Congressional Committee Proposes Fundraising Cost Disclosures
The House of Representatives Oversight and Government Reform Committee held a second hearing on Jan. 17 to investigate fundraising costs by veterans charities, with several members of Congress calling for charities to disclose their fundraising costs and how much they spend on programs and services.
In December, the committee held its first hearing on the issue, using report cards by the American Institute for Philanthropy, a charity watchdog group, to criticize several veterans groups for excessive fundraising costs. However, one of the key witnesses, Roger Chapin, who has founded several veterans groups that the committee is investigating, was unable to attend the December hearing.
Chapin appeared before the committee this time, defending the work his charities have done for veterans. He argued with several members of the committee about what percentage of his organizations’ funds went to programs and how much was spent on salaries and other perks.
Also appearing at the hearing was Geoff Peters, Esq., president of CDR Fundraising Group in Bowie, Md., who offered an authoritative and detailed discussion of fundraising costs and why percentages are a simplistic and misleading indicator of charity efficiency and effectiveness.
Disclosure of Costs?
During the testimony, several members of the committee proposed that charities be required to disclose on all communications with the public what percentage of funds raised is used on programs and services. However, such a requirement would not pass constitutional muster because the Supreme Court has ruled several times over the past two decades that charities do not have to disclose such percentages unless asked.
Rep. Henry Waxman (D-Calif.), chair of the committee, also suggested that Congress might consider eliminating the reduced postage rates that nonprofits enjoy unless they disclose the percentage they spend on programs and services.
With two hearings in just over a month on the issue of fundraising costs, it is quite possible that Rep. Waxman and other members of the committee may introduce legislation regarding some aspect of disclosure. AFP continues to reach out to members and staff on the committee to educate them about fundraising costs and best ways to prevent fraud and abuse.
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Barely Half of All Charities Require Board Member Contributions
A new survey by accounting firm Grant Thornton LLP reveals that just slightly more than half of charities require their board members to make financial contributions to their organizations.
In the past, many charities have employed a “give or get” policy where board members are required either to contribute to the organization or to solicit contributions from friends, colleagues and other contacts. However, the survey, the fifth annual National Board Governance Survey for Not-for-Profit Organizations, shows that requiring board members to personally give is slowly becoming the norm.
“Board members are increasingly expected by other constituencies and stakeholders to set the example by personally making significant contributions,” said Frank Kurre, national managing partner of Grant Thornton LLP’s nonprofit practice.
Board Contribution Expectations
The survey also looked at how much board members are expected to give based on the budget size of the organization. The table below shows the range of gift expectations for board members, with the size of expected gifts increasing as the budget size of organizations increases.
If board members are expected to make a financial contribution to the organization, how much of a contribution is expected on an annual basis? (By the organization’s budget size)
$20M - $50M
$50M - $100M
$1,000 or less
$1,001 - $2,500
$2,501 - $5,000
$5,001 or more
AFP Member Organizations See Significant Board Giving
AFP’s 2006 State of Fundraising Survey also asked participants about board giving, specifically what percentage of their boards of directors financially support the organization. Respondents reported a significant amount of board giving.
Nearly nine in 10 respondents (87.4 percent) in AFP’s survey reported more than half of their board members made gifts to their organizations. In addition, more than seven in 10 respondents (70.6 percent) said that at least 80 percent of their board members contributed to their fundraising efforts, and about 60 percent indicated that more than 90 percent supported the organization financially.
At the other end of the spectrum, 4.4 percent of respondents saw minimal participation (0 to 10 percent) from their board members. Another 8.3 percent of respondents experienced board participation in the 11–50 percent range.
These numbers show an increase in board participation figures from the 2005 survey. In 2005, almost half of respondents (47.5 percent) reported that nearly all of their board members (90 percent or more) made gifts to their organization. About 10 percent of respondents reported that their board members barely participated at all (0 to 10 percent).
About the Survey
A copy of Grant Thornton’s fifth annual National Board Governance Survey for Not-for-Profit Organizations is available free of charge online.
The survey was conducted in September 2007. Responses to the web-based survey were received from 603 nonprofit executives and board members in 47 states and the District of Columbia.
Grant Thornton LLP is the U.S. member firm of Grant Thornton International, one of the six global accounting, tax and business advisory organizations.
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States Seeking to Protect Donor Privacy as Anonymous Gifts Increase
Anonymous giving is suddenly in the spotlight as a new study shows an increase in major gifts made anonymously, while several states are moving to protect donor privacy.
The Wall Street Journal reported (“Why Donating Millions Is Hard to Keep Secret,” Jan. 9, 2008) that 37 gifts of at least $5 million were made in 2007 by anonymous donors, according to an analysis made by the Indiana University Center on Philanthropy. Twenty-seven such gifts were reported in 2006 and only 13 in 2004. According to the article, donors chose to remain anonymous for a number of reasons, including:
- Religious beliefs that anonymous giving is more sincere or a “higher” form of giving
- Jealous relatives who would like to see family wealth used in other ways
- Increased solicitations from other charities if the donor is revealed publicly
- Personal safety, with worries that individuals might be targeted by criminals if a gift is made public
The article also notes that with increasing concerns about publicity, many major donors have turned to donor-advised funds. Giving through a donor-advised fund allows the donor to give to a charity in the name of the entity that runs the fund, typically a financial-services firm.
States Protecting Information
At the same time, several states have made or are in the process of making changes to their privacy laws to safeguard information about donors to public higher education institutions.
The Virginia legislature is currently considering legislation that would exempt public higher-education institutions in the state from some of the requirements of the Freedom of Information Act. Under the bill, information about anonymous donors would not have to be disclosed, and data on other gifts would be limited to the donor’s name, the size and date of the contribution and for what the contribution was designated.
According to The Wall Street Journal article, Colorado and Georgia have recently passed similar laws to keep anonymous donors’ names private, while the Kentucky State Supreme Court is deliberating on a lawsuit from a local newspaper that would require the University of Louisville Foundation to reveal the identities of 62 anonymous donors.
Advocates of disclosure agree that personal information should be withheld, but argue that the name of anonymous donors should be disclosed, citing concerns about favoritism in admissions, procurement and hiring.
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Newlyweds Forego Wedding Gifts, Request Donations
Newlyweds Jacob and Miriam Hodesh, of Miriam, Ga., deleted their entire wedding registry and instead requested family and friends to make donations to The Save Darfur Coalition.
The couple’s decision, which dismayed some and impressed others, helped raise more than $20,000 for the Washington, D.C.-based organization that seeks to end the genocide in the Darfur region of Sudan.
The coalition posted the Hodeshes’ blog on its website as part of its Darfur Heroes section, giving the bride and groom an opportunity to discuss why they made the decision to forego their wedding gifts.
“You wouldn’t imagine how difficult it is to actually delete a registry. Nonetheless, it was a decision that we believed in, and we moved on together to yet another decision,” the couple wrote. “Some people didn’t understand why two white Jewish kids from the Midwest would suggest donations be made to their black African brothers and sisters many miles away. Our answer was that we are all brothers and sisters.”
The coalition’s Darfur Heroes section will feature one outstanding activist’s story each month—through a blog featured on Save Darfur’s website—not only to recognize those individuals who have helped build the movement, but also to inspire others with unique fundraising and awareness-raising tactics.
Does your organization have stories about donors giving up traditional gifts and asking for contributions instead? How are you recognizing them? Are you seeing increases in these types of gifts?
Email email@example.com and let AFP know, and we’ll use your stories in future eWire stories.
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CFRE Review Course Offered at the International Conference on Fundraising
For intermediate-level fundraisers wanting an overview of fundraising skills and techniques, and for practitioners studying the for the CFRE exam, there’s no better course than AFP’s CFRE Review Course, will is offered throughout the year, including at the International Conference on Fundraising in San Diego. AFP also offers a First Course in Fundraising for those new to the profession, volunteers and trustee and CEOs who want to learn more about the development function.
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How to Apply for AFP Research Grants
Research grants up to $10,000 annually are available through the AFP Research Council to members who want to explore new aspects, trends or issues related to fundraising, with the next deadline for proposals being Feb. 1, 2008.
The AFP Research Council offers grants up to $10,000 each year to individuals who wish to undertake research projects that enrich the profession’s knowledge of fundraising and improve the practice of fundraising. Grants are awarded on a rolling basis twice a year, with deadlines of Feb. 1 and Sept. 1.
Possible topics might include, but are not limited to, the priorities set by the Research Council for study over the next three years:
- Fundraising salaries, especially incentive compensation
- Cost of fundraising/fundraising effectiveness
- Trends/gaps in knowledge about fundraising and philanthropy
- International issues related to fundraising and philanthropy
- Demographics of fundraisers/donors
Guidelines for a Proposal
In general, a proposal for research should include or discuss the following items in order to receive full consideration by the AFP Research Council:
- Define the research need, rationale, goals and objectives.
- Include a review of the literature related to the proposed research.
- Describe the research methods to be used.
- If applicable, estimate the size of the sample to be studied.
- Outline the anticipated benefits of the study and quantify them if possible.
- Specify the time frame for the project (usually a six to 24-month period) and note whether this is part of a larger research project for which funds are being sought from other funders.
- Indicate the particular project costs that the grant will support and note whether you would be able to conduct this research if awarded partial funding of project costs. [Note: Because grant funds are limited, AFP’s Grants Committee has a policy of paying direct costs only.]
- Include a letter from a cooperating nonprofit organization executive documenting permission of the nonprofit to carry out the project. General letters of endorsement are neither required nor desired.
- Include the investigator’s resume.
- Show how the project supports the goals of the AFP Research Council.
- Include a plan for dissemination of research results.
Fundraising professionals who wish to submit proposals are encouraged to seek advice from or partner with academic institutions in developing the research design and to attend the AFP International Conference information session on how to submit a grant application to AFP. It is presumed that any nonprofit organization involved in a study will be fully aware of the project and will give permission to the researcher to carry out the project.
Process for Consideration
Proposal letters will be reviewed and grants recommended by the Grants Committee of the AFP Research Council, which may include representatives from the Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA) and other academic organizations. Grants will be authorized by the AFP Research Council.
The researcher should be willing to share research results with AFP members by preparing a complete analysis of the research methods and outcomes for possible publication as an article in Advancing Philanthropy and/or in an online publication. Any other publication derived from the research project should note the grant support from the AFP Research Council.
Grant awards are made in two equal payments, the first upon receipt of the grantee’s signed letter of agreement and the second upon receipt of the final written report for the project.
Inquiries and proposal letters should be sent to: Cathlene Williams, Ph.D., CAE, vice president, research, Association of Fundraising Professionals, 4300 Wilson Blvd., Ste. 300, Arlington, VA 22203; (703) 684-0410; email firstname.lastname@example.org.
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AFP Canadian Legal Webconference: Donation Tax Shelters And Flow-Through Shares (Jan. 24, 2008)
A special Webconference presentation just for AFP’s Canadian members! Terrance S. Carter, B.A., LL.B. and Theresa L.M. Man, B.Sc., M.Mus., LL.B. will provide an overview of flow-through share donation tax shelters, well as the status of draft legislative amendments to curtail tax shelter donation arrangements. This program can be heard as either a Webconference or an Audioconference, either for the same low price of $145 per member site. Go to the AFP website (www.afpnet.org) and click on the Webconference in the “To-Do List” on the right hand side.
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