Category: Grantmaking

Abolishing the Charitable Deduction will cost American charities billions

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Over its nearly 100-year history, the charitable deduction has become one of the most time-tested provisions in the Internal Revenue Code. But it has also been a perennial target by people on both ends of the political spectrum who want to eliminate or restrict it.

While economists have long studied the impact of the deduction, they have not reached a clear consensus on how much it matters. A new study, however, along with recently released IRS data make it quite clear that America’s charitable organizations could be hurt greatly if donors lost all or part of the charitable income-tax deduction as lawmakers seek ways to avert the looming “financial cliff.”

The new study of the wealthy and their philanthropy, released last month by Bank of America, asked affluent people (mostly with incomes of $200,000 or more and net assets of at least $1-million) how they might alter their giving if deductions were eliminated.

Just under 50 percent said their giving would remain the same. But nearly 49 percent said they would decrease their giving—and 20 percent of those people said they would “dramatically decrease” their giving. Less than 2 percent said their giving would increase.

Read Financial Impact on American Charity

Excerpts of an article by Robert Sharpe, a fundraising consultant

The impact on American charity of donors who itemize

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Some point out that most donors wouldn’t be affected by changes in the charitable deduction because 70 percent of Americans don’t itemize. While it is true that people who don’t itemize often give generously from their incomes, they don’t provide the lion’s share of the gifts that help fuel the nonprofit world.

In 2010, the 30 percent of Americans who itemize provided 79 percent of the money “Giving USA” reported that individuals donated to nonprofit organizations.

If a loss of the charitable deduction caused people who itemize deductions to reduce their giving by just 20 percent, that would mean a $34-billion drop in charitable giving, by far the largest decrease since the Great Depression. To put that in perspective, $34-billion is more than three times the sum that individuals donated to all U.S. colleges received last year (not counting bequests).

If nonprofits suddenly had to reduce costs by $34-billion, they could well need to eliminate 5 percent of their work force, or 680,000 jobs. That could increase the unemployment rate in the United States from 7.9 percent to 8.4 percent.

And if government cuts spending, charitable giving will have to play an even more important role in our society as those cuts inevitably put even more strain on the nonprofit infrastructure that enriches Americans’ lives in countless ways.

Excerpts of an article by Robert Sharpe, a fundraising consultant

Two sides of philanthropy in Africa

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The phrase ‘philanthropy in Africa’ has often tended to conjure up two quite diverse images. On the one hand, there are the well‑intentioned multi‑million dollar budgets of large (often international) foundations. On the other, the well‑established cultures and practice of small grassroots‑contributions and systems of social solidarity at the community level – the significance of which has never really been tapped by the formal development sector.

Across the continent, however, a new generation of local philanthropic institutions is emerging, some seeded with money from outside the continent, others entirely home‑grown – and all seeking to draw on local resources and tap into different forms of wealth, which include cash but also include other, less tangible, forms of social capital such as trust and credibility. These organizations seek to occupy the spaces between large, formal philanthropy and more local level mobilization of communities and their assets, and to build bridges between the two. At the same time they also promote a form of development which is community‑led and community‑owned.

Although the first self‑described ‘community foundations’ may only have been established in Africa in the late 1990s, the idea was not falling on fallow turf but rather offered a more formalized framework for naturally occurring traditions of giving and sharing. Those traditions are well encapsulated in the African philosophy of Ubuntu, defined by Liberian peace activist, Leymah Gbowee, as ‘I am what I am because of who we all are.’ The idea of Ubuntu means that you are known for your generosity. Instead of thinking of ourselves as individuals, separated from one another, we are connected and what anyone does affects the whole world. Generosity spreads outwards in a ripple that benefits the whole of humanity.

Africa is a continent rich with traditions of solidarity and reciprocity. In Kenya, for example, the practice of harambee as a form of local fundraising to cover the costs of funerals, weddings and school fees, was well‑established and drew heavily on a local culture of giving which had a social as well as a financial aspect.6 And in Southern Africa, ilima (coming together to help those without) was a mechanism for the sharing of communal labor for harvesting and house‑building.

A recent report by Jenny Hodgson and Barry Knight, “Mapping a Baseline of African Community Foundations” focuses on this group of institutions. They include community foundations, other types of community philanthropy institutions and local foundations – all operating throughout the African continent.

 

Samsung undertaking solar-powered Internet schools in Africa

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Old shipping containers repurposed into solar-powered classrooms are giving students in the most remote parts of Africa access to education and innovation.

Samsung’s Solar-Powered Internet Schools Initiative brings mobile classrooms filled with gadgets to rural towns. By outfitting a mobile shipping container with desks, a 50-inch electronic board, Internet-enabled solar-powered notebooks, Samsung Galaxy tablet computers and Wi-Fi cameras, children can receive a technology-rich education without traveling far.

“I have this motivation in me. It’s this need to just grow up and become something better in life and help others to become a success so that in South Africa, or in the whole continent of Africa, we can have a better life,” a Secondary School student named Lefa told us in a video by the Samsung Corporate Social Responsibility team.

For her, the computer lab presents an opportunity to “learn all the things” she’s ever wanted to learn.

Each 12-meter portable classroom has space for up to 21 students to learn how to use computers and how to surf the Internet, many for the first time. The pilot program will bring mobile classrooms to K-12 graders in five African countries including South Africa, Kenya, Nigeria, Senegal and Sudan. The project will expand in upcoming years. The technology giant hopes to reach 2.5 million students in Africa by 2015.

 

Gates Foundation, USAID Award African Women Scientists $19 Million

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African Women in Agricultural Research and Development has announced $19 million in joint funding from the Bill & Melinda Gates Foundation and the United States Agency for International Development (USAID), in support of a fellowship program for women scientists.

Grants of $14 million from the Gates Foundation and up to $5 million from USAID will support the second five-year phase of AWARD’s efforts to bolster the research and leadership skills of female agricultural scientists in eleven sub-Saharan African countries. Since 2008, more than two thousand women have applied for two hundred and fifty fellowships, and more than a thousand are competing for seventy places in the next round, which will be announced in December.

According to a 2008 benchmarking study by AWARD, while the majority of those who produce, process, and market food in Africa are women, only one in four agricultural researchers is a woman and only one in seven holds a leadership position in African agricultural research institutions.

“Cultivating a new generation of African leaders in food and agriculture is strategically important,” said AWARD director Vicki Wilde. “That leadership will be all the more effective when women are highly represented, especially by those technically competent and strategically positioned to generate and promote the innovations needed by rural women and other smallholder farmers.”

Dedicated Funding for Leadership Development

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The Evelyn and Walter Haas, Jr. Fund … believe strongly in the critical importance of unrestricted general operating support because it provides nonprofit leaders with the flexibility to direct spending toward strategic priorities facing their organizations.

However, the Haas, Jr. Fund also believes there are times when general operating support may not be the most effective capacity-building strategy. Over the past seven years of the Haas Leadership Initiative, our experience has been that executive directors are often reluctant to allocate unrestricted funds to strengthening organizational leadership for a variety of reasons:

  • Executive directors almost always find it difficult to prioritize longer-term staff and leadership development work when confronted with short-term programmatic needs and tight budgets.
  • The “selfless” culture of nonprofit leadership discourages leaders from dedicating resources to their own development.
  • Some executive directors fear that choosing to invest general support funds in leadership development could be perceived as a sign of weakness—a sign that a leader, or the board, isn’t up to the task of managing an organization and “needs help.”

John Harvey, Managing Director of Global Philanthropy with the Council on Foundations, recalled his own time as a nonprofit ED and the struggles he went through as he sought to convince himself and his board of the value of investing discretionary funds in leadership development. “A restricted grant would mean that no one—not a frugal board nor a prudent (or un-self-aware) nonprofit leader—could say no to professional development,” Harvey wrote.

The bottom line: many in philanthropy, including the Center for Effective Philanthropy, agree that large, multi-year operating support grants are critically important for nonprofits. But it seems that an increasing number also see that there are times when dedicated funding is an important complementary strategy for strengthening organizational leadership.

Excerpt of article by Linda Wood

Microsoft has given $1 billion to 31,000 non-profits

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Microsoft is celebrating 30 years of giving, a huge milestone for the Redmond-based software company. And at a press conference, the company also announced that it has given $1 billion in donations to more than 31,000 non-profit groups during that time.

“We stood up in times of crisis and helped the people in Japan, in Pakistan, in Haiti,” said CEO Steve Ballmer.

Needless to say, Microsoft has given time and money that has had a huge impact around the world.

It’s a culture of generosity that was started by co-founder Bill Gates, who credits his parents for setting an example of philanthropy and encouraged him to start a giving program.

Wealthy focus more on giving globally and quickly

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Forbes Insights and Credit Suisse conducted a study of some of the world’s wealthiest to gain deeper insight into their motivations, strategies and financial philosophies. The research shed light on the total lifecycle of philanthropy — from the moment an individual first decides to use his or her fortune to do good to the legacy he or she plans to leave behind — and the spirit of giving they hope will live on in their descendants.

Those who participated in the study bring the same tenacious, pragmatic approach to giving away their wealth as they brought to amassing it in the first place. This makes sense; when you get right down to it, business and giving are not really all that different. Both require a results-driven approach, a strong strategic vision, the ability to surround oneself with the right team for the job and the understanding that the biggest risks most often result in the biggest rewards. Fifty-three percent found applying their business experience to their philanthropy an effective and successful approach to giving – a sentiment that only increases with wealth.

More of the wealthy respondents partner with businesses (40%) for their philanthropic endeavors than with government agencies (22%) or other non-profits (28%). Eight in 10 of the wealthiest preferred to give to early- or growth-stage endeavors, rather than the more established organizations. Why allow yourself to get snagged in the stickiness of so much red tape when you can use other channels to move more quickly?

But what surprised us most in our Forbes Insights study was not just the scope and scale of the wealth they plan to disburse, but how quickly they plan to do so.

And more than half – 54% — of respondents to the study planned to leave more than a quarter of their assets to charity. Close to half of those with more than $20 million in investable assets plan to leave half or more of their wealth to charity; nearly 1 in 5 of those with over $50 million in investable assets plan to give it all away. A massive level of giving, to be sure – but those with the greatest amounts to give planned to give it away the fastest.

 

Africa Social Venture Crowd Sourcing

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In microfinance, crowd-sourced ventures have aimed at connecting first world capital with developing world opportunity – and with some success.

Mads Kjaer and Tim Vang co-founded MYC4 which works to connect online investors with entrepreneurs in Africa. MYC4 was founded using a Dutch auction method for retailing loans to small and mid-sized businesses in developing countries – a crowd-sourced for-profit micro finance company with an initial presence in Africa.

Since they started five years back, over $20M has been invested in over 10,000 loans. These funds have come from over 19,000 investors/lenders. The biggest challenge facing MYC4 at the moment is lack of adequate liquidity to fund all the loan requests. This year alone, over $1M worth of loan requests has not funded. At the moment, MYC4 requires an increase of investors/lenders with a short term year end funding gap of $1M in new liquidity to fund growth.

Says Mads, “Africa is no longer a basket case but a business case. For decades, highly subsidized credit and grants have not helped African businesses grow but has often created a dependency syndrome.

“What we are learning now is that small businesses that are looking for capital to grow can pay market rates of interest. Their major concern is reliable and continuous access to rightly priced capital. Through the Dutch Action on MYC4, businesses have an upside of receiving cheaper funds than they were initially willing and able to pay. We have seen to type of investors/lenders; social and for profit and the Dutch auction accommodates both.

“The on-going transformation in microfinance means grants and subsidies are a thing of the past and commercial sources of funding will continue to be the major source of funding.”

Read more

 

Going green in Ghana with sewage power

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How might the world’s poorest continent go green? Kwabena Otu-Danquah’s job is to crack that riddle. The renewable energy czar for Ghana ranks among the handful of bureaucrats across Africa tasked with picking which forms of green energy might prove affordable on a continent where most people don’t pay for the electricity they sometimes receive.

Last year the Ghanaian parliament signed a pledge to derive 10 percent of the country’s electricity from alternative sources come 2020.

Sun? Forget it. Solar costs 40 cents to 50 cents a kilowatt hour, while Ghanaians pay just 5 cents to 10 cents for electricity from conventional sources. Wind? Too slow. Breeze ambles through this tropical doldrum at a leisurely average of five kilometers an hour (3.2 miles per hour).

That’s forced Ghana to consider a more imaginative set of choices. Among them, sewage. Flush with a $1.5 million grant from the Bill and Melinda Gates Foundation, local Waste Enterprisers Ltd. is building Ghana’s first “fecal sludge-fed biodiesel plant.” That’s longhand for cooking human excrement into generator fuel, Chief Operating Officer Tim Wade explains. The transformation would serve a dual purpose. Open sewers sweep 1,000 tons of slurry each day into the ocean off Accra. Outside the upland city of Kumasi, roughly 100 trucks dump tens of thousands of liters of septic tank sewage daily into what used to be a small pond.If all goes according to plan, next month one truck a day from Kumasi will dump its payload into a warm and massive vat that will skim lipids – fat – off the top. “That’s your biodeisel,” he explains.

At $7 a gallon, he can sell the muck to local mining companies, who are keen to buy because they too have been required by parliament to power 10 percent of their private electric plants from green sources. Normal diesel does sells a few bucks cheaper, he admits, “But we’re still optimizing the process.” If he can get costs down, Mr. Wade intends to build four plants in Accra and lecture sub-divisions back home in Colorado on the folly of treating their waste.