Takeaways

Nonprofit Forum — May 8

 

Amplifying Impact: A Toolkit for Activating Philanthropy’s Meaningful Middle 

Moderator:
Jordan Forney, Principal, Bernstein

Panelists:
Clare Golla, National MD Philanthropic Services, Bernstein
Nathaniel Heller, VP & MD. Geneva Global/Global Impact

Session Description:
“Is this it? What else can we do to make more of a difference with these dollars?”
With increasing entrepreneurial wealth creation, early innings of the Great Wealth Transfer, and such increasingly common acronyms as CSR, DEI, ESG, AI to name a few…a growing community of philanthropists is asking these questions and seeking more than traditional grantmaking practices have historically delivered. And, while the media thankfully celebrates our country’s largest donors—Ruth Gottesman, MacKenzie Scott, the Chronicle of Philanthropy’s entire “Philanthropy 50…” the fact is, there is relatively little focus or research dedicated on the next tier—much smaller measured by each donor’s or entity’s individual pool of philanthropic funds, but much, much larger by number and in aggregate by dollar amount. 

What tools are available, and how can we leverage the latent potential and power of this philanthropic “meaningful middle” to generate additional positive change? This conversation with experts in the field touched on specific examples of strategies and structures that are amplifying impact.
 
Topics included:

  • Key characteristics and opportunities unique to what we’re defining as the “meaningful middle”
  • Creative uses of Donor-Advised Funds including recoverable grants and area-of-interest funds
  • Donor collaboratives, giving circles, pooled funds
  • Use cases for structures such as 501c4s, charitable LLCs, private operating foundations
  • The power “beyond the check” and other elements of trust-based philanthropy
  • Modernizing the “philanthrocapitalism” mindset
  • Getting creative with noncash assets (including life insurance, real estate, closely held business shares)

TAKEAWAYS

  • Growing population of meaningful middle: Donors making grants/gifts between $1M and $25M annually
    • In between “mega donors” (MacKenzie Scott and Bill and Melinda Gates) and “mass market” donors (appeal efforts like sports fundraisers and Girl Scout cookie drives)
  • Donor-Advised Funds are being used alongside and in place of private foundations
    • They offer scaling strategies for transitioning/growing foundations, flexible solutions (i.e., recoverable grants, especially in a higher-interest-rate and tighter-credit environment), and increasing opportunities to build community 
  • Meaningful middle donors are good candidates for local and regional place-based giving based on their credibility locally, which is a tactic amenable to donor collaboratives and pooled funds. Pooled funds allow meaningful middle donors to “level up” and influence much larger donors as well as create philanthropic leverage by crowding in capital to their priority causes and initiatives.
  • Warm introductions are crucial to nonprofit fundraising initiatives and statistically help grow and diversify revenue—activate board members and existing donors to serve as ambassadors and implement relationship mapping to discover hidden connections.
  • A re-visioning of “philanthrocapitalism”—Funder mindset evolution from a paternalistic view focused on accountability to how donors can create access to people, resources, strategy, and tools, while still embracing data for learning and course correction.

We look forward to sharing the article that Clare Golla and Nathaniel Heller are writing on this topic.

 

Ask the Nonprofit and Estate Planning Attorneys: AI, DEIA, ESG, and Everything Else You Want to Know

Jennifer Goode, Director of the Institute for Trust and Estate Planning, Bernstein Private Wealth Management
Jeffrey S. Tenenbaum, Esq., Managing Partner, Tenenbaum Law Group PLLC

  • The legality of nonprofit DEI programs—both with respect to employment and contracts (such as fellowships, scholarships, and grants)—is rapidly evolving, with numerous cases working their way through the federal court system now, with some almost certain to end up at the U.S. Supreme Court. The Court’s June 2023 college admissions decision opened the floodgates to these new cases, adopting its reverse discrimination reasoning.
  • There are some concrete ways to mitigate the legal risks of DEI programs and initiatives.
  • There are abundant legal risks for nonprofits in using generative AI—involving, for instance using AI bots to record meeting notes and using AI in the employee recruitment/hiring process—but there are a number of practical steps that nonprofits can take to mitigate those risks, such as not allowing the generative AI platform to use your organization’s “inputs.”
  • It is critically important for nonprofits to adopt an employee AI usage policy and to include AI-specific provisions in certain contracts, in its agreements with authors and speakers, and the like.
  • Meeting your board’s fiduciary duties while pursuing ESG investment strategies is achievable (see the Fiduciary ESG Investing white paper below).
  • Proactively engage with legal counsel when you have questions.

Resources

 

Top 5 Mistakes Nonprofits Make with Their Finances

Manny Cosme, President & CEO, CFO Services Group
Adi Rubin, Partner, Marcum LLC

Mistake #1: No Formal Budget

  • Without budget, you are flying blind!
  • Risk of making decisions “on-the-fly” instead of with intention toward goals
  • Buy-in from team since they better understand why they do the work they do and how it fits into bigger picture
  • Must monitor budget continuously

Mistake #2: Financial Reports Not Action-Oriented

  • What is the purpose of a financial report? Why do you receive info every month? To help make DECISIONS
  • Financial report = explaining status of resources: Also needs to tell you what to do about it.
    • NEEDS ACTION STEPS

Mistake #3: Bookkeeping Records Lack Detail

  • Bookkeepers used to doing for-profit bookkeeping are NOT generally good candidates for nonprofit accounting
  • Nonprofit orgs need much more detail

Mistake #4: Ignoring Internal Controls

  • Why do Internal Controls matter??
  • Audit and regulatory requirements
  • Deterrent against fraud
  • Understand your regulatory environment
  • Make sure you are relying upon the financial team rather than development or programming

Mistake #5: Underutilizing Technology

  • Change is difficult! We are all accustomed to continuing to do things the way we've always done them. But solutions that worked during the start-up phase of an organization or a program are not necessarily the best solutions down the line
  • Engage a technology assessment to understand your organization and identify opportunities for increased efficiency and security

Presentation

 

Leadership Panel: Leading Through Change

Moderator:
Clare Golla, SVP, National Managing Director of Philanthropic Services, Bernstein

Panelists: 
Tom Clark, Chief Strategy & Advancement Officer, KIPP DC Public Schools
Aileen Fuchs, President & Executive Director, National Building Museum
Misty Thomas Zaleski, Executive Director, Council for Court Excellence

Session Description:
Having experienced massive cost increases, a historically tight job market, demographic shifts and major changes in what employees want within and from their places of work, uncertainty with unrest and protests globally and domestically, a polarized political environment and presidential race—let’s hear from leaders who are successfully leading very different types of organizations on how they’re navigating challenging terrain and where they’re finding opportunities for positive change.

Tom Clark
Since 2019, KIPP DC has consistently achieved 15% growth annually throughout a historically tumultuous time for all educational institutions and dramatic ebbs and flows of financial resources. Share a bit about how you managed through this.

  • We were flooded with additional resources during the pandemic, but those are sunsetting now and that has meant tough choices, including cutting staff. However, this has allowed us to keep important programs going.
  • Having to adjust course to meet the evolving needs of our schools meant that we sometimes had to scrap plans we had made and refocus our efforts on the promises we had made to our community.
    • As we face this next inflection point, where recovery resources are drying up and the philanthropic landscape is shifting, we decided to take a very strategic approach to what’s next. We went through a rigorous process to identify and evaluate all of our program offerings, strategically downshift on some of them (including cutting our existing budget by about 5% and about 3.5% of current roles) in order to free up resources and capacity to make huge investments in areas of greatest need. We are headed into our next fiscal year with a clearer focus on priorities and a budget, staffing model, and plan that is aligned with our focus.

Tell us about the greatest challenge you’ve led through at KIPP DC and what it took to get to the other side?

  • Fraud from a trusted and long-time employee has definitely been the greatest challenge. Before it occurred, we operated like any other nonprofit, but we are a $250M organization, and now so much has changed.
  • Biggest lessons learned for me were:
  1. Leadership requires an extraordinary amount of emotional resilience—to show up every day calmly and with consistency. People are looking to leaders to give them a sense of comfort and ease, and that's one of our primary responsibilities.
  2. As stewards of public resources and philanthropic dollars, we have a responsibility to our community to have the systems, policies, and controls in place to mitigate as much risk as possible. Even small organizations should put in the effort to professionalize their infrastructure.

Misty Thomas Zaleski
One change that every institutional leader is grappling with on some level is the massive shift in what employees want and demand from their employers. In particular, you’ve shared some of the hard and humbling work you’ve done around race and power particularly at a social change organization…share some of that experience.

  • In the last few years, I’ve seen a mission-driven staff that has been struggling with the many crises and conflicts in the broader world around us, and perhaps, at times, have felt like national or global change is nearly impossible or too slow in coming. Instead, I’ve watched staff turn their energies to places where they can be influential agents of faster change, and that has led to high expectations that their workplaces be better, more equitable, more inclusive, and more responsive. I think that has been for the good and has presented exciting opportunities for nonprofit leaders and boards to reflect and act. In this time, it  h It has led many nonprofits to really look inward and consider ways we can make, not only our outward-facing work more equitable and anti-racist, but also how we exist as an employer. In this period of change, I see nonprofit staff wanting—and expecting—their organizations to reflect their values, to be inclusive across differences, and to question how majority culture ways of work and ways power are distributed. 

Aileen Fuchs
You joined the National Building Museum as an experienced leader of another cultural institution, yet you found yourself in a completely new situation in the depths of COVID with a staff that had been reduced by over 50%... what did you do?!

  • Yes, from 95 to 19! It was like a startup with the remaining employees being tired and overworked. It took resetting the stage, with smart, slow growth focused on rebuilding a team, diversifying income streams, shoring up reserves, and articulating an inspiring, focused, and timely vision for the Museum.  

You’ve also navigated a fundamental shift in the role or identity of a cultural institution in the community…what people want, how they engage…share a bit about this.

  • Cultural institutions pivoted during COVID to become beacons of community and wellness in new ways and in some cases taking on social services that have had lasting transformation of their missions. At the Museum currently, we have the opportunity and the responsibility to contribute to a reimaging and activation of the Downtown. Conditions like unprecedented commercial vacancies, housing shortages, and remote work preferences combine to undermine the vitality and viability of Downtown culture—it needs reimagining! Arts and culture organizations need to partner with retail, hospitality, private industry, and civil services to create safe, cool, activated centers of urban life.

ALL PANELISTS
Share with the audience one action item that leaders of organizations can take back and implement:

Tom Clark
As we settle into our new reality and move beyond the pandemic, a question I’ve been asking myself a lot lately is: Are we turning the page or are we writing a new chapter? Now is the time to sharpen our pencils to be more focused, intentional, and smarter about where we dedicate our time and resources as nonprofit leaders.

Misty Thomas Zaleski
As an organizational leader, spend more time thinking about hidden and overt power in your existing policies and decision-making structures; reflect on whether something is a “PTR”—a preference, tradition, or requirement—when deciding if the process or policy is equitable and inclusive, and really lean into openly naming and considering race and other power dynamics at play in decision-making. 

Individually, try to lean into an analysis of all of your own privileges and how that might impact how you show up as a leader. If you want support, consider affinity groups for discussions of DEIJ/belonging work so you can unpack any hesitations or places of uncertainty.

Aileen Fuchs
Abandon the scarcity mindset.

 

Strategize and Thrive in 2024 — February 14



Key factors in the economic and capital markets backdrop as well as the social and political landscape could have major implications for both fiduciaries making financial and investment decisions on behalf of their institution, as well as philanthropists seeking to be as effective as possible in their giving. 

This session provided guidance in three key areas:

1)    Optimizing cash and investments
•    We’re at a pivotal moment regarding interest rates and monetary policy, with a starting point of higher yields than we’ve seen in recent history, and expectations for slowing economic growth, moderate inflation, monetary easing and therefore a gradual lowering of interest rates, all a mixed bag for stocks.  
•    While institutions should hold enough cash to cover near term needs, holding excess cash is now, and will continue to be, increasingly costly vs. allocating even to short and intermediate high quality bonds, in part due to likely price appreciation (as rates decrease, the price of bonds will increase, whereas money market funds will simply earn less).
•    We offer a Reserves Analysis tool to assist fiduciaries with sizing and allocating short and intermediate reserves in the environment ahead. 
•    Analyses further demonstrate and quantify how incorporating a diversified basket of alternative investments will likely enhance overall portfolio performance while decreasing volatility. 
•    It is critical to codify all of this in your Investment Policy Statement (IPS) as part of strong governance practices.

Bernstein resources and how we can help: Quarterly Outlook for Fiduciaries, Reserves Analysis Tool, IPS Drafting & Review 


2)    Spending considerations and aligning decisions with mission
•    What is the long-term impact on an investment portfolio of increasing spending today to meet current needs?  We provided a forecast analysis illustrating when crossover occurs (larger % spend is effectively a smaller $ amount), and the incremental impact over time.
•    For organizations that cannot spend less, or even for those who can, many leaders are seeking to better align their financial resources with their mission, vision and values.  Organizations continue increasing incorporation of responsible investing and diversity, equity and inclusion, while many of the same factors continue to be cited by others for not using this lens.
o    Bernstein’s Jennifer Goode presented on a piece entitled Fiduciary ESG Investing:  Navigating the New Frontier which is a deeper dive into critical considerations.
•    Finally, we touched on the significant costs to organizations of employee turnover plaguing the social sector, including nonprofit employees receiving less value at a greater cost for retirement benefits than private sector counterparts.  Conducting an independent evaluation of your organization’s retirement plan could result in significant cost savings and enhanced financial wellness benefits and education for employees – we can do that for you.  

Bernstein resources and how we can help: ESG Investing for Fiduciaries, Investing in Your People, Compensation & Benefits Support


3)    Philanthropic trends and opportunities ahead
•    Impacts of Uncertainty.  We expect 2023 final tallies on giving will reflect a continuation of international giving eclipsing other issue areas.  The November US Presidential election in a politically polarized environment could yield similar results to 2016’s post-election philanthropic surge, so organizations most likely affected should be prepared for smart investment and deployment of significant cash flows.
•    Donors seeking stability may lean, in some cases, toward permanence - an opportunity for endowments.  Others particularly entrepreneurs will seek additional tools to deploy more dollars, such as recoverable grants.  Continuation of shrinking overall number of US donors but larger and increasingly savvy donors, results in planned giving programs becoming increasingly important to nonprofit fundraising programs.
•    The economic slowdown we expect actually creates opportunities to unlock philanthropic potential of assets “off the personal balance sheet” of donors.  Massive growth of DAFs presents us with over $200 billion in philanthropic assets to be deployed, particularly in an economic environment when they may not want to tap personal assets.  Likewise, demographic research also supports an increasing pool of nontraditional assets, some with significant tax costs to the owner if sold—fine art, jewelry, cars, antiques, collectables etc.-- that could be contributed then converted by an organization into usable philanthropic capital.  Due to the complex landscape, it’s critical to partner with the right experts for success.
•    Finally, technology - particularly generative AI - provides promise for both grantmakers and fundraising organizations seeking to increase efficiencies and streamline certain business processes.  Bernstein offers guidance on building a plan for integrating AI to suit your organization’s needs.

Bernstein resources and how we can help: National Philanthropic Trust 2023 Donor Advised Fund Report, Planned Giving Strategies, AI/Technology Integration

** Please note that the deck itself also offers links to resources throughout**
 

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