Where Most Needed

A few days ago, WMN noted that the Bi-partisan Katrina Report was far less critical of Red Cross than press reports would have us believe.  Now Sen. Charles Grassley (R-Iowa) is again directing critical comments at the Red Cross, but the real question is why did Congress neglect its oversight role so long.

In late December, Sen. Grassley sent a detailed letter to the Red Cross covering a wide variety of topics. 

With the release of the Red Cross response and back up materials on Monday, we can expect to see more articles like this AP report and NY Times article detailing specific alleged failings. 

The truth is, Sen. Grassley put his finger on the key problem in his reponse to these materials.  The Red Cross board is too big and gives too much representation to the local chapters.  The Red Cross consists of over 800 local chapters, which themselves represent a mind-boggling coordination challenge.  The chapters dominate the national board, which gets in the way of any attempts at operational modernization. 

Why did it take so long for Sen. Grassley to figure this out?  One of the problems appears in his response: there does not appear to be any effective dialog between Congress and the Red Cross leadership.  The Senator is more in tune with constituents who happen to be Red Cross volunteers or are with smaller charities who want a piece of the disaster response action.  On the Red Cross side, there is a memo in the backup material (On page 89 of 336—caution: it's a 17,559K file) showing that the Government Relations Department has only reported directly to the President and CEO since December, 2003. 

This isn't the way to oversee the agency that is the nation's designated first responder for emergencies. 

The purpose of the Katrina Emergency Tax Relief Act of 2005 was not just to benefit victims of the hurricanes, but also to keep contributions flowing to other charities.  So Boone Pickens took advantage of KETRA and catapulted to fifth place in the 2005 Slate 60 largest charitable contributors with a $165 million gift to Cowboy Golf, a charity that raises money for Oklahoma State University athletics. 

Mr. Pickens did not make the 2004 list and was 19th on the 2003 Slate 60 with another gift to alma mater OSU. 

KETRA encouraged contributions by removing limits on the deductibility of large donations.  But there were provisions in the act to ensure that the contributions went to operating charities, not just warehoused in donor-advised funds.  That's why the New York Times found it noteworthy that the funds from the contribution immediately went to a hedge fund controlled by Mr. Pickens (who also sits on the board and investment committee of Cowboy Gold Golf).

CNN picked up the Times story, which led to a rebuke from a conservative watchdog group, who noted that there was nothing illegal about Mr. Pickens' contribution to a charity that then invests the money with his own company.  (Doesn't conflict of interest count?) 

For some perspective on this, he also gave $7 million to the American Red Cross for Katrina relief.  A lot for most of us, but not much compared to the $165 million for OSU.  But after all, the purpose of KETRA was to make sure that contributions keep flowing to other charities, like college athletics.  As the cover story over at the Chronicle of Philanthropy suggests, the largest donors give to the causes they feel personally passionate about.  Even when a catastrophe wipes out a major city. 

The Slate 60 is a joint project of Slate and the Chronicle of Philanthropy. 

The IRS press release on political interventions by charities received coverage here, there, and everywhere.  Reading the stories one would get the impression of widespread and increasingly defiant violation of strictures on political intervention by charities. 

So the 26-page report itself "Political Activities Compliance Intitative [PACI] Final Report" is worth a read on its own.  Under the section "Lessons Learned" on page 21, we find an interesting admission that over half of the alleged interventions at church services or functions were not explicit endorsements but indirect endorsements.  "In fact, the circumstances often suggested that the pastor made a conscious effort to avoid an express endorsement ...." says the report.  Nevertheless, the PACI project still considered it a political intervention if someone in an official capacity mentions a position on an issue closely connected with a particular candidate.  So it's widespread confusion rather than widespread disregard for the law that seems to be the real problem. 

Accordingly, the IRS issues 6,000 words of additional guidance in the form of a fact sheet that includes examples.  Examples 15 and 16 cover the issue of indirect endorsements.  It's an attempt to clarify a situation that Commissioner Mark W. Everson described thus: "There are few bright lines for evaluating political intervention; our work requires a careful balancing of all the facts and circumstances."  Fair enough, but let's not lambaste charities for failing to come out of that careful balancing test with the same answer as the IRS.

Anyone with an interest in charity accountability might take this weekend to take a look at the LA Times series earlier this year on the legacy of Cesar Chavez and the present-day United Farm Workers.  The stories show the downside of our preoccupation with visionary, media-based leadership and the effect it has on individuals and organizations. 

First, there's a look at how the present-day organization has drifted far from the original ideals of the movement and how fundraising has replaced organizing as a primary focus because the organization has so few labor contracts.  The UFW in effect sells its brand name to political campaigns, and it's PAC pays the union to campaign. 

The next story exposes the numerous UFW-related charities that work with each other to support the members of the Chavez family.  Much of the work has shifted to housing development, and those that benefit are rarely farm workers.  The organization can use the Cesar Chavez name to get government grants and foundation support, often with a more general focus on Latinos rather than farm workers.  Not incidentally, some efforts also go into developing a tourist attraction at the union headquarters, which is even rented out for conferences and weddings.

Then there's a look at the leadership of Cesar Chavez himself, which in some ways set the stage for the current drift of the organization.  It tells how Chavez established a leadership style based on his own vision and personality.  He used purges and a system of staff criticism developed by Charles Dederich, the founder of Synanon, to keep staff under close control.  Even during his lifetime, the focus on labor organizing began to fade.  While the article is critical of Chavez, it also shows the extreme difficulty of making progress with all the competing voices and visions in a nonprofit organization.

Finally, there is a generally favorable portrait of an ex-UFW organizer, Eliseo Medina, who has achieved some success by keeping his attention on organizing, though rarely of farm workers these days. 

There's a curious story in the Cleveland Plain Dealer about frustrated nonprofit workers in their 30s and 40s who aren't finding opportunities to move up.

It's been nearly seven years since the Compass Point study "Leadership Lost: A Study of Executive Director Tenure & Experience." (If you're interested, you might find it here, but it is a very slow connection.)  And there was a follow up report from a few years later. Then the Annie E. Casey Foundation picked up the idea and has published a whole series on executive transition. 

What I thought odd about the Compass Point studies was their unvarying focus on the incumbent executives, their attitudes and expectations.  Wouldn't it be more relevant to look at the way the next generation of leaders is being groomed?  It looks to me like there is only one study from the AECF series addressing the issue from the side of the up and coming leaders.  In a section titled "The future" it offered these findings that should give pause:

• Most older directors have no intention of leaving their jobs.
• Younger people who are already directors acknowledged the possibility of moving on, but like their older counterparts they already see their job as their life.
• Non-director staff has much less difficulty picturing life outside the organzations.
• Staff in their mid 30s to mid 40s expressed the most frustration with the lack of upward mobility.

Not a pretty picture, all those nonprofit EDs who want to die with their boots on.  Not very promising for the organizations they will leave behind.

The Chronicle of Philanthropy is running a front page article on its web site, "Red Cross Gets Chided by Congress."  The reference is to the Select Bipartisan Committee to Investigate the Preparation for and the Response to Hurricane Katrina that one can find here (PDF 6,231 KB—374 pages). 

While the report does quote a lot of criticism of the Red Cross by others, here's what the report itself says:

It is unrealistic to expect any charitable relief organization to instantaneously pivot in response to the might inflicted by Katrina. As Katrina was too large for the emergency management professionals in the state of Louisiana, the city of New Orleans, and FEMA, it was as well for the Red Cross.

The section on charities begins on page 343 of the 379 page report, so you can see that the Red Cross comments are not the main focus. 

What is useful for anyone with an interest in the role of charities in disaster is the summary of a typical Red Cross disaster response described early in the report, from page 42 to 46.  In a typical disaster, the local Red Cross chapter is responsible for the first 48 hours of the response while the regional structure are established.  In the case of Katrina, the Red Cross had set up a coordination center at national headquarters a day before landfall—the first time this had ever been done—evidence that the Red Cross did not exhibit the "Failure of Initiative" described elsewhere in the report. 

I hold no particular brief for the Red Cross, but it does seem to me that it is subject to a lot of distorted coverage and brickbats from the rest of the charity community. 

On a monthly basis the IRS releases a huge file with summary data about all the charities in its Master File of Exempt organizations.  The financial data is limited, but it's enough to show some broad characteristics of charities as economic players.  The National Center for Charitable Statistics in turn makes the IRS master file data available for some standard queries, if you can figure out how to do it.  Their lastest data is from January, 2006, and I've summarized it in a PDF file to download (67.8K). 

The lastest data shows the same pattern:  very large organizations account for most of the economic impact of the nonprofit sector.  Less than 2,000 organizations with gross receipts over $100 million account for 63% of the income of all the organizations combined.  About 11,000 organizations between $10 million and $100 million account for an additional 23%. 

On the other hand, the 178,000 organizations with income under $1 million account for only 3% of the  reported income.  It's a much more pronounced disparity than the typical 80-20 rule: this is closer to an 80-3 rule. 

There's a fundamental misunderstanding of this basic reality of charities.  There's a persistent belief that because small organizations are so numerous, they must have an economic impact in the aggregate.  But it just isn't so. 

And there's Robert Egger, who makes flat out statement in his book Begging for Change that 25% of nonprofits are unnecessary.  When you look at economic impact, 25% is a gross understatement.  More than 90% of nonprofits could go out of business and there wouldn't be a noticeable impact on employment figures. 

Coincidentally with the buzz about the impending resignation of Lawrence Summers as President of Harvard, I was responding to a post by Andrew Taylor over at the Artful Manager about the validity of John Carver's theory of corporate governance.  There could hardly be a better refutation of Carver's theories than the events the unfolded in Cambridge.

John Carver has a strong faith in the ability of Chief Executive Officers.  When he talks about the relationship between staff and board, he is talking about one staff: the executive.  That's the model that Dr. Summers tried to pursue at Harvard.  As huge as it is, Harvard has at its corporate center a small body of seven, known as the Corporation, which includes the President, and which on paper serves as a joint executive body.  However, under Dr. Summers, it appears to have evolved into something of a Carver-style board, with an Executive pursuing his own course under general policy guidance. 

What was ignored in this model was the Faculty of Arts & Sciences as a body with power of its own, not part of the formal system of governance.  The history of events is available in many place, but the actual voices of the faculty are only available here, to my knowledge.  Ultimately, the rest of the Corporation had to conclude that continuing on with passionate discussion in this vein was not going to be productive.  In effect, Summers was jawboned out. 

[Update] Time offers the theory that the FAS found new ammunition in an recent investigative report in Institutional Investor questioning the lenient treatment of economics professor Andrei Shleifer after Harvard's $26.5 million settlement in a case involving alleged fraud and misuse of USAID funds by Prof. Shleifer in Russia in the 1990s.  That theory hasn't seen traction elsewhere (or here).  I would guess that it's just one more talking point in the faculty jawboning. 

The Carver model, and any model that focuses exclusively on the relationship between board and executive, is bound to fail.  With large organizations like Harvard and the American Red Cross, what is called for is a master politician, able to keep many interest groups happy, not just a board.  While some have called for Al Gore in the role, it seems to me that the more likely available candidate for Harvard, despite his flawed background (that is, Yale), would be Bill Clinton. 

After six months groups are finally wrapping up the relief phase of Katrina and the Chronicle of Philanthropy provides a tally of who raised what.  (The relief phase is the second stage in the disaster response model of rescue, relief, reconstruction.  One measure of the impact of this disaster is the extreme length of the phases compared to other disasters.) 

Here's the basic breakdown: 

Or, roughly 2/3 went to the ARC, of the remainder, roughly 2/3 went to 4 large groups: Salvation Army, Catholic Charities, and the Bush-Clinton Katrina Fund (all general relief), and Habitat for Humanity, specializing in housing.

Of the remainder, it breaks down like this:

Totals do not add due to rounding. 

*The "parachurch" designation refers to groups like World Vision that have a religious outlook without being associated with a particular denomination.  For simplicity I have included Mercy Corps' $10 million in this group, although it has moved from a Christian to a purely humanitarian focus. 

The conclusion that these numbers point to is that for this catastrope, the largest dollars flowed to the largest and most general relief agencies, with smaller but significant flows to groups serving basic material needs (food, shelter, medical supplies) and care for animals.  Let's try to remember that for the next catastrophe. 

The Chronicle of Philanthropy gave a front page spotlight to the Edna McConnell Clark Foundation, touting its approach of giving long-term grants to relatively few organizations, but holding them to challenging goals for growth and measurable outcomes.  The article balances the conversation with the foundation between Nancy Roob, Clark's current president, and her predecessor, Michael Bailin. 

The paradox is that the foundation does not hold itself to such growth goals.  President Nancy Roob says that the total number of grantees of the organization would probably top out at 30.

And in that light, it is most interesting to take a look at the salaries paid by the foundation.  The 2004 Form 990 shows Mr. Bailin with a salary of $538,793 and Ms. Roob $246,345, and that both salaries have been steadily rising since at least 2002. 

So it appears that holding other people to high standards does have its rewards. 

What's sneaky?  WMN wondered not long ago how prominently industry links to nonprofits have to be disclosed.  Shouldn't it be taken for granted that disease advocacy groups probably have ties to pharmaceutical companies? 

Now, the New York Times is going a step further, questioning whether industry funding of a study of the risks vs benefits of fish consumption was sufficiently disclosed.  The research was conducted by the Harvard Center for Risk Analysis, with funding from a food processing industry group duly noted in a footnote.  But the Times found that the primary source of the industry group funds was the United States Tuna Foundation.  So they claim that the disclosure was not specific enough to flag the potential bias in the report. Here's the actual footnote from the report:

This work was supported by a grant from the National Food Processors Association Research Foundation (NFPA-RF) and the Fisheries Scholarship Fund. The sponsor played no role in the design or conduct of this study or in the identification and interpretation of the literature, and the authors retained control over the final form of the manuscript. NFPA-RF did offer comments on an earlier draft of this manuscript, in response to which we made minor revisions (details are available upon request). Member companies of the NFPA-RF may be affected by the findings of research that funded my participation on the panel that wrote this paper.

The study itself is quite technical, but it simply wraps some quantative analysis around the risks of warnings about fish contaminants, given that fish consumption also has some health benefits.  Would knowledge that the tuna industry (not just any "fisheries" group) was directly involved in the funding have changed the credibility of the findings?  It's certainly possible, but a stretch.

But more directly problematic is the press release by the Harvard School of Public Health with the headline: "Study Finds Government Advisories on Fish Consumption and Mercury May Do More Harm Than Good."  Nowhere in the study itself does the phrase "more harm than good" appear.  But it was the press release, not the study itself, that got picked up by a number of news sources. 

So Harvard has it both ways.  The Center for Risk Analysis adheres to its Conflict of Interest Policy, but the Harvard School of Public Health PR office attaches the Harvard name to the industry spin on the results.  Slick as a fish.

While I'm not buying this line of "insufficient disclosure" criticism (leave that to special prosecutors),  what's at work here is a far more insidious manipulation of the relationship between universities and the media. 

By the way, thanks to PR Watch for pointing WMN to this story. 

The perception of what is and isn't news in the charity sector can sometimes be hard to fathom.  Last year, there was a compensation scandal and resignation at American University that caught the attention of the press that covers charities.  But now there's a much larger scandal in the University of California system that is not much noted outside the Golden State.  Could it be that people don't perceive state universities as part of the charity sector?  Well, in the most recent Chronicle of Philanthropy 400 rankings, public universities on the list raised $6.8 billion in private support (compared with $3.9 billion for United Way).  (The CoP 400 list requires a subscription, sorry.)

The California scandals include various sorts of additional compensation (as we have recently seen at the Getty Trust and the North Carolina Museum of Art).  The San Francisco Chronicle even provided a searchable database of 2,277 employees receiving additional compensation over and above their stated salaries.  The list starts with head coach Jeff Tedford, whose official salary of $152,590 is a small fraction of his $1,562,453 pay.  These stories prompted a lengthy response from the university system that offers an even more detailed view into the realities of university compensation.  But the ongoing complaint is the lack of disclosure of all these arrangements, in apparent violation of internal university policies.   

But there is also the issue of employment on outside boards, profit and nonprofit.  University of San Diego chancellor Marye Anne Fox earned nearly as much from her board service last year as her university salary of $359,000.  Here, too, required disclosure reports of outside income have not been filed for two years. 

So compensation—how much, where it's from, and how it's disclosed—seems to be a recurring issue in the charity world, yet it's peculiar that none of the self-appointed "charity watchdogs" address compensation in any of their standards of ethics. 

The Gallup organization has released a poll on charity and volunteering that calls into question some of the conventional wisdom about giving and volunteering.  It's only available with a trial subscription, but a few of the results seem worth repeating:

• Conventional wisdom: Poor people are more generous than rich people.  Not here:  96% of households with income over $75,000 per year gave money and 76% gave time.  For households with incomes under $30,000, 72% donated and only 52% volunteered.
• Conventional wisdom: People get more generous as they get older.  Nope:  the 30-49 year old group were the most likely to donate and to volunteer.  The 65+ group were by far the least likely to volunteer and only the 18-29 group was less likely to donate money. 
• Conventional wisdom: Volunteering is for youth.  Wrong again.  The 18-29 group was behind the 30-49 group and the 50-64 group in volunteering. 
• Conventional wisdom: Church people are more generous than non-church people.  Yes, but only for religious causes.   For non-religious causes, 79%  of weekly chuch attenders gave, only slightly higher that the 75% of monthly churchgoers who gave, which is exactly the same as non-attenders. 
• Conventional wisdom: Church people are generous with their time.  There is some support for this one.  Volunteering for non-religious causes ranged from 54% for the every week church group, 49% for the monthly group and 41% for the non churchgoers.  So it's a difference, but not a huge one.  But here's an interesting note: of the unchurched group, 36% gave money and 13% volunteered for religious charities.

My guess is that church attendance is not really the relevant factor.  I'll bet that the real explanatory factor is children.  People give money and time—and go to church, for that matter—because of their kids. 

It's not a typical news angle to take a broad survey of a particular genre of charity, but that what the St. Louis Post-Dispatch gave us with its piece on wish-granting charities.

Perhaps more than most, these charities offer a bewildering number of choices among similarly named groups with similar mission statements.  The genre first appeared in the 1980s and has become widespread, with geographical coverage from local to international.  And from an accountability standpoint:

Many are run by tireless volunteers and selfless, low-paid staff workers. Others are headed by family members earning six-figure salaries who turn over the lion's share of their donations to outside professional fundraisers.

The prototype Make-A-Wish Foundation is still one of the most successful.  Like many nationwide charities, including the American Red Cross and United Way, Make-A-Wish has a chapter structure, with autonomous local groups that raise funds and grant wishes.  Oversight of these independent groups can be a challenge, and there have been local scandals in Make-A-Wish operations.  As with ARC and United Way, the chapter structure increases the risk that the group as a whole might suffer when the misdeeds of one are publicized. 

The article also profiles other organizations whose operations are questioned by the one or another of the self-appointed "charity watchdog" groups like the Wise Giving Alliance and the so-called American Institute of Philanthropy.  The article places heavy reliance on these two groups for analysis, and these groups, in turn, rely heavily on IRS Form 990 data, which is often quite difficult to interpret. 

At the end of the day, the analysis stops and AIP's Daniel Borochoff just offers a personal opinion that money is better spent on more substantial charity.  Maybe that's what charity watchdogs are really for, to provide common sense quotes for reporters rather than their questionable analysis and oversimplified letter grades. 

The advice is from 1997, but truth is timeless. One "Miss $$$" asked Elle Magazine advice columnist E. Jean (E. Jean Carroll) the question we all ask on Valentine's Day: "How do I marry rich?"  After rolling on the floor laughing and Miss $$$ writing back with clarification, E. Jean offered this sage advice:

How to Catch a Flush Fellow

1. Create a charity.
2. Draw up a list of the 500 richest chaps in America.
3. Drive like a b***h to all their offices and plead for a donation.

All I can add is that it can't be just a run of the mill charity:

• Heather Mills met Sir Paul McCartney by advocating for amputees and against land mines. 
• In my home base of Baltimore, my old boss Rebecca Hoffberger found husband Leroy, of one of Baltimore's weathiest families, through pursuit of her interest in outsider art, the two of them eventually co-founding (cached link) the American Visionary Art Museum. 
• And while Melinda Gates met Bill at work, it was by trying to find a cure for malaria that they got together on the cover of Time with Bono, and how romantic is that?

This weekend's Boston Globe gave us a deeper view of the troubles facing Wikipedia, the do-it-yourself encyclopedia.  It brings us up to date on the case of John Seigenthaler Sr., whose libelous biographical entry led to his Op/Ed complaint in USA Today  ("This is a highly personal story about Internet character assassination. It could be your story.")  Seigenthaler's entry on Wikipedia continues to be vandalized.

And it brings in the more insidious problem of burnished biographies of members of Congress by their staffs, along with the usual vandalism.  The Washington Post has also reported on this phenomenon, more than once. 

These issues threaten to overwhelm the original question of Wikipedia accuracy, with numerous large and small errors that call into question the fundamental premise of Wikipedia that the mere fact of open editing will produce accurate results on its own. 

This is akin to the notion following the South Asia Tsunami and Hurricane Katrina that spontaneous volunteer efforts are more effective than the American Red Cross.  It's a superficially attractive idea, but the reality seems to remain that some form of organization is necessary to achieve an overall acceptable result.  Wikipedia may become a resource on obscure areas of knowledge, but where there is controversy, it seems unlikely to prevail as a source of unbiased information. 

Nonprofit feature stories tend to run on weekends.  The Wall Street Journal offered a feature on Saturday about executive compensation for symphonies, opera, and dance companies.  The article itself is subscriber-only, but it appears that anyone can take a look at the chart that tracks the pay of about 40 of the top names and compares it to the program revenues of their organization for FY 2004, the last year with IRS Form 990s readily available. 

By today's standards of stardom, the biggest names don't seem that richly compensated, with only Daniel Barenboim (Chicago Symphony), James Levine (Metropolitan Opera), and Loren Maazel (New York Philharmonic) pushing $2 million.  There are only  5 more names over $1 million:  Michael Tilson Thomas (San Francisco Symphony), Christoph Eschenbach (Philadelphia Orchestra), Esa-Pekka Salonen (Los Angeles Philharmonic), Leonard Slatkin (National Symphony Orchestra), and Franz Welser-Möst (Cleveland Orchestra).  Of course, we're not seeing these performers' other income sources. 

Is the comparison of executive pay to organization performance justified?  Probably not.  As with doctors, artistic directors are being compensated for a skill different from that of a typical CEO.  In fact, most of these organizations also have an executive director or similar administrative chief who is paid much less.  In addition, there is the star factor, the name recognition that allows these individuals to command premium pay. 

Not where one would ordinarily expect a Washington exposé, the LA Times on Saturday provided an in-depth analysis of how Jack Abramoff used various charities to support his shady dealings.

Some of the charities were created by Abramoff, with and without actual operations, but probably more disturbing is how he secured the cooperation of several existing charities in his schemes. 

The point of this is that the explosion of mostly small charities with very little oversight by the IRS produces an environment where sustained and blatant abuse can go undetected. 

Now, I'm just curious where the Washington Post is with respect to these issues.  It could be that the Post does not see any significance in the large number of charities involved in the Abramoff scandal.  Of late, Jacquline Salmon of the Post has been more concerned with stories of Katrina follow-up, like this one about Vietnamese victims or the mini-industry of church volunteers in the Gulf.  Not that there is anything wrong with covering the Katrina follow-up. 

In Canada, a charity that has raised funds to send poor athletes to the Olympics for the last nine years has had its name snatched up by the Canadian Olympic Committee.   Jane Roos, a Toronto sports marketer, started in 1997 with a campaign called "See You in Sydney" and repeated the campaign with every Olympics since, with "See You in Athens" raising over $2 million for more than 400 athletes.   

Until Torino.  Last Fall the Canadian Olympics Committee used its prerogative as a public authority to preempt the organization's trademark claim.  Ms. Roos has changed the name of the organization to CAN (Canadian Athletes Now), but after initially vacillating, has also decided to challenge the COC claim.  The Olympics are entitled to trademark protection, but the COC claim here is that the use of the Olympic city name in the organization's title amounts to piracy of an Olympic symbol.

In the dog eat dog world of sports trademarks, charities are not entitled to any special treatment. 

Also in Olympics charity news, the Wall Street Jounal has a mildly interesting story on fundraising shortfalls in Torino, but that story is behind WSJ's subscribers-only walls.

Probably most people are unaware that one of the leading charity regulators in the US is the Office of Personnel Management, who oversees and regulates the Combined Federal Campaign.   Jacqueline Salmon of the Washington Post reports that the CFC is likely to drop the requirement that listed agencies spend no more than 25 percent of their support and revenue for administration and fundraising expenses.  This is after Make-a-Wish Foundation took the CFC to court after being dropped from the 2005 CFC for exceeding the ratio. 

So OPM won't make it a requirement, and acknowledges that there is no agreement as to the standard, but instead it plans to publish the ratio for every agency.  That is a much worse outcome. 

As presently computed, the ratio overwhelmingly and unfairly favors organizations with substantial in-kind donations.  IRS accounting rules allow these groups to include the estimated cost of in-kind distributions as a phony "program expense."  So groups that distribute in-kind donations—in other words, where all of the cash donations go to administration and fundraising—nevertheless appear to have the lowest administrative and fundraising cost ratios.  As long as the IRS allows groups to combine in-kind and cash donations in a single contribution category, the so-called "efficiency" ratio will be grossly misleading. 

Amid several controversies surrounting the J. Paul Getty Trust, Barry Munitz has resigned as head, repay the organization $250,000 and forego a severance without admitting any wrongdoing.  Again as we have seen recently, a confidentiality clause in the severance agreement limits our knowledge of more details. 

Here is the Getty Trust press release, which can't be found on the Getty web site.  And still here is the LA Times article from last June that first described the lavish spending, outside income (akin to double dipping), and use of museum resources by Dr. Munitz to pursue personal interests. 

The LA Times has reported on a number of issues relating to the Getty Trust:

• Marion True, a curator (now ex) on trial in Italy accused of knowingly receiving looted items,
• Board member Barbara Fleischman resigning last month after making personal loans to that same curator after the museum closed a $20 million deal to acquire her collection
• The lavish spending, travel, and pay of Dr. Munitz, some only disclosed in footnotes in tax filings
• A lack of transparency that prompted the Council on Foundations late last year to put the Trust on probation as part of a relatively new process for monitoring ethics and accountability

Despite the Getty Museum's international reputation and reach (and nearly $10 billion in assets), many of these stories are treated as local or specialty interest.  It looks like only the New York Times and the Times of London produced a byline story going beyond the LA Times & AP coverage.  Yet of particular universal interest here are not only the issues of board accountability and executive compensation, but also the importance of paying attention to the severance agreement whenever leaders depart under a cloud. 

Barry Munitz has been controversial both in his tenure at the Getty Trust and previously as Chancellor of the California State University system.  Prior to that, he was vice-chairman of Maxxam, Inc. and was involved in the administrations of both Pete Wilson and Gray Davis. 

One of the main themes of Where Most Needed is that local news stories often illustrate significant aspects of charity operation that rarely receive attention from the major media.  One of these issues is the extent to which charities expect to be exempted from the consequences of their poor management practices, particularly with respect to ICT.

Here's a case: Marc Bennett, the CEO of HealthInsight, the Medicare Quality Improvement Organization (QIO) for Utah and Nevada, is complaining to the press about a $25,500 long distance charge from AT&T for unauthorized use of its 800 number by a hacker.  AT&T claims that the organization had inadquate security over the use of its 800 number and was warned three times about the unauthorized use and failed to take action. 

The article contrasts the size of the AT&T CEO's salary with the budget of HealthInsight.  More to the point (for WMN) is the fact that CEO Bennett of HealthInsight takes home $188,000 a year (according to the organization's IRS Form 990) and the organization's VP of operations $130,000 a year, in an organization with contract (not contribution) revenue of $7 million and about 70 employees.  In today's environment, monitoring an 800 number for unauthorized use should be expected of every organization.  And if it isn't done, it hardly seems fitting for a completely fee-based organization to plead charity.  Not to mention that the organization's mission is to keep down the cost of health care through quality control. Physician, heal thyself!

Sen. Charles Grassley may be opening a new, charity-related front in the controversies surrounding Fannie Mae.  The Wall Street Journal reports (subscription only, but now  Reuters has also picked up the story) that the Senate Finance Committee is investigating the connection between charities and lobbying at both Fannie Mae and Freddie Mac.  There are two possible directions for the probe: the activities of the affiliated charity foundations of both organizations, and the use of contributions to pet charities by the foundation or company executives as a means of gaining access and influence. 

To date, the Senate Banking Committee has been at the center of investigations and proposals relating to reform of the two government-sponsored enterprises (GSE).   Sen. Grassley's overture may be related to the GSE reform measure, or it could be part of a broader investigation into the numerous links between charity and lobbying. 

A freelance science reporter Tinker Ready files a report in the Washington Post that questions the pharmaceutical industry support for disease and disorder groups, specifically the American Diabetes Association  and the  National Osteoporosis Foundation.  In both cases, the reporter notes that the organizations accept a significant amount of support from Bristol-Meyers Squibb and Merck with limited disclosure and also that they fail to provide certain cautionary information about drugs produced by these companies. 

And so what?  The story noted that these organizations don't carry that much information about drug safety, period.  These are advocacy groups, not watchdog groups, and their focus is on research, not treatment.

And what do watchdog groups have to say?  Where Most Needed found that the Health Research Group of Public Citizen (the consumer watchdog group founded by Ralph Nader and headed by Joan Claybrook), has questioned the safety of muraglitazar, one of the drugs mentioned in the story.  But the other drug, Fosamax, appears to pass without comment even by the watchdog group.

What's also interesting is that Public Citizen is promoting a subscription web site, worstpills.org, that will provide safety information on drugs, but charges a fee because it refuses to accept industry support. 

That seems like the most sensible solution.  Rather than expecting the advocacy groups to provide objective treatment information while taking industry money, those who want information without an industry bias have to be willing to foot the bill.  Consumer Reports has built an incredibly successful and effective nonprofit business around this model. 

It is also noteworthy that the research for the article was supported by a grant from the Fund for Investigative Journalism, a very small organization that provides modest grants for reports to investigate stories involving corruption, malfeasance, incompetence, and societal ills.

That's the other bottom line.  Both the Fund for Investigative Journalism and Public Citizen's Health Research Group have annual budgets well under $1 million.  The National Osteoporosis Foundation has a budget in the $10 million range and the American Diabetes Association has a budget in the $200 million range.  So effective investigative work does not require the massive funding required for medical research.  Let disease groups advocate and give grants for research, let reporters and watchdogs do the investigations. 

While there is talk of limiting or eliminating sponsored Congressional trips in the light of the Jack Abramoff scandal, resistance is emerging, especially as it comes to light that nonprofit think tank organizations are the largest sponsors of these trips.  As New Majority Leader John Boehner put it on Fox News Sunday:

It's not about lobbyists on many of these trips in terms of making their case. It's about going to an industry meeting. It's going to look at a nuclear energy system in Spain, as an example, to gain an appreciation of what's happening in that industry, or — the Aspen Institute, going to an education seminar.

Aspen Institute, a 501(c)(3) charity /educational institution, has been by far the largest sponsor of Congressional trips over the last 5 years, based on analysis by Political Money Line of Federal Election  Commission data.  Here are the top destinations for guests of Aspen Institute (and total Congressional costs picked up). 

Something to ponder when you're putting together your next charity event. 

A midwest museum and an international Jewish advocacy organization are going through suprisingly similar crises of accountability. 

The Milwaukee Public Museum is facing bankruptcy due to overly ambitious expansion plans and has laid off over 100 people, 42% of the staff.  But the press coverage has focused on what the financial staff did or did not tell the board about the condition of the finances over the last several years.  The county audit interim report and final report (Note: the final is a 9,979kb file, takes time to download) were critical of the clarity of disclosures and questioned the capitalization of staff salaries, among other things.  The audit reports also questioned the severance agreements including non-disclosure provisions as inconsistent with the public mission of the organization. 

The World Jewish Congress has just entered into a settlement with NY Attorney General Eliot Spitzer to removes its leader, Israel Singer, from financial responsibilities within the organization.  Singer had been caught transferring $1.2 million to a Swiss bank account.  An internal investigation stalled as staff members were dismissed with severance agreements that required confidentiality.  But continued agitation by long-time member Isi Leibler, motivated by personal and political dislike of WJC's major funder, Edgar Bronfman, kept the issue in the news and led to the AG investigation.  The story is told in colorful detail here.

One disturbing aspect of these stories is how in both cases investigations were hampered by severance agreements with financial staff requiring confidentiality.  The facts came to light only by a cash crunch in Milwaukee and a disgruntled member at the WJC who took the case to the media.  This leaves us to wonder how many other cases of fiscal irresponsibility never see the light of day because staff are dismissed and paid not to speak up. 

Neither the press or bloggers showed much interest in the annual report on university endowments by the National Association of College and University Business Offices (NACUBO), except the Wall Street Journal (by subscription, but you might have some luck here or here).  And Where Most Needed.

A typical story in the mainstream press emphasized that the number of schools with endowments over $1 billion increased to 56.  But the WSJ identified real significance in the mere 5 institutions in the over $10 billion club, with Princeton & Stanford joining Harvard, Yale, and the University of Texas system.  The next largest endowment, MIT, is over $3 billion away from that mark.  These 5 endowments account for 25% of all the endowments surveyed. 

But the most astounding aspect of these mega-endowments is that they showed an average growth of 16.5% over the last year, with Stanford jumping a whopping 23.0% (UT, the loser in the group, grew 12.3%).  The WSJ points out that endowments of this size have access to investments that are not available to the average university, and also that Stanford in particular has unusual access to venture capital investment opportunities due to its location near Silicon Valley. 

The $1 billion to $10 billion endowments on average grew 11.3%; $100 million to $1 billion grew 10.0%, $10 to $100 million grew 9.3%   The smaller institutions showed a much greater range of results as well.  Only one institution over $1 billion showed a decline, and only 1.5% of all institutions over $100 million.  Under $100 million, 6.5% showed a decline. 

Government auditors and the local media are questioning the Head Start enrollment figures of San Diego's huge ($100 million) Neighborhood House Association.  Agency official are quoted as saying that the organization has serious record keeping problems.  Apparently at it worst, the organization is serving 40% fewer children than it claims.  For an organization this size, the lack of record keeping is hard to fathom. 

The Union-Tribune has been critical of NHA Head Start policites for some time, last year complaining that up to 30% of participants families earn too much to qualify.  The paper also questions the unusal arrangement whereby NHA also runs the San Diego Food Bank, which has itself been rocked by accusations of diversion of food donations.

Overall, the General Accounting Office has complained about lax monitoring of Head Start.  In a report to Congress last year, GAO noted that 76% of grantees reviewed in 2000 showed lack of compliance with federal financial management standards.  A year later, more than half of the deficient grantees still showed financial management problems.  The Head Start program is a nearly $7 billion program (the whole United Way system is under $5 billion), serving nearly 1 million children through 1,680 programs. 

The recent Heritage Health Index Report on the condition and preservation needs of all US public collection has a particularly discouraging assessment of the ability of small organizations to live up to their stewardship responsibilities. 

The study found that 81% of the items in the care of small organizations were at risk because the organizations lacked emergency plans, compared to 63% of items in medium sized organizations and 43% in large organizations.   In every aspect of the study, small organizations fared the worst: condition of collections, collection environment and storage, emergency planning, security, preservation activities, funding, assessment, and accessibility by the public. 

It is also interesting that the report was first proposed back in 1997 and was published late in 2005.  One of the reasons for the lengthy process was the effort put into locating and securing the participation of the smallest groups.  So not only did small organizations demonstrate less capability, their numbers greatly complicated the completion of the survey itself. 

In the US, the belief in the value of small nonprofit organizations is widespread, and thousands of new organizations start up every month.  This one report is not going to change that.  But it is one piece of quantifiable evidence that small organizations are not only less capable, but actually increase our risk of losing what we most want to keep.  One obvious conclusion is that it may make more sense for foundations and philanthropists to try make large organizations more responsive than it does to make small organizations more capable. 

One of the giants of twentieth century psychology has been restored to a board seat on the organization that bears his name, the Albert Ellis Institute.  Judge Edward Lehner has ruled (Times / Newsday / Daily News) that the board ouster of Dr. Ellis in September of last year was done in violation of the organization's own by-laws (here's the memorandum ruling; you may be asked to authenticate yourself).  Moreover, Judge Lehner discredited the board's explanation that the ouster was to avoid problems with the IRS due to the Institute's payment of Dr. Ellis' large medical bills. 

This case has generated some discussion about whether Dr. Ellis is an example of founder's syndrome.  The board's lawyers used the term to denigrate Ellis in a New York Times article last October, but others like Matt Dobkin of New York Magazine provide a more complex and more sympathetic reading of the situation. 

Founder's syndrome is one of those buzzwords that management consultants throw around, frequently as an alternative to real understanding of complicated social situations.  It seems to be quite inappropriate in this case, as we are talking about the founder not just of an organizations, but of a whole paradigm of therapy, cognitive therapy or rational emotive behavior therapy, who is trying to maintain some say over an organization named after himself.  At 92, he is clearly declining but still capable.