Friday, January 19, 2018

Time to Change Nonprofits' Game Plan

It's NFL football playoff season and that brings to mind the situation now facing nonprofits with the newly enacted federal tax overhaul bill.  When a quarterback breaking out of the huddle comes to the line of scrimmage and sees the situation has changed since he fixed the play, he calls out an
"audible," which informs his team of necessary last minute adjustments. In the same way, nonprofits must now quickly change their game plan.

The recent legislation is potentially very injurious to nonprofits. Although the tax deduction for charitable giving remains, the incentives to do so are constricted by the redesign of the deductibility architecture. The doubling of the standard deduction (now for a single person $12,000, a couple  $24,000) makes it unnecessary for  many taxpayers in the middle income ranges to itemize deductions. Before, itemization of charitable gifts as tax deductible was believed to encourage such donations. Similarly for the very wealthy the prospect of a hefty estate tax made present day donations attractive to some. That tax was virtually eliminated in the legislation.

On top of all this, nonprofit leaders are worried about the inevitable upcoming battles over federal spending made more acute by the looming budget deficits. If, as widely predicted, the Republican leadership will use the budget shortfalls as an excuse to attack the social safety net/entitlements (Medicaid, Medicare, etc. ) long a favorite target of the Right. As these are cut, the pressure on social service nonprofits to make up the difference becomes acute.

So the quarterbacks for the charitable community come to the line of scrimmage and see the landscape has changed radically. Time for an audible. First, the issues must be faced head on.  Will donors reduce giving because of the changes to deductibility? Do  donors know what the changes are and how they might be affected? To the extent that nonprofits  have had a hands-off relationship with  donors except for year-end asking for money, this attitude needs to change. Perhaps organizations should collaborate in presenting a seminar for donors led by accountants and financial advisors on tax law changes. Then enter into a dialogue with donors. How important actually is deductibility to them?

If it is an important  factor, then provide a counterweight to that rationale. Logically that should be an increased emphasis on communicating your mission - what service do you provide the community? What return do you provide on the donated dollar? The effectiveness of those messages depends on building a strong relationship with the donor. If it is weak, strengthening that bond should be a goal embarked on now. I am not sure tax deductibility is the principal impetus to philanthropy but it is important to ascertain how important it is has been in your organization and build powerful alternative reasons for support. 

As for the other threat - budget cutbacks- relationship is once again the key, here with elected representatives at all levels of government. There is consensus that the nonprofit community dropped the ball (to continue my football analogy) in the recent tax bill fracas.  The advocates relied too much on assumption that previous support from legislators would continue without factoring in the speed in which the bill was fashioned and the changes in political climate. It relied too much on the old formulas - for instance the mass "advocacy day" assault on Capital Hill. In November 2012 I wrote a blog post called "Getting the Dog Back" about political persuasion. It still makes sense to me. Here it is:  http://geoffreyplattconsulting.blogspot.com/2012/11/

If "trickle-down" was a buzzword for adherents of the tax changes, then their effect on state and local governments, along with impending federal budget cuts, would resemble more of a mudslide. In the offing might be additional fees, payment in lieu of taxes on nonprofit real estate and overall reconfiguration of  state and local tax laws. So building relationships with state and local officials  has to be part of the advocacy/firewall  mix. If you review the backgrounds of federal legislators many of them came up through the local and state elected ranks. A county commission can do as much damage - or good - to a nonprofit as any federal legislature.

So, nonprofit quarterbacks, signal the necessary changes to the game plan. Position your blockers, align your receivers to catch your brilliant initiatives and most of all, know the players, both defensive and offensive. It's early in the game. But don't wait until the last quarter to act!

Comments on this blog post (#68) and any other found in the archive to the left are always welcome at: gplatt63@gmail.com








Tuesday, December 12, 2017

Tax "Reform"???



I had started to write this blog post about the tax (“reform” “overhaul” “cut”), bill, analyzing the various provisions that affect nonprofits in both the House and Senate versions, soon to be reconciled in legislative conference. But then on December 7 I was caught up short by a full page photograph in The Washington Post, and put aside the analysis until there is a final bill. I am not sure I understood all I knew about it anyway. But I daresay not many of the legislators do either.

The photo is heartbreaking. It shows a mother clinging to her adult son. Both are standing. Her age- lined face is a portrait of misery and apprehension. Her head rests on his shoulder, held there by his hand.  The son’s face, looking over and beyond her, is impassive. Their physical position together is all too familiar to him, as is their economic one.  

They are Tyler McGloghin and his mother Sheila of Grundy Va.  The $500 a month she gets from disability supports her unemployed son and daughter-in-law. Periodically Tyler stands on the highway holding a sign that begs for money to help feed the family. 

To me, this photo symbolizes the rotten core of the tax legislation, its content and purpose.  It Ignores the poor through the middle class in favor of very rich individuals and corporations.  Its Republican advocate-enablers admit the monster deficits it will give birth to will eventually mean cutting back Medicaid and Medicare, and other parts of the fiscal “safety net” designed to assist families like the McGloghins.  

A recent study by economist Edward N. Wolff revealed that the richest 1 % of American households own 40% of the country’s wealth. There is hardly anyone but the “One Percenters” who benefits from this blatantly cynical train wreck of “law-making.” 

There are other telling anecdotes about the stark contrasts between the have and have nots in our society. A Leonardo Da Vinci sells for $450 million at a New York City auction. Even though it was bought by an obscure Saudi prince, who were those who bid up to that point?  The founder of Amazon (and owner of The Washington Post ) Jeff Bezos’ net worth is  $96.1 billion (down from $100 billion in November). And so on.
I have written before about the plutocrats in the Trump cabinet (“Pluto Philanthropy” April 2017). Longtime political commentator E. J. Dionne Jr. writing recently in The Washington Post  suggested why Republicans dare not take on Trump: …” it might derail their party’s only  driving purposes: court packing, the care and feeding of the privileged, and the gutting of federal social services and regulation.”
Undoubtedly the final tax bill will affect nonprofits negatively in one way or another, most likely through altering the deductibility architecture or raising taxes on individuals.  At the same time, many of the nonprofits, especially in the social service arenas, will face intense pressure to make up for the federal cutbacks. But what the congressional Republican leadership lacks in backbone and serving any purpose other than their own interests, nonprofits and their supporters must try to bridge the gap. It will take courage. It will take donors to ignore the tax roadblocks and step up in support of decency and compassion.
Finally, some charities are advising their donors to accelerate giving this year given the uncertainties –tax code and otherwise- in 2018. Those who benefited from the stock exchange run-up have increased encouragement to act now. And shake out some of those Bitcoins, if you have them and/or understand what they are.
In any case, happy holidays, Merry Christmas and above all, Happy New Year! The latter is sorely needed.  See you in 2018.

Comments on this and any other blog posts found in the archive to the left are always welcome at gplatt63@gmail.com




Tuesday, November 7, 2017

Norman Rockwells on the Block?



On November 1, Judge John Agostini  of the  Berkshire Superior Court surveyed his packed courtroom in Pittsfield, Massachusetts and quipped that  “it usually takes a murder case to equal such a turnout.”  What brought so many citizens, lawyers and the press together? :  Art.

The art in question are 40 works by the likes of Alexander Calder, Augustus Saint-Gaudens , Albert Bierstadt and central  to this case, Norman Rockwell, that the Pittsfield-based  Berkshire Museum  last July announced it intended to deaccession and put on the auction block. The estimate of proceeds is $50 million to be used to fund an endowment, deal with chronic financial shortfalls and to renovate the museum to suit its “new vision” mission  emphasizing  interactive displays of  science and natural history.  The museum has claimed the art works up for sale were “not essential to the museum’s refreshed mission.”

Facing $ 1 million annual deficits, the museum trustees undertook a two year study evaluating its purpose with a view to attracting larger audiences and support.  Founded in 1903 the museum was intended by its founder paper magnate Zenas Crane to educate the public with art, scientific and history displays, as a “window on the world.”
Two lawsuits, one by three of Norman Rockwell’s sons, have been filed to block the sale. Rockwell lived and worked in nearby Stockbridge (where a popular museum dedicated to his work now exists). He personally donated the two paintings to the Berkshire Museum in 1958 and 1966. They are expected to fetch over $30 million in a sale scheduled at Sotheby’s on November 13. The Rockwell sons stated their father did not intend the paintings to be sold as a commodity to reduce deficits but rather held  for the pleasure and education of the public in the Berkshires. Norman Rockwell had a long association with the museum; it was the first museum to exhibit his work.
The Rockwell paintings have given the case an emotional edge not often seen in deaccessioning battles, fueled by the participation of his sons and public desire to keep close to home famous work by one of the region’s native sons.  Recently the Office of the Massachusetts Attorney General, which oversees charities in the state, entered the fray.  At the November 1 court hearing it sought an emergency motion to halt the art sale. Its brief made a strong case that the court should ultimately decide whether the museum has the right to sell the art.  Local and national media have been covering the issue.
The issues raised range from museum ethics to the role of trustees in their fiduciary/public trust roles.
Museum ethics, as defined by two national organizations, the American Alliance of Museums (AAM) and the Association of Art Museum Directors (AAMD), state clearly that proceeds of sale of work  from a collection must only be used to fund future acquisitions, not for debt reduction or other operational uses. It is believed this sale would be the largest ever used for such unethical purposes.  Besides public censure, the only teeth the AAMD  has is to recommend  that member institutions not make loans to the museum. That even may be weakened as the Berkshire Museum seems to be disposing of its art –related mission.
The question before Judge Agostini is whether the plaintiffs (the suits are now consolidated into one, along with the Attorney General)  have the right to challenge the trustees’ action. Do they have “standing” in legal terms.  If he rules they do not, then in all likelihood the November 13 sale will go forward. If he rules in the affirmative, the legal battles should only heat up. Sotheby’s is already exhibiting in New York the major Rockwell painting “Shuffleton’s Barber Shop,” which the house estimates will draw bids between $20  and $30 million.
“Trustees” are so named because they are charged with managing a museum and its collection, which is held in public trust.  There seems little doubt these trustees are facing a difficult future. They have invested in consultants, a lengthy public input process and arrived at what is clearly a transformative solution. But at what cost? The public would lose access to great art, acquired largely by the museum from donors who presumably, if they knew the works were to  be cashed in, might have had second thoughts about their generosity.
What is particularly troubling is the magnitude of the transactions. The Attorney General questioned if the amount was really keyed to the museum needs or just simply matched the amount Sotheby’s estimated the art would fetch at auction. There is an aura of commodity trading about the whole business.
I hope the judge will grant the restraining order in order to give time for the Attorney General to complete her investigation and the court to adjudicate the entire matter absent the pressure of an impending sale. If the sale goes forward on November 13, the Rockwells and other fine works  disappear from public view. And after the sale, there is no going back.
The judge’s decision is imminent.  I will post it.
What do you think?

UPDATE:

Just a few hours after I posted this on my webpage November 7, Judge Agostini announced his ruling - in favor of the museum. In a 25 page decision, he stated the plaintiffs failed to make the case to halt the sale. He wrote "it was the court's duty to act dispassionately and decide cases solely on the legal merits."  He conceded his finding means "timeless works by an iconic, local artist will be lost to the public in less than a week's time."

He added" "the rights of a charitable board to make thoughtful decisions to steer its charity through troubled times have been vindicated."

I would add: there's a lot more steering ahead.

The sale will proceed November 13 at Sotheby's.

UPDATE #2:

Friday evening November 9:  A judge of the Massachusetts Court of Appeals granted a last-ditch appeal by the Massachusetts Attorney General for a preliminary injunction to halt the sale scheduled at Sotheby's for November 13. The AG had requested more time to complete the investigation. The injunction holds until December 12.
Comments on this and other posts found in the blog archive are always welcome at: gplatt63@gmail.com




Thursday, September 28, 2017

Harvey, Irma and the Nonprofit Spirit


The terrible hurricanes of late summer 2017 - first Harvey that swamped Houston, and later Irma that took an awful toll on Florida and the Caribbean – produced images in every media that won’t leave our memories soon. The damage to property, the loss of power, and the scarcity of water, fuel and food that affected millions was heartbreaking to observe.

For my family, there was a direct impact. Our daughter Lucy, her husband Aaron and their Springer Spaniel Bobo on September 7 obeyed the mandatory evacuation order leaving their rented home in Little Torch Key, in the lower Florida Keys near where Irma made landfall.  After a grueling 36 hour drive they arrived safely to harbor with us in Maryland. As of this writing they have just been able to return and inspect the damage. With no roof or walls,  the contents of the house are in ruin. Lucy is a veteran evacuee, having fled New Orleans and Katrina in 2005 but that is small solace.

The other memorable impression from the coverage of those storms is that of people volunteering to help others, many complete strangers. These images ranged from dramatic rescues of people and pets to the drudgery of hour after hour filling sandbags or manning bucket brigades delivering bottled water. And who can easily forget the “Cajun Navy” - folks from southeast Louisiana who left their jobs, hooked up boats to their pickups and drove miles to Houston to help those stranded by the floods?

The heroics too of first responders - police, firemen, the National Guard and EMTs - were notable, as they should be. Everyone, amateur and professional, was aided by the modern technology, cellphones, GPS and social media, which served to connect and guide victims and saviors.

There would have been much greater loss of life and property were it not for the unhesitating work of volunteers. Undoubtedly, if you were to interview some of them, you would discover they belonged to a nonprofit organization - a church or civic group or even a softball league, where they learned through firsthand experience the value of volunteerism.

Alexis de Toqueville, a French diplomat and historian, visited the U.S. in 1831 and a year later published what was to become the famous Democracy in America. In it he states: “Americans of all ages, all conditions, all minds constantly unite… if it is a question of bringing to light a truth or developing a sentiment with the support of a great example, they associate. Everywhere that, at the head of a new undertaking, you see the government in France and a great lord in England, count on it that you will perceive an association in the United States…I often admired the infinite art with which the inhabitants of the United States managed to fix a common goal to the efforts of many men and to get them to advance to it freely.”

So it was when the call went out for help, the response was sometimes overwhelming. Credit too goes to the nonprofits whose mission is disaster aid, such as the American Red Cross, which, along with government agencies, not only provided aid but helped coordinate the work of the thousands of unaffiliated volunteers.  

Response to disasters can bring out the best in people, as with these hurricanes. But once the waters have receded and the debris cleared, keeping that civic spirit alive is a task for all of us.  That spark can be kept alight by nonprofits that understand that fulfillment of their missions would be in peril without the dedicated work of volunteers. They may include board members, docents, grounds workers, or hospitality attendants. You can name them from your own experience.   

The heightened attention given to volunteers by virtue of these natural disasters should remind everyone of their daily value in calmer times. Volunteers should never be taken for granted. They should be recognized and celebrated.  If that is ingrained in a nonprofit’s culture, then there is a cadre ready to be called out for work to cope with future crises, wherever and whenever they occur.


comments on this post and any others found in the archive (this is #64!) are welcome at: gplatt63@gmail.com

Thursday, August 24, 2017

The Dog Days of Summer and a Few One Percenters

"Dog Days of Summer" is a familiar phrase and descriptor. I had to research its derivation, suspecting it had little to do with panting canines - a plausible though ignorant assumption given the season's heat. In fact the dog in the phrase refers to the constellation Canis Major, with its prominent star Sirius, known as the "dog star." The Greeks and Romans believed that about the time when Sirius appears to rise just before the sun (approximately late July) coincides with the hottest time of the year. Furthermore, as suggested for instance in Homer's The Iliad, there is the belief that the Dogs Days portend a time of war, calamity and disaster.

This ancient meaning of  Dog Days might even have a correlation with today's horrors of terrorism, violent bigoted behavior and the feckless leadership in Washington D.C. I won't pursue that line of thought further but as I am writing this not far from D.C. in mid August I can confirm without fear of contradiction that it has been very hot (heat indices over 100). We have just been witness to the tragedies of the riot in Charlottesville, the  Barcelona terrorist attacks and the unconscionable  reactions by Mr. Trump to these events. Add in the recent total eclipse of the sun and you have to wonder if the Ancients didn't have a point.

Luckily my wife Hope and I were able to escape the worst of the Late July-Mid August heat by trips to Western Colorado and an island off mid coast Maine. Along the way I garnered some news items about One Percenters, a class well represented in the Trump administration (see my post "Pluto Philanthropy" - April 2017). In Aspen Colorado, the high altitude playground of the mega rich, I came across a front page story in the Aspen Daily News of July 26: "Developer Fights for Ownership of Huge Aspen Home."  And huge it is.  Built in 2011, here are some of the amenities in the 19,000 square foot structure: seven bedrooms, 11 bathrooms, a lazy susan for vehicles in the subterranean five car garage, 40 feet ceilings and a 30 foot rock water fall. It was offered at $45 million, then later reduced to $39.7 million. What the developer called a "lifestyle compound" has never sold.

The Boston Globe of July 31 excitedly reported the sighting of the super yacht Vava II moored in Boston harbor.  It is approximately 315 feet long, sports a helicopter on its upper deck and reportedly cost $150 million to build in 2012.  The owner is a Swiss billionaire Ernest Bertarelli, known as a lover of yachts and an avid sailor. It was not clear if he was aboard with his wife, a former Miss United Kingdom or why it was in Boston. He is however  a graduate of the Harvard Business School. Attending a reunion, perhaps? To put the yacht's size in perspective, a football field is 340 feet long. I am guessing he at least has enjoyed his possession as opposed to the Aspen developer who apparently hasn't.

While I am on a mega bender, let's be positive and and report that on August 14 The Chronicle of Philanthropy reported that Bill and Melinda Gates gave $4.6 billion  of Microsoft stock to their Bill & Melinda Gates Foundation. The gift reportedly is designated for the foundation's global health initiative. That is mega philanthropy.

These tidbits found during the Dog Days come to you with best wishes for a happy end of summer and smooth re-entry to the workaday world after Labor Day. I will be returning in September as well  to continue with posts on nonprofit issues. Then should be cooler days, at least as far as the weather is concerned.


Comments on this post and others found in the archive to your left are always welcome at gplatt63@gmail.com. Past blog posts can also be viewed at www.geoffrey platt consulting.com





Thursday, July 6, 2017

A Short (and late) Post, plus noting humility

It's been a while since I posted but I have a good excuse: moving. Moving is acknowledged by many psychologists as one of life's most stressful events. My wife Hope and I recently packed up and left New York's Hudson Valley after 11 pleasant and mostly fulfilling years, to return to Bethesda, Maryland to a house we have owned for a long time but not occupied for twenty-five years. Why? The clearest answer is to get farther away from NY taxes and closer to our son who lives in Baltimore. But there is a greater significance. The house is where our young children grew up and so the verse Hope chose for our change of address card is appropriate - by T.S. Eliot, from Little Gidding

We shall not cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the first time.

Quite right, once we can see past all the boxes....

On a less personal note:  we have a president  who dominates the media with his boasting, falsehoods and glorification of ME. So when one comes across examples of humility, you want to store them away like squirrels do acorns before wintertime.

I watched all of former FBI Director James Comey's riveting June 8 testimony before the Senate Intelligence Committee and was struck by his not infrequent use of a phrase: "I could be wrong"  prefacing an opinion. Uttered for effect? Perhaps, but refreshing none the less. You seldom hear that from any public figure.

Then on June 7, this announcement from MIT, later widely reported:

"MIT has received a commitment of $140 million in unrestricted funds that can support any facet of the Institute's educational and research mission. The contribution, is from an alumnus who wishes to remain anonymous..."  The donor received financial aid while a student at MIT.

This huge gift is from someone who doesn't want the credit or his name on a building or a college program. We never expect to know the name.This gift in unrestricted. The donor trusts the institution to put it to wise use and isn't advocating a favorite cause or program. It is an act of  humble generosity.

The theologian Thomas Merton once wrote: "Pride makes us artificial and humility makes us real,"  The root of the word humility is Latin humilis or low. Let us honor those whose self esteem doesn't require the vaporous fuel of puffed up self congratulation. Let us honor and support those real citizens who serve the public interest selflessly.

I hope you had a fine July 4.









Saturday, April 29, 2017

Pluto Philanthropy

The words plutocrat and  plutocracy are increasingly being used, given the makeup of our government at the highest levels and a trend in giving. No, they don't refer to the dwarf  planet or a beloved Walt Disney character, Mickey Mouse's pet pup. The words derive from the Greek ploutos meaning wealth. A plutocrat is a person whose power or influence derives from wealth and a plutocracy is defined as a government ruled by the rich.

Of the 16 members of the Trump cabinet two are billionaires and 12 are multi-millionaires. The total net worth of the cabinet members is $4.5 billion. No one quite knows the net worths of the president or his children.but certainly it is safe to assume they are in the upper millions.

If the recently announced tax reform package, skimpy as it is in detail, is any indication, the main beneficiaries of proposed tax cuts will be the rich. There appears to be a bone or two thrown to the middle class, but they are bones that Pluto the Pup might ultimately find undernourishing and unworthy even of burial in the backyard.

Philanthropy has its share of plutocrats too. In February The Chronicle of Philanthropy released its list of the 50 Most Generous Donors in America in 2016. The total given by those in the list was $5.6 billion, with a median gift of $55 million. There are familiar names here such as Bill and Melinda Gates  (#9), and Michael Bloomberg (#2). Topping the list were Phil and Penny Knight (Nike) who gave an astonishing $500 million to  the University of Oregon along with another $400 million to Stanford.  In fact 48% of the total given by the listed donors went to colleges and universities.

So, what could be wrong about this generosity? Like anything else revolving around money, power is the issue and that what is being increasingly discussed. A recently published book by David Callahan "The Givers: Money, Power and Philanthropy in a new Gilded Age" was the subject of an article in The New York Times April 14 that included an interview with the author. He calls the megadonors "super citizens" but questions the wisdom of their ability to donate where they want and for what purpose with little accountability - for instance to either shareholders or voters.

In matters of policy he cites the examples of Mark Zuckerberg's well-meaning venture into improving the public schools in Newark NJ, where he invested $100 million in 2010 in what was a "top down" effort to influence performance and behaviors of schools and their administrators. The results were widely viewed as failed, with the main beneficiaries being the consultants -  not the students. Might there have been a better investment of these dollars towards education reform?

To be sure, there are many examples of successes that Callahan cites, such as the Gates' emphasis on public health  and vaccinations.The point is not to belittle the generosity but rather raise an issue framed by Mr. Callahan: "philanthropy is rising as government is falling. Ordinary people do not feel their voice counts. They feel the wealthy have too much power and calls the shots."

What gives the public the right to question the prerogative of private individuals and foundations to give away money as they see fit? For one thing, as a matter of public policy, these "super citizens" (I rather like "pluto philanthropists")  receive billions of dollars in tax breaks. As an example, the U.S. Treasury estimates that the billionaires that signed the Buffett/Gates Giving Pledge -those who agreed to donate to charity 50% of their fortunes- their gifts would cost the government  an estimated $740 billion in lost tax revenue over ten years. For that, the ordinary citizen has at least the right to call the question.

I am putting aside the almost age old tradition  - at least back to the first Gilded Age with the likes of Andrew Carnegie-  of donating big bucks and getting your name on a building. The stakes have risen however. with hedge fund mogul  John Paulson getting his name of an entire graduate school at Harvard - The Harvard John A. Paulson School of Engineering. That is what $400 million will get you at the richest university in the world, one that nests on a $35.7 billion endowment.

There's the old play on the Golden Rule: "Them that has the gold makes the rules."  But the inequality gap is widening rapidly in America and that is not healthy for our democracy. Recall that  the etymological root of the word democracy is the Greek demos - people, with cracy, from the Greek kratos, power or strength.

In the case of  the super gifts, at the least more transparency would be welcome, especially in the arena of donating to tax exempt advocacy groups that espouse candidates or public policy issues, such as education and health care reform.

With all the attention given to these mega gifts, the donors of small amounts to local causes dear to respective hearts should not be intimidated or forgotten. These donations, often made year after year and in some cases at some sacrifice, are the bedrock of our nation's philanthropy.

I love the stories of unknown philanthropists, which I have reported to you from time to time. I leave you with one to cheer you up, should that be necessary. On April 14 the Boston Globe reported that one James H. Connors had died at age 89 in Medford MA. Mr. Connors had lived for years with his (also unmarried) sister Thelma in a small rented apartment in a vinyl-sided house. He ran a lock and key service. Unknown to anyone but his lawyer he had inherited a sizable stock portfolio. His legacy was more than $3 million to create a foundation that, starting this summer, will annually award $3000 scholarships to 50 high school students in Medford.

Thank you Mr. Connors and thank you all donors, mega or mini, whose gifts make a difference.

Comments on this post, or any other found in the website archive, are always welcome at gplatt63@gmail.com