May 6, 2012

Phony Foundations?

Fraudulent...?  No, that’s too strong a word.  Not Genuine?  Well...let's take a closer look.

The definition of “phony” can either mean fraudulent or not genuine.  This blog series takes a closer look at foundations to see if perhaps they are saying one thing and doing another.

First, a foundation is a nonprofit that gives money to causes; typically 501(c)3’s that have a tax-exempt certification with the IRS.  Second, foundations are allowed to invest their money in profitable ventures; so long as a given percentage of their investment income is given away to charity.  Foundations cannot be used to give money to family members or friends; but many walk a fine line between philanthropy and...well, you be the judge.  Today we start with one foundation chosen at random...Amanter Philanthropy.

Amanter Philanthropy is a platform dedicated to promoting education, strengthening families and improving the lives of children.  Over a span of 12 years, the organization claims to “work hand in hand with the nonprofits they support.”

How many organizations do you think they have supported in over 12 years?
  • Under Children & Education, their website lists (4)
  • Under Health & Family, their website lists (9)
  • Under Arts & Community Outreach, their website lists (4)

The total number listed on their website indicates (17) organizations have been supported by Amanter Philanthropy since 2000.  Not included on the website is the amount of money they have given away, nor do they list the size of the Amanter Fund.  Additionally, on their contact page it states “Amanter Philanthropy does not accept unsolicited grant proposals or charitable contributions.”

What does this mean?  Supporting (17) organizations over a period of 12 years indicates that this foundation is extremely selective in causes they support and that their use of the term “Global Reach” does not have a geographical connotation.  It also means that Amanter Philanthropy does not have quantifiable performance metrics to support their work; not even a gross dollar amount of money given away.  Finally, without an active grant solicitation process readily available, it means that they are either inundated with proposals or that they are not giving away money to organizations they don’t already support. 

Most likely, the economy has diminished the performance of their fund; which means that anything given away would need to come out of the principle balance of the fund.  Or in layman's terms, since the fund is not making money, they are not giving money away.

If you have a specific foundation you would like us to review, please let us know and we will add it to our list.  Otherwise, we will continue to select foundations at random., Inc Inspiration

How I Came Up With Mission EfficiencyI am often asked how I came up with the idea for WhyDoParents.  As the previous owner of a national service business, I have donated a lot of money to charity.  Most of it went into supporting a missionary effort to establish orphanages for kids in third world countries whose parents had died of unnatural causes.  I have always felt strongly about protecting children and giving them an opportunity to succeed in life, so the donations were easy for me to justify.

I wanted to make sure that the money I gave away was going towards solving a social problem.  Unfortunately, it was virtually impossible for me to track the progress of how my donations were used.  Sure, I knew that the money was being used to further the cause of the charity, but I wanted more detail.  This thought was the initial catalyst that led to the development of, Inc.

As I searched for nonprofits that made their donations easy to track, I began to uncover a number of things that didn’t make sense.  For example…did you know that nonprofits compete against each other for money?  I was expecting to find nonprofits competing for “social impact”.  When asking questions, people would look at me as though I were crazy.  I may have been out of touch, but my thinking was anything but crazy.

How can nonprofits focus on maximizing their impact on society if they are always trying to raise money?  The answer is…”they can’t!”  If the public wants their donations going towards bettering society, one would assume that the most efficient nonprofits would have nothing to worry about…right?  But again this is not the case.  Generating the funds to operate is as much of a relationships and marketing game as it is in the for-profit world.

Now consider that almost 2 trillion dollars flows through nonprofit organizations each year.  I also learned that this was only the income reported to the IRS; which does not require nonprofits that make less than 25K each year to report their income (which represent a large number of local charities).  Moreover, this number did not account for all the volunteered hours or the many in-kind donations that charities depend on each year.  I was under the impression that money for nonprofits was scarce.  The truth is that the nonprofit industry in America is the largest market cap in the world.  In cash alone, they generate enough money to account for 1/7th of America’s Gross Domestic Product.

The last thing I will mention here that stood out to me was that nonprofits were not appealing to the business side of their donors as much as they appealed to the emotional side.  I thought nonprofits would realize that people with money didn’t become successful by running inefficient businesses.  All things considered, donors would much rather support a cause that uses their money precisely as their donors intended.  This does not mean that using a higher percentage of revenue on programs makes a nonprofit efficient.  What if their programs were inefficient?  How would a donor go about finding this out?

So what’s the net effect of our current system?  Nonprofit market conditions have taken the focal point off performance and made it about perceived significance and attention.  As an industry, this makes it much more difficult for smaller nonprofits to raise money (i.e. unhealthy competition).  As a society, we have taken the fundamental goal of nonprofits and changed it into a popularity contest (i.e. diminished performance).

As with any free market system, companies that adapt to market conditions will succeed and those who don’t will fail.  When the system rewards something other than its intended result, success becomes impossible.  The question then becomes, how can we influence the realignment of nonprofit priorities within the rules and regulations of our current free market system…(i.e. without additional government intervention)?, Inc is my attempt to accomplish just that.