Advisers, Ms. Iarussi said, may spot red flags that idealistic funders may miss. “We want to see the best in everyone,” she said, adding that “you need a little bit more objectivity, or you can get carried away.”
To help ensure their philanthropy is being used effectively, donors are increasingly seeking the help of professionals.
“Philanthropic advising has grown as philanthropy has become more complex,” said Una Osili, associate dean for research and international programs at the Indiana University Lilly Family School of Philanthropy.
A family foundation may be overwhelmed with funding requests and need help vetting programs, evaluating proposals and monitoring grants. Services offered by philanthropic advisers vary, but often involve helping funders identify causes they are passionate about supporting and map out a giving strategy.
Advisers typically work with donors to help them find specific groups that will make good use of their contributions, assess financial and operating information, and help establish a system for measuring results. Many offer administrative or back-office support, handling tasks like soliciting proposals and mailing checks. They can also serve as gatekeepers, buffering donors from excessive grant requests. Some charge fees based on an hourly estimate, or on a group’s grant-making capacity; others charge annual subscription fees.
“Our mission is to help funders increase the effectiveness of their philanthropy,” said Leslie Pine, managing partner with the Philanthropic Initiative, a Boston-based advisory firm.
Ms. Iarussi said her family began working with the Philanthropic Initiative when her family’s foundation was established 15 years ago. She and her relatives had seen other families struggle to identify funding priorities. “We knew others who were winging it,” she said, and sought a more formal structure.
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Working with the group, she and her family, including two uncles who are also trustees, soon agreed on areas of emphasis, and a process for deciding what to fund. The foundation focuses on helping children in poverty, particularly those affected by the incarceration of a family member, as well as community building and environmental justice, which seeks to protect the poor and powerless from adverse environmental conditions. It gave away about $2 million in 2016.
She credits the Philanthropic Initiative with helping her family learn how to conduct in-person assessments of charities. “I’m a big fan of site visits,” she said. Once, she showed up to meet with leaders of a small nonprofit and quickly realized that the group had not told her that it was being evicted from its offices; boxes of files were stacked for relocation. The foundation still funded the group, she said, but the visit prompted a conversation about transparency.
Donors can do very basic early sleuthing themselves because of digital information. An essential first step, for instance, is verifying that a potential grant recipient is qualified as tax exempt. Eligibility can be verified instantly online, through GuideStar’s nonprofit tracker, Charity Check.
Advisers typically dig deeper into the details of the group’s financial reports; talk to their contacts in the field, as well as the group’s leaders and existing donors; and arrange site visits.
“If you really want to have an impact, it takes some work,” said Henry L. Berman, chief executive of Exponent Philanthropy, a nonprofit that guides and educates a membership network of small, sparsely staffed foundations. “Don’t just Google ‘middle school arts programs in New York City’ and write a check.’”
Cautionary signs when assessing a charity, he said, include revenue that is decreasing; a deficit that is increasing, particularly over several years; unexplained variances from the proposed budget; and missing documents. Such findings are not necessarily deal breakers, he said, but warrant further inquiries.
Donors may also be wary of a group’s overhead — the spending for staff, office space and support services — or the amount it spends fund-raising. Some online nonprofit watchdogs, like Charity Navigator, rate charities based on the proportion of funds spent on administration and fund-raising. While such spending is a consideration, many advisers say, they caution donors that it must be considered in context.
“You have to keep in mind what’s required for the staff to actually achieve their mission,” said Betsy Brill, president of Strategic Philanthropy, an advisory firm in Chicago. A nonprofit providing mental health services, for instance, likely needs doctors, lawyers and psychiatrists, and such professionals tend to receive higher salaries.
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Similarly, a group’s financial statements cannot be read in isolation, Ms. Brill said. Expecting a small nonprofit to maintain, say, a reserve of two years of operating expenses may be unrealistic.
And while a group running a deficit is a concern, it also needs to be evaluated with additional information. “Is it an ongoing issue?” she said. “Or is it a one-time problem?”
Neil Gobioff, president of the Gobioff Foundation, a private grant maker in Tampa, Fla., that supports the arts and social justice causes, said the foundation’s grants are relatively small — $6,000 on average. But that amount can be significant for small arts groups, so it is important that the funds are used wisely. The foundation ran into at least one problem, he said, when a grant recipient did not use funds as specified.
That led to some changes, Mr. Gobioff said, with the help of Foundation Source, which provides advice and back-office services to foundations. Previously, the Gobioff Foundation would mail checks to recipients with letters stating terms of the grant; cashing the check meant the recipient agreed to the rules as outlined. But in this case, the recipient claimed that the person responsible for the grant was never made aware of its requirements. So the foundation changed its approach. “Now we require a signed letter” acknowledging acceptance of the grant terms, he said, before any checks are presented.
Some donors avoid fledgling organizations, in favor of more established, high-performing nonprofits that may be seen as less risky. But Janis A. Reischmann, executive director of the Hau’oli Mau Loa Foundation in Honolulu, said her organization was willing to back groups at early stages.In 2009, she recalled, the foundation funded an organization that had $500 in the bank and a new executive director. “There was a lot of risk in that,” she said. But the foundation had faith in the director and the group’s board. “We felt if anybody could make it happen, they could.”
That bet paid off. The group, she said, was on sounder financial footing within five years.
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Article source: https://www.nytimes.com/2018/03/22/your-money/philanthropy-donors-advisers.html?partner=rss&emc=rss
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