Donor Advised Funds Receive More Giving Than Public Charities

Earlier this month Vu Le of the Non Profit AF blog linked to a piece reporting that Donor Advised Funds (DAF) had surpassed charities as recipients of charitable revenue.  The problem with this, as I have previously written, is that unlike public charities which are required to spend at least 5% of their funding each year, donor advised funds have no such requirement but the donor gains the tax benefit of making a donation.

In other words, the government is subsidizing giving that is not necessarily providing any charitable benefit. From the Inequity.org article:

Of particular concern are DAF sponsors that are affiliated with for-profit Wall Street financial corporations. As we have documented, these commercial DAFs provide enormous publicly-subsidized tax benefits to their high-rolling contributors while actively encouraging the warehousing of charitable wealth. And commercial DAFs have been growing explosively.

In fact, the largest commercial DAF sponsors now take in more money each year than our largest public charities.

The article has an animated graphic illustrating how over time DAFs have occupied six of the top ten recipients of charitable revenue, displacing United Way Worldwide from its top spot to number four.

There has already been some discussion about how the required minimum 5% annual distribution by charities was a low bar to meet, especially since some of the charity’s administrative expenses and activities can count toward the 5% expenditure rather than purely distributed as grants.  So the fact that so much more money is being directed toward DAFs than ever before with no requirement that it be distributed is of growing concern.

Where Is Your Favorite Podcast Getting Its Material?

h/t to Isaac Butler who retweeted a somewhat horrifying thread written by author Brendan Koerner recounting how one of his Atlantic articles, two of his books and a WIRED piece he authored have been ripped off by podcasters.

Koerner recounts how the person who created a podcast based on his Atlantic article blatantly told him he was going to rip it off.

A couple people Koerner confronts do give some cursory acknowledgements. He feels it is insufficient, but doesn’t have the energy to fight all these battles.

Given the ever broadening proliferation of podcasts, this is going to be something to which to pay attention. People want to jump on the wave but if they don’t have original material to share, apparently they don’t have many scruples about stealing it.

I suspect we are going to see people getting paid speaking engagements or interest in developing expanded work based on their podcasts only to find there are credible claims of plagiarism and theft.

But even if it goes no further than podcast episodes, as Koerner points out, people are creating ad revenue supported episodes that compete with his books and spoil the plot twists in his writing.

How Arts Orgs Used Relief Funding Is Beginning To Be Examined

A couple weeks ago Hyperallergic had an article that was a critical of museums who had received Paycheck Protection Program (PPP) funds meant to keep people employed, but instead ended up laying off large numbers of people. They particularly noted that the Museum of Science Boston initially didn’t qualify for the program due to employing more than 500 people, but were later able to apply for funding after laying off more than 300 people.  The article also suggested that while some institutions needed the money to survive, some of those at the top ended up in almost better financial shape.

It found that out of $1.6 billion given to about 7,500 cultural institutions that qualified for PPP loans, nearly half of the money ($771 million) went to just 228 recipients. These same 288 institutions collectively laid off more than 14,400 employees, or at least 28% of their workforce.

[…]

However, AFSCME’s report found that not all museums faired that poorly during the pandemic. In fact, an analysis of 69 cultural institutions with available financial data revealed that 67% of them ended fiscal year (FY) 2020 with operating surpluses.

The Museum of Contemporary Art, Los Angeles (MOCA), which received $3.3 million in PPP loans, laid off 97 workers during the pandemic despite ending FY 2020 with a $2.3 million surplus. Nearby, the Natural History Museums of Los Angeles County ended FY 2020 with a $23.9 million operating surplus after receiving a $4.8 million PPP loan. And yet, it furloughed its 127 part-time employees from March 2020 until the end of December 2020.

Not to excuse the act of laying off people after accepting money to keep staff employed, the fact that institutions ended fiscal year 2020 with a surplus may not be indicate they profited off of layoffs. Many non-profits have a July 1 -June 30 fiscal year so if the organization was doing well from July 1, 2019 through March 2020 when the pandemic started, losses of the three months from March-June 2020 may not have moved them into a deficit. The PPP program started in April 2020 with a deadline of June 30, 2020 so organizations may not have received the funds until their 2021 fiscal year.

It has been generally acknowledged that a lot of those who applied for the PPP program didn’t have the severe financial need the program was intended to serve. Determining whether museums used funds meant to stave off layoffs to achieve better financial footing should be examined, but it isn’t clear from the information provided here. The full report can be downloaded on the AFSCME website. I haven’t downloaded the report at this time because the registration form indicates they and others may use the information to solicit and lobby me.

It will be interesting to see if a similar examination is conducted of performing arts venues which largely fall under the Shuttered Venue Operators Grant (SVOG) program, something most museums were not eligible due to the fixed seating requirement for that program.  From what I have seen, the administration of that program is still plagued with errors which they are trying to resolve for adversely effected venues, but that raises concerns that there was opportunity for inappropriately granting funds as well.

I Hope No Arts Organization Is Doing Anything Close To This

In writing posts I often draw on examples from commercial enterprises and other types of non-profits to provide interesting ideas or lessons that my primary audience of arts and culture professionals might use. It isn’t often that I come across something where I firmly believe no arts and cultural organization could possibly be engaging in.

But just in case, here is an example of an operation which would undoubtedly give non-profit charities a bad name and make people want to subject them to additional scrutiny.  Gene Takagi of the Non-Profit Law blog had retweeted a post by Karl Mill which I initially assumed was just going to deal with what can be a fine line between what is allowed in terms of political lobbying and action by 501 (c) (3) non-profits and is better organized as a 501 (c) (4).

But it got oh so much worse than that really quickly. In addition to wanting to actively lobby for political candidates, the proposed non-profit intended to assist the homeless and indigent by enrolling them in the multi-level marketing program of the company which was forming said non-profit organization.

Mill goes through the application for non-profit status in some detail, commenting on what activity is okay, falls into a gray area of the law, and falls off the rails completely. Some of that is definitely useful for those who are confused about the difference between issue advocacy and lobbying. But he also gets to the point where he starts to comment “I wish I were making this up.”

At the end he sums up all the problems he identified in a bulleted list:

At this point, you might be wondering whether your organization can learn anything from an organization that was planning on:

  • Scooping up homeless and other indigent individuals;

  • Putting them in a home together and brainwashing persuading them to pay to become salespeople for a multi-level marketing company,

  • Charging them a fee for that initiation on top of the fees that all salespeople pay up the chain;

  • Taking control of their finances and charging them money for non-compliance, and

  • Having their conscripted army of indigent salespersons produce videos, op-eds, and go canvassing door-to-door to campaign in support of the company’s chosen candidates or in opposition to the company’s political enemies.