Charities Merge Differences, Controversy Ensues

(New York TimesSmile Train and Operation Smile–two charities that alleviate impoverished children born with cleft lips–are well-known in the nonprofit world, but what might be lesser known is their longlasting conflict. 

Smile Train was established by former board members of Operation Smile; the split occurred because of disagreements regarding Operation Smile’s medical practices.  Whereas Operation Smile flys doctors and supplies all over the world to perform procedures as needed, Smile Train trains doctors in the local regions where help is required, such as India and China. 

When it was announced at Smile Train’s February 8 board meeting that a merger would be taking place, some board members were shocked.  Mr. Charles Wang, co-founder of Smile Train, will have control over Smile Train’s $160 million in assets as well as half of the money raised from the merger in the next three years. 

Some donors are distressed by the news; actor Christopher Meloni said he doesn’t know details but that “it really sounds like the fox got loose in the chicken house.”  Carlyle Group Partner William Conway withdrew his position as advisory board member to Smile Train and requested that his past contributions be returned.

Assessing Swipegood: Will Small Change Make Big Change? 

(New York TimesSwipegood, a program that allows credit card users to donate change to charities, has been evaluated in Yale professor of economics Dean Karlan’s blog.  Swipegood users register their credit card of choice online, choose a favorite charity, and then the change from everyday purchases gets donated to that charity by the month’s end.  Buying a latte for 3.56, for instance, would mean a 44 cent donation, and so on.  The idea seems solid, but Professor Karlan worries that these small donations mean lesser big donations at the end of the year; the only way to evaluate how effective it is, he says, is to ” to run a randomized trial: encourage half of their constituents to sign up for Swipegood, and another half not, and follow them all over time to see which half ends up giving more in the long run.”


(Wall Street Journal) New York City’s own Mayor Bloomberg gave the second highest amount of money to charities in 2010.  Mr. Bloomberg focused his  $279.2 million in donations on arts, human services, and public affairs.

(The Chronicle of Philanthropy)  Charity effectiveness is a definite problem in the nonprofit community.  Many people have good intentions, but bringing about that positive change takes creativity and careful effort.  Hildy Gottlieb, host of Making Change via the Chronicle of Philanthropy, speaks to Rich Harwood, President of the Harwood Institute for Public Innovation, about meeting charitable missions.  The interview is available online in audio format.

(New York Times)  Nonprofits may face more problems due to the recession.  In an effort for the federal government to try to get the deficit under control, debate about the charitable tax deduction–a large incentive for giving–has come about.  Diana Aviv, president of the Independent Sector, says that “Pandora’s box was cracked open,” with these new proposals.  Charities claim that reducing or eliminating the tax deduction will produce lasting harm for the nonprofit sector, a notion especially troubling when the demand for charities is up.  But in Britain, a system called Gift Aid is working just fine.  The Bipartisan Policy Center panel suggested adopting a similar plan to Britain, and philanthropic experts are interested.  The idea behind the new proposal is that once they receive a donation, charities qualify for 15% of the gift in tax credit.  If a donor gives $100, then charities qualify for an extra $15 from the government, giving donors a partial match.  The criticism of this system is that it is too bureaucratic, leaving millions of dollars unclaimed.  Director of research for the Center for Economic Development and member of the Bipartisan Policy Committee Joseph J. Minarik asserted that Gift Aid was not the inspiration for the new plan; instead, the plan was to simply streamline the system into a more equal donor distribution.  Mr. Minarik, who also worked to reduce tax-rates on the wealthiest tax payers in the Tax Reform Act of 1986, said that although fears of ruining the nonprofit sector abounded, giving rose by 10% the following year.

(Business Week)  A minor increase in donations for US nonprofits leaves some hopeful that the economy is turning around, but times are still tough for charities and nonprofits.  Executive director of the Center on Philanthropy at Indiana University Patrick Rooney said, “Technically, we’re in a recovery.  We are beginning to see some positive signs. But despite that, giving still has a long way to go to return to the levels it was at three or four years ago.”

(ABC News)  The Giving Pledge, a philanthropic endeavor brought about by Bill Gates and Warren Buffett in early August, is in the news again.  The idea behind the Pledge is that the world’s wealthiest give away the majority of their monetary worth to solve global problems, such as hunger, health, and education.  Mr. Buffett, Mr. Gates, and Mr. Ted Turner discussed wealth, giving, and philanthropy in a recent interview. Though philanthropy and morality were discussed at length, politics also came into play.  Mr. Buffett stated that “tax breaks” for America’s richest is actually not a practical way to have the money “trickle down.” Mr. Buffett said, “Well, all I can say it hasn’t trickled. You know, as I said, a rising tide has listed all yachts, but the row boats have been left behind.”  The Giving Pledge continues to grow, with 40 new billionaires agreeing to pledge in the last three months.

(New York Times)  One way that nonprofits handle a difficult economy is by embarking on a “hybrid model” for funding, in which a for-profit company works with a nonprofit to propel further funding and, ideally, more effective philanthropy. Allen Bromberger, a lawyer specializing in nonprofit financing, said of the hybrid model:  “It is virtually impossible to grow a social enterprise in any significant way relying wholly on donated money, earned revenue and debt financing, which are the only sources of financing available to nonprofits.  These hybrid structures allow social enterprises to tap conventional investors interested in making profits while continuing to pursue their social missions.”  But the hybrid model has its downsides.  Conflicting missions from the two companies certainly create problems, and commercial units can be bought out by larger companies, leaving the nonprofit to wobble solo.  In some cases, though, it works well.  Freelancers Union, a nonprofit insurance company, is owned by the for-profit Freelancers Insurance Company, and both are connected to Working Today.   Board members from both non-profit and for-profit sides meet and discuss the most efficient and necessary way to distribute money.  Chief executive Sara Horowitz calls the arrangement “complicated but necessary,” citing that “the structure ensures that there is no way that Freelancer’s Union could be sold for the benefit of any individuals or that the nonprofit could be abused for the benefit of the company.”  Though its a risky endeavor, hybrid modeling is an interesting option in a troubled economy.

(The Atlantic)  The decline of charitable giving is a hot topic of late, especially given the effects of the extreme economic downturn in 2008.  In his blog on the issue, Daniel Indivigilio cited the Chronicle of Philanthropy’s statistic, averring that charitable giving to the largest 400 charities is down by 11%.  The glaring culprit is, of course, tough economic times.  Even though the economy is enjoying improvement now, citizens are nonetheless replacing losses, not donating to causes.  The Chronicle of Philanthropy expects an increase in donations to charities in 2010–about 1.4% increase, to be precise–but it will take much brighter economic days before that number balloons.

(Bloomberg)  Sixteen employees in a small office a few blocks away from Berkeley are trying to make a difference in the world.  Their company, a Facebook application called Causes, has raised over $16 million for charities, connecting 119 million users to various philanthropic pursuits.  Founded by former Facebook president Sean Parker, Causes is a for-profit company that allows users to give money to various charities.  By selling giftcards in supermarkets, Mr. Parker hopes the name will become more well known and that the company will expand.

(Washington Post)  A 71-year-old philanthropist living in the Pennsylvania suburbs is working toward decreasing unemployment and promoting small businesses, one person at a time.  Gene Epstein has begun a $250,000 effort called Just Hire One.  If a company hires an unemployed person and keeps that person on payroll for at least 6 months, Mr. Epstein will donate $1,000 to a charity in the company’s name.  Mr. Epstein believes that charitable effort is a strong incentive and hopes that his plan will help small businesses get over the tough economic times.  “It’s an encouragement to businesses to not wait,” he said.  “This becomes like an incredible stimulus program.”