Grand Rapids Community Foundation

You Poor Souls! ;-)

December 2^nd, 2011

It's time for Diana's Soapbox!

For years, I have been on a mission to help people understand that the nonprofit sector is not second class! While the sector has been hit hard by the recession, what sector hasn't? Well, MiBiz is featuring a section of their publication now focusing on the nonprofit sector and frankly I couldn't be more pleased.  I am not trying to promote this publication over any other but I am just making a point that with all the focus on how the nonprofit sector should be more businesslike and other uninformed comments like that I've heard over the years, frankly this is refreshing.

In the November 28th issue, the section on nonprofits was introduced and in that section was an article that featured my opinion on the nonprofit sector and its role in helping to revitalize our state of Michigan.  As a sign used to proclaim in my office, "everyone is entitled to my opinion", please feel free to open this link and be greeted by my thoughts! 

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Threat to the Charitable Tax Deduction

October 17^th, 2011

Over the years, I have either participated in or witnessed the "great debate" around why people give to causes and various nonprofit organizations. Recently, I had a lively conversation on Facebook with a woman who was adamant that people would give to causes regardless of having a tax incentive or not. I acknowledged that while many do give because they believe so strongly in the cause, if we lost the ability to offer a charitable tax deduction frankly I do believe that would have a tremendous negative impact on the nonprofit/social sector.

Given the fact that both at state and federal governmental levels, there exists a serious deficit problem, it is no wonder that many proposals and legislation are being introduced to try to stem the tide of financial woes. For the 4th time, President Obama is proposing a change on the charitable tax deduction for households with income greater than $200,000 or net worth greater than $1 million. This is part of the President's formal recommendations to the supercommittee charged with developing a deficit reduction plan by November 23rd.

According to the Council on Foundations:

"The administration has proposed disallowing any charitable deduction to the extent such a deduction reduces the income tax liability of the donor by more than 28% of the donation. Individuals subject to the highest tax rates - currently 33 percent and 35 percent, and scheduled to increase to 36 percent and 39.6 percent in 2011 - would see the tax benefit of their charitable deductions reduced significantly."

This is a big issue for the philanthropic community! I believe that this proposal could be the beginning of a slippery slope; merely the start of undoing the charitable tax deduction which has been in existence for more than 100 years. I am wary that if the charitable tax deduction is reduced once, it will continue to be whittled away over time. Even if a small portion of donors take advantage of itemizing their charitable donations, we don't need a reason to take away giving particularly at this moment in time! We need to encourage people to give! I will write more on this issue - this could have the impact of billions of dollars to the philanthropic sector across the country.

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Financing the nonprofit sector - current methods may be short sighted and inadequate

June 12^th, 2008

I just read in the online edition of today's Grand Rapids Press that the Public Museum of Grand Rapids was denied funding from the Downtown Development Authority to expand and update their kitchen facilities to increase their ability to host larger catered events. This may increase the museum's revenue which is needed to help offset the gap in their budget created when the facility transitioned from a city operated one to a private nonprofit organization.

The reasoning behind the denial had to do with using public funds that would be used to potentially create competition with other for-profit catering services and the museum was encouraged to explore those options first.

My purpose here is not to comment on this decision but to underscore that a great of deal of writing and thought has been put into how the nonprofit sector is financed particularly in the past five years. Trying to find revenue sources is increasingly challenging and I question if we are tying the hands of the sector by limiting our notions of funding mechanisms that may or may not help keep organizations healthy and vital. All funders - governmental, foundations, and others - need to take more seriously the challenge that befalls the nonprofit sector in its efforts to find sustainable revenue sources - which is actually an oxymoron these days!

In Jim Collins' monograph entitled Good to Great and the Social Sectors (with the subtitle that is important here: "Why Business Thinking is Not the Answer") he made many astute observations but one notion in particular has stayed with me since I first read the monograph back in 2005. (This publication is available on Jim Collins' website.)

"I find it puzzling how people who clearly understand the idea of investing in great companies run by the right people often fail to carry the same logic over to the social sectors . . . social sector funding often favors "time telling" - focusing on a specific program or restricted gift . . . But building a great organization requires a shift to "clock building" - shaping a strong, self-sustaining organization that can prosper beyond any single programmatic idea or visionary leader. . . If an institution has a focused Hedgehog Concept and a disciplined organization that delivers exceptional results, the best thing supporters can do is to give resources that enable the institution's leaders to do their work the best way they know how. 1

Clara Miller, the president and CEO of the Nonprofit Finance Fund, addresses another interesting aspect of this in an article entitled The Equity Capital Gap found in the Summer 2008 edition of the Stanford Social Innovation Review . (A subscription is required to read the article.)

Ms. Miller explores the premise that current methods of revenue generation for nonprofits are short sighted. These methods may include traditional grants, debt financing, and donations. She is encouraging funders like this foundation to find ways to tackle this challenge collectively. As she states, "Creating an equity capital equivalent - and an equity ethic - for nonprofits is a critical first step in this process." 2

As I stated before, all funders - governmental, foundations and others - need to THINK harder about what we can do to strengthen the financial standing of the social sector. This has been on my mind for quite some time and I am still trying to grasp how to address this challenge.

1 Jim Collins, Good to Great and the Social Sectors (Jim Collins, 2005) 24-25.
2 Clara Miller, "The Equity Capital Gap," Stanford Social Innovation Review, Vol. 6, No. 3 (Summer 2008): 41-45.

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