Lollipop Philanthropy

When I was at the Creative Placemaking Leadership Summit last week, one of the other participants asked if there was a way to communicate to funders that they can’t just fund a program and forbid using the money to pay the people who will actually run the program.

I spoke up and mentioned she wasn’t alone,  this was a big topic of discussion among non-profits and cited Vu Le’s Non-Profit AF blog as a place where this is frequently addressed.

Along these same lines, I was happy to see FastCompany (h/t Artsjournal.com) is refuting the non-profits should be run like a business argument.  The case they lay out isn’t anything you haven’t heard before. They too mention the prohibition on paying people to run the program. It is good to see a business oriented magazine criticizing the practice. It helps circulate the topic outside non-profit circles.

One of the main things raised in the article is that while for-profit success is measured by effectiveness at making a profit, non-profits’ successes are measured by doing everything from treating drug addiction and diminishing gang violence to education about climate change and music lessons.  There is no easy metric for any of these, nor is there any relevance in comparing reduction in gang activity to an increase in musical aptitude.

(my emphasis)

…that hasn’t stopped some deep-pocketed donors from trying. In one case, a venture philanthropy denied a grant to the founding board member and chair of an organization that works with homeless kids because the “cost per life touched” ratio was too high, despite the fact that there was no analysis of how the group compared to others in its area. “Ratios seem rigorous, when in fact it was an inappropriate comparison, given the expense of reaching the different populations,” he says. The measurement didn’t take into account all the benefits that could occur in communities if these life changes stick either. To simplify the argument: “My friend said, ‘I could give everybody in the city a lollipop, and I would have touched a lot of lives.’”

That lollipop metaphor is a tangible illustration of the problem non-profits have been facing with some philanthropic entities. There is a desire for a large quantity of touch points on the cheap. Fleeting impact on thousands this year feels more satisfying than enduring solutions for hundreds over a decade.

Accepting Donations Is Increasingly Complicated Business

While I have written about this before, of late it seems that the decision to accept a donation from someone is increasingly one requiring deliberation. An article on The Conversation lays out a case for either having a morals clause or time limits on any donation that involves naming rights.  Citing the number of non-profit arts, cultural and educational institutions who have refused to accept donations from the Sackler Family due to their ownership of opioid maker Perdue Pharmaceuticals, author Terri Lynn Helge notes it is easier to refuse a donation than to refund one.

As a nonprofit law scholar, I have seen that it’s much harder to sever prior arrangements with donors embroiled in scandals than it is to stop taking money from donors who are the object of public outrage.

[…]

When these scandals strike, charities face a dilemma – keep the money given by the now-tarnished donor or return the tainted funds. But returning the funds may be easier said than done.

Once the money is given away, it’s committed to charitable use. Returning that money just because the donor’s reputation is now sullied may get the charity in trouble with state regulators.

Helge mentions donations from Harvey Weinstein and Bill Cosby as cases where organizations began to experience negative perceptions of their brand and were faced with refusing a donation or making public statements distancing themselves from the donors.

Increasingly these are issues non-profits of any size need to consider as they accept and recognize donations from a variety of sources. Both returning the donation and grinning and bearing the bad publicity can be equally bad options:

They can give the money back, perhaps with interest. They can suspend programs or professorships named after the donors whose names have become an embarrassing burden, perhaps with threat of litigation from the donor for not fulfilling the charity’s end of the bargain. Or, they can continue to maintain the donor’s name and face public outrage.

[…]

Once the cost of doing nothing gets too high in the long run, charities may implement costly options to terminate the association.

That is why in my view, museums and other recipients of the drug-making family’s philanthropy could eventually redirect their donations. But that won’t happen until what they lose by honoring Sackler gift agreements becomes more exorbitant than satisfying all of the anti-Sackler movement’s demands.

Enacting Your Solution Or Your Funder’s Solution?

Often when we talk about arts and cultural organizations applying for grant funding, there is mention of how organizations might try to recast what they are doing in a context that makes it appear that their work aligns with that of a funding organization. There might also be a mention of an organization creating a new program in order to qualify for funding with an eye to doing the least possible in order to use that funding for their core operations.

When there is discussion about how foundation agendas are shaping what type of work get done, it is often in the context of the contortions non-profits will go through to secure the funding or how they need to piece support together based on narrow criteria of what an organization will or won’t fund.

While we all agree this situation is bad for non-profits because it diverts resources from the organizations core activity, less discussed is whether funder agenda is shifting the core activity of organizations in an nonconstructive manner.

Non Profit Quarterly had a story about the research Megan Ming Francis conducted on the relationship of the NAACP and one of their first major funders, Garland Fund.  Based on records of the interactions between the two organizations, the NAACP reluctantly ended up shifting away from their efforts to get state and federal entities to address lynching and mob violence to align with the Garland Fund’s education and unionization agenda because Garland was one of the few groups willing to fund them.

From a Vox piece on Francis’ research,

Garland’s organization also started out with a firm commitment to not “attempt by promise or by the setting forth of conditions or by any other means to control the policy of any group or individual entrusted with this money or a part of this money.” That, though, eventually changed, according to Francis.

The Garland Fund was most interested in education and organized labor, two areas it saw as the most important foundations for improving society. Over time, according to Francis, it discouraged the NAACP’s work on racial violence in favor of a focus on black education, and effected a swing in priorities that still guides the NAACP today (though the fund stopped operations in 1941).

[…]

Francis points to evidence that black leaders at the time didn’t think of desegregation as the pivotal success that we see it as today. Other researchers have emphasized that the fight for Brown was somewhat out of step with what black communities prioritized at the time.

Francis refers to this shift in priorities as “movement capture.” In the podcast interview that accompanies the NPQ article, it seems little has changed in the grant application process. Francis paraphrases an NAACP member writing to a member of the Garland Fund, “I have no pride of authorship. I basically just regurgitated what you wanted me to write.”

If you work in an arts and cultural organization, you may not think that some of the programming you are doing is counter to your interest. After all, if schools aren’t offering arts programming, your organization needs to pick up the slack by going into schools or adjusting operations to allow for school group visits and matinees. Children are the future of the arts, right? But might it not be more in the interest of museums to be open later in the day to better accommodate visitations at night when people got off of work?

I don’t know that museum operating hours are really dictated by a perceived need to be available for visitation by school groups. Megan Ming Francis suggests that the influence of funders have in shaping standard practice is underestimated.

She worries that funders often assume they have a better picture of the problem when they might not — and she thinks funders underestimate the costs to the movement of grassroots organizations aligning themselves with the funding zeitgeist.

I hadn’t set out to draw the connection when I started this post, but I realized the question of whether your organization would be focused on school outreach if educating wasn’t such a priority among funders is related to an frequent topic of this blog of late: Would your operations and activities look different if you didn’t have to justify your value in terms of economic impact and test scores?

If this line of thought intrigues you, check out the NPQ article and listen to the accompanying podcast interview with Megan Ming Francis where she discusses movement capture and wonders how funding may change the goals of groups like Black Lives Matter.

Don’t Solicit Ads For Your Program Book

Thanks to Drew McManus for remembering that Butts In The Seats turned 15 this weekend. Hard to believe I have been writing for 15 years now. Hopefully readers have found the content worthwhile.

Speaking of which….

Over on ArtsHacker today, I had a post on a very worthwhile subject– Unrelated Business Taxable Income.

I know, you are fighting to keep your brain from shutting down right now.

What that translates to for non-profit arts organizations is, among other things, any advertising you may have in publications, playbills, social media and web posts, etc., is considered an activity unrelated to your organizational purpose which means you need to pay taxes on it.

Now before you panic too much, placement of sponsors logos and contact information is permitted within the scope of your non-profit status. While advertising versus sponsorship may sound like a distinction without a difference, there are strict guidelines you need to follow.  There can’t be comparative or qualitative language, no pricing, no inducements/endorsements to use/purchase a product/service.

If this sounds like something you have run into trying to promote an event on a public radio station, that is exactly what it is. At one time I thought it was a characteristic of public broadcasting charters so they didn’t compete with commercial broadcasting. In fact it is a characteristic of non-profit status so it also includes school yearbooks, neighborhood sports leagues, community newsletters, etc.

The post I made isn’t a comprehensive discussion of the matter. I didn’t even try to tackle the recent change that made providing employee parking something non-profits need to pay taxes on. It is a good place to start before following up with an accountant or attorney.

On a semi-related topic, I also made a post about the detail to which a non-profit needs to go when valuing and acknowledging a gift from a donor.   Even if you think you know a lot about this subject, it is worth checking about because money from donor advised funds are viewed differently than those received directly from the donor. Given the growing popularity of donor advised funds, there are likely things you will want to learn more about from an accountant or lawyer.

You Need To Pay Taxes On Program Book Ads

Valuing and Acknowledging Donations

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