When people ask me what I do for a living, I often hesitate before answering. If I say “fundraiser” it sounds as though I run church bake sales. If I say “development professional,” I see blank stares as who knows what that is all about? With nearly $100 million raised, trust me, I didn't do it with bake sales.
In plain English, I am a nonprofit specialist whose expertise spans more than 22 years and for most of that time, I have been accruing information regarding every aspect of nonprofit development. Each and every day, I learn something new; hence, that is why this profession resonates with me – I love to learn and bask in the challenge of strategic decisions based on institutional knowledge.
Although, I have raised millions of dollars for worthy organizations worldwide, I find myself having to qualify my insistence of good governance and best business practices. The Picasso Strategic Solutions (www. picassostrategicsolutions.com) website is full of articles explaining the intense oversight that is ensuing by the Internal Revenue Service of nonprofit organizations.
I will continue to write more about compliance in my blogs and articles because “if you don’t play by the rules, your organization may be either heavily fined or closed down.”
For those foundations that invested with ponzi mastermind, Bernard Madoff, not only did they lose their funding, but now, they may also be facing a huge tax levy as a result of not having acute oversight of their investments.
The article below explains this further.
Not a day goes by that I don’t receive a call from a prospective client that says, “Lisa, I don’t care about compliance, I want you to raise money.”
Nothing could be more ridiculous of a statement.
The public, as well as the government, insists that measures be taken to protect the interest of those who have “invested” their resources with the charity. No trust; No money will be raised.
If nonprofits do not recognize that oversight matters, they are wasting their time by engaging in any effort to fundraise as a “public trust.”
Under an obscure tax rule, private foundations can be heavily penalized for failing to vet their investments properly; heed the red flags nonprofit managers, you either play by the rules, or you too will face dire consequences.
Next week, I will be highlighting an Arizona charity that is flourishing, not folding, in these difficult economic times. You will learn why some organizations can exceed financial expectations, and why others fail, in good times and in bad.
I want you all to succeed and continue to provide the services that our respective communities urgently need.
Have a restful weekend.
Lisa E. Benson
FROM: "The New York Times"
February 11, 2009
By LYNNLEY BROWNING
Published: February 11, 2009
Foundations that lost billions of dollars investing with Bernard L. Madoff have another reason to fret: they could be socked with sizable fines for failing to exercise sound judgment.
Under an obscure tax rule, private foundations can be penalized for failing to vet their investments properly, to heed red flags or to diversify prudently. While foundations are exempt from federal income taxes, they are subject to this excise tax, intended to keep them from taking outsize risks that could threaten their very survival.
“The I.R.S. could well assert these taxes,” said Marcus S. Owens, a tax lawyer and partner at Caplin & Drysdale in Washington, who headed the agency’s exempt-organizations division for 10 years.
The penalty can equal 10 percent of the amount invested during the tax year in question. If the foundation fails to try to recover the funds, there is an additional 25 percent penalty.
The foundation’s officers, directors and trustees also face a 10 percent penalty, and a 5 percent additional penalty if they ignored red flags or did not thoroughly vet Mr. Madoff’s investments and proposals. While the fines for individual managers are capped at $10,000 and $20,000, respectively, they are levied per investment.
At least 147 private foundations invested with Mr. Madoff, according to an analysis by Daniel E. Smith, the president of Benefit Technology Inc., a software company in Miami. Some of them, according the analysis, bet the farm — which some tax lawyers say could signal the lack of due diligence and fiduciary responsibility that the tax provision is meant to ensure.
Mr. Owens estimated the potential penalties at around $1 billion for all those invested with Madoff.
Though the I.R.S. has taken a gentle approach to pursuing tax penalties on charities, he suggested that might change with the Madoff case. “It’s pretty rare for a private foundation to make bad investments of this sort,” Mr. Owens said of the agency’s track record. “Most transgressions deal with excessive compensation or grants used for a noncharitable purpose.”
A spokesman for the I.R.S. declined to comment.
Among private foundations, the Picower Foundation, of Palm Beach, Fla., appears to have had the largest exposure to Mr. Madoff, investing virtually all its assets, more than $958 million. Others include the Carl and Ruth Shapiro Family Foundation, also of Palm Beach, which put its entire $199 million with Mr. Madoff; the Betty and Norman F. Levy Foundation of New York, which put in nearly all its assets, more than $244 million, and the Chais Family Foundation, of Encino, Calif., which appears to have lost all its $178 million.
Many, if not all, of the foundations would probably assert that they were fleeced in what prosecutors say is the world’s largest Ponzi scheme. As proof, they might point out that many of their donors also lost considerable personal money investing in this manner.
Still investors of all types, ranging from nonprofits to individuals to corporations, appear to have relied heavily on Mr. Madoff’s reputation and word-of-mouth referrals, which could suggest a lack of fiduciary responsibility.
Private foundations are typically created by a single family or donor, and exist to make grants. The other big piece of the nonprofit world is public charities — college endowments, hospitals and the like — with a broad array of donors.
Because private foundations have a limited base of donor funding, they have been subject for decades to the penalty excise tax, which is intended to encourage prudent investing decisions.
Friday, February 13, 2009
Wednesday, February 4, 2009
Hedging with Giving Annuities
For many months, I have been advising my clients to promote life income plans to donors. The article below reinforces my instincts that donors are seeking to make charitable gifts while receiving regular income vis-a-vie Charitable Gift Annuities. I hear from my colleagues who are fundraising at university centers that gift annuities are "flying out the door."
Please contact Picasso Strategic Solutions, LLC if you would like to have life income while at the same time making a gift to charity giving to charity. We can direct you to financial advisors who can help you.
Likewise, if you are a charity and would like to set up a Charitable Gift Annuity program, we are happy to offer strategic advice.
From: The Wall Street Journal
February 3, 2009
Charitable annuities are the gifts that keep giving.
These vehicles allow individuals to support a charity, reduce their tax bill and secure a steady stream of payments for life.
The rates paid to annuity beneficiaries are scheduled to decrease in February, but they're still attractive in today's depressed market.
The American Council on Gift Annuities, a nonprofit that sets the rates that guide annuity payments, cut its recommended rates by .4% to .7% for annuities funded after Feb. 1.
But with guaranteed rates of 5.3% to 9.5% for individuals 65 and older, gift annuities compare favorably with cash-like investments. Five-year certificates of deposit are yielding 2.78%, for example, and the yield on 10-year Treasurys is 2.67%.
For someone seeking a fixed payment, "in the midst of a recession, those rates still look pretty good," says Tony Martignetti, managing director of Martignetti Planned Giving Advisors.
The annuity rate reductions are a result of deep declines in both long and short-term interest rates -- markers used in calculating rates, says Cam Kelly, assistant vice president for principal gift programs at Duke University, who chairs the council's rates committee. Lower rates will help charities preserve their assets.
Charities aren't required to adopt the recommended rates but most will, Kelly said.
Under the new rates, a 70-year-old donor making a charitable gift of $100,000 would receive $5,700 a year, down from $6,100 under the current rates. Tax advantages vary with an individual's specific circumstances.
People with existing contracts aren't affected by the lower annuity rates.
Annuity rates are set with an eye toward the nonprofit receiving about half the donor's initial contribution.
Those concerned with maximizing their payments in retirement can typically receive higher payments from commercial annuities.
"You have to have a charitable intent to create one of these," said Jonathan Lander, vice president and senior wealth planner with PNC Financial Services Group Inc.'s wealth management business.
Tax Benefits
When funding a charitable gift annuity, donors make a gift of cash, securities or other assets to a charity. In return charities pay donors a fixed amount for their lifetime. The remainder goes to the charity.
Most organizations don't charge fees and a document can be drawn up fairly easily, planned giving experts say.
A portion of the annuity payments are tax-free and donors can take an upfront income tax deduction on the gift.
You can also recognize taxable gains on appreciated property, such as stock, over your life expectancy instead of paying capital gains tax all at once, as you would if you sold the property and purchased a commercial annuity.
Charitable annuities can be appealing for investors looking to avoid market risks, ACGA's Kelly says. With markets that are "going up, down and all over the place, donors can use charitable gift annuities to transfer the market risk to the charity and assure a fixed dividend for life," she says.
The flip side of a fixed rate is its inability to keep up with rising interest rates or inflation.
Since annuities are backed by the charity's assets, Kelly suggests thoroughly vetting the institution's financial strength before funding an annuity. Ask organizations about their total asset levels and for records of any defaulted annuities.
Gift annuity defaults, due to an organization's insolvency, are rare, said Frank Minton, senior adviser at charitable consultancy PG Calc and former chairman of the ACGA.
Donors should be wary of a charity that doesn't use the ACGA's rates and ask why, said Jere Doyle, senior vice president at Bank of New York Mellon Corp.'s wealth management division.
Donors can also consult their financial adviser, accountant or attorney to make sure a charitable gift annuity is best for their particular financial situation.
Remember that gift annuities involve an irrevocable transfer of assets, Minton says. You can't get your assets back once you fund an annuity.
When funding a gift annuity, donors can choose to receive payments immediately or defer them to a later date. The older you are, the higher the rate you receive. Some charities enforce a minimum age, such as 60 years old, to begin receiving payments.
Rates for immediate gift annuities are based on the beneficiary's age at the time the annuity is established. Rates for deferred gift annuities, which are less common, take into consideration both the compound interest on the contribution during the deferral period and the annuity rate for the age at which payments begin, Minton says.
A gift annuity is typically structured with funds of at least $10,000.
Payments can go to one person for the individual's lifetime, or for a slightly reduced rate, to two people in succession. For example, if a husband and wife fund a charitable annuity the charity would continue to make payments until both spouses pass on. Donors may also fund a charitable gift annuity for another family member, such as a parent or ill sibling.
Parents or grandparents may consider funding a tuition annuity, whereby a gift annuity is created for a young child, with the donor deferring the payments until age 18, or when the child is expected to go to college. Some states such as New York do not permit this type of annuity.
Write to Shelly Banjo at shelly.banjo@dowjones.com and Kristen McNamara at kristen.mcnamara@dowjones.com
Please contact Picasso Strategic Solutions, LLC if you would like to have life income while at the same time making a gift to charity giving to charity. We can direct you to financial advisors who can help you.
Likewise, if you are a charity and would like to set up a Charitable Gift Annuity program, we are happy to offer strategic advice.
From: The Wall Street Journal
February 3, 2009
Charitable annuities are the gifts that keep giving.
These vehicles allow individuals to support a charity, reduce their tax bill and secure a steady stream of payments for life.
The rates paid to annuity beneficiaries are scheduled to decrease in February, but they're still attractive in today's depressed market.
The American Council on Gift Annuities, a nonprofit that sets the rates that guide annuity payments, cut its recommended rates by .4% to .7% for annuities funded after Feb. 1.
But with guaranteed rates of 5.3% to 9.5% for individuals 65 and older, gift annuities compare favorably with cash-like investments. Five-year certificates of deposit are yielding 2.78%, for example, and the yield on 10-year Treasurys is 2.67%.
For someone seeking a fixed payment, "in the midst of a recession, those rates still look pretty good," says Tony Martignetti, managing director of Martignetti Planned Giving Advisors.
The annuity rate reductions are a result of deep declines in both long and short-term interest rates -- markers used in calculating rates, says Cam Kelly, assistant vice president for principal gift programs at Duke University, who chairs the council's rates committee. Lower rates will help charities preserve their assets.
Charities aren't required to adopt the recommended rates but most will, Kelly said.
Under the new rates, a 70-year-old donor making a charitable gift of $100,000 would receive $5,700 a year, down from $6,100 under the current rates. Tax advantages vary with an individual's specific circumstances.
People with existing contracts aren't affected by the lower annuity rates.
Annuity rates are set with an eye toward the nonprofit receiving about half the donor's initial contribution.
Those concerned with maximizing their payments in retirement can typically receive higher payments from commercial annuities.
"You have to have a charitable intent to create one of these," said Jonathan Lander, vice president and senior wealth planner with PNC Financial Services Group Inc.'s wealth management business.
Tax Benefits
When funding a charitable gift annuity, donors make a gift of cash, securities or other assets to a charity. In return charities pay donors a fixed amount for their lifetime. The remainder goes to the charity.
Most organizations don't charge fees and a document can be drawn up fairly easily, planned giving experts say.
A portion of the annuity payments are tax-free and donors can take an upfront income tax deduction on the gift.
You can also recognize taxable gains on appreciated property, such as stock, over your life expectancy instead of paying capital gains tax all at once, as you would if you sold the property and purchased a commercial annuity.
Charitable annuities can be appealing for investors looking to avoid market risks, ACGA's Kelly says. With markets that are "going up, down and all over the place, donors can use charitable gift annuities to transfer the market risk to the charity and assure a fixed dividend for life," she says.
The flip side of a fixed rate is its inability to keep up with rising interest rates or inflation.
Since annuities are backed by the charity's assets, Kelly suggests thoroughly vetting the institution's financial strength before funding an annuity. Ask organizations about their total asset levels and for records of any defaulted annuities.
Gift annuity defaults, due to an organization's insolvency, are rare, said Frank Minton, senior adviser at charitable consultancy PG Calc and former chairman of the ACGA.
Donors should be wary of a charity that doesn't use the ACGA's rates and ask why, said Jere Doyle, senior vice president at Bank of New York Mellon Corp.'s wealth management division.
Donors can also consult their financial adviser, accountant or attorney to make sure a charitable gift annuity is best for their particular financial situation.
Remember that gift annuities involve an irrevocable transfer of assets, Minton says. You can't get your assets back once you fund an annuity.
When funding a gift annuity, donors can choose to receive payments immediately or defer them to a later date. The older you are, the higher the rate you receive. Some charities enforce a minimum age, such as 60 years old, to begin receiving payments.
Rates for immediate gift annuities are based on the beneficiary's age at the time the annuity is established. Rates for deferred gift annuities, which are less common, take into consideration both the compound interest on the contribution during the deferral period and the annuity rate for the age at which payments begin, Minton says.
A gift annuity is typically structured with funds of at least $10,000.
Payments can go to one person for the individual's lifetime, or for a slightly reduced rate, to two people in succession. For example, if a husband and wife fund a charitable annuity the charity would continue to make payments until both spouses pass on. Donors may also fund a charitable gift annuity for another family member, such as a parent or ill sibling.
Parents or grandparents may consider funding a tuition annuity, whereby a gift annuity is created for a young child, with the donor deferring the payments until age 18, or when the child is expected to go to college. Some states such as New York do not permit this type of annuity.
Write to Shelly Banjo at shelly.banjo@dowjones.com and Kristen McNamara at kristen.mcnamara@dowjones.com
Monday, February 2, 2009
GLOBAL MELTDOWN
From: The Jerusalem Post
February 3, 2009
Some 30 non-profit organizations called on the government Monday to immediately create an emergency plan to help keep hundreds of local charities and grass-roots organizations from closing down due to economic burdens, The Jerusalem Post has learned.
"If something is not done soon to help these organizations, then we will likely see more than 20 thousand people joining the unemployment lines," representatives of the organizations wrote in a statement. The groups were set to meet with government representatives late on Monday to discuss the matter.
"Just like everyone else, we pay our taxes [and] social welfare packages, and support tens of thousands of families," continued the statement. "Firing workers will eventually cost the state much more in unemployment benefits than a comprehensive rescue package."
Eran Klein, project manager at Shatil, the New Israel Fund's empowerment and training center and one of the organizations belonging to the umbrella body, said it was not only a matter of employees losing their jobs.
"We are also talking about many charities being forced to close due to the economic crisis and that, in turn, means some of society's weakest segments not getting essential services," he said.
Klein, who was to be at Monday evening's meeting, said he was not optimistic that the government would agree to a relief package on the scale needed to protect the non-profit sector from the recession. His assumptions were based on the conclusions of previous meetings held between the Prime Minister's Office and the Treasury.
He said the charities were asking the government to address four central issues as part of an aid package: the cancellation of a seven percent tax on non-profit organizations; the establishment of a comprehensive program to slow down recession-induced layoffs; a drive to increase donor bases, including those for grassroots donors; and a new fund to provide emergency aid to organizations on the verge of closing down.
"If the government expects the third sector to continue in the same way it's been operating up until now, it will be extremely disappointed," Klein said.
He added that the situation had become dire for many non-profits over the past few months, and that even if the government refused to implement an immediate bail-out program similar to initiatives for the business sector, "we will continue to push them to tackle this problem."
Meanwhile, speaking at the Herzliya Interdisciplinary Center's annual conference on Monday, Minister of Welfare and Social Services Isaac Herzog addressed the challenges faced by the third sector during the economic crisis.
"The non-profit sector is falling apart, with many organizations closing down completely," Herzog said in his speech. "Due to the situation, we have to think twice about privatizing our social welfare activities."
Herzog's director-general, Nachum Itzkovitz, told a conference panel that 90% of the ministry's operations were currently being outsourced to non-profit organizations. He also warned that further increases in unemployment would most certainly put a strain on the entire social welfare system.
February 3, 2009
Some 30 non-profit organizations called on the government Monday to immediately create an emergency plan to help keep hundreds of local charities and grass-roots organizations from closing down due to economic burdens, The Jerusalem Post has learned.
"If something is not done soon to help these organizations, then we will likely see more than 20 thousand people joining the unemployment lines," representatives of the organizations wrote in a statement. The groups were set to meet with government representatives late on Monday to discuss the matter.
"Just like everyone else, we pay our taxes [and] social welfare packages, and support tens of thousands of families," continued the statement. "Firing workers will eventually cost the state much more in unemployment benefits than a comprehensive rescue package."
Eran Klein, project manager at Shatil, the New Israel Fund's empowerment and training center and one of the organizations belonging to the umbrella body, said it was not only a matter of employees losing their jobs.
"We are also talking about many charities being forced to close due to the economic crisis and that, in turn, means some of society's weakest segments not getting essential services," he said.
Klein, who was to be at Monday evening's meeting, said he was not optimistic that the government would agree to a relief package on the scale needed to protect the non-profit sector from the recession. His assumptions were based on the conclusions of previous meetings held between the Prime Minister's Office and the Treasury.
He said the charities were asking the government to address four central issues as part of an aid package: the cancellation of a seven percent tax on non-profit organizations; the establishment of a comprehensive program to slow down recession-induced layoffs; a drive to increase donor bases, including those for grassroots donors; and a new fund to provide emergency aid to organizations on the verge of closing down.
"If the government expects the third sector to continue in the same way it's been operating up until now, it will be extremely disappointed," Klein said.
He added that the situation had become dire for many non-profits over the past few months, and that even if the government refused to implement an immediate bail-out program similar to initiatives for the business sector, "we will continue to push them to tackle this problem."
Meanwhile, speaking at the Herzliya Interdisciplinary Center's annual conference on Monday, Minister of Welfare and Social Services Isaac Herzog addressed the challenges faced by the third sector during the economic crisis.
"The non-profit sector is falling apart, with many organizations closing down completely," Herzog said in his speech. "Due to the situation, we have to think twice about privatizing our social welfare activities."
Herzog's director-general, Nachum Itzkovitz, told a conference panel that 90% of the ministry's operations were currently being outsourced to non-profit organizations. He also warned that further increases in unemployment would most certainly put a strain on the entire social welfare system.
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