Fresh Research, a NonProfit Times Podcast

“Employees are the most important thing to the success of our business so if allocating resources there is going to make a difference in achieving our mission and achieving our  goals, we’re going to allocate resources there,” Tara Fitzpatrick-Navarro, CEO of the United States Tennis Association Mid-Atlantic Section (USTA-MAS), said.

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Last year, the USTA-MAS hired a concierge service for its employees. It’s not about scoring reservations at the trendy new restaurant or tickets to a sold-out show. It’s more about getting tedious or mundane tasks off the plate of employees so they can focus on their jobs.

It’s the second consecutive year that the Herndon, Va.-based organization earned the No. 1 ranking in The NonProfit Times‘ 2022 Best Nonprofits To Work For. In this episode, Fitzpatrick-Navarro explains how the concierge service helps her organization. She also discusses other programs, benefits and initiatives, including employee involvement in selecting a new healthcare plan option and personalized, handwritten notes she sends to her nearly two dozen employees.

“It’s just this additional step of trying to make everything in your life work through benefits that we provide you so that you can be your absolute best employee,” Fitzpatrick-Navarro said of the new concierge service. “So you can be the most productive, both personally and professional. It’s awesome.” USTA Mid-Atlantic also made changes to its health care plans, including employee engagement in making that decision. Employees also were surprised with a pie — delivered to their doors — for Thanksgiving.

The Best Nonprofits To Work For is an annual survey by The NonProfit Times in partnership with Best Companies Group. Organizations register in the fall to participate and go through a battery of surveys. Those results are then scored across eight different categories and ultimately 50 nonprofits make the cut. You can find more details and the complete Best Nonprofits special report in the April print edition of The NonProfit Times.

A woman builds a business empire and then goes on to give away millions of dollars to charity. It’s not an unusual story, at least not today — but if the woman was an African-American during the Jim Crow era?

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Madam C.J. Walker is considered America’s first self-made, female millionaire. We’ll learn more about her in today’s episode from Tyrone McKinley Freeman, the author of Madam C.J. Walker’s Gospel of Giving: Black Women’s Philanthropy during Jim Crow.

Freeman is an associate professor of philanthropic studies and director of undergraduate programs at the Lilly Family School of Philanthropy. He’s also among nine winners of the 2022 Dan David Prize, which recognizes “outstanding scholarship that illuminates the past and seeks to anchor public discourse in a deeper understanding of history.”

Established in 2001 by the late entrepreneur and philanthropist Dan David, the prize is endowed by the Dan David Foundation and headquartered at Tel Aviv University. Winners will be honored at a ceremony in May. Each winner will receive $300,000 to recognize their achievements to date and support future work.

In this episode, Freeman provides some history and perspective on African-American charitable giving and practices, how they shape today’s giving, and what fundraisers and charity executives can learn from that.

“I grew up in the Black church, which is a very strong and historically important philanthropic institution, it was all around me,” Freeman said. “I grew up in it but that word philanthropy wasn’t used. It was just something that people were doing what they thought they should do, what they felt like they were called to do but they didn’t think of themselves as philanthropists but this was the community that taught me about giving and generosity,” he said.

“When I became a professional fundraiser and I was trying to look at the field and see how it was engaging this community and other diverse communities, and really wasn’t finding much, or wasn’t finding much of an understanding or a connection to it, and yet it produced me so I knew it was real, I knew it existed,” Freeman said.

He also discusses MacKenzie Scott’s giving and from a historical perspective when it comes to Historically Black Colleges and Universities.

Freeman shares the history of Madam C.J. Walker and where her cosmetics empire stands today. “Being Black billionaires is new but giving is not,” he said. The book “presents the first comprehensive story of Walker’s philanthropic giving arguing that she was a significant philanthropist who challenged Jim Crow and serves as a foremother of African American philanthropy today.”

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Endowments are a common form of giving to higher education, arts , and medical research organizations.

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William Foster, managing partner, and Darren Isom, partner, of The Bridgespan Group, analyzed the investment income of 56 nonprofits dedicated to social change. Between 2000 and 2013, only 5% of philanthropic gifts of $10 million or more were deployed to endow social change organizations. On average, the endowments of organizations led by people of color were almost four times smaller than those of white-led organizations, and their average percentage of revenue was less than half.

Rarely are endowments deployed for funding social change but they are common institutional nonprofits: 70% of organizations in higher education; 33% among hospitals, and 23% in the arts.

Based on their analysis, Foster and Isom authored a piece in Stanford Social Innovation Review (SSIR) titled “Endow Black-Led Nonprofits.”

In this episode, Isom and Foster tackle what they say are the three objections that funders and donors often cite about endowing social change nonprofits:

Most nonprofits, especially those led by people of color, lack the capacity to absorb a large gift.

Nonprofits should work themselves out of business.

I can manage the money better than a nonprofit.

William Foster

“It’s a stodgy tool for a radical purpose,” Foster said of endowments. “It’s about giving money that you have to an organization that can deploy it in perpetuity. And it’s how all the greatest institutions that had a huge effect on our civil society was built,” he said.

“An endowment is not just a gift of transfer of money, it’s a transfer of power,” Isom said. “That makes endowments the ultimate form of trust-based philanthropy. The question becomes how do you disrupt the narrative in which you share who you think should be given that power.”

The pair put into context the disparity of endowment sizes of Historically Black Colleges and Universities (HBCU). The 10 most richly endowed universities have almost 95 times larger than the total wealth of all 107 HBCUs combined.

Darren Isom

“As we think about the myth of absorptive capacity to some degree, I think there’s something to be said, that for black-led organizations, particularly those with a proven record of progress, giving them too much isn’t the problem, the real pitfall is when you give them too little,” Isom said. “We engage in this world of philanthropic sharecropping where organizations are given just enough to make it into the year and ask for more the following year. There’s something to be said about how you change the dynamic there.”

An increase from 3 to 4 stars on Charity Navigator can be associated with a 6% rise in contributions. For smaller charities, the impact can be as much as 11%. That’s not too surprising but what about when ratings drop? According to new research, there’s no impact on contributions.

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“There seems to be this asymmetric effect,” said Jennifer Mayo, a Ph.D. student at the University of Michigan and author of Navigating the Notches.Charity Responses to Ratings. Some charities respond to incentives by changing behavior to try to get themselves above the star thresholds, which leads to “bunching.” Mayo explains more about that and what fields that’s more likely to occur during this episode of Fresh Research. “You always see this tradeoff between how much you want to incentive the organization or person to improve their score versus how many people are facing that incentive,” she said.

A notched rating system like Charity Navigator’s four stars, induces more behavioral change than a continuous measure, like its new Encompass Rating System, which affects a smaller number of charities. About 9,000 nonprofits are included in Charity Navigator’s four-star rating system. Last year, the organization began to roll out its new Encompass Rating System, based on four beacons. About 60% of that rating – which is on a 100 scale – is based on the impact and results beacon.

“It came through to us as a data point for helping us with the evaluation and unification of those rating systems,” said Kevin Scally, chief relationship officer. “The notched system does have benefits to nonprofits as well as users.

“Her analysis of the notched system, particularly the bunching, is really going to help us inform how we can incentive performance of the nonprofits,” Laura Andes, vice president of impact ratings for Charity Navigator, said.“She gave us clues on how we can more effectively do that as we move forward. Who is most incentivized, and it’s not everyone; some sectors more than others.”

Some 80% of donations through Charity Navigator’s Giving Basket go to organizations with 3 and 4 stars, according to Scally.

#GivingTuesday in 2020 raised an estimated $2.47 billion both online and offline, which was up 25% from $1.97 billion in 2019. Almost 35 million people participated in 2020. What’s on tap for 2021?

According to Woodrow Rosenbaum, that’s up to nonprofits. “We’ve been handed an opportunity. It’s not often that you have an industry that’s had a multi-year trend that just suddenly turns positive,” the chief data officer for Giving Tuesday said in this bonus episode of the Fresh Research podcast. “Whether that becomes a positive legacy of this crisis, depends on what we do now. How we engage them now, in this absolutely critical time, is going to be the difference between preserving this shift and going back to a declining donor base.

#GivingTuesday was the single biggest day for donor acquisition in 2020, with Dec. 1 showing the highest percentage of donors acquired across all cause areas, according to Rosenbaum. Donor acquisition was up, there were more donors in the system, and multi-year trends for contractions reversed.

“There’s a really pervasive scarcity mentality in the nonprofit sector and it’s really harmful and most of all because the data do not support it. The giving economy is lot more elastic than people realize. #GivingTuesday is one example of the potential to get more and not have it cannibalize other giving,” he said. “As soon as you release yourself from this fear of competition and this scarcity mentality, it opens up all kinds of opportunities to engage and to re-engage. Donors aren’t tired of giving but that doesn’t mean they’re not tired of your message.”

Whole Whale predicts that this year’s #GivingTuesday will surpass $3 billion for the first time. Using analysis that includes trends in Google Search terms, national giving trends, and adjusted linear regression, the digital consultancy to nonprofits estimates that $3.048 billion will be raised on #GivingTuesday, which would be 27%, or $648 million, more than the 2020 total.

MacKenzie Scott’s billions of dollars in mega gifts and American donors’ response to the coronavirus pandemic (COVID-19) fueled the largest charities in the United States last year.

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The 2021 NPT 100 ranks the largest nonprofits in the U.S. that derive at least 10% of total revenue from public support. Colleges and universities are not included in the study and neither are donor-advised funds (DAF).

Jacob Harold

Jacob Harold, executive vice president of Candid, joins the discussion in this episode to talk about the 2020 numbers and what it could mean for charities moving forward. Candid helps provide data for The NPT 100. Also playing a part in this year’s report were Grant Thornton, which helps to compile and analyze the data, and Data Axle, which designed the charts that appear in the November print edition.

“How is it that during a crisis like this, the sector as a whole, or at least this group as a whole, was able to come away with not having to dip into reserves, ultimately, actually strengthening balance sheets,” Harold said during the conversation. “I think that’s a question that has a number of different dimensions to it that we should explore.”

Total revenue was an estimated $79.88 billion, an increase of 3% from the previous year for these 100 organizations but public support was up more than 6% to $48.568 billion. Other revenues that increased were government, almost 15% to $10.919 billion, and investment income, 11.2% to $3.327 billion. Program service revenue took a 12% hit, down to $14.65 billion. Other revenue declined almost 9%, to $2.471 billion.

GiveDirectly (No. 70, $306.216 million) in New York City, the Atlanta-based CDC Foundation (No. 86, $255.483 million) and Second Harvest Heartland (No. 94, $236.949 million) in Brooklyn Park, Minn., were among the fastest-growing nonprofits from 2019 to 2020. All three organizations ranked in the NPT 100 for the first time. Other nonprofits that returned to the top 100 after an absence included New York-based organizations Sesame Workshop (No. 89, $246.073 million) and Robin Hood (No. 97, $220.093 million).

Nonprofits have been pushing for a universal charitable deduction for years. The CARES Act created a temporary tax deduction for charitable gifts up to $300 for single or married filers in 2020. Congress extended that into 2021 and increased the deduction to $600 for married couples.

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Two professors at the University of Virginia proposed a tax subsidy to increase civic engagement and volunteering in a time of income inequality and political polarization. In their paper, The Charitable Tax Deduction and Civic Engagement, Andrew Hayashi and Justin Hopkins propose that all taxpayers with adjusted gross income (AGI) less than the national median would get the Community Contribution Credit. Hayashi is a professor at the University of Virginia School of Law and Hopkins is a professor at the University of Virginia’s Darden School of Business.

The refundable tax credit would be equal to 90% of their contributions, capped at $500. It would apply for donations to 501(c)(3) nonprofits — but also 501(c)(4) social welfare organizations, which currently are not eligible for deductible contributions. In 2018, the most recent year for which data are available, the national median AGI was $43,614. That year, 87.4% of taxpayers claimed the standard deduction while 11.4% of taxpayers claimed itemized deductions.

“We’re trying to make the taxpayer incentivized to think about their local organizations that they either have used in the past or are familiar with because I think there’s a good portion of people in our community who have never considered potentially donating to their local organizations because theres’s a lack of resources, or money is tight,” Hopkins said on this episode of the Fresh Research podcast. “But if you provide this incentive to everybody, then all of a sudden, you create sort of a whole new class of donor,” he said.

“Now all of a sudden, they have the the ability to make contribution to these organizations and maybe it’s organizations that have helped them in the past. And so I think one of the beautiful aspects of this is, is the idea of transforming a recipient or a client of a local nonprofit into an actual donor of it. And the idea that they would get involved in the operations and just provide a level of support and feedback that I think a lot of these organizations don’t see.”

When the Nonprofit Revitalization Act passed in 2013, it was the first major overhaul of nonprofit regulations in New York State in 40 years. The legislation modernized rules around nonprofit boards and committees and, among other things, prohibited nonprofit officers from being present at meetings where their pay is discussed.

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Ilona Babenka

In the years since, a trio of researchers has examined the effect that one regulation had on executive compensation, becoming the basis for Regulating CEO Pay: Evidence from the Nonprofit Revitalization Act. The 67-page paper was written by Ilona Babenka, associate professor in the Department of Finance in the W.P. Carey School of Business at Arizona State University; Rik Sen, associate professor in the School of Banking and Finance at the University of New South Wales, and Benjamin Bennett of Tulane University’s A.B. Freeman School of Business.

They examined tax data for almost 1,700 nonprofits in New York State and found that from 2009 to 2017, average compensation for the chief executive officer (CEO) dropped by 2% to 3% after the act went into effect. Despite earning less than they might have expected, CEOs spent 2% more time working without additional turnover, according to the research.

Rik Sen

At the same time, nonprofit performance improved in terms of larger contributions, more volunteers and bigger revenues. Nonprofits also were more likely to set up a compensation committee, perform independent compensation review, or adjust pay to be in line with peer organizations. The legislation, authors argue, reduced the fraction of “compromised boards” among New York’s nonprofits.

“Overall, our results suggest that regulation that targets the pay-setting process can be effective at improving organizational outcomes at nonprofits.“

The average nonprofit in the research has seven executives, reports $265 million in total assets and $129 million in revenue and some 600 volunteers. Average CEO pay was an estimated $600,000 while median CEO compensation was $350,000.

You finish up your shopping and the cashier asks, “Would you like to donate to a local charity?” Do you give? If you do, how much? Or maybe they ask you, would you like to round up your total to donate the difference? Those are some of the scenarios in a recent experiment.

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Results of that experiment are found in Checking Out Charity: A Study of Point-Of-Sale Donation Campaigns, by Adrienne Sudbury and Christian Vossler. Sudbury is a professor at the College of Business and Economics at Longwood University in Farmville, Va. Vossler is an economics professor at the Haslam College of Business at the University of Tennessee in Knoxville.

Adrienne Sudbury

Individuals were presented with three different ways to make a donation at checkout: a fixed amount, a rounding request, and an open-ended ask. “With open-ended, you definitely have much lower rates. What we theorize is there’s some sort of cognitive cost going on, where people have to decide actually how much to donate under that scenario,” Sudbury said on this episode of Fresh Research. “With the fixed request amount and giving people a binary choice, you limit the potential donation. There’s pros and cons because if you only ask someone for $1 but they were willing to donate $2, you’re missing out on some potential donation there,” she said.

The authors attribute some differences in donation rates to what they called “loose change effects” — where people are more likely to donate if they end up with less change. “The majority of people chose to give themselves less change through their donation amount,” Sudbury said. “Some gave the same amount of change but absolutely no one gave themselves more change.” That change adds up: More than $605 million was raised through point-of-sale (POS) fundraising campaigns in 2020, according to America’s Charity Checkout Champions from Engage For Good.

The American Cancer Society aims to raise $1 million exclusively through cryptocurrency. Its Cancer Crypto Fund will be renamed in honor of the first donor to contribute $250,000. Donations of at least $10,000 will appear on the Cancer Crypto Fund Wall of Honor. The Salvation Army launched a cryptocurrency option the week before Christmas and received 13 donations, including one donor who gave 2 Bitcoins.

 

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Jason Shim and Anne Connelly join this episode to talk about their new book, “Bitcoin and the Future of Fundraising: A Beginner’s Guide to Cryptocurrency Donations.” They discuss how nonprofits can get started accepting cryptocurrencies, why they think charities should, and the future of cryptocurrency.

A board member of NTEN, Shim is director of digital strategy and transformation at Pathways to Education Canada, an organization dedicated to helping youth in low-income communities to graduate from high school. In 2013, it was the first charity to issue tax receipts for Bitcoin donations.

Connelly is on the faculty at Singularity University, a company that offers executive educational programs, a business incubator and innovation consultancy service. She previously worked with Doctors Without Borders as a field worker in Central Africa and as a fundraiser in their offices in Canada and Ireland.

American Cancer Society so far has raised $400,000 in its Cancer Crypto Fund, including 10 donations of at least $10,000. But it’s not just big national charities getting involved with cryptocurrency. Miami Lighthouse for the Blind and Visually Impaired received a few thousand dollars, including a donation in Ethereum from the CEO of Coinbase, when it announced that it’s now accepting cryptocurrency donations. The Brotherhood SisterSol in Harlem also recently announced they will accept cryptocurrency donations.

There are thousands of digital currencies but Bitcoin is probably the most popular and mainstream. It’s also volatile. A year ago, 1 Bitcoin was valued at about $10,000, jumping to $20,000 by December, and $40,000 in January. By April, it was worth more than $60,000. As of July, however, 1 Bitcoin was worth about $33,000.