Archive for Steven Ketchpel (author of "Giving Back")

Al Gore on the “Power of Philanthropy” at the Silicon Valley Community Foundation Regional Meeting

October 5, 2011 / / No comments

Bottom Line:  Al Gore’s talk was one of the more inspirational I’ve heard.  He indicted the short term thinking found in “Quarterly Capitalism” which is infecting “Quarterly Democracy,” and leading us to make poor choices about necessary investments for our future (yes, mostly environmental).  Will our children be asking us “What were you thinking?” (if we ignore the warnings of 98% of climate scientists who say the time for action is now) or can we avert a crisis, and have them ask instead “Where did you find the moral courage to act?”

Silicon Valley Community Foundation Turns 5

I’ll admit that I’m biased against Community Foundations.   I favor a global outlook in my charitable activities and I typically assume Community Foundations are about, well, the community.  The “Regional Meeting” held by the Silicon Valley Community Foundation today caused me to take a bit broader perspective.  One way they serve the community is by being a resource to donors in the community, even if those donors choose to give internationally.

Things I admire about Silicon Valley Community Foundation

  1. They do a great job with donor education.  They’ve got programs targeted at kids, they’ve got an informative web site, a print magazine, and events (like today’s) open to the community for free.
  2. They raise the awareness of the role of philanthropy in the community.  Their presence is a gravitational center that pulls in people who are interested in or are thinking about philanthropy.  They do a good job of marketing and outreach to bring more donors into the fold.
  3. They have a good staff (79 employees!) and know the community issues.  Grants made by the foundation (in contrast to the donor-advised or corporate-advised funds it administers) address the strategies of:
    • Economic Security
    • Education
    • Immigrant Integration
    • Regional Planning
    • Safety-net Services  (85M pounds of food distributed to 9M clients in 2010)
  4. They’re metric-driven.  They shared some impressive numbers today, and I believe that they obtained those impressive numbers because they’re watching them.  That is, they’ve found important objectives, and the numbers to track to make progress on those objectives.

Silicon Valley Community Foundation Scoreboard:

In the 5 years since the merging of the Peninsula Community Foundation and the Community Foundation of Silicon Valley (which they admitted had some rough patches, including the financial meltdown of 2008 and subsequent recession):

  • $1B worth of grants have been made (nearly matches the total dollars granted by both parent organizations in their ~50 year histories prior to the merger)
  • $1B worth of donors funds have been raised
  • $500M have been added to the asset base, bringing the total assets under management to $2B
  • $150M of contributions in 2010 alone

Al Gore’s Keynote Address

[Although I had registered late and only had a “live simulcast” ticket, there were enough no-shows for the main ballroom that they let us dozen-or-so procrastinators join the other thousand-or-so people at the main event.  Thanks SVCF!]

Al Gore gave a good talk.  I suspect that he has had a lot of practice at it–this was probably pretty similar to other talks that he gives, two or three times a day, probably 15 days/month.  It was a good mix of humor, scientific evidence, collective questioning of how we got here and encouragement on choosing a new path forward.

What was most surprising to me was the sharpness of the rebuke of politicians, fund raising, and the impact of special interest money.

“American Democracy has been hacked,”  Gore said.

[From my notes, not a transcript, so what follows are not exact quotes….]

“To add to the problem of ‘short-term-ism’, there is the tendency of too many officeholders to think not as much of what the long term impact to the country will be–but human nature being what it is, and the need to raise ever-increasing amounts of money per election cycle, at levels provided only by special interest lobbies–what will be the impact of my vote at tomorrow’s fundraiser?”

Gore had started off by decrying our lack of long term thinking, wondering “What has caused us to lose our abundant ability to look ahead?” and longing for the wisdom of an (unnamed) World War II general who said that it was “time to steer by the stars, and not the lights of each passing ship.”   He said that short-sightedness had afflicted our corporations, citing a study where 80% of the CEO’s and CFO’s said that they would not make an investment that would meet their internal rate of return goals over the long term (and all other criteria for being a good investment) if it would cause them to slightly miss their current quarterly earnings estimate.  That short term view of “quarterly capitalism” causes our corporations to bypass many investments that they should, rationally, make.

The quarterly time horizon is infecting politics as well, with incumbents having daily fund-raising goals from the day they take office. The quarterly Federal Election Commission reports are deemed as snapshots to show momentum, so the days before a report deadline become a flurry of solicitations.  More worrying, the special interest lobby fund-raisers are scheduled the day after key votes, so politicians are held hostage by the prospect of losing key financing if they don’t support a particular position on a vote.

Gore cited some examples from the business world suggesting that we really have become over-dependent on speed.  In the “Flash Crash” of May 2010, the market lost 20% of its value in 20 minutes (and recovered most of it before market close).  The investigatory committee considered adding the requirement that any buy or sell order would be required to remain open for at least one second (presumably would be closed before that if filled).  That duration was determined to be too hazardous, since 55-60% of the volume is high-speed, high-frequency trades.  A second example was an investment opportunity for a $1B capital investment laying fiber optic cable to lower Manhattan so that the orders would have a 2 millisecond advantage over the alternative.

He next trained his criticism on the banking sector and its behavior during the subprime mortgage crisis, with the emblematic email acronym of “IBGYBG”  standing for “I’ll be gone; You’ll be gone [before the problems caused by this proposed transaction surface].”  But, he implied, we are all taking that excuse when we deal with the environmental problem we are causing with carbon emissions.   We have $7 Trillion in “subprime carbon assets” (in the coal and gas industry) keeping us from taking the action we need.  (Gore’s recommendation which he made implicitly rather than explicitly, was a carbon tax, offset by tax cuts in other areas.  Here he is consistent with suggestions from his tenure as Vice President.)

But the “IBGYBG” assumption is a fallacy in the environment case, he argues.  We’re already seeing extreme weather, species extinction, and the first environmental refugees, with more of each yet to come.  While individual weather events can’t be tied to climate change, our actions are impacting the odds that they occur.  “We’re not just loading the dice…  We’re painting more dots on them.  We’re rolling 13’s and 14’s now…”  The 235 km/hour wind speeds in the Philippines storm, the second in a week are causing climatologists to wonder how to add a “Category 6” to our current 5-point scale.

He cited other extreme weather examples:

  • 95% of Texas in “extreme” or “exceptional” drought, fires in 252 of 254 Texas counties
  • an Australian region the size of France & Germany combined entirely flooded
  • 20M Pakistanis driven from homes due to flooding last year, it doesn’t even make the news when 8.5M are affected this year
  • worst Russian drought/fires on record

and then traced the chain of impacts of the last one:

  1. Due to the drought, the Russian wheat crop failed;
  2. Russia (and surrounding former republics) pulled their production off the global market for domestic use
  3. Food prices spiked, stressing lower income people who spend a greater percentage of their income on food;
  4. One particular Tunisian food vendor was particularly affected (leading to the Tunisian protests and the start of the Arab Spring).

He closed with some reason for optimism:

When President John F. Kennedy challenged our country to go to the moon, many doubted our capability.  Eight years later, when Neil Armstrong landed, the average age of the engineers in the control room was 26, meaning that they had been only 18 when Kennedy issued his challenge.  We have similar potential today, we have the financial resources to address the problem, the only thing that we lack is the political will to do it.  “And that,” Gore closed, “is a renewable resource.”

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“Give $mart” authors Tom Tierney and Joel Fleishman at Stanford

September 21, 2011 / / No comments

Bottom Line:  Tierney and Fleishman have a ton of experience and have written a good book aimed at foundations and philanthropists.  They advise people concentrate their giving on “fewer/bigger/longer” projects and proactively go out to seek world-class organizations that are already working effectively in the area of interest.

The Stanford Center on Philanthropy and Civil Society (PACS Center) hosted a talk last Thursday night by Tom Tierney and Joel Fleishman, the authors of Give $mart. Bill Meehan moderated.

The book centers around 6 questions:

  1. What Are My Values and Beliefs?
  2. What Is “Success” and How Can It Be Achieved?
  3. What Am I Accountable For?
  4. What Will It Take to Get the Job Done?
  5. How Do I Work with Grantees?
  6. Am I Getting Better?
This approach (starting with values, tracking metrics, and looking for continual improvement) resonates with me and the approach that I outline in Giving Back.
There were some interesting stats quoted:
  • The Non-profit sector in the US is about $300B, or 2.2% of GDP, #1 world-wide.  Runner-up UK accounts for only 0.8% of GDP.
  • The Boomer generation will be passing some $40 trillion on to successive generations, as much as $6 Trillion of it might go to non-profits.

The Emergence of Venture Philanthropy

They made the controversial assertion that “Philanthropy’s natural state is underperformance.”  Saying that it does good, but could do more if attention were paid to how to give money.  Tierney noted that the mid-90’s marked an inflection point for not-for-profits.  Since then, a language for social change has emerged (“social return on investment, social entrepreneur”), and we’re seeing a talent transfer with business people like Omidyar, Gates, and the Bridgespan partners leaving their business roots to focus on working in philanthropy (but bringing their business point-of-view and skill set).   There’s also a whole new level of information transfer with Stanford Social Impact Review (the new “journal of record” for the non-profit space, according to Fleishman) and papers and case studies published by Bridgespan–with this much shared learning, there are bound to be fast changes in the space.
  The authors noted a change in funding strategies where historically, most foundations have been set up to last “in perpetuity”, while more of the current generation philanthropists are creating “spend down” foundations, so they will see the results in their lifetimes, or the money will be spent within the next generation.  It gives the foundation management a different mindset if they don’t have to preserve the institution forever.

Andrew Carnegie, the Original Engaged Philanthropist

Fleishman described Andrew Carnegie as the prototype of an engaged philanthropist:  At age 36, Carnegie said that he would devote the rest of his life to giving away what he had earned.  His innovations included the creation of TIAA-CREF (to provide pensions for educators) as well as the first Challenge Grants (offering to fund the building for a  library if the town would pay its ongoing operating cost and buy the books.  He constructed 2500 libraries on those terms.)  He also worked to bring world leaders together to avert World War I, and created the Carnegie Institute (later part of CMU.)

Silicon Valley vs. East Coast Philanthropy

Asked about the differences between Silicon Valley philanthropy compared to the traditional power centers on the East Coast, the authors noted that there is more of an orientation to experimentation here “Let’s try it and see what happens,” with a willingness to experiment outside the conventional boundaries.

“Overhead” as viewed by Business and Non-Profit Leaders

They pointed out an interesting difference between the for-profit and the not-for-profit world.  Businesses proudly proclaim “Our people are our most important asset.” and payroll is commonly 25% of costs.  But when those same business leaders shift over to the non-profit space, that “most important asset” suddenly becomes “overhead” and is squeezed to 12-15%.

Advice for Your Philanthropy

Tierney and Fleishman strongly encouraged philanthropists to be “not merely giving your money–giving yourself, your time.  Put your life into it!”  “If you don’t the things you really care about, you’ll just give money–not time, not get your friends involved.”  These personal connections with causes are the “anchors” that keep you going and prevent you from just being adrift.

A personal thanks….

Tom and Joel were signing books at the event, and I was really impressed that they not only took the time to sign them, but listened to me as I explained my interest in their work, and personalized the dedication, offering their best wishes for the success of Giving Back!  

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One World Children’s Fund Fellows Presentations

September 17, 2011 / / No comments

Bottom Line:  Innovative non-profits, like OWCF, seek to try new things, empower people and get out of the way to let them get things done.  OWCF’s inaugural group of “fellows” was an effective way for the organization to jump start some important projects, while providing valuable training to a new generation interested in learning the ropes in the non-profit world.

[And, we’re back…  The lack of posts over the last 3 weeks was a result of my moving.  It’s remarkable how much time and energy it takes to find a new place to live, pack up, get boxes from one place to another, and unpack them.  I’m not done yet, but far enough along that I can get back to blogging….]

I currently serve on the board of the Palo Alto Congregational Foundation, a small grant-making foundation that supports projects and organizations in the Palo Alto, CA area.  We typically make 5 – 8 grants per year, totaling about $20,000.   We do accept unsolicited proposals, though we give preference to those organizations that have a tie to First Congregational Church of Palo Alto, either through financial support from the Outreach Board or church members who serve as volunteers or employees.  We do not support operating expenses, preferring to provide either seed funding for new programs or capital expenses.  Contact me for more information about the application process.

One of our recent grants was to One World Children’s Fund to start a summer fellowship program.  Yesterday, the three fellows presented what they had done in their part-time, three-month, unpaid fellowships.  I have to admit that I was late, and missed the first 45 minutes of the presentations, but from what I did see, the fellows tackled some of the marketing challenges that OWCF faces, specifically:

  1. Creating an “Elevator Pitch” with talking points to describe the OWCF model:  “One World Children’s Fund is a non-profit that supports community-based organizations serving children around the world.  We are unique because volunteers approach us with organizations they wish to raise funds for.  Once selected, these volunteers are provided tools and training for fundraising.  100% of the money they raise goes directly towards supporting children.  Fundraising isn’t the only way to get involved with One World.  People come to us from all walks of life to make a difference in the lives of children, and so can you!”
  2. Improving Donor Stewardship.  It sounded like the main initiative there was publishing donor stories, which is a start.
  3. Using online video to tell the story.  One of the fellows created a storyboard for a 2 minute animated short that describes OWCF’s champion model.  She also found an animation studio who agreed to produce it pro bono.
  4. Making sure web content is available to a global audience.  Another fellow set up a process to create a volunteer community of translators who could ensure that the content of OWCF’s is available in other languages.
Several members of OWCF’s board were in the audience, and they seemed to also appreciate the contributions of the fellows.  I had a chance to speak with the fellows afterward, and was impressed.  These women had strong academic and work backgrounds, but needed the practical non-profit experience to make the desired transition into non-profit management as a career.  They were happy with the autonomy and responsibility that OWCF had given them, and OWCF had also lined up a series of weekly speakers talking about their areas of non-profit specialty.  In a testament to the value of the program, one of the fellows learned about the fellowship from idealist.org and applied from Hong Kong, enduring a three-month separation from her newly-wedded husband to participate in the fellowship.
In summary, I was impressed that OWCF put together a quality fellowship program (run entirely by volunteers) and believe that it had the desired win-win outcome of providing value to both OWCF and the fellows.  I hope that the longer term benefits of improved messaging, donor stewardship, and website reach will result in more projects helping more children under the OWCF umbrella.
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More on Metrics

August 24, 2011 / / No comments

Today we’re looking at an organization that aims to improve life for African girls and give them the means to travel more easily to school or for household tasks like carrying water or firewood, while improving their self-esteem as well. This organization has amazing financial metrics: all of its work is performed by volunteers, and through industry connections and a generous group of founders and officers, they spend nothing on fund-raising.  That is, all of the $10 million donated has gone directly to its programs and beneficiaries.

The program staff has established two performance metrics that they report faithfully:

  1. The amount of reduction in travel time for school and household tasks for the beneficiaries; and
  2. The satisfaction of the beneficiaries with the service

The ratings on both metrics are amazingly high.  Couldn’t be better.  Looks like a winning organization, worthy of your support, right?

Before you write that check, you should probably know that “Sports Cars for Africa” has used its $10 million to provide 100 lucky girls each with a $100,000 sports car.  The girls do get to school very fast (Metric #1) and are highly satisfied with the organization (Metric #2).  But perhaps not what you had in mind?

You’ve probably guessed that this is a fictitious example.  But it’s good to keep in mind that as you evaluate organizations, you should look at the metrics they offer.  Don’t blindly accept them. Do they make sense?

Organizations respond to the way they are being measured, and may make some strange decisions if the metrics aren’t properly aligned with the real mission of the organization.

If you want to invest in a real organization that has similar goals, but a more sensible approach to meeting them, World Bicycle Relief gives $134 bicycles, not $100,000 sports cars to community health care workers and other recipients identified by on-the-ground NGO partners.  They have substantial expertise (founded by SRAM bicycle executives)  and train bicycle mechanics to handle repairs locally.  They strive to do as much in-country manufacturing and assembly as possible, further aiding the economy.  And they do a good job of financial transparency.

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Why relying on “Fund Raising Effectiveness” might not be enough

August 19, 2011 / / No comments

 

We gravitate toward objective metrics when evaluating complex problems.   For a new car, that might be horsepower, braking distance or towing capacity.  For non-profits, it’s often “fund raising effectiveness” or related metrics of “overhead” or amount spent on program.  On the surface, it seems a sensible approach:  after all, you want your donated dollars going to educate children or immunize infants, not paying for fund raising consultants or direct mail campaigns.

If I saw the following table, it would be hard *not* to choose Organization A.

Name % of funds spent on program % of funds spent on fund raising
Organization A 100% 0%
Organization B 97% 3%
Organization C 63% 37%

But there’s more to the story.

Imagine that you are the volunteer Executive Director of a small organization that provides bed nets to families in Africa to help stop the spread of malaria and other mosquito-borne illnesses.  Each bed net, with delivery and training, costs $15.

You have $15,000, and could serve 1,000 families.

You brainstorm with your team about how you could raise money to serve more families, and you come up with two promising ideas:

Idea Guaranteed Income Fixed Expense Net Profit
(pardon the pun)
Raffle / Silent Auction $16,000 $1,000 $15,000
Gala $40,000 $25,000 $15,000

What do you do?

Assuming that we had the staff to pull it off, why not do both?  We end up serving an extra 1,000 families for each of the fund raisers that we run.  Go for it!

Now, re-cap the financial impact of these choices:

Scenario income expense # of families helped % of funds spent on program % of funds spent on fund raising
Base level
(no fund raisers)		 $15,000 $0 1,000 100% 0%
Base + Raffle $31,000 $1,000 2,000 97% 3%
Base + Raffle + Gala $71,000 $26,000 3,000 63% 37%

By choosing to increase our efforts, to help more families, we have transformed our organization from “Organization A” in the table above to “Organization C”. What seemed a clear choice with some information reverses when more information is revealed. In summary, yes, fund raising effectiveness is important, but keeping in mind the bigger context of how the money is being spent and how many people are being helped is also important.

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9/11 Day of Service and Jeremy Glick

August 16, 2011 / / No comments

There’s a movement afoot to transform the memory of 9/11 into one of civic action.

The site has partnered with All for Good, HandsOnNetwork, VolunteerMatch, and GuideStar to provide search engines for giving and volunteering opportunities.  As I was doing my researching recommended sites for the book, this was exactly the set I came up with.  So, kudos to them for partnering with the best out there, and if you find yourself looking for opportunities for days *other* than 9/11, try going to these partner sites directly (more detail below).

If you happen to be in an area where these sites have critical mass, you may find hundreds of listings each month. When filtering by type of event and date, though, even the more robust lists dwindle to a handful of options. In areas of the country that are less “wired” or less densely populated, the online databases may not yield anything of interest.

Web Sites Listing Volunteer Opportunities

  • All for Good (www.allforgood.org) includes the listings from several other sites, so appears to be the most comprehensive. It offers the ability to restrict the search by geography, cause area, and date range, so is a good place to start.
  • VolunteerMatch (www.volunteermatch.org) is another nation-wide site. The advanced search tab allows restricting the results to those opportunities that are good for kids, teens or groups. Although you can’t easily filter the results to the date(s) you’re interested in, you can sort by date.
  • HandsOn Network (www.handsonnetwork.org) with 70 affiliates and 245 “action centers,” this site lists many opportunities, and has quite a bit of helpful information.

A Memorial to Jeremy Glick

I can’t write about September 11th and giving without remembering one of my co-workers who gave his life on that day. Jeremy Glick was an account manager for Vividence who was on UA flight 93 on his way to a sales meeting in San Francisco.  He was in phone contact with his wife during the hijacking, and was part of the group of passengers who prevented the plane from reaching its intended target.

My “I will”:  “I will honor Jeremy Glick’s memory with a gift to a charity, and sharing that memory with others.”

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Three Questions to Uncover your Passions

August 11, 2011 / / No comments

What inspires you to give back?

Most giving back results from a personal connection to a cause or group.  If you haven’t yet found the cause that drives you to learn more, do more, and tell more people about it, try asking yourself the following Three Questions:

  1. What organizations do you give credit for the person you have become?
  2. What activities bring you JOY that you want to make sure people in the future can do?
  3. When you travel (in your own neighborhood or around the world) what groups do you see that are treated unfairly or need extra help?

Yes, OK, I’ll share my answers to these questions:

  1. What organizations do you give credit for the person you have become?
    (Chronologically…) My church (the United Church of Christ), Boy Scouts, Harvard College, Stanford University, improv, and the Reuters Digital Vision Program.
  2. What activities bring you JOY that you want to make sure people in the future can do?
    Listening to jazz, watching live theater, walking in nature, snorkeling.
  3. When you travel (in your own neighborhood or around the world) what groups do you see that are treated unfairly or need extra help?
    Those suffering from poverty, homelessness, and disasters. Women and girls, especially in the developing world, but in America, too. Cancer patients and their families. Torture victims.

These answers are a pretty good reflection of how I focus my giving back.

Volunteering:

  • I volunteer quite a bit with my church, especially around Peace and Justice issues and our connection to Stanford University.
  • I spent a year in the Reuters Digital Vision Program volunteering with the Grameen Foundation on a project to improve access to microcredit (small loans to women entrepreneurs in the developing world) through software.
  • I view my performances with an improv troupe as giving back (we aren’t paid, and all of the ticket proceeds go to scholarships).

Donating:

  • I make financial gifts to support my church, poverty alleviation and disaster relief efforts, Harvard, the environment, medical research and jazz (in roughly that order).
  • Being an active audience member, seeking out rising jazz talent (attending and tipping!) helps preserve that community.
  • I’ve set up a living trust that will, upon my death, distribute the bulk of my estate to some of the organizations and causes listed here. (Watch for a future blog post on this important topic….)

The Three Questions were the seed that germinated into the book Giving Back. I started trying them out on people in December 2010, and here are some answers that were shared back then.
I invite you to consider your answers, and would love to hear about them, in the comments if you feel like sharing globally, or in email or conversation if that’s more comfortable.

What organizations do you give credit for the person you have become? What activities bring you JOY that you want to be sure people in the future can do? When you travel (in your own neighborhood or around the world) what groups do you see that are treated unfairly or need extra help?

The Three Questions as posed to Lisa Chu's Essential Self Extravaganza (Dec 2010)

 

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GirlUp Campaign on PBS NewsHour

August 11, 2011 / / 2 comments

PBS NewsHour ran a nice segment on the Girl Up Campaign (5:25 clip) yesterday.  It sounds like a great program, sponsored by the UN Foundation.

The idea is to build grassroots support among American teens and tweens to help peers in developing countries stay in school, stay free from child labor, and safe from violence.

The segment also tells the story of identical twin girls born in Vietnam.  One sister was given up for adoption and is now lives in California, a 12 year-old with the dream of going to UCLA and med school.  Aware that her sister, still in Vietnam, faces a reality of hard work with little opportunity, Isabella Solimene is doing what she can, working with GirlUp, to help her sister and girls like her.

Find out more about Girl Up 

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Donor Advised Funds

August 9, 2011 / / 2 comments

Bottom line:  If you are paying capital gains tax and donating cash to charities in the same year, you’re wasting money.  Giving appreciated securities can be a hassle, but a Donor Advised Fund makes it (more) convenient and simplifies other record keeping.  Schwab, Fidelity, and Vanguard offer “free” accounts.  Get one.

Donor Advised Funds (DAFs) have been gaining popularity recently, but they still don’t occupy their rightful place as the default choice for mid-level givers (those who give in the $5,000+ range across all their donations in a year).

A DAF is sort of like having your own foundation, but the money is pooled with other people’s, and bookkeeping records track who contributed what (and therefore, how much you can subsequently pay out to charitable causes).  You make contributions (typically of appreciated securities) to the DAF on an as-needed basis, and then draw down the funds as you recommend grants to non-profits.

Why should you care about a DAF?

  1. It simplifies things for you.  All your records are in one place, and you can get year-end or longer summaries of your giving.  The deduction comes when you donate to the DAF (not when you recommend a grant to a non-profit), so you typically only have to track a smaller number of donations, rather than every $50 gift that you make over the course of a year.  (Though the DAF keeps track of those for you, too…)
  2. It simplifies things for the agency you’re giving to.  It’s a hassle for most small non-profits to get appreciated securities.  But in order to avoid capital gains tax, you should be giving appreciated securities.  Give them to your DAF, and let them deal with it.  Your local non-profit gets a check, not shares of stock it then needs to sell.
  3. It allows you to be anonymous if you choose (and still get the deduction.)
  4. You can control the timing of the deduction separately from the timing of the gift.  Donate to the DAF now, get your deduction now, and then recommend a grant from the DAF to your alumni association in 2 years for your 35th reunion year.
  5. Gifts cards (offered by Fidelity Charitable Gift Fund  ) let you give someone else (a child or any other gift recipient) the ability to choose a non-profit where the donation goes.  This can be a good way to introduce kids to the practice of charitable giving.

What does it cost?

Not much.  Typically 6/10 of 1% of the assets of the fund are charged on an annual basis.  The trick is, you don’t really need to keep assets in the account.  You can, but mostly, you can fund the account just before you make a round of grant recommendations to your chosen charities, so the DAF itself has only a nominal balance.  In this case, the $100/year minimum fee kicks in (drawn from the DAF itself, so it reduces the amount you can give, but not an expense to you).  Money that you do have in the account istypically invested in some fund or mix (in a similar fashion to the investment options of your 401K, probably), and you pay the management fees on those funds in the same way that you do for a 401K (subtracted from the share price, again reducing the amount available for gifting, but not a direct expense to you.)

Where can you get one?

The major brokerages offer them as a service to their clients.  Here are 3 popular sources.

Provider / URL

Minimum Initial Contribution

Minimum Follow-on Contribution

Minimum Grant to Charity

Offers “Gift Cards”?

Base Fee

Fidelity Investments
www.charitablegift.org

$5,000

–

$50

Yes

0.6%

Schwab
www.schwabcharitable.org

$5,000

$500

$100

No

0.6%

Vanguard
www.vanguardcharitable.org

–

–

$500

No

0.6%

What are other requirements, drawbacks or hassles?

  • As the chart above shows, you do need to have a fairly substantial amount ($5,000) to set up the accounts.  If you give away at least that much in a year, and you have a brokerage account at one of these providers, then I’d say it definitely makes sense to set up a DAF.  If you typically give  $2,500 – $5,000 in a year, but want the convenience of a DAF, you might be able to “double up” and fund the DAF in December 2011 with the money that you would usually donate in 2011 and 2012.  You can then make the grants to your chosen organizations over the course of the two years, so there’s no perceived difference to them.  As the chart shows, once the account is established the minimums for adding to it are much lower ($500 or no limit).
  • The processing done by the DAF provider will also typically take a few days to authorize a gift, so it’s not the best for truly time-sensitive things.
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Giving to Somalia, on behalf of 11-year-old Melissa

August 6, 2011 / / One comment

Bottom Line:  The dire famine situation in Africa, especially Somalia, has been pushed from the headlines it deserves by the Debt Ceiling Debate and financial situation in both US and Europe.  Melissa, an 11 year old, is still paying attention, and wanted help putting her $10 gift into action. Her generosity inspired me to research the options and donate the money to Concern Worldwide US. While I was there, I made a gift of my own. Thanks, Melissa. Your example is inspiring.

Today, one of my church friends told me a heart-warming story.  Her granddaughter Melissa was reading about the famine in Somalia.  When she finished reading the entire article, she ran to her bedroom, opened up her piggy bank, and came back with $10, which she handed to her grandmother and said “Nana, I know you’ll be able to do something to help them with this.”  I admired the young girl’s generosity, as this was a large gift from someone of her age, and her grandmother and I talked about the best way to put it to use.

One option was to use our church giving (United Church of Christ’s One Great Hour of Sharing) as an intermediary for this gift.  Normally, I’d consider that a very good option.  For special appeals, 100% of the donations go straight to the cause, plus through the network of local churches and partnerships on the ground, they often have the relationships with disaster relief organizations already established, so money can be put to work very quickly.  In this case, however, the urgency is high, and since our local church hasn’t made this a special appeal, a gift in the offering plate would likely sit for weeks or months before it made it to its destination.

Instead, I thought an online donation would result in the money getting there more quickly.  I offered to research organizations and make the gift on Melissa’s behalf.

I started at CharityNavigator, which evaluates different non-profits to determine how efficient they are.  They review the IRS 990 forms that non-profits submit, and determine how much of the money goes to fund raising and administrative costs, and how much goes to “program” (the work directly supporting the cause).   They have other metrics for the growth and capacity of each organization, and boil it all down to a four-star scale.  I was surprised that some of the organizations that I respect had earned only 3 stars (Oxfam America, 14% fund raising expenses pulled it down…; World Food Program USA 8% fund-raising, and a negative overall asset level, their site also mentioned that they used a UK clearing bank, which might take an additional cut from your gift) or even 2 stars (Church World Services 11% fund raising, but apparently hurt more due to their anemic growth over the past years).

So, instead of assuming that I knew a good place to go, I searched for charities that matched the keywords “Africa famine”.  Twenty search results came back.  I compared several (a nice feature of Charity Navigator, worth doing the free registration) and then visited the websites of a few of the results that had a 4-star rating.  Confident that Charity Navigator had screened out the organizations that weren’t good stewards of the money, I focused on assessing whether I thought these were effective in delivering the program and communicating their results.  Given that the situation in Somalia is dire, I expected that an organization that was serious about helping would have special web pages and resources linked from their main page about it.  (UCC’s OGHS appeal page was a bit harder to find)  Recent, frequent updates helped build credibility, as well as evidence that they had been working in the region and were well informed and well-staffed, and presented that information to donor prospects.

Ultimately, I selected Concern Worldwide US.  Its 4-star rating included a less than 3% fund-raising expense, modest administrative expenses (3.4%), a strong assessment of their capacity, and a salary for their executive director that was under $100K.  Their website also impressed me with the direct link to a nice summary of the situation and their expertise for handling it.  I donated directly to them via Kintera, and inspired by Melissa’s generosity, multiplied her gift by 10.

The runner up organization I considered was Mercy Corps.  They’re a much larger organization (annual budget $245M vs. Concern Worldwide US $21M), and also got a 4-star rating, but their administrative expenses were a bit higher than Concern Worldwide US’s.  If you wanted to support a larger organization that might have greater scale to make a larger difference, Mercy Corps would be a good choice.

Thank you, Melissa!

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