Category: Grantmaking

Treasury and IRS rule changes reduce barriers to global grant making

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The U.S. Department of the Treasury and the IRS have recommended a significant change in the process for determining whether a foreign nongovernmental organization (NGO) meets U.S. standards for charitable giving.

In “Reliance Standards for Making Good Faith Determinations,” a document just published in the Federal Register, Treasury and the IRS have proposed regulations that lessen the administrative and financial burdens for U.S. grantmakers to engage in international philanthropy. Secretary of State Hillary Clinton announced the guidance in an address at the Clinton Global Initiative, during which she unveiled the Global Philanthropy Working Group.

The process of evaluating whether a non-U.S. NGO is equivalent to a U.S. public charity has been subject to rules that have not changed for 20 years. Secretary Clinton noted in her remarks this morning that the change clears the way for the establishment of organizations that can serve as repositories for equivalency determinations, though the proposed regulations do not specifically address this matter.

“Secretary Clinton’s announcement and the IRS guidance support a shared cross-sector vision of ways to reduce redundancy and lower costs and are a welcome signal from the government to grantmakers and their grantees,” said Rebecca Masisak, co-CEO of TechSoup Global.

Kelly Shipp Simone, deputy general counsel of the Council on Foundations, said, “While this guidance is key to reducing the burdens of private foundations in making international grants, we expect it will also serve as a guide to public charities seeking to make similar grants. The net result will be to reduce the burden on potential grantees as well.”

Microsoft’s YouthSpark commits to help 300 million youth worldwide

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Late last week, Microsoft announced the launch of YouthSpark, a new worldwide program that seeks to close the “opportunity gap” that is disenfranchising young people across the world. The program is an important first step in solving the rampant unemployment issues that have left young people jaded and discouraged in both the developed and developing world.

The lack of job opportunities are one reason the Arab Spring has flared up across the Middle East. Meanwhile, the dearth of job skills stifles business growth in Latin American nations. And the lack of jobs for high school and college grads in the U.S. has been one of the worst outcomes of the recent global financial crises.

To that end, Steve Ballmer, Microsoft’s CEO, announced the company’s most ambitious philanthropy initiative in its 37 years of existence. At a cost of $500 million spread over the next three years, the program’s goal is to provide training, employment and entrepreneurship opportunities to as many 300 million youths in 100 nations. Children as young as six up to young adults in the mid-twenties, according to the company, will benefit from Microsoft’s partnership with over hundreds of NGOs and non-profits across the globe.

Billionaires aim to make their quick mark via philanthropy

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It’s not often – well ever, really – that 150 of the world’s 400 wealthiest billionaires gather in one place at one time, particularly to talk about how they plan to give all those billions away. But that’s just what philanthropists Bill and Melinda Gates, Warren Buffett, Jacqueline Novogratz, Leon Black and Steve Case – and their peers – gathered together to do this past June.

Forbes Insights, together with Credit Suisse, used this unprecedented gathering to better understand how the world’s wealthiest approach giving back. What we found surprised us: yes, legacy is important, but not as important as making an impact as quickly as possible. And billions of dollars can make a tremendous impact — it can truly change the world.

More than half of Summit attendees who participated in the poll said that they expected to see a meaningful return on their philanthropic investment within 10 years, while four in 10 were prepared for an impact that stretched beyond their lifetime.

And they were risk takers, applying the same aggressive approaches in their charitable endeavors that they used in their business activities. Two-thirds invested in either early- or growth-stage philanthropic endeavors, rather than the old tried-and-true established charities with long track records.

In short: they were looking to make their mark, take risks, and solve the world’s most intractable problems – the huge knots that no one had yet been able to untangle.

Gates and Buffett philanthropic investment

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Bill Gates and Warren Buffett are the most philanthropic folks on the planet. To date the men have given away $28 billion and $17.5 billion respectively.

And Buffett’s and Gates’ partnership in generosity is by now well-known. In 2006, Buffett pledged to donate 10 million shares of Berkshire Hathaway stock to the Bill & Melinda Gates Foundation. The gift, then valued around $31 billion, is given in annual increments of 5% of the remaining pledged shares. So far, more than $9.5 billion has been transferred—and largely given away.

One of Buffett’s few requirements is that each installment be spent within a year of receipt. So the 2011 payment of about $1.5 billion must be granted out in 2012. His other stipulations are that use of his gift must meet all legal requirements of charity and that Bill or Melinda must be alive and active in the foundation for the pledge to hold.

Buffett’s $1.25 billion contribution in 2009 accounted for slightly more than 50% of the just under $2.5 billion given by the foundation in 2010. So that year, by Forbes estimations, Buffett gave $751 million to global health and $157 million to education, while Gates gave $734 million and $154 million, correspondingly.

In total, Forbes estimates that Gates has given around $8.3 billion toward health and $4.6 billion toward education. Buffett’s health total is about $3.9 billon and his education number is around $1.1 billion.

 

Millennials move toward impact investing

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Over the next several decades, as baby boomers in the United States age and transfer their wealth to the next generation, an unprecedented $41 trillion will change hands.

These young inheritors are, for the most part, Millennials — the generation born between 1978 and 2000. As it turns out, this group’s attitudes about social responsibility, private capital, and the intersection between the two do indeed appear to differ from those of their parents, perhaps starkly.

“Think back to the great philanthropists of years past who thought of making money in the first half of their lives and giving it away in the second half,” says Justin Rockefeller, a trustee and member of the investment committee at the $739 million Rockefeller Brothers Fund, great-great grandson of John D. Rockefeller, and, at 33, himself a Millennial. “Today, that view is still pretty pervasive, that there’s capitalism and making money on one side, and philanthropy on the other. I think the younger generation is seeing that as a false dichotomy, or at least something that will increasingly become a false dichotomy.”

Data indicates that he’s right: Millennials are more likely to embrace a philosophy that financial interests and social interests ought to directly overlap, thereby ostensibly benefitting both wallet and world.

In late 2011 Deloitte Touche Tohmatsu commissioned two surveys: Both surveys asked whether business success should be based on more than just profit — 92 percent of Millennials said it should, and 71 percent of current business leaders agreed. When each group was asked to describe the purpose of business, Millennials most often said “innovation” and “societal development,” while business leaders’ top responses were “profit” and “value.”

Over half of Millennials believed that in the future, more than any other sector of society, business would achieve the greatest impact on solving society’s biggest challenges. These are no longer abstract philosophical schisms for the wealth management firms and advisers who are overseeing the massive transfer of assets from one generation to the next — the schisms are practical, and they’re starting to force changes at firms and family offices from the inside out.

Community foundations gaining respect in Russia and Eastern Europe

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Throughout Central and Eastern Europe and Russia (CEE/Russia) and Western Europe, the same two characteristics are often cited when leaders describe what first attracted them to community foundations — the institutions are non-political and they are owned by the communities they serve.

While community foundations are now operating in more than 15 countries in CEE/Russia, they didn’t start developing until the 1990s — first in Slovakia, Poland and elsewhere. Former Soviet states, including Russia, were moved to develop philanthropic organizations that could support the civil society sector after international donors pulled out.

A common characteristic of community foundations in the region is their operational transparency — something unthinkable during communist rule and still viewed with skepticism, says Natalya Kaminarskaya. She is CEO of the Russian Donors Forum, an organization that represents 128 of the nation’s about 300-plus grantmakers of all kinds, including community foundations. “People still have a lack of trust in their neighbors, businesses, government officials and even non-governmental organizations (NGOs) in Russia,” Kaminarskaya said. “But things are slowly improving.”

In addition to residents’ opinions of NGOs moving “from negative to neutral,” she says, the Russian government is also changing the way it interacts with indigenous grantmakers. Five years ago the government made it easier for Russian foundations by allowing them to keep money in reserve from year-to-year for permanent endowments without having that money taxed, as had been done previously.Also, a new national law in Russia became effective in 2012 providing individuals with tax incentives for donations made to community foundations and other NGOs. While these same tax incentives are not yet available for businesses and corporations, Kaminarskaya says, she is hopeful that change also will come.

The real reason the world will remember Bill Gates

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William H. Gates, III, shall ultimately be remembered as the most significant person of his generation. It may not be for the reasons you think.

Bill Gates is eligible for consideration by virtue of founding Microsoft. For fourteen out of the fifteen years from 1995 to 2009 he was the richest person in the world. Such achievements, however, will likely seem small in the scope of history.

Consider the scale of the Gateses’ philanthropy.  The Bill and Melinda Gates Foundation through which their philanthropy flows is, according to Wikipedia, the largest “transparently operated private foundation in the world.”  Since inception, the Foundation has made grants of over $26 billion, including $15 billion in global health alone.

The annual giving of just the GlobalHealth program of the Foundation is about $800 million and approaches the scale of the United Nations World Health Organization.

A significant contribution to the Foundation was made by Warren Buffet in 2006, but most of the money in the Foundation has been provided by the Gateses. 

Gates is also famous for asking other billionaires to commit to giving away half their fortunes. Bill and his wife Melinda have committed to giving 95% of their fortune to charity over time; that is an astounding measure of generosity.

 

Philanthropy and Corporate Social Responsibility (CSR)

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Corporate social responsibility (CSR) is also referred to as corporate conscience, corporate citizenship, social performance, or sustainable responsible business. The goal of CSR is to embrace responsibility for a company’s actions and encourage a positive impact through its activities.

CSR is meant to aid an organization’s mission as well as a guide to what the company stands for and will uphold to its consumers.

Corporate philanthropy is many times mistaken for corporate responsibility. But it is not the same, or to be more accurate, it is just one dimension of CSR, and frankly not the one we should be concentrating on when we talk and debate about the social responsibility of business.

To figure out what CSR means and why it doesn’t equal philanthropy, we can use the classifications Prof. Geoffrey P. Lantos presents in his paper, The Ethicality of Altruistic Corporate Social Responsibility. Lantos offers three different types of CSR:

1. Ethical CSR: Morally mandatory fulfillment of a firm’s economic responsibilities, legal responsibilities, and ethical responsibilities.

2. Altruistic CSR: Fulfillment of an organization’s philanthropic responsibilities, going beyond preventing possible harms (ethical CSR) to helping alleviate public welfare deficiencies, regardless of whether or not this will benefit the business itself.

3. Strategic CSR: Caring corporate community service activities that accomplish strategic business goals.

A holistic approach in grantmaking

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Community foundations in South Africa often use a holistic approach in their grantmaking, addressing multiple, inter-connected issues simultaneously, such as education, employment and health care.

Community foundation leaders in South Africa intentionally focus on creating positive local change from the bottom up, initiated by citizens, instead of the top down, initiated by elected officials, say those in the field.

“If we believe in the community foundation movement, and I do, we need to get down to the ground level and talk with the people living there and hear how they are affected by our community’s problems,” said Beulah Fredericks, executive director of the Community Development Foundation Western Cape based in Cape Town, South Africa. “We need to hear their voices and what their aspirations are. We should be asking: ‘What do you want to change? Where do you want your life to go?'”

Elsewhere in Africa, community foundations that are in varying stages of development are being created in response to local needs. These newer foundations are able to bring a holistic approach to their grantmaking, which means addressing multiple, inter-connected issues simultaneously, such as education, employment and health care.

“Before, people in a community would be told: ‘We’ve got money for water; where do you want your pump?'” one participant says. “Instead of assuming they all need pumps, community foundations are instead asking: ‘What do you see as your most urgent need? What assets do you have? How can we help you meet this need?'”

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Grantmaking to Latin America

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While the nonprofit sector in Latin America is among the smallest in the world, these nations are on the cusp of significant philanthropic transformation. This is due, in part, to a rising middle class, technology connecting more citizens and increasing corporate social responsibility (CSR).

Concerning grantmaking in Latin America and the Caribbean: Findings show that Canadian and European foundations favor funding programs in Central American and Andean countries, while Caribbean foundations almost exclusively fund within their own region. U.S. foundations favor Mexico and Brazil, although grants are made extensively across the region.

Nearly two-thirds (64.2 percent) of all grant dollars went to two countries—Mexico and Brazil. Four other countries—Peru, Colombia, Argentina, and Chile—comprised the next 22 percent. The remaining 13.8 percent was distributed among the other 39 countries of the region.