Special Report: 2005 In Review

December 1, 2005       Craig Causer      

The tsunami that sent shock waves throughout Southeast Asia this past December 26 served as the impetus for a fundraising surge in early 2005. It also proved to be a harbinger of things to come, as 2005 was marked by the tireless work conducted by nonprofits in light of the devastation from the tsunami, and later in August, Hurricane Katrina. Then of course, there were the attempts by government to regulate those actions.

With hundreds of thousands dead, a global nonprofit effort rallied to help tsunami survivors. The requests for aid were met with a surge of online donations, despite the holiday giving period coming to a close. According to numbers posted by the Center on Philanthropy at Indiana University, private tsunami donations from the United States totaled more than $1.5 billion.

More than $350 million has been raised by nonprofits via the Internet for the tsunami, an occurrence that shows that there is a benefit to having an online disaster preparedness plan. The tsunami not only corralled donors but pushed vendors to enhance their tools to be able to handle the volume of donors who are increasingly looking to give immediately in the wake of a disaster, explained Michael Stein, formerly of GetActive software and now an Internet consultant for nonprofits.

“The tsunami continued to reinforce in the synapses of the public that, ‘I should make my gift with a credit card online,’” Stein said. “If you think about it, that’s a pretty big mind shift for people. Not every gift is going to be given online. But you can burn that message that every gift given in an emergency should be given online. I think the tsunami started that trend and Katrina continued it.”

In the aftermath of Katrina, the challenge proved to be much greater than raising funds to help the victims. With the Federal Emergency Management Agency (FEMA) slow to respond to the flooding in New Orleans and the devastation throughout the Gulf region, nonprofits including the American Red Cross, Salvation Army and Feed The Children helped fill the void by providing food and shelter to evacuees. The endeavor is nothing short of a long-term plan for a number of organizations.

The Salvation Army (SA) has planned on serving survivors for up to four years, according to Major George Hood, national community relations secretary at SA’s headquarters in Alexandria, Va. It has reassigned officers and, in some cases, called upon retired officers to help with the relief effort. Officers will be present in Alabama, Louisiana, Mississippi and Texas handling the fallout from Katrina on a full time basis for the next two years.

“The immediate response was to set up mobile canteens in the field to provide sustenance and drinking water for survivors,” Hood explained. “The difficult part was getting the green light to get into some of the restricted neighborhoods but we had officers who were in the heavily affected areas who were ready with equipment and volunteers, which helped our response time.”

What did not increase response time was that nearly 80 percent of New Orleans lay submerged in as much as 20 feet of water. Since all of the warehouses in the area were under water, it was difficult to get supplies into affected areas. It took the SA 48 hours to work through that back-end supply chain problem, Hood said. It has since set up regional warehouses and distribution centers from which to serve those in need.

With $280 million in Katrina money raised by the SA as of November, getting supplies has not been an issue; it’s getting to the people who need the supplies. The SA has set out to help survivors that have been scattered to 30 states across the country. It has continued to offer short-term food support, clothing, cleaning kits, gift cards and employment services since the storm hit the Gulf Coast August 29.

Despite the inherent difficulties of navigating the relief efforts for a Category 4 hurricane, the SA was unaffected by the well-publicized tardy response by FEMA.

“The actions of the government didn’t really affect our response,” Hood said. “We’ve been preparing very well for these types of events since 9/11. Unfortunately, it seems that every year they seem to get bigger and more complex. We’ve never had a Katrina to draw from until now. So it’s important that we continue to re-evaluate and tweak our operations in preparation for the future.”

The American Red Cross (ARC) collected approximately $1.3 billion in gifts and pledges for hurricane relief and estimates that Katrina efforts will exceed $2 million, according to a fact sheet released by the organization in November. In 2005, the ARC provided financial assistance to more than 3.7 million survivors via client assistance cards, vouchers, checks and cash. The endeavor is just part of a five-year recovery plan that has utilized more than 210,000 Red Cross disaster relief workers from all 50 states, Puerto Rico and the Virgin Islands.

Other nonprofits turned to planning for the more immediate future. Catholic Charities USA admittedly adjusted its end of the year fundraising to be colored by Katrina. To put out appeals and talk about homelessness or every day needs and not talk about Katrina when everyone is thinking about it would be kind of odd, offered John Keightley, senior vice president for planning and external relations. Organizations need to ask: How do you tie all of these realities together for people to realize what’s going on in the community right now?

With the $101 million raised to assist families victimized by Katrina and Hurricane Rita, Catholic Charities has embarked on the largest disaster response effort in its history. Some 58 Catholic Charities agencies and organizations have already received grants ranging from $6,000 to $25 million.

“Our role is to focus on the long-term,” Keightley added. “What we’re looking at now from a programmatic perspective — and also to a degree, a fundraising, financial perspective — how are we going to be engaged in this work for the next five to seven years? Where are the resources to support that kind of effort?”

In-kind gifts proved to be a boon following the storm. Surplus food, clothing, school supplies and paper products were just a sampling of the goods collected and distributed by Oklahoma City, Okla.-based Feed The Children (FTC). That surplus of items had been sitting in warehouses all along and Katrina released it, explained Larry Jones, president of FTC.

“I have taken 446 trucks into Katrina and Rita and that it is all donated goods,” Jones added. “The most that we had ever done for a disaster in America was 215 trucks a year ago for the four hurricanes in Florida. We will pass, easily, 600 trucks for this one. We’re sending trucks on a daily basis, all through the area.”

For a number of nonprofits, relief efforts were necessary not only for the public but staff and volunteers. Roughly 3,000 local nonprofits were affected by the storm that wrought havoc on the infrastructure of local nonprofits, many of which established temporary offices outside of The Big Easy.

The National Cancer Coalition’s ( NCC) warehouse in New Orleans sustained minimal structural damage but the loss of electricity resulted in the shut down of the organization’s refrigerated warehouse rooms. NCC lost nearly its entire inventory of medicines and relocated its operations to Baton Rouge, La.

“Although no one was prepared for a disaster of Katrina’s magnitude, we had a contingency hurricane plan in place to protect NCC’s information, business operations and assets,” said Robert Landry, president and chief operating officer, via email. “ NCC had procedures for backing up the computer systems, and communicating with employees in this type of situation. We had information distributed in multiple locations. We are pleased that these measures were effective.”

A few nonprofits were also effective at making the short-term relocation of New Orleans-based conferences. The National Catholic Development Conference was scheduled to hold its annual conference and exhibition at the New Orleans Marriott during early October. That event was moved to St. Louis. APICS – The Association for Operations Management, pushed it’s conference to Kansas City, Mo., when it became apparent that New Orleans was in for a long-haul recovery.

 

Rocky regulation

When it wasn’t beating the government to the punch in disaster recovery, nonprofits were bobbing and weaving the regulatory efforts of Sen. Charles Grassley, R-Iowa. While Grassley’s concern about alleged nonprofit fraud, including supposedly bogus donation programs, excessive executive compensation and perks and scammers fronting as nonprofits, were more heavy handed than a Rocky flick, Independent Sector (IS) convened to offer recommendations to Congress.

The Panel on the Nonprofit Sector had wide participation from the nation’s charities and foundations and advocated 120 actions to be taken by nonprofits in the name of governance, transparency and accountability, none of which Independent Sector would mandate of its members – just suggest they follow. In June, the final report was released, of which it’s offerings included:

• The recommendation that charitable organizations adopt, implement and publicize audit procedures and policies on travel expenses, conflicts of interest and whistleblower protection.

• Congress should require audits by charitable organizations with annual revenues of $1 million or greater and an independent accountant’s review for organizations with annual revenues between $250,000 and $1 million.

• Congress should require mandatory electronic filing of charitable organizations’ annual information returns, the Forms 990; the IRS to improve the design of and instructions for Forms 990; and charitable organizations to have their chief executive officer or chief financial officer certify the accuracy of their information returns.

• The recommendation that Congress establish more lucid legal guidelines for donor-advised funds, Type III supporting organizations and participation by tax-exempt entities in potentially abusive tax shelters. It also urged Congress to tighten up rules and strengthen penalties to help prevent transactions that benefit donors, rather than the public.

• To ensure that non-cash contributions support charitable causes, rather than provide improper tax deductions for donors, the Panel recommended that Congress establish clearer rules for valuing donated property and mandate stricter guidelines for appraisals of land and other appreciated property.

• The Panel recommended that Congress strengthen the penalties levied on board members who approve and executives who receive excessive compensation, that the IRS revise the Forms 990 to make the total compensation of executives clearer to the public and regulators and that charitable organization boards approve executive compensation each year.

The Panel’s 24 members reconvened in the autumn months to issue a supplementary report. There were two areas that were not included in the supplemental report because the Panel decided that it wanted to spend more time evaluating those particular areas. The first is self-regulation. The second is financial reporting that includes both the 990 and 990-PF and how the panel can reconcile the accounting standards required by the Financial Accounting Standards Board (FASB).

Many organizations are concerned that with people who are not familiar with FASB, it could look like some years organizations are overspending and other years they’re under spending when, in fact, that’s not the case, said Diana Aviv, president of IS. The standards require that an organization record all of the money it receives for a particular year in the year that they get the money, she added.

IS expects to see some “rerform” legislation during 2006, Aviv mentioned in November. How much legislation still remains to be seen. Aviv added that she expected Grassley to offer a reform package that would be part of this year’s budget reconciliation bill. Some of the broader reforms should follow next year. Grassley’s Washington, D.C., office did not return calls seeking comments.

“We will examine the package and to the degree that it agrees with the report we will be very supportive,” Aviv explained. “To the degree to which we diverge, we will take a closer look to see whether (Grassley) did better than us or something where we need to encourage him to move more toward what we have recommended. We will work with other members of the Senate Finance Committee on that as well as members of the House Ways and Means Committee that has jurisdiction over these issues.”

Others have been a little more leery as to how Grassley will receive the Panel’s recommendations.

“You would have to be one of Grassley’s brain cells to know how influential the IS report will be,” offered Gary Bass, executive director of nonprofit government watchdog OMB Watch in Washington, D.C.

“We can all speculate and we know that Grassley is very determined in his points of view but beyond that, I don’t think we can say much. I do think that Independent Sector put together an important effort in a short amount of time. I believe they did everything in their power to structure a report to influence Grassley. It appeared from the outset that their intention was solely to shape that process. Only time will tell whether that’s successful,” said Bass. NPT

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