Fundraising

Always Good To Vet Before Giving And Be Wary Of Stolen Non-Profit Identity

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As we move through the middle of the holiday season, it seems like a good opportunity to remind people to do a little due diligence so they don’t fall prey to some charity scams.  Back in September For Purpose Law Group posted about a case of stolen non-profit identity that was exploited to make a lot of money.  PetCo Park in San Diego, like many athletic venues around the country, allows charities to staff concession stands in return for a cut of the revenue.

When a group known as “Chula Vista Fast Pitch” wound down their operations and filed a dissolution notice with the state, two guys basically assumed the organization’s identity and applied to participate in the charity food service program at PetCo Park and then subsequently at other athletic venues.

While it was something of an open secret that the charity didn’t really exist, it was able to continue operating for years, reapplying to the program multiple times. It took reporting by the non-profit news organization, Voice of San Diego, to finally close the whole scam down.

Something else that doesn’t seem to exist at our baseball stadium is any meaningful vetting process for organizations applying (or reapplying each year) to participate in this coveted program. See Monday’s VOSD article along with: The Fake Charity at Petco Park Has Also Been Working at Snapdragon Stadium  (August 29, 2023); Fallout Over Fake Nonprofit Continues at Snapdragon Stadium and Petco Park (August 30, 2023); and More on that Fake Charity that’s Been Raking in Cash at Petco (August 31, 2023).

It was a years-long lucrative fraud perpetrated in plain sight. But it was exposed and shut down in less than a week.

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“At Petco,” Will Huntsberry points out, “Chula Vista Fast Pitch brought in $3.7 million in net sales over a five-month period earlier this year, according to receipts obtained by Voice. Charities generally get roughly 10 percent of their net sales at Petco. Ten percent of $3.7 million is $370,000.”

Extrapolating these figures over nine full years, at multiple venues, and including special events, Chula Vista Fast Pitch likely took in huge sums of money that should have gone to a local charity in good standing and operating for the benefit of the community.

Everybody wants to operate on good faith and believe that charitable organizations are benefiting worthy causes. Scams like this place a greater burden on other charities who operate legitimately and have to make additional efforts to prove it to funders. There are tools out there like Pro Publica’s Non-Profit Explorer potential donors can use to do some preliminary vetting of non-profits to which they intend to donate.

NPR’s Fortunes Changed By Billions And Billions Sold

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Last month there was an interesting story in the Washington Post about the $220 million bequest left to NPR 20 years ago by Joan Kroc, widow of former McDonalds CEO Ray Kroc.  What I found interesting was that while the money helped to expand NPR’s capacity in a very real way, it has also been something of a double edged sword when it comes to additional fundraising.

NPR spent some of the money, but put about $194 million into an endowment from which they have drawing off the interest. However, because NPR constantly expresses their gratitude for a gift which significantly impacted the direction of their organization, 20 years later people think Kroc is continuing to give money and there is no reason to make a donate themselves. Similarly, Congress cites the gift, questioning why NPR continues to need money.

“Kroc’s bequest has also periodically been invoked by congressional Republicans and conservatives intent on cutting the federal government’s annual outlay to public radio and TV. Most of those funds go to member stations; NPR receives almost no direct federal support. But that nine-figure gift from a multibillionaire remains a politically potent talking point.”

It raises something of a quandary about how do you appropriately acknowledge the generosity of a large, but one time gift, without dissuading others to donate as years pass. Perhaps somewhat ironically, Joan Kroc herself could have potentially been dissuaded from making her gift if she learned another had made a significant donation because she shared a common confusion about NPR’s identity.

Ken Stern, a veteran public radio executive who once served as NPR’s chief executive, wrote in 2013. Joan Kroc, he wrote, “frequently confused NPR (as many people do) with other public media organizations ranging from PBS to BBC to other public radio producers.”

Indeed, Kroc had apparently intended to make a donation to PBS, but her staff couldn’t ever get someone on the phone so she instructed them to move on.

As you might imagine, the NPR staff thought fondly of McDonald for a time after receiving the gift. The last line of the Post article says they enjoyed Big Macs on the day they announced receipt of Joan Kroc’s gift back in 2003.

Competition Among Donor Advised Funds Is Constricting Charitable Giving

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I am always interested in news about how donor advised funds (DAF) are operating. On the whole, their use hasn’t gone as intended and they have reduced, rather than increased or incentivized charitable giving.   A few weeks ago Vu Le linked to an article that examined how the differences in the way DAFs are promoted is an indicator of whether they are distributing or sequestering funds. (emphasis original)

National sponsors that spend more time talking about donor benefits on their websites have more assets, take in a much higher proportion of noncash contributions, and pay out grants at much lower rates than sponsors that spend more time talking about charitable giving.

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But our analysis predicts that a hypothetical national sponsor with a strong emphasis on charitable grantmaking on their website would pay out at 53 percent, while a hypothetical national sponsor with a strong emphasis on donor benefits would pay out at just 2 percent. And those lower payout rates have ripple effects when it comes to the buildup of assets: Our model predicts that the highly charity-focused sponsor would have assets of just $34 million, whereas the highly donor-focused sponsor would have assets of $2.7 billion.

Something to note is that the analysis focuses on national sponsors of DAFs rather than regional and local sponsors. The author of the piece, Helen Flannery, notes that since national sponsors tend not to have the specific focus, whether it be geographic region or cause, they often need to work harder to make a case for people to arrange their giving through them. Flannery seems to suggest that the those that tout financial benefits to the donor are able to make a more compelling case than a more charitably focused sponsor without a specific focus.

Flannery calls for a more specific evaluation and regulation of DAFs on an individual basis rather than looking at the aggregate giving of sponsors since the really generous ones tend to make the parsimonious ones look better due to averaging.

The analysis we present in our paper quantifies this phenomenon. It measures the degree to which sponsors have financialized what was originally intended to be a nonprofit instrument, and it measures just how intense the competition has become among the very largest DAF sponsors in this country.

Bad Enough Having Computers Making Hiring Decisions, Are Grants Awards Next?

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A couple weeks ago Vu Le wrote about how useful AI can potentially be in the process of writing grants. So often granting organizations essentially ask for the same information, with some variation in what they want answered when and the word/character limits they have set for each response.

Given that grant awards can tend to favor organizations with the resources to employ a professional grant writer who knows how to employ terminology and language that funders seek, under resourced groups and those who are not comfortable or facile at employing the preferred vernacular could benefit from the use of AI.

Unfortunately, Le notes, some funders are using AI to detect if an organization is using AI to write their grants. Le writes:

“Grants are not college essays or news articles, where it matters who actually does the writing. Grants are a tedious mechanism for delivering answers about an organization and its work. AI just makes it less tedious. Punishing nonprofits for using AI is petty and paternalistic.”

He also says some funders are moving toward having AI evaluate the grant proposals which is even worse for a number of reasons.

“Funders who use AI to write grant RFPs, read proposals, eliminate applications, come up with a list of grant finalists, or whatever, should be aware that AI engines, which are mostly designed by white dudes, will likely favor white-coded proposals. It will be interesting to see the dynamics between AI-generated grant proposals and AI-supported grant review and selection. To keep it from reinforcing inequity, both funders and nonprofits need to be aware of biases that are built into these tools.”

For years there have been conversations about the job seeking process and how dispiriting it is to have a computer program evaluate your resume and cover letter before summarily rejecting those materials before a human ever gets to see them. Many have discovered how to game the system by using keywords in their materials, sometimes resulting in stilted or nonsensical content which nonetheless sees their application advance.

The grant application process is bad enough as it is without incentivizing cynical attempts to game the system. What would it say if an AI awarded a grant to an AI constructed application that no one ever seriously evaluated over an impassioned application written by a human? Should funding for homeless projects be determined solely by algorithms conversing with each other?

If funders are trying to detect grants written by AI out of concern about possible fraud, that is certainly valid. But that is also an indication that funding decisions should never be entirely made on the basis of polished prose. Vu Le suggests that just as AI can free applicants up to concentrate on delivering their core services, so too can it free funders up to focus on more directly interacting with those they fund to learn more about the work they do. Likewise, they can work on re-evaluating the criteria and processes they employ as part of their funding decisions.

There is an opportunity to double check the AI. Are its recommendations poor to middling in quality? Are those it rejects doing a better job than the AI indicates?  AI can certainly be useful in removing some of the subjectivity a person brings to information, but for every example of how it is better than humans, there are examples of gaps, some times so glaring a five year old would have avoided them that AI fails to fill.