Man, I hate it when I’m right all the time…OK, no I don’t.  Dang!  There I go again, being right and saying so.  Anyway, I’ve read the first few pages in “Uncharitable” and WOW am I impressed; this guy (Dan Pallotta) sounds like me!  Don’t be impressed with anything I’ve said or blogged on this subject; Pallotta says it much better than I ever could, but these are some of the things I’ve been talking myself blue in the face over: the NPO sector has this hat-in-hand, tin-cup mentality that is symbolic of an inferiority complex.  True story:  there actually is a NPO that gives out the Tin Cup Award to the board member who has  supported it the most.  Can you believe it?  An award that exemplifies small-mindedness!  As you might have guessed, this NPO is so backward, it’s not even funny.  And it’s too bad, because the need is so great for what they do, but as Pallotta said, some NPO’s think that process has greater value than progress.

Man, I hate it when I’m right all the time…OK, no I don’t.   Have you noticed that several of my prior postings have started out this way?  Hey, when you’re right, you’re right, so why hide it?  OK, enough gloating.

“Uncharitable” came in today and from what I’ve read on the jacket and a few of the appendix items I flipped to, I’m right on with some of my “heretical” NPO ideas, like advertising,  special event fundraising, and direct mail.  I’m going to read a few chapters before I contact the author, but so far, it appears he and I are philosophical soul-mates on NPO’s.  Who knows?  Maybe he and I can do something to shake things up; Lord knows it’s needed.

Man, I hate it when I’m right all the time…OK, no I don’t.  I read over the US News article on leaders and lo and behold only one name stands out as anything resembling an NPO leader: Marian Wright Edelman, who is described as an “activist”.  Well excuse the @#$%& out of me, but when you say “activist” I see ACORN and Lenin and the Black Panthers and a whole lot of folks that are just professional butt-rashes.

OK, the part about me being right, and being right ALL the time.  There are others mentioned in this article who are NPO leaders, but no one knows who they are.  Why aren’t Dr’s Freeman Hrabowski and Regina Benjamin household names?  Why aren’t we shouting the praises of Linda Rottenberg from the roof-tops?  These are fantastic people who have made it their life’s work to make the world a better place…but no one knows who they are.

Do you remember what you saw a few posts back when I challenged y’all to think of the top 3 NPO leaders?  Well, I did.  The point being is that NPO “leaders” aren’t too well known.  We know who the leaders are in politics, religion, sports, higher ed, entertainment, etc., but no one can just sit down and say “these are the most well known NPO leaders in America”; because no one knows who they are.  Why is that?

Some of that fault lies with the NPO’s themselves and part lies with a culture that devalues NPO work and it’s various policies and strategies, especially in the fundraising realm.  When I say “fundraising realm” I mean the usual suspects: spaghetti dinners at the firehouse, golf tournaments, and the other brain-dead methods we see in the paper all the time.  Who can blame anyone for not getting excited if this is what the public is exposed to?  It is dry and boring and unexciting.

I’m getting to my point; I promise.  Here it is: I am just now discovering a “US News & World Report” magazine piece titled, “America’s Best Leaders” (Dec. ’08).  Of the 24 entries, a few are identified as activists or reformers, but most are politicians or educators or scientists.  None of them, again I say: none of them are identified as NPO leaders.  It’s as if this $2 trillion gorilla is in the room and no one sees it.  Can someone tell me what in the wide, wide world of sports is a-goin’ here?  NPO “leadership” is either non-existent or hidden so well that it isn’t seen by outsiders.  I’ll ask it again: with a $2 trillion asset base, excellent PR, highly motivated workers/volunteers, and a track record of operational efficiency, why is it this way?

OK, this is for all of my adoring fans out there; yes, both of you.  I’m going to keep saying this until someone kills me dead or puts me on a much-deserved pedestal and throws a parade in my honor and elects me to sainthood and makes me king of the world and declares there is no one anywhere smarter than I and…oh, sorry, got carried away.

If anything comes forth from this blog, I hope it’s this: that NPO’s stop cowering from their shadows and do something, anything financially pro-active.

By that I mean please evaluate my idea for their donors converting reverse mortgages into gift annuities.  Or another great idea; (from Stephanie Buckley at Pepperdine) converting life estates into gift annuities.

NPO’s are uniquely positioned to offer an incredible service to their donors: gift annuities from real estate transactions.  These are times in which leadership will be immediately seen and appreciated; these are times when NPO leaders need to stand up and say, “We may have an answer.”  Not every NPO will see this as an attractive funding mechanism, but as I’ve disclosed before, even if 99% of this market says “no”, then “only” $20 billion will be put to use.  “Only” $20 billion.  That’s billion with a “b”.

Folks, the process, products, and procedures all exist now.  Nothing has to be invented or legislated or dreamed up.  Nothing.

But Steffan, you wild-eyed capitalist tool, you; NPO’s don’t take risks and don’t like to gamble with new ideas and policies.  Then go talk to all the NPO’s that lost money with Bernie Madoff or were ripped off by an unsupervised bookeeper. 

THIS IS EXACTLY THE RIGHT TIME TO LOOK AT NEW IDEAS AND POLICIES…because…THE OLD WAYS AREN’T GOOD ENOUGH ANYMORE!

True leadership is defined by a willingness to use past and present information and experience to shape a better future.  We don’t have crystal balls to gaze into, but we do know what doesn’t work anymore.  And we do know that if we don’t change and at least explore other methods, we will go the way of the T-Rex and Burger Chef (see first or second post).

Try this; please, please, please try this.  There is nothing illegal or immoral or unethical about this proposal.  There is due diligence to perform, but you did that before you gave $10 million to Madoff, right?  At least do that much, and I believe you will pleasantly surprised.  By the way, I wrote this up in the October 2007 issue of “FundRaising Success” magazine.  Check it out.

Since this my blog, I’m able to promote/demote ideas and/or thoughts as I see fit.  Several of my remarks may have seemed too harsh for some of you thin-skinned types out there; too bad.  If you have an opposite view-point, please use the commentary portion of this blog to say so.  Or better yet, start your own blog.  In the meantime, I want to appeal to all my fellow financial/estate/philanthropic planners to attend a meeting of the Tampa Bay chapter of PPP, the Partnership for Philanthropic Planning, f/k/a NCPG, or the National Council on Planned Giving.  You won’t find a more dedicated group of professionals who are committed to serving their clients/donors and their community.  If you’re a CPA, you’ll find an estate planning attorney, if you’re a trust officer, you’ll find a insurance professional, and so on.  I’ve discovered that it is best to have a team approach when discussing philanthropic  issues with clients/donors and their families; all the questions get answered and all the contingencies get covered.  If you need to assemble a team, the Tampa Bay chapter of PPP is the place to find one.  One area I hope to add to the above list of pro’s is commercial real estate (CRE).  It is my experience that about 20% of CRE deals don’t get to the closing table because of capital gains taxation.  On a $5 million deal, that’s a $1 million price tag that can be ethically and legally avoided through the right planning.  PLEASE NOTE: avoiding taxes is so far down on the list of charitable motivators as to be negligble, but it’s there.  CRE owners typically have a favorite charity or two that they have supported over the years, so discussing a CRT (Charitable Remainder Trust) or CGA (Charitable Gift Annuity) shouldn’t be too surprising to them.  It is also my experience that CRE professionals are some of the sharpest folks around; they network, they have several different industries represented within their ranks, and they have an extensive program of professional development through training, education and credentialing.   CRE transactions are also huge; a small deal is $500,000!  To some NPO’s, that’s a whole year’s planned gift budget.

Man, I hate it when I’m right all the time…OK, no I don’t.  The Daytona 500 is this weekend and the buzz in NASCAR is about those teams which are no longer able to secure sponsorship $’s.  I told you, I told you, I told you; CORPORATE SPONSORSHIPS ARE NOT RELIABLE!!  NEITHER IS GOVERNMENT FUNDING!!  This is nothing new, folks.  For hundreds of years, there have been unforeseen economic forces that cause corporations and government entities to change their spending practices.  The first things cut from the budget are the non-essentials.  For corporations, those may be the corporate jet or the expensive retreat or the year-end bonuses.  For government, it’s the non-profit sector, especially social services.  This does not sneak up on anyone, these forces or trends or whatever you want to call them will always be there; the problem is forecasting when and to what degree they will impact the NPO sector.  So what is a responsible fore-sighted NPO to do?  Invest in people; donors, volunteers, and staff, who are willing to develop relationships (a tribe) with each other and the NPO.  This may sound all warm and fuzzy (it’s warmer and fuzzier than a government agency) and gushy and mushy, but people will not give to an NPO they don’t have a relationship with.  A committed donor (or tribe of) will not abandon their favorite NPO.  Wars, depressions, recessions; none of these have caused a downturn in giving by individuals.  Of the $296 billion donated in 2007, how much was by individuals?  88%!!  So over $260 billion was given by entities other that foundations, corporations, or government sources.  Why, oh why do NPO’s spend so much time and effort and money on crappy fund-raising schemes like golf tournaments, direct mail, and government contracts?

OK, my rant has lost it’s way; back to resolving this fund-raising dilemma.  Hire fund-raising professionals who know planned giving and who are out of the office doing it.  Fund-raising from the office DOES NOT WORK.  It’s called order taking, not fund-raising.  Good fund-raising operations know that you can’t cultivate relationships with a piece of mail or a phone call; it has to be done face-to-face.  Clueless NPO managers (and you know who you are) that continue to use inefficient practices are expecting a different outcome by repeating failed procedures year after year.  A very intelligent man once said that that was the definition of insanity.

So what do I have against endowments?  Nothing, as long as they’re used in a way that is consistent with the mission of the NPO.  As a hedge against unknown economic downturns or as a way to help those drawn in by the mission, endowments are a good way to offset those costs.  But as I stated before, Harvard’s mission is education, not endowment building;  XYZ’s mission is helping kids, not endowment building.  The biggest problem I see with NPO endowments is their never-ending quest for government dollars, a/k/a taxpayer dollars.  So here’s the rub:  Joe and Jane Taxpayer have Junior who is a soon-to-be high school grad.  Jr is at the top of his class and has met all other requisite items to get into Harvard.  Does the Harvard endowment pay for Jr. to go to school there?  Probably not, unless Joe and Jane were alums.  But Harvard gets millions annually from the government (the taxpayer) via student loan disbursements and research grants.  Locally, XYZ has a $15 million endowment and government contracts (financed by the taxpayer) to help troubled kids.  XYZ can only house 60 kids, so anyone else attempting to get into the program will be shut out.  How does society (the taxpayer) integrate a troubled kid back into it without treatment?  Why isn’t XYZ carving out a portion of the endowment to build another residential treatment cottage?  Isn’t the unsavory alternative of turning a disturbed youth on an unsuspecting society (the taxpayer) the only other decision?   What kind of decision is that?  “Yeah, we have $15 million in our endowment, but we would rather hold onto it instead of helping 10 more kids and our community; while we have your attention, call Congress and tell them we need more funding”.  Say what?  Does anyone else see this as a problem?  Are NPO’s supposed to give back or hold back?  It would be like me asking friends or family for $250,000 to build a house when I have $5 million in stocks or other liquid assets I could use.

I’ve just charged myself with developing a formula, one that will evaluate the ratio of government funding to endowment holdings.  If endowment assets are X percent of the value of NPO A, then any government funds are disbursed accordingly.  The greater the percent, the less government involvement (re: dollars) there will be.  It serves both purposes actually; Harvard doesn’t like Senate sub-committees nosing around their business, the Senate doesn’t like uppity Harvard trustees blowing them off nor do they like appropriating more money to an NPO with a $30 billion endowment.  Harvard gets less government money; the Senate is happy.  The Senate diverts government funds to a Constitutional purpose for a change and stays out of Harvard’s hair; Harvard is happy.  I’m a stone-cold genius!!  Not really, but it sounded good for a minute.

A critical reader (and that’s OK) may decide that this Cress guy is way too abrasive or coarse to be considered a leader in the NPO world.  After reading the previous posts one might get that idea; but I hope one also picks up the passion I have for NPO’s and the incredible potential they possess, potential that I believe hasn’t been fully tapped.  I’ve documented a few of the reasons why I believe NPO’s are leaving too much on the table: an inferiority complex, an unwillingness to rock any boats or take risks; an aversion to “the ask”, too dependent on unreliable funding sources (government, corporate sponsorships, special events), an unwillingness to embrace successful for-profit strategies (ex: advertising), etc.  Let’s suppose that I am too critical; I have to ask, though: why should NPO’s get a pass from criticism?  Are they so pristine in their activities and mission that they’ve reached perfection?  Has their NPO status reached such a lofty place that they can’t be criticized?  I’ve said it before: the NPO world is sitting on a $2 trillion chunk of assets – there shouldn’t be one hungry kid or homeless vet or unsaved whale or uncured disease anywhere.  Why aren’t we spending $2 trillion to feed kids or give shelter to a veteran or save a whale or cure cancer?  Because there is power and authority and leadership (!?!) in possessing a $2 trillion asset, not spending it down.  Spending it down means letting go; letting go of the power, the authority, the leadership that possessing anything brings.  As is my annoying custom, I’ll pick on one of the big boys: Harvard.  Harvard has $30 billion endowment; with $30 billion, Harvard could educate every man, woman, and child in the US for the next 50 years.  Harvard’s mission is education, not asset hoarding or endowment building, especially in light of the government subsidies (student loan proceeds, research grants, etc.) they receive.  On a smaller scale, I know of a long-standing child welfare agency with a $15 million endowment; this agency has a residential program that houses about 60 kids.  Excuse the @#$%& out of me; but with $15 million in their back pocket, why aren’t they housing 160 kids or 66 kids?  The endowment is not to back up any deferred gift obligations because they have too few to back up.  But this is an organization that’s been at the government teet for decades without being required to take one dime from a $15 million endowment.  Sometimes the balance sheet gets more attention than another kid does.  Shame, shame, shame.

I’m not talking about bankrupting any organization, either; but with $505 billion in foundation assets plus $495 billion in endowment assets out there ($1 trillion) why can’t a little more, say .001, be disbursed?  Even at a .001 disbursement, that’s an extra $100 million in the economy helping people.  Who needs it more: needful missions or endowment managers?  Who could use an extra $30 million from Harvard?  Thousands of potential Harvard grads or the Harvard endowment managers?  Who could benefit from an extra $15,000 from XYZ organization?  One or two kids or the XYZ endowment manager?

I’m just sick and tired of being told what can’t be done rather what can be done.  “It can’t be done…” because (1) “we’ve never done it that way before”, (2) “the board won’t like it”, (3) “we aren’t budgeted for that”, (4) “you aren’t supposed to spend the principal”, (5) “it’s our rainy-day fund”, (5) “our bank is our investment mamager and we have to keep high balances”.  Did I say “shame, shame, shame” earlier?  Let’s add “lame, lame, lame” in characterizing these excuses, OK?  When an organization which has existed for 117 years, only has a handful of planned gifts, has a piss-ante $15 million endowment, has lived off the government for 50 years, and only houses 60 kids, there is something fundamentally wrong with that business model.  But Steffan, you wascally wabbit you, what’s wrong with helping 60 kids and collecting $15 million endowed dollars?  Because this is an organization that has looked at fund-raising as a “tin cup” operation.  Because at 117 years, you would think that they would have $115 million in their endowment, not just $15 million.  Because with $115 million in an endowment, an organization can capitalize more that just 9 gift annuities, maybe 999.  Because with a $115 million endowment, an organization can now afford to house 600 kids, not just 60.  Do you see where this pettiness and small-mindedness has taken this organization?  But don’t dare try to say anything; you might be accused of “not fitting in”.