In the first part of a two-part interview, our Assistant Vice President of Grantmaking Services, Andrea Rush, explains some of the challenges that face grantmaking organizations in the immediate aftermath of a disaster and how long-term commitments to the affected communities are just as critical.

This spring marks the one-year anniversaries of the earthquake and tsunami that devastated many parts of Japan and the deadliest tornadoes in the U.S. in nearly 60 years. A number of challenges still face the local communities in Japan and the Midwestern U.S., and their respective local and national governments, as they continue to rebuild.

In the first part of a two-part interview, our Assistant Vice President of Grantmaking Services, Andrea Rush, explains some of the challenges that face grantmaking organizations in the immediate aftermath of a disaster and how long-term commitments to the affected communities are just as critical.

Q: What is the disaster that spurred the most action from NPT’s donors?

A: By far, the reaction in the aftermath of 9-11 was the most powerful one I have seen to date. It was immediate and powerful.  Literally, on September 12^th, we changed our grant processing to get 9-11 related grant funds out the door on a daily basis to the Red Cross, Salvation Army, and three other reputable assistance funds.  One local donor even came to our offices with grant recommendation forms in his hand because he wanted to do something. It was also a sustained effort; those grants kept coming for months after.  For most people, the only way they could REALLY help was to give money, so they did – it was a very visceral reaction.

Q:What types of organizations do donors typically give to in the wake of a disaster?

A: Donors typically chose to give to relief service organizations right after a disaster strikes.  For example, the Red Cross, Doctors Without Borders, Save the Children and other recognizable and well-respected organizations fulfill immediate needs, like clean water, medical supplies, food, shelter, etc.  As you can imagine, after a tragedy, a variety of organizations collect money for assistance funds, and the majority are reputable and worthwhile organizations, but this is a time to be very cautious. The aftermath of a tragedy is not the time to support a charity you have never heard of.

Q: Are these the most high-impact charities you can give to?

A: In the immediate aftermath, yes, the relief and recovery charities are most important.  However months down the road, the need switches drastically to the organizations which provide education, on-going healthcare, food security, employment opportunities, and long-term housing.  These are usually the forgotten needs which are necessary to recovery. This is something that Haiti is currently struggling with. 

Q: How common is it to see a sustained commitment to giving after a disaster is out of the news?

A: Sustaining commitment in the long-term to impacted communities after a tragedy or crisis is a real struggle. At a conference I attended at NYU last year, a representative from the International Rescue Committee said they struggle with receiving an influx of funding for a particular area post-tragedy or conflict, and then grapple with sustain long-term aid to these same areas after the donors have moved on to other areas of focus.   In many cases, after a crisis, out of sight is definitely out of mind, and relief organizations struggle to keep their work in the public eye.   

After September 11^th, 2001, NPT was privileged to work with a program that was created specifically to address the long-term needs of children affected by the attacks.  The Hasbro Children’s Foundation of Hasbro Toys started the September 11^th Children’s Fund at NPT with an initial gift of $250,000.   Hasbro covered all of the Fund’s overhead expenses so that every dollar we collected would support the children who were affected by the tragedy.   The focus of the fund was to provide for the long-term health, wellness and mental health issues facing children directly affected by 9-11, either through the loss of a loved–one, or the children who were present in lower Manhattan on September 11^th. NPT received over $4 million in additional donations from hundreds of people around the world.  Over the course of five years, we strategically made grants to address the lingering effects of grief, anxiety, post-traumatic stress, etc.  More of this type of pointed grantmaking towards recovery is needed, and hopefully will be seen in years to come as rebuilding continues in place like New Orleans, Haiti and Japan. 

In our next post, Andrea will explain what challenges charities, like NPT, face in the wake of a disaster and an outpouring of support.

Today marks the ninth annual International Corporate Philanthropy Day. Started in 2004, the day is an opportunity for corporations to recommit to their philanthropic goals.

Today marks the ninth annual International Corporate Philanthropy Day. Started in 2004, the day is an opportunity for corporations to recommit to their philanthropic goals.

Recent reports have shown that consumers want to support businesses that give back. On its face, it seems as if businesses are responding to this consumer preference: the most recent Giving USA report estimated corporate philanthropy up by more than 10% in 2010 from the previous year.

However, a study from the Committee Encouraging Corporate Philanthropy (which founded International Corporate Philanthropy Day) showed that more than 40% of surveyed businesses maintained or cut back on corporate philanthropy in that same time period. More telling, I think, is that—on average—corporations give away only one-tenth of one percent of their after-tax earnings, while individuals give between 2 and 3 percent of their adjusted gross income to charity. With this imbalance, it is unsurprising that individuals are more likely to support a company with transparent corporate philanthropy practices.

Attendees at this year’s International Corporate Philanthropy Day noted the difficulty in convincing investors that charitable giving is an important part of doing business these days. No doubt this is a challenge, but it’s one that companies must overcome. As consumers become increasingly educated about corporate practices and engaged in social media, their purchasing influence will rise accordingly. Companies who can’t demonstrate a transparent and meaningful commitment to philanthropy may be left behind. 

If corporations need a reason to engage in philanthropy, they should look no further than data published by the University of Iowa last year. The numbers showed that giving not only bolsters PR and community relations, but actually improves employee morale and productivity--making corporate giving good for the bottom line at every angle.

On February 8, 1867, the first meeting of the nation’s first foundation was called to order. One hundred forty five years later, its legacy remains embedded in American philanthropy.

The Peabody Education Fund, established with a $2 million gift from philanthropist George Peabody, was created for the purpose of encouraging education in the post-Civil War American south. During the fund’s existence, its trustees distributed more than $3.5 million in southern states. Liquidated in the 1890s, the majority of the fund was used to establish what is now Vanderbilt University’s George Peabody College for Teachers.

The indirect legacy of the Peabody Educational Fund is equally notable. The original Board of Trustees, selected by George Peabody himself, was comprised of Governors from the north and the south, marking one of the first collaborative efforts since the onset of the Civil War. The first educational philanthropy, the fund also served as a model for future efforts to improve education in America.

George Peabody is said to have influenced his friends, Johns Hopkins and Enoch Pratt, to establish the famed institutions still in existence that bear their respective names. Other American philanthropists through time, including Rockefeller, Carnegie and Gates, have also cited Peabody and his model for charitable giving as inspiration for their own giving.

Bank of America just released its 2011 Study of High-Net Worth Women’s Philanthropy. For years, women have been known as active volunteers. But their charitable giving has long trailed the amount given by men, as women often mirror their spouse’s philanthropy.

This study highlights how things are shifting. As women’s presence in the work place, and in turn their personal earned income, increases, they are taking charge of their philanthropy in new ways.

I found it particularly interesting—though unsurprising after 25 years in this business—that women are more likely than men to map out a giving strategy and budget; less likely to tolerate risk with their philanthropic assets; and more willing to diversify the charitable organizations that receive their support from year to year.

With women becoming more involved in philanthropy, they’re not just changing who is giving, but how.

For other articles discussing the implications of this new study, click here and here.

After collecting data over the past year, we are happy to release our 2011 Donor-Advised Fund Report.
 
One of the highlights in this year’s report includes a marked increase in contributions to donor-advised funds. National charities received nearly $4 billion, which was an increase of 42.3% from the previous year and more than half of contributions to all sponsoring charities.
 
Another noteworthy statistic is the total of $30 billion in assets under management at all sponsoring charities. This figure is important because it approaches the pre-recession high of $30.2 billion.
 
These numbers, combined with others in the report, signal an optimistic future for donor-advised funds. Several large national charities have already reported robust increases in contributions in fiscal year 2011. NPT projects donor-advised funds could achieve historic highs in next year’s Donor-Advised Fund Report.

Numbers in the published report vary slightly from those used in earlier blog posts based on extra data collected.

My last post on donor-advised fund payout rates turned out to be quite timely. During the week of December 5, 2011, the Treasury Department released its long-awaited study on donor-advised funds and supporting organizations.
 
The Treasury Department’s study used 2006 data, but found that payout rate from donor-advised funds is substantially higher than the 5 percent required of private foundations. According to the Treasury’s study (which, again, uses slightly dated figures) the payout rate for national donor-advised fund programs ranged from 14.2 to 28.7 percent. These findings closely mirror the data in NPT’s annual Donor-Advised Fund Report.
 
Those of us in the industry have been waiting for the Treasury Department’s study for years. We didn’t know what the study would say, but we knew it would address some of the more hotly-debated issues, like the role of donors as advisors for investments and grants; and distribution rates for donor-advised funds.
 
Interestingly, the study did not make any recommendations on a minimum distribution requirement. With this new data, I contend that decision-makers won’t have any justification for creating new payout requirements. As I outlined in my last post, the data supports the idea that creating a minimum distribution level for donor-advised funds may actually suggest a maximum to donors. The effects of which would actually lower the payout rates and reduce the amount granted to charity.
 
It remains to be seen what, if any, ultimate action the Treasury Department’s study will spur. Using the data from the study, especially when supported by NPT’s most recent Donor-Advised Fund Report, the real pressure may be on the private foundations to increase their minimum annual payout.
 
After years of waiting for the Treasury Department’s study, I look forward to reading my colleagues’ analysis of and response to it.

Last month, the New York Times ran an op-ed by academic Ray Madoff on donor-advised funds (DAFs). In her piece, Ms. Madoff painted a picture of DAFs as a kind of “warehouse” for charitable contributions. As the President and CEO of a national DAF program, I find this characterization misleading and a disservice to donors and the charitable sector.
 
While many DAF programs are not legally required to meet a minimum annual payout, the majority have guidelines to ensure that DAFs actively make grants. In fact, the overall payout rate for DAFs is nearly four times that of private foundations. 
 
The data NPT collected for its annual Donor-Advised Fund Report shows the average payout rate of DAFs in 2010 was over 17 percent. This total includes all charitable sponsors, including community foundations and single-issue charities, like universities and hospitals. The average payout rate for national DAF programs, of which Ms. Madoff is particularly critical, is even higher at 19 percent.  Over time, many of the national programs have far exceeded that level—NPT and our donors have granted out more than half of our assets since inception in 1996.
 
According to the IRS, private foundation payout rates hover around the obligatory 5 percent each year. That payout includes overhead costs of operating a private foundation, so the total amount reaching smaller charitable organizations is actually much less than 5 percent. I contend that placing a minimum on grantmaking from DAFs may also be suggesting a maximum to donors—ultimately having a negative effect on grants paid out.
 
The crux of Ms. Madoff’s argument seems to be that money in DAFs is languishing, out of reach to worthy charitable organizations. However, that logic assumes that all contributions to a donor-advised fund would be given directly to charitable organizations instead of another charitable giving vehicle. It is far more likely that those funds would go to an alternative giving vehicle, such as a private foundation with a substantially lower payout rate or a charitable remainder trust with a substantially deferred payout.
 
DAFs allow philanthropists to create concentrated source of charitable capital. Investments in DAFs grow tax-free, creating more money for charity.
 
I presume Ms. Madoff and I can agree that philanthropy is of critical importance and a hallmark of American society. If giving patterns continue, DAFs will keep granting out vastly higher percentages of their assets than other charitable vehicles, thereby supporting important charitable programs and services in the U.S. and around the world.
 
You can find another industry response to Ms. Madoff’s op-ed here.

Last week, I was one of four judges for the 2011 Social Innovation Fast Pitch competition. Sponsored by Los Angeles Social Venture Partners, this event was the final step in a process designed to help nonprofits tell their story more powerfully and succinctly.

Earlier this year, 103 nonprofit organizations applied to the competition. From this group, 20 semi-finalists were invited to participate in a two-month workshop to help them fine tune their skills. How did that happen? Forty volunteer business leaders volunteered to mentor and train the semi-finalists to become masters at communicating their mission and impact. Finally, ten finalists were selected and given three minutes to present their best pitch and compete for more than $100,000 in awards.

As I watched ten finalists tell their stories, I knew that the competition made perfect practice for anyone who wants to attract assets to their cause. To effectively tell your nonprofit’s story, the first challenge is fully understand your mission and to be able to explain in a short compassionate – and accurate manner. You need to be able to summarize a large amount of information. If you’re a new group, you have to explain your inspiration, vision and strategy. An established organization may have years of results to share.

Passion for the cause and human-interest highlights can make hard data come alive but it can’t replace it entirely. So you have to be facile with facts and reinforce the impact you are having. A complete story works best.    

You need to know which part of your story works best, which facts underscore your effectiveness and how to weave facts and mission and human stories together. It was clear that three minutes was enough time for these nonprofit leaders to tell a compelling story and provide key facts.

In this competition, everyone did a remarkable job of achieving balance. In fact, they made it difficult to select. But like real life, money is a finite resource and someone had to win. Caroline Kunitz, representing L.A. Diaper Drive, earned both the Judges' Award of $20,000 and the LASVP Investee Award. The latter includes an initial investment of $20,000 as well as continued funding and capacity building support from LASVP. Other winners were Ezequiel Olvera, from the Gumball Foundation and Karen Van de Laat, from Get on the Bus.

I learned from someone at LASVP that, in the aftermath of the competition, one runner up received unexpected resources from a generous donor in the audience. Making your case clearly and persuasively in front of the right group can attract resources and also bring excitement and other kinds of support to great missions.

Grantmaking is a key piece of information that we measure in our Donor-Advised Fund Report. This year, when we looked at all different kinds of donor-advised fund programs, we found a modest increase (1.3%) in the total amount of dollars granted. The combined number was $6.2 billion, the second highest we’ve seen since our report began.

We also found that donor-advised fund programs collectively granted out 17.9% of their assets in 2010. This percentage is higher than the 16.8% payout rate from 2009. It also far exceeds the typical 5% payout rate made by private, family and corporate foundations.  

When we looked at the programs in separate groups, we found that National Charities were driving the increases. In 2010, National Charities increased grantmaking by 15.3% to a record high of $2.9 billion. Since 2007, National Charities have increased grantmaking by 33%.  
 
By contrast, Community Foundations decreased their grantmaking by 12.7% to a total of $1.9 billion. This was the fourth straight decrease for Community Foundations and the steepest decrease since 2007. Furthermore, Single-Issue Charities (faith-based institutions, universities and “issue specific” charities) decreased their grantmaking by 1.9% to a total of $1.46 billion. This is the lowest total for Single-Issue Charities since 2007. 

For the Donor-Advised Fund Report, NPT’s annual survey of donor-advised fund programs, we break down sponsoring charities into three categories: National Charities, Community Foundations and Single-Issue Charities.  National Charities include 501(c)(3)s created by financial service companies and Single-Issue Charities include faith-based institutions, universities and “issue-specific” charities.

Over the last several years the fastest growing segment has been the National Programs.  Last year, National Programs achieved record highs in number of accounts (88,396), assets ($12 billion) and grants ($2.9 billion).  And while contributions to National Programs fell short of their 2008 high, the nearly $4 billion received was a 41% increase from 2009. Currently, National Programs serve more donors and receive more contributions than the other two market segments combined.  

Despite granting out 65% more than that of Community Foundations ($2.9 billion versus $1.7 billion), NPT projects that by next year’s Donor-Advised Fund Report, the assets in National Programs will surpass those held by Community Foundations.