Licensing: Is It Time?

"A License to Shampoo: Jobs Needing State Approval Rise"
--Wall Street Journal

Wall Street Journal reporter Stephanie Simon writes that in 2008 23% of American workers needed a state license to do their jobs. (She was quoting data from Morris Kleiner at the University of Minnesota). Conspicuously absent from a list that includes - as she says " ... cat groomers, tattoo artists, tree trimmer and about a dozen other specialists ..." are "professional" fund raisers.(I put professional in quotes because there is considerable confusion and controversy in deciding who is or is not a "professional)."

The industry's long-time position has been that self-policing is an effective constraint and that licensing is not required. For many years I shared that view. As matters stand right now all the states have some sort of registration requirement for consultants, "professional solicitors" and fund raisers. But no state licenses fund raisers. Yet. Legislation has been introduced in New York state from time to time but has always been killed when the lobbyists checked in.

Putting aside the states' thirst for new revenue sources in the face of shrinking tax collections is licensing fund raisers an idea whose time has come? When I look at professions that are licensed - such as law, architecture, medicine, real estate, securities etc. it is difficult to conclude that licensing assures either competence or honesty. Why would it be any different in this instance? The Association for Professional Fundraisers (AFP) encourages all its members to "certify" by passing an exam and renewing credentials every three years. But only about 20% of the members do so - a datum that has been remarkably consistent since the certification program was introduced a few decades ago.

Medicine requires a state license and board certification for specialties (the boards' pass rate hovers at about 90% so the rigor of boarding is open to inquiry). In law and other fields continuing education credits are a mark of keeping up with one's profession but still voluntary as I understand it. Thus certification or boarding to some extent serves as a form of self-policing and augments licensing which is not a choice but a requirement for professional practice.

So if professional fund raisers were licensed would it make any difference? As a matter of practice I don't think so. Embedded mediocrity would still obtain as it does now. But as a signal to the public that you or I have met some standard external to self-policing licensing might have weight. And as the WSJ article suggests licensing would "... box out competitors."

Given the regulatory environment - and I know New York best as sub-par, bureaucratic legalism without forethought, and the appearance but not the reality of protecting the public from scammers, crooks, cads and other low life - the idea of the charity bureau writing up and enforcing the licensing of fund raisers and consultants in the field is just plain scary. But there are many thousands of men and women in New York alone who work full or part time as "fund raisers," a potential honey pot of dollars likely to be far more remunerative than the tribute collected from tree trimmers, cat groomers, barbers, undertakers and what all else.

The largest cohort of licensees in New York (and everywhere I guess) are of course drivers. In New York City if you believe a driver's license protects the public you best up your meds. I do believe licensing of fund raisers is coming. May the public beware!

WHAT'S AHEAD?

Friend and colleague Marilyn Hoyt sent this along yesterday. With her permission ...

Where are we now?

I. Trending up slowly

The Financial Times talks about the LUV Recession. Europe is the L, descending fast and then stabilizing and running flat. North America is the U, descending fast, stabilizing flat and now coming up. Asia is the V, descending and rebounding. The nonprofit sector always comes down later in a recession and then climbs back later too. I think we are all aware that we are in a slow traipse back from the abyss.

**New foundations grew by 5000 in the last half of 2010. This is great news. We now have more than 100,000 foundations, even after the mergers and spend-outs that marked 2009 and '10. And many foundations are beginning to report that they'll increase granting activity in 2011. To catch new RFP's, foundations and staff changes in your areas of interest, be sure you are signed up and have flags set to generate automatic mailings from Philanthropy News Digest: http://foundationcenter.org/pnd/

**Corporate foundations are still struggling. However, corporate honoree galas are a bright spot in corporate giving. Have you recruited to your board to generate access to honorees? (See attached two 2010 Boston College studies on how corporations are thinking about CSR and the role of philanthropy in their policies and practices)

**Annual giving is really lumpy--recovering in some regions and not in others. Keep asking! And keep thanking! A person who sends $100 in response to a direct mail piece is worth getting to know.

**Major gifts, including mega gifts for spunky "new" ideas are popping up all over. Tough to manage at a time when we are trying to stabilize fundamental operations. Be sure to bake indirect costs into any major gift and any grant...."feed the baby" as my colleague, Eric Siegel, at the New York Hall of Science always reminded. Spotted by Cathy Sharp who works on Haitian issues as head fundraiser for H.E.L.P, here's the latest Bank of American/Indiana University study on high net worth individuals: http://mediaroom.bankofamerica.com/phoenix.zhtml?c=234503&p=mediaMention&id=394026

**Government overall is really stressed. BUT there are contracts, subcontracts through partner agencies and even restricted grants flowing at good and sometimes even unprecedented levels. Network like crazy and watch the blogs/newsletters/conferences/e-broadcasts in your field to avoid missing them. And if you don't have the core competence to compete, but do have the right service demographic, build a consortium of colleague organizations to make a competitive proposal. Build synergy to compete.

**Earned income is an increasing part of the income "pie" for many institutions. It's an area of income that's grown a lot across the sector during this rough time. Expenses needed to earn this income are also an increasing part of the expense "pie." It is unclear whether increased activities in this area are generating income to cover both their direct and indirect costs. Be smart. A new dollar earned is not a win if it cost $1.33 to bring in. (Cause related marketing? See the Cone study attached.)

II. Don't drive on 4 flats. Address damage to your institution even as you move ahead

Zombies and institutional failures, plus "faking it through extremis" (like closing a whole institution for a year in order to remodel one wing) are showing up everywhere....These news stories remind all of us to assess the damage to the fundamentals of our institutions and be sure that they are mended all along the way (Attached, 2 studies: 2010 NPO Job Loss report and 2010 October Guidestar projecting upturn)

**Since 2008 nearly 200 churches have been foreclosed on by their banks

**The business models of selected sectors, like orchestras, are under tremendous stress and we are seeing musician strikes, chapter 11 filings and even chapter 7 liquidations. If you are in a sector where this happening, it's worth some analysis. ("...never send to know for whom the bell tolls. It tolls for thee." John Donne)

**Universities, historical societies and some art museums continue to sell off collections in order to cover operating costs, and attornies general in several states including NY are looking into this departure from the American Association of Museums code of ethics. In some states, including NY, bills prohibiting this practice are under legislative consideration

**Likewise, endowment invasion is drawing attention by attorneys general in a number of states including NY. Legal firms are noting a rising business in "work outs" to review endowment contracts and identify which can legally be invaded

**Because traditional fundraising methods are not covering fundraising needs, there is a rush to unproven fundraising methods such as social media and heroic major gifts and endowment campaigns. We can look before we leap! Talk with your colleague network. Use Chronicle of Philanthropy and studies listed on the Foundation Center website to do the research.

------If your organization does not have a group of regular major donors and a broadstroke foundation directory online search shows only 4 foundations giving endowment grants for organizations like yours in your region, there is no endowment campaign.

-----Likewise, if your organization and even your sector has not traditionally won a high % of income from major gifts, this is a 10 year process, not help for next year.

-----Big bucks from the internet? A really mixed bag. Let me know if you are interested in data coming out on social media -- myth/vs facts. I have 2 good hard copy reports I'll be glad to mail you.

**More small liberal arts colleges are failing than we've seen for some time. And State universities are increasing a 10 year trend toward private fundraising to make up for government losses. Some states, again like NY, may dare to raise the idea of closing some schools. Department closings are already underway across the sector. Looks like tenure may be a tradition under challenge. Adjuncts, on the other hand, are beginning to recognize their importance and seek better pay and more work.

**Hospitals are closing, and another round of mergers appears to be underway in many large cities.

**Personnel benefits are under siege in the private, nonprofit and government sectors.

III. Fending off the next tsunami

**Anyone who works with corporations knows something of the web of subsidies, grants, tax credits, payment stretch-outs, tax deductions and outright grants received by the for-profit sector. This is a huge piece of their business model. However, because there are so many ways this is done and so many of them are obscure, public and even policymaker awareness of this support is low. On the other hand, the nonprofit sector's tax exempt status is uniform and visible. This is making our sector a target during hard times.

**Clawbacks aimed at nonprofits by starved governments are on the rise. We need to be proactive. Whether via direct use fees, taxes, abolishing nonprofit status or reducing/eliminating tax deductoins for our donors, we are under siege now and will continue to be.

**We are suddenly discovering that we've done a great job of talking about needs and our responses, but not done a good job of sharing the key elements that make this possible...nor even that every donor and contractor receives a "discount" on the cost of their desired services via the investments of other donors and contractors. We are the only sector that provides such incredible value to our donors and contractors. Here's one of the best "make the case" example I've seen....not a separate mailing or communication, but the case including in a communication prepared routinely -- the Brookfield Zoo holiday greeting. We all need to do what Brookfield Zoo (the largest public attraction in Illinois, as well as one of the great conservation organizations worldwide) did after they had to ultimately go to the State legislature and pass a law to avoid an onerous sales tax on admissions. Here's how they move forward in all their communications now: http://www.czs.org/czs/HappyHolidays

IV. Thinking about your own next moves

**Many of us are recognizing that our own institutions will not be able to increase our department budgets or our salaries for some time. Although we understand that continuing important work with a place we love (and perhaps have seniority as a buffer against possible additional cuts), some of us want to move on.

**Many board and managers and employees have lost faith in each other through this period and some of us are being forced out

**Recruiters are seeing sharp rises in search contracts

**Job listing sites are also seeing sharp rises

**I am seeing a sharp rise in good, capable colleagues who take a new job and either leave or are out on their ear in less than six months.

**We need to be mindful of the realities of these recent years. Is the job you are looking at viable? Or is it an amalgamation of 3 jobs? Or are all the staff and financial resources needed to support it gone? Or is the institution convinced that things should be back to normal "right now" and it's your job to meet that goal? Where, by the way, do goals come from? If you aren't a part of setting your goals, you don't want that job.

**For those of us who've decided that as long as we are working all the time and kind of miserable, we might as well be working all the time and miserable at a higher salary -- so we are going for CEO. Here's a GREAT article on this topic from the New York Times on this subject. http://www.nytimes.com/2011/01/16/jobs/16career.html

---------------

Still reading? Here attached is some mind candy -- reports that rise well above the din and get you thinking. Open those that interest you.

2010 - May lecture on Zakat -- Muslim Giving in America

2011 -- Governing Magazine, what every department head needs to know

2010 -- Deloitte Survey of Worker Passion

2010 - January IUCN Gender and climate change training manual

This is not a time that makes us feel like great professionals. But actually we are. We are likely the best nonprofit professionals the planet as ever produced. Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better. Samuel Beckett.

Find Marilyn at hoytmarilyn@gmail.com]

Taxing Charities

Congress has reconvened and despite a patina of civility my guess is the combatants will shortly withdraw to their respective corners and come out fighting. As we know perhaps the biggest fight will be over the budget deficit. This is always good for lots of ink and some of the more inane ideas that flow from the lips of Congresspersons.

To effect significant deficit reduction spending has to be cut and taxes raised. Duh. The four holies of massive government spending are of course social security, health care, defense and the home interest deduction. Some sensible ideas have been advanced for the first that center on increasing the retirement age for new entrants into the system. That might have a shot. But cutting medicare/medicaid, defense and the home mortgage advantage are in my view much tougher nuts; I do not believe much will or can happen. Clinton erased most of the deficit because he benefited from a rapidly growing economy. Growth is the only realistic driver of deficit reduction.

The entrenched lobbies that drive both houses of congress are formidable. That means the deficit continues to grow but perhaps at a decreasing rate of increase as tax revenues recover as the economy enlarges and modest operational economies are realized in various programs - including cuts that don't require legislative action. Flailing away at so-called "entitlement" programs (in quotes because as my wife says "what 'entitlement?' We pay for both") will, we can be sure, cause the premature death of countless trees.

Meanwhile a number of quixotic notions intended to address the deficit abound. Among them is a proposal that charities be taxed. This is another non-starter because at the federal level a significant revamp of the tax code would be required. On its face that is a better than good idea because there is no way a proposal to tax charities would/could not trigger tax policy overhaul. Of the more than 1.2 million 501-c-3 organizations that file 990s - most are small. Only a tiny fraction have annual operating budgets exceeding $5 million.

But:

• How much tax revenue would charities generate?
• A sliding tax rate or a fixed percentage?
• Exempt religious organizations or not? God.
  
• Forget "death panels:" TV images of starving orphans, abused kittens or closed emergency rooms - i.e. cutting services to pay taxes?I don't think so.

If taxing charities is the best idea Congress can conjure we are either in serious trouble or we can exit laughing.

Ho-ho-ho! The Charity Deduction

In light of the recent extension of tax cuts for the middle class, the rich and the uber-rich full-throated cries for overhaul of the federal tax code have come up (again). Cynic that I am I don't see much emanating from the Cave of the Winds but more wind. But I digress.

In The New York Times on December 19th economist Richard Thaler argues that "it's time to rethink the charity deduction." The burden of his essay is that the donations of the rich are "valued" more than those of the poor because contributions are "subsidized" by the government through tax deductibility. He's right of course. A gift's value is worth more to someone in a 36% bracket than someone at 25% or 15% or zero. His suggestion is that the deduction be replaced by a tax credit to level the field.

We can expect that my industry's lobby will submit that if this happened The-World-As-We-Know-It would end(!) because a tax credit rather than a tax deduction would dis-incentivize and decrease giving at the top. I don't know, nor does anyone else, what the practical effect might be.

To me an equally intriguing problem (about which I have written frequently) is that the 501-c-3 is too broad and many organizations that qualify as "charities" are anything but. There should be a distinction between traditional charity - e.g. serving the poor, helping the sick, etc. and that donations to large and/or less needy charities (size to be determined) should be deductible on a sliding scale - i.e., a higher deduction (or credit) for gifts to the smallest and neediest. I know - how is this to be defined? I have no idea but someone invented the wheel because pushing and pulling was a big drag. This can be solved too.

If you're still awake - who writes about economics at Christmas anyway? - think about it: as a contrarian I pretty much applaud in general the work of WikiLeaks. Quite a show! But is it a charity in the traditional meaning? No. But a gift should be "worth" something but not as much as a gift, say, to a food bank.

Prof. Thaler admits that his other bete noire - the mortgage deduction - should also be one of the first points of attack in re-doing the tax code. His conclusion is that no serious progress can be made on deficit reduction (assuming that is a real concern - economists as usual disagree)and cutting expenses. He also concedes this is a non-starter.

I happen to think messing with the charity deduction is just another dog that won't hunt.

And on that profound note Happy Holidays to all!

HOMELAND INSECURITY: TERRORISTS WIN

ORAM MATTERS focuses on nonprofits, philanthropy and related topics and generally we avoid personal screeds and rants. This blog is a mix of personal and professional because like many of you I am a frequent flier - a road warrior - mainly for work.

I fly out of American at JFK mostly and am pretty much an expert in getting through security without hassle - unless I get stuck behind a family that has gotten into the priority access lane. Until now. Full body X-ray scanners are becoming ubiquitous along with the full-body pat-down (I had a Flair pen in my shirt pocket. Don't ask).

The object of terrorism is first and foremost to intimidate and frighten the civilian population; that is exactly what the Bush and Obama administrations have countenanced. Do you know of a single instance in which a TSA inspection interdicted anything other than your mouthwash and nail clippers? Meanwhile the cargo holds get a pass 98% of the time.

TSA is a huge p.r. boondoggle. Fifty billion dollars or so and counting but I do not feel a whit safer. The invasive X-ray machines should be withdrawn. Up to now inspections have been intrusive, even silly, but tolerable. Now we have crossed a line and without judicial review absolutely compromised Americans' freedom of travel.

Whether the X-ray machines violate 4th Amendment search and seizure the courts will have to decide. I've read that the courts are deferential to the executive branch in these matters so I hold out little hope. Meanwhile we are being bombarded with - according to the government - "microscopic" amounts of X-ray. In my view no one should be exposed to any amount of radiation unless it is absolutely necessary as a health or diagnostic aid.

It is barely possible that public outrage will prevail. TSA has already exempted pilots from the full body scanners; flight attendants are probably next. I don't know if the expediter services that you pay for (and that have not really caught on thanks be) will make any difference. I doubt it.

I hope this image makes you angry and disgusted It's not from J-Date.

If so may I suggest you get to one of the sites that are stirring the pot on this and join in the fight:

http://epic.org/bodyscanner/incident_report/ https://secure.aclu.org/site/SPageNavigator/TSA_Travel_Complaint

MICROLENDING: MACRO FAILURE?

In the 1970s Dr Muhammad Yunus, who went on to win the 2006 Nobel Peace Prize, pioneered in lending very small amounts of money to the very poor and near poor to Bangladeshi villagers enabling them to start small businesses. For example someone would borrow money for a cell phone and then rent out calling time to others. At first interest was modest and repayment was near 100%. Dr. Yunus learned early on that women were more reliable borrowers than men.

This kind of endeavor is known as "contract failure" in academic circles - translated it means nonprofit activity arises when the incentive for profit is either too risky, too scarce or otherwise inadequate to attract investment and return in a for-profit enterprise.

About a decade or so this idea - at least in micro-lending - was turned on its head when banks and other capital aggregators realized they could actually make money lending to the poor if they charged higher interest than a nonprofit investor. And so they did. In India, as today's New York Times and other publications reported, extortionate interest rates have forced poor borrowers to replicate - i.e., borrow from second and third companies to pay interest to the first: a Ponzi scheme in reverse.

All of which brings me to this: in the last half decade a new corporate hybrid has developed. It combines a for profit motive with a greater good (nonprofit) mission. In other words oil and water. I think it may have been Woody Allen who said "when the lion lays down with the lamb the lamb doesn't sleep much." Put otherwise greed trumps need.

In my view the challenge for the hybrid company is to be able to pull this off actually make money and do good. The competition private business has brought to nonprofit micro-lending has essentially compromised an idealistic motive. As today's (Toronto) Globe and Mail wrote on November 12th "A debate is raging between those like Dr. Yunus, who say the sector should remain non-profit with its focus fixed firmly on the very poorest of the poor (those living on less than $1 a day), and entrepreneurs who favour a faster-expanding, for-profit approach backed by investors who want to do good – and see returns."

A related Globe and Mail chart shows what big business this is:

154.8 million Total number of microloan clients around the world as of the end of 2007

13.5 million Microloan clients in 1997

106.6 million Microloan recipients living on less than $1 a day in 2007

533 million Number of people affected by microloans worldwide, when family members are included, as of 2007

1,893 Number of microfinance institutions worldwide last year

$65-billion (U.S.) Size of gross microloan portfolio globally last year

98.95% Repayment rate among borrowers at Kiva.org, the world's first personal microlending website

$381.32 Average loan size at Kiva.

26% Average interest rate for a microloan (though some in Mexico have hit 90 per cent)

(Sources: Microcredit Summit Campaign; Microfinance Information Exchange, Kiva.org, CGAP.)

KIVA by the way is an outstanding vehicle for micro-lending. No it can't compete with predatory lenders

THE GIVING COUNT

On November 11th The New York Times published its annual Giving section; this morning Giving USA Foundation presented the Gurin Forum a timely conjunction. The forum is an endowed program, established twenty plus years ago by the late Maury Gurin one of the country's best fund development consultants, a mentor of mine, an idea machine and a curmudgeon.

This morning's program focused on "The Giving Count -- The Numbers: What Do They Measure? What Do They Mean? Why Do They Matter?" The idea of an open dialog on a subject of common interest to a specific audience is simple enough. But this had never been done in this way for a mostly non-academic audience. Given that 160 people - professional nonprofiteers, philanthropoids, major donors, data researchers and others showed up indicates we touched a nerve (and nearly ran out of Danish).

On behalf of the foundation and the forum I organized and led this event so am responsible for inadvertently failing to invite, among others, Charity Navigator and The Foundation Center, major data compilers for which I apologize and will correct at another opportunity. This collaborative discussion was impelled by the fact that there is a lot of research under way and a lot of data out there, worked on by an array of sources, each working from its own perspective. It's a dog's breakfast so the idea here was to have a cohort of researchers describe their work, tell us what it means, what it measures and why it matters.

There were two panels: the first was facilitated by Stacy Palmer editor in chief of the Chronicle of Philanthropy, Patrick Rooney, PhD executive director Center on Philanthropy at Indiana University; Bob Ottenhoff president & CEO Guidestar USA, Inc.; and Paul Light, PhD Paulette Goddard professor of public service New York University.

The second, facilitated by Ruth McCambridge Ruth McCambridge, editor in chief of Nonprofit Quarterly, facilitated the second panel. that included Charles “Chuck” Longfield chief scientist Blackbaud, Inc.; Ann Kaplan director, voluntary support of education survey Council for Aid to Education; and John Havens, PhD Senior Research Associate & Senior Associate Director Center on Wealth & Philanthropy, Boston College.

An audio of the proceedings has been posted to www.givinginstitute.org. Also available are presenters' PowerPoints.

This could have been a real snooze but because two participants John Havens and Patrick Rooney essentially disagree on each others' methodology. They mixed it up in the donnish fashion expected of academics but proved anew that the death of a drama is the lack of a villain.