Southeastern Council of Foundations

When I led the U.S. Small Business Administration (SBA) in San Francisco, I was struck by the enormity of people who thought they could start and run a restaurant profitably. Mind you, many of these individuals had never even worked in a restaurant, engaged in wholesale food purchasing or developed menus beyond their family units. A business plan?  No chance. But most had a concept, a name picked out and a fervent belief they would be successful. Not surprisingly, restaurants represented the greatest chunk of failures on SBA loans, and those were establishments that had business plans and capital to fuel their launch.
 

There is a parallel in our world, of course. There are scores of people out there that think that they’re capable of starting and managing a nonprofit. It can’t be that difficult, right?
 

As I shoved my Chronicle of Philanthropy into my laptop bag in anticipation of landing in Northwest Arkansas recently, my thoughts were interrupted by the individual in the adjacent seat, “Excuse me.  Do you work with charities?”
 

“Yes,” I answered.  “Why do you ask?”

“I’m thinking about starting a non-profit to help kids with literacy,” he responded.  “I’m going to call it Each One, Reach One, Teach One.”
 

He looked to me for approval, but received instead a rapid-fire string of questions: “Have you been involved as a board member of any non-profit organizations? Have you looked around your community to see if any good literacy programs exist to which you might lend a hand?” Etc.
 

A bit startled, he answered no to all of them, then retreated with a, “Like I said, I’m just thinking about it right now.”
 

I encouraged him to check with his United Way to learn about community organizations with a focus on literacy, and he said he would do so.
 

We’ve all had those conversations, with our friends as well as perfect strangers. Somehow, there’s this passionate, altruistic desire to give back coupled with the notion that putting together and running a non-profit can’t be that difficult.
 

The "putting together" side of that equation is fairly accurate. The fact that we now have 1.1 million charities in this country is testament to that. Comply with the laws of your state for incorporation, determine your charitable purpose, pull together a few friends to serve on your board, send off your eligibility request for tax-exempt status to the Internal Revenue Service and, voila, you’re in the charity business.
 

The precipitous decline in our U.S. economy in 2008 and the strains it placed on charities catalyzed a call from the philanthropic community for collaboration and consolidation in the non-profit sector. Perhaps weeding out the charitable marketplace isn’t a bad thing, we proffered. Likewise, I’ve heard sentiment expressed recently that the IRS revocation of 501(c)(3) status of charities failing to file their 990 PF forms is not such a bad thing, either, under the rubric that charities that can’t handle such basic regulatory checks shouldn’t be permitted to exist in perpetuity.
 

I can’t refrain from the obvious question, however: what if we required more on the front end to secure 501(c)(3) status? Perhaps requiring incorporators to demonstrate how their proposed charity will distinguish itself in the marketplace by meeting a need (in the community or otherwise) that is not served already by another charity. How about charging a registration fee sufficient enough to make people think twice about creating a new entity, and simultaneously create more resources for the IRS to undertake a broader review of the non-profit sector? If nothing else, that might encourage more due diligence and encourage people driven more by altruism than ego to give their time and talents to an existing nonprofit.
 

In the meantime, we can continue to have those one-on-one conversations.

What do you think?

Dr. Sherece West is president and CEO of the Winthrop Rockefeller Foundation in Little Rock, Arkansas. She will be participating in a panel discussion on philanthropic leadership at the SECF Annual Meeting in November.

I recently read a blog post from Pablo Eisenberg entitled, “The Social Innovation Fund: Innovation for What?” In it, Mr. Eisenberg criticized the Obama Administration’s Social Innovation Fund for focusing too small an investment on only a few large, well-known nonprofits and engaging only a small number of very large foundation supporters.

In particular, Mr. Eisenberg points to rural communities that will essentially be left out of the game, and notes an opportunity for innovation that the fund will certainly miss:

Thousands of small nonprofits in rural areas and in regions currently underfunded by philanthropy are in desperate need of financial support. To meet this need, the Administration could use the Presidential bully pulpit to urge the foundation community to create new, large rural and regional foundations with the capacity to reach out to these overlooked nonprofit organizations and their communities.

Working in Arkansas, a predominantly rural state, I completely agree with Mr. Eisenberg’s criticism of the Social Innovation Fund and about missed opportunities in rural philanthropy, and I hope he’ll speak more to that during his live debate at the SECF Annual Meeting. But I also think that those of us who live in rural states bear our share of the responsibility for changing the game. Before we create “new, large rural and regional foundations,” those of us who are already working in rural areas need to ask ourselves some serious questions:

• What are we going to do to make rural America a priority for national funders and the federal government?

• What are we going to do to attract public resources to leverage our grantmaking and make scalable best practices?

• What are we going to do to influence public policy decisions?

• What are we going to do with our limited resources to be part of the solution as opposed to continuing to perpetuate the problems through grantmaking practices and approaches?

I can think of three things.

First, we can become advocates.  We can help policymakers in Washington correct their misconceptions of rural America as an agrarian Utopia and help them see the true challenges of joblessness, poverty and out-migration that rural communities face. We can inform the process of advocating federal dollars so that rural localities could collaborate on initiatives that would benefit broader regions. We can go to the Hill and talk with our congressional leaders about funding formulas. We can support research that informs the policy debate. We can bring in technical experts to help us consider the best short?term and long?term approaches. We can use our convening power to spur conversation and educate policymakers and advocates about what is best for our rural communities.

Second, we can be activists. Philanthropy is sometimes called the research and development arm of society. At our best, we can use our unique role to identify and understand the dimensions of deeply rooted social problems, test strategies to address them, and serve as a catalyst for change. The creation of new economies in rural areas with livable wage jobs; building the capacity of our nonprofit infrastructure to play its vital role in rural society; and bringing to scale the outstanding work of many of our nonprofits to provide services and supports to rural citizens — all of these are more likely to happen with activism. I know that “activism” is a scary word to most funders, but we need to get over our fear and begin collecting good data, educating our constituencies to develop community change goals and actively influencing how resources are attracted to and used within our communities.

And finally, we can be accelerants, the catalysts for change that light a fire under rural grantmaking. Nationally, more needs to be done to grow the capacity of our vitally important community foundations in rural areas and the affiliate structures in those areas with affiliates. But community philanthropy must include those who live and work in rural communities as part of the solution and not simply as the recipients of benevolent gifts. Foundations and communities must join together in collective or collaborative strategies for community change.

Yes, Mr. Eisenberg is right. Rural America deserves philanthropy’s attention. But it’s up to us to make sure we get it.

Reason #10 – November’s not really that far away.

Even though summer’s just begun, we’ll all only get busier as the year goes on. Don’t let the Southeast’s premier event for grantmakers get lost in the shuffle. Register now to secure your spot and check it off your list.

Reason #9 – The “Clash of the Titans” is for real.

Right now, there are two strong opinions in our sector about what foundations could and should be doing. How that conversation develops will doubtlessly influence how federal and state policies about philanthropy are shaped. No one represents the two sides of the debate better than Pablo Eisenberg and Dr. Leslie Lenkowsky. These two thought leaders will go head to head at the SECF Annual Meeting — and you can have a front row seat. 

Reason #8 – It’s better than having a crystal ball.

The SECF Annual Meeting follows immediately on the heels of what will to be a very critical election. You’ll hear the “morning after” impressions from experts about what the results could mean in terms of legislative policy for philanthropy, investment strategies for foundations and the short and long-term future of grantmaking.

Reason #7 – The Great Recession’s not over yet.

Things may be looking up, but we’ve still got a long way to go. At the SECF Annual Meeting, you’ll learn new strategies for tackling the full suite of recession-related realities — from internal investment approaches to ways to develop a community workforce and jobs.

Reason #6 — Powerful philanthropy starts with meaningful conversation.

There’s no place like the SECF Annual Meeting to gather with sector-leading peers in a format that encourages open, honest communication. In fact, the exchange of ideas in hallways and elevators alone has sparked ideas that have changed communities. Although we can’t promise everyone a life-changing moment, we can guarantee you’ll leave with plenty to think about.

Reason #5 — The Gulf Coast gets our support.

SECF secures meeting sites years in advance, and at the time we set this year’s Annual Meeting in Mobile, Alabama, no one could have foreseen the disastrous oil spill that now challenges the Gulf Coast.  While we wish the spill had never happened, we’re heartened that we have a chance to help by visiting the region, helping to generate revenue for the community, and learn about the role foundations will play in the ongoing recovery efforts.

 
Reason #4 — We ditched the stuffy dinner.

Conversation is key. Instead of plated entrees and podiums, we’ve heard the call for more informal networking — loud and clear. This year we’ve replaced the chairman’s dinner with a grand, Southern-style reception. We’re talking heavy on the hors’deouvers and mingling, and light on the interruptions. In fact, we’ve minimized the talking heads and stuffy panels throughout the entire Annual Meeting, and emphasized the opportunity for more discussion, interaction and collective reflection.

Reason #3 — Mobile invented Mardi Gras.

That’s right. Mardi Gras began in Mobile, Alabama, and the spirit of celebration and hospitality still imbues this beautiful city, along with great restaurants, breathtaking architecture and plenty of galleries and shops. What better place to celebrate and share the great work of your foundation? Although we’ll take a look at the serious issues facing our country, our communities, and our philanthropy, we’ve also made sure there’s time for you to enjoy a taste of Mobile and explore one of our region’s historic gems with your friends and colleagues.

 
Reason #2 — You just might sleep easier, because it’s free.

There’s nothing like a good night’s sleep — and yours could be free! Complete your SECF Annual Meeting registration by July 1 and you could win one free night at either The Battle House or Renaissance Riverview Hotel. All you’ll need to do is show up and snooze. (After a full day of action-packed Annual Meeting sessions, that should be a cinch!)

Reason #1 — All your friends and colleagues will be there.

We know what your mama told you: “If all your friends jumped off a bridge, would you do it, too?” But in this case, we think she’d approve. All of your friends and colleagues are coming together to share ideas, meet new leaders and thinkers, learn from experts and enjoy the fellowship of philanthropy. Shouldn’t you?

Don’t miss out. Learn more and register now. See you in Mobile!

• Nonprofits do not perceive funders to have communicated their responses to the economic downturn clearly, if at all.
• Nonprofits report that funders have offered them little useful help in responding to the challenges of the downturn. 

• Clearly communicate with grantees about their own responses to the economic climate.
• Be involved helping grantees consider changes they are making in response to the economic climate.
• Work to build better relationships with grantees, particularly by taking the time to understand the goals and strategies of grantee organizations.

I’ve just returned from the SECF Family Foundations Forum in Charleston, South Carolina. It was an incredibly rich and meaningful time together, complete with ample opportunities for foundation networking and much sharing of great grantmaking resources. Once again, I was impressed with the level of engagement among the 70 trustees and staff who attended. Their commitment to their foundations and communities, and their sincere desire to continually learn how to do their great work even better, is truly inspirational.

One saying popped up a few times during this meeting, “If you’ve seen one family foundation, you’ve seen one family foundation.” That’s very true. Family foundations are in essence extensions of the families that steward them, and are every bit as diverse. It spawned some great discussions and exchanges of ideas.

One topic that generated discussion was that of politics and philanthropy and, specifically, the relationship between our field and government in light of the new administration. To me, it underscored the point that the jury is still out on whether a deeper level of engagement from government will be a plus or minus for our field.

Some of the discussion centered around last week’s article in the Wall Street Journal about the very palpable mutual admiration between foundations and the current administration at the Council on Foundations meeting. But I was at that meeting, as well as other philanthropy conferences, and I've also heard a different view. Many were still feeling the sting of the proposed cap on charitable deductions in 2009, which was beaten back with bipartisan opposition, but has reappeared in the President’s 2011 budget.

Then there’s also the question of the Social Innovation Fund.  Many applaud it, and it will no doubt have a significant impact on some terrific organizations. There’s another perspective, however, that the White House, in creating this fund and the bureaucracy to support it, essentially is saying they think the government can affect change and invest this money better than foundations.

It’s still too early to tell. I believe that the real litmus test for the Obama Administration and its embrace of philanthropy and supportive philanthropy policy may not come until we see what happens when and if tax reform arrives on the front burner.

But there’s one key observation that comes from being among our family foundation members this week. Legislation and policy have alternatively targeted or all but ignored philanthropy for generations. And for generations, families with charitable values have found a way to keep the foundation fires burning.

Cookie Sprouse is executive director of The Chapin Foundation in Myrtle Beach, South Carolina and has worked in family philanthropy for more than 25 years. As a grandmother herself, she has a strong personal passion for fostering philanthropy in future generations.

I just registered for the Family Foundations Forum in Charleston, May 2-4, and I’m already so excited I can hardly stand it. This meeting is always very special to me, because it is the one time each year when I can get together with a small group of other family foundation staff and trustees and talk comfortably about the things that really matter. It’s where, instead of feeling like a number, I can feel like I’m among, well, family.

Gatherings like these are important in any profession, but I think especially so in philanthropy. There is a great deal of intimacy in our work, between our foundations and the communities we serve, and among those who govern us. Having an intimate setting in which to feel “safe” as you learn, make connections and even admit your weaknesses is really a blessing. It’s an opportunity for professional and personal development that I would hate to miss.

Plus, I have to admit that being in Charleston this year gives the whole thing an extra layer of charm. I was reared 70 miles from Charleston so I consider myself a “Carolina Low Country Girl.” The month of May will be a beautiful time! In addition to a really solid and exciting program, there will be plenty of opportunities to enjoy the amenities of the Holy City! In particular, I’m looking forward to the Low Country boil on Sullivan’s Island and a special reception at The American College of Building Arts. Historic and architectural preservation are strong in Charleston, and the city provides a perfect backdrop to our discussions of stewardship and cultivating future generations.

If you haven’t had time to register yet, I hope you will. (It’s so easy!) I’d love to see you among my friends in family philanthropy in Charleston!

- Cookie Sprouse

Standards are something that most of us accept as part of our everyday life.  They have become such an integral part of our existence that the average person gives little or no thought to everyday products and services, and how they work.  Standards make modern conveniences possible: light bulbs fit into lamps, electronic files are transferred over the Internet, trains move between states because the tracks are the same gauge, and the list goes on.

The American National Standards Institute defines a standard as "a recognized unit of comparison by which the correctness of others can be determined."  Simply put, standards make life safer and help organizations operate more efficiently.

In spite of the vital role that trustees of foundations play in protecting the economic health of charitable institutions, uniform standards that define how they should perform their fiduciary duty do not exist.  The investment community compounds the risk for donors caused by the lack of a fiduciary standard.  For example, procedures vary greatly from one investment firm to another for selecting and monitoring money managers and the securities in which they invest.  The reason; firms that provide investment advice, manage mutual funds, and offer alternative investing programs have yet to adopt common rules.

Imagine if airplane manufacturers had no standards to guide the way wings are made.  Many airplanes just would not fly and there would be no commercial aviation industry.  Yet tens of thousands of transactions, affecting the accounts of donors and beneficiaries, are handled every day without a recognized standard for managing the investment decision-making process at foundations.

No better example of the catastrophic effect of the lack of standards exists than events of September 11, 2001.  In the communications world, interoperability is very important.  It is a word that describes how electronics equipment exchanges information directly and satisfactorily between devices and their users.  On September 11th, many emergency response agencies were unable to communicate due to the use of different communications equipment and frequencies.  The Department of Defense reported later that hundreds of people died on September 11th due to the lack of a needed communication standard.  Because of the unfortunate lessons learned at the Pentagon and the World Trade Center, local, state, and federal emergency agencies are all looking for universally accepted interoperability standards and equipment to enable radio and telephone communication between responding units.  Sadly, their efforts are too late to save victims of the 9/11 attacks.

While it is unlikely that people will die from the lack of fiduciary standards, the economic threat is wreaking havoc.  Massive fraud cases like the Madoff and Stanford Group’s Ponzi schemes gained their start because fiduciary standards were missing.  Although more subtle, a just as serious danger lurks.  The difficulty fiduciaries have in benchmarking investment firms’ practices, due to the absence of standards, sets up the potential for the depletion of asset values from undisclosed fees and conflicts of interest.

The lack of standards to guide the conduct of fiduciaries is primarily responsible for the uncertainty felt by trustees and members of investment committees.  Confusion and chaos in committee rooms are symptoms of a similar situation that existed on a wide scale right after World War II.  The realignment of nations quickly showed that a less regional and more global economy was forming.  In order to ensure that products and services could move across borders, standardized ways of making them were needed to guarantee their quality.  Just as countries needed standards to make global commerce safe and profitable, so, too, foundations need uniform process standards for its fiduciaries and their investment providers.

Ronald E. Hagan

Chairman of the Board of Directors - The Investment Fiduciary Leadership Council

www.iflcouncil.org

Ron Hagan has served as chairman of the non-profit Investment Fiduciary Leadership Council since 2008.  He is also President and CEO of Roland|Criss which is a Professional Fiduciary Organization serving foundations and pension plans in a named fiduciary capacity.  Ron has a lengthy career in helping trustees develop their oversight skills in the four disciplines for fiduciaries; governance, controls and practices, administration, and investments.  Prior to joining the Roland|Criss team he was a Senior Vice President and member of the Executive Committee of the First National Bank of Commerce where he served as a fiduciary on its Asset Liability Management Committee.  Earlier in his career Ron was a Principal with Booz, Allen & Hamilton.  His duties at Booz, Allen included advising executives of Fortune 500 companies on prudent fiduciary processes.

We've all just returned from Foundations on the Hill, and today I offer my blog space to Helen Ishii, our director of member and government affairs, who led SECF's charge of 50 people up the steps of Capitol Hill and lived to tell about it. The results were the best we've seen from any Foundations on the Hill event to date. My hat's off to Helen for pulling us all together. Here's her reflection from the experience:

I'm sitting across from a couple of very bright Congressional staffers, making idle chit chat and finding connections with less than six degrees of separation, as we await Rep. Boozman (D-AR-3rd) to return from a vote to meet with us. I appreciate that the Congressman finds our visit important enough to return to the office, especially as it's now 5:00 p.m.  I also appreciate that in every office we've visited today, someone in our group has found a personal connection to at least one staffer and also often to the Member of Congress. These personal connections have proven important over the years as they are often what makes a staffer or Member comfortable calling on us as a resource.

This is my 6th trek to DC for Foundations on the Hill. This physically exhausting trip has become a valued annual event for our members, 50 of whom made it this year. These hearty souls put many miles on their soles as they walk and walk and walk the halls on the Hill. This year they have visited 94 Members of Congress from the 11 states in the Southeastern Council of Foundations' (SECF) region. Every year we return to educate the ever revolving supply of extremely young, extremely bright and extremely inexperienced staffers about the work of foundations, as well as to inform Members of Congress on the issues impacting our sector.

This year I joined our teams from Arkansas and South Carolina as they made their visits. Senator Blanche Lincoln (D-AR) immediately "got" the importance of basing the TANF (Temporary Aid to Needy Families) funding formula upon need and the benefit that would accrue to all Southern states. She also remarked about how helpful it was to have the same message delivered to her Southern colleagues by other SECF members.

Everyone saw how a cap on charitable deductions could be harmful to the sector.  As to be expected, the chair of the House Budget Committee, Rep. John Spratt (D-SC-5th) asked about the "scoring" of H.R. 4090, which will simplify the private foundation excise tax to a flat rate. We were able to answer his question, thanks to the briefings we'd received from COF the day before.  Soon, blessedly soon, I'll be walking to the METRO to catch a flight home, where I'll finally be able to soak my aching feet and begin my thank you notes to continue the relationships begun today.

- Helen Ishii, SECF Director of Member and Government Relations

An article in the January 10 Arkansas Democrat-Gazette, "Transition from Sparks Hospital to Charitable Entity a Long Process," is noteworthy in two respects: it is a great example of a local reporter, Laurie Whalen, reaching out for a larger perspective on philanthropy, setting up a foundation and foundation regulations; and it underscores the importance of having foundation officials who are accessible to the media, willing and capable of explaining philanthropy policy in terms that the average reader can digest and comprehend.

In this instance, Heather Larkin, president and CEO of the Arkansas Community Foundation in Little Rock, offered a very helpful explanation of health conversion foundations, while articulating that transparency and accountability must be hallmarks of all foundations. Kudos to Whalen and Larkin for helping Arkansas citizens to understand the challenges and nuances involved in the creation of the Fort Smith Regional Healthcare Foundation out of the sale of the non-profit Sparks Regional Medical Center to a for-profit health care provider and simultaneously increasing public awareness of the extraordinary benefits that foundations offer their communities.