointment was often a thank you for services rendered elsewhere.

The poor attendance of these so-called public members at board meetings also helped to concentrate power in management - for better or worse - and also magnifies the accountability problem.

The Red Cross business model is antiquated. I can see two possible solutions to their dilemma. First the federal government could take over completely - funding all existing Red Cross functions. Given FEMA this option may fail to excite some readers. But as a federal agency a board of trustees is not required and all the present incumbents can become an "advisory committee."

The second - and highly preferred - option is for the Red Cross to privatize, a very appealing idea for the last eight years, and who knows what portends? I would recommend to either President Obama, or President McCain (it hurts to type that, yes!) this course. It would enable the Red Cross to begin anew by privatizing the board: all presidential appointees kaput; start over. Legislation would be required to change the existing chartering provisions for board appointments.

As I am fond of repeating "fish rots from the head down." In my experience with thousands of nonprofits, 95% of the time, until the board is fixed and fully understands and enforces its responsibility for oversight, management will still not be accountable, actions will still lack transparency, fund raising will still suffer - and most of all public confidence will continue to wane.

(For an earlier Red Cross blog see the January 23rd post).

*Next blog: Is United Way Finally Getting It Right?