Saturday, February 21, 2009

Third Rail Politicking

If it's not pensions, it's nonprofit sector salary. The thing with third-rail politics isn't that there's never a point to the argument - in fact, there often is. Surely, some state pensions need to be fixed and there are nonprofit CEOs and executives being overpaid, especially in this economy. The problem, of course, is that there's all too much focus on these issues which, in the grand scheme of things, are rather petty when compared to the size and scope of our problems today.

Moreover, often times the people making these third-rail arguments are hurting their own cause - such as AmberPaw today, over at BMG. Amber argues that MSPCA is overpaying its employees by a lot. The news will surely cost a lot of donations to MSPCA over the course of this year - perhaps millions. The result? Even more people will be laid off, more clinics could be shuttered and, most important of all, more dogs and cats will be homeless and without anyone to care for them or find them permanent families. This is what it means to shoot your own leg.

All for an organization that applies over 90% of its funds directly toward caring for the dogs and cats, not administrative costs. In nonprofits, 90% is the gold standard - heck, 80% is considered good. It doesn't get much better than 90%. So, for this cause that's so important and already underfunded, it's going to get hit even worse, all because supporters were supplying an irrational amount of anger at salaries which are in fact middling for the industry and could have been dealt with in a way that wouldn't have hurt the pets (such as a few big donors signing a letter asking the top-paid employees take a 10-20% pay cut in this economy, to spare a few jobs from being laid off).

1 comment:

Anonymous said...

MSCPA has only provided one tax return for Charity Navigator to exam - see the article below on the rampant evasion of transparency most charities employ to get a high rating. Just like the credit agencies that rated all the Wall Street forms triple A, Charity Navigator needs more than one tax return for me to beleive all is up and up!

Using publicly available tax returns (IRS Form 990) filed with the Internal Revenue Service, the Charity Navigator rating system bases its evaluations in two broad areas — organizational efficiency and organizational capacity. Based on how the charity rates in each of the two areas, it is assigned an overall rating, ranging from zero to four stars. To help donors avoid becoming victims of mailing-list appeals, each assessment of a charity's finances is accompanied by a review of its commitment to keeping donors' personal information confidential.

However, the IRS Form 990 categorizes a charity's expenditures into three broad categories that are open to accounting manipulation. The nonprofit sector does not have the strict financial regulation and transparency required from public corporations (under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Sarbanes-Oxley Act, among others), creating limitations on how accurately a charity's efficiency can be graded based on a tax return.

This methodology was criticized in an article in the Stanford Social Innovation Review for taking into account only a single year's IRS Form 990.[3] This can lead to significant fluctuation in the ranking of a charity from year to year.[3] Also, the focus on the IRS Form 990 has itself been criticized, as the accuracy and reliability of IRS Form 990 data is questionable.[4] Particularly relevant to Charity Navigator's methodology is that 59% of the 58,000 charities receiving public donations in 1999 failed to report any fundraising expenditures, illustrating a potential problem with relying upon IRS Form 990 figures alone when analyzing an organization.[4]

As of December 2007, Charity Navigator would recommend donors support concerns that meet six criteria:[5]

Able to communicate who they are and what they do
Defined short-term and long-term goals
Able to state the progress it has made (or is making) toward its goal
Programs make sense (to the donor)
Programs that you (the donor) feel you can make a long term commitment

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