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It’s a New and Changing World: Leading Nonprofits in the 21 st Century

It’s a New and Changing World: Leading Nonprofits in the 21 st Century. H. King McGlaughon, Jr., JD, MDiv Managing Executive, Wachovia Nonprofit and Philanthropic Services Winston-Salem, NC. The number of 501(c)(3) organizations, 1996–2006. The Dimensions of Giving.

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It’s a New and Changing World: Leading Nonprofits in the 21 st Century

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  1. It’s a New and Changing World: Leading Nonprofits in the 21st Century H. King McGlaughon, Jr., JD, MDiv Managing Executive, Wachovia Nonprofit and Philanthropic Services Winston-Salem, NC

  2. The number of 501(c)(3) organizations, 1996–2006

  3. The Dimensions of Giving • More Americans give than any other country in the world • 80% of US households donate money each year to over 1.5 million charities, social welfare organizations and religious congregations in the U.S. • an estimated 75% of those donors receive no tax benefit from their charitable gifts • As our wealth increases, the percentage contributed rises markedly • 95% of families with a net worth in excess of $1 million give to charitable organizations annually • 98% of families with a net worth in excess of $5 million give annually Source: Chronicle of Philanthropy

  4. Millionaire Households(in Millions)

  5. The Importance of Giving for the Affluent Source: Boston College - Social Welfare Research Institute & Bankers Trust

  6. The Dimensions of Giving • Aggregate contributions from individuals, corporations and foundations for 2006 was $295 billion, an increase of 5% over 2005 • contributions from individuals (lifetime, at death and through private foundations) made up more than 90% of the total • since 1959 contributions have grown at an average of 3% per year above inflation • contributions fall an average of 0.7% in recession years Source: Center for Philanthropy at Indiana University

  7. Percentage of total giving by sourceFive-year spans Individuals Bequests Foundations Corporations

  8. 2006 CONTRIBUTIONS: $295 BILLIONBY TYPE OF RECIPIENT ORGANIZATION Environmentand animals$8.863.4% Internationalaffairs$6.392.5% Foundations$21.70 8.3% Arts, culture, and humanities$13.515.2% Unallocatedgiving $16.156.2% Public-society benefit$14.035.4% Human services $25.36 9.7% Religion $93.18 35.8% Education$38.56 14.8% Health $22.548.7%

  9. Average rates of change, 1987–1996 and 1997–2006 by type of recipient (adjusted for inflation) 1997–2006 1987–1996

  10. Giving by type of recipient as a percentage of total giving, 1967–2006 (Five-year spans; does not include "unallocated") Religion Education Foundations Health Human services Arts, culture, and humanities Public-society benefit Environment and animals International Data begin in 1978 for foundations and in 1987 for environment/animals and international affairs.

  11. Total giving, 1966–2006 Inflation-adjusted dollars Current dollars Recessions in yellow: 1969–70; 1973–75; 1980; 1981–82; 1990–91; 2001

  12. Distribution of levels of change in charitable revenue, 2005–2006 (By organizational size category) Large Medium Small Share of all organizations in size category -100% -50% to -25% to -1% to No 1% to 25% to 50% to 100% or worse -99% -49% -24% change 24% 49% 99% or more Percentage change range

  13. Total giving by sourceFive-year spans, adjusted for inflation 1,381.94 $ in billions 1,200.69 829.65 766.08 671.94 597.70 563.91 551.47 1967–71 1972–76 1977–81 1982–86 1987–91 1992–96 1997–01 2002–2006 Individuals Bequests Foundations Corporations Giving USA uses the CPI to adjust for inflation.

  14. Individual giving as a share of income, 1966–2006Personal income and disposable personal income

  15. What DOES Matter? – Source of Wealth

  16. Philanthropy is one of the top 4 financial issues for UHNW investors Tax Tax 91% Minimization Minimization Asset 89% Management Estate Planning 73% Philanthropy 51%

  17. Philanthropy is one of the top 4 financial issues for UHNW investors Tax Tax 91% Minimization Minimization Asset 89% Management Estate Planning 73% Philanthropy 51%

  18. Philanthropic Motivation

  19. Client values that DO affect Philanthropy: • Philanthropic Motivation • Concern about effects of wealth on heirs • Desire to control access to wealth by succeeding generations • Preservation of capital • Protection of assets from spouses, creditors, etc. • Desire to create a “legacy” • Sense of moral or legal obligation

  20. Motivation for Increased Giving

  21. The Current Market Environment

  22. The Current Market Environment • CRTs are excellent asset management tools • Tax free asset management zone • Ability to move around in market without concern for realization of gains in portfolio • Creates cash flow through Income Tax Deduction, conversion of dividends a/o interest into income stream based on total value • Ability to control taxability of income stream through changes in asset allocation

  23. The Current Market Environment “Not-readily Marketable” Assets (Generally unaffected by market declines)

  24. The Current Market Environment • “CLTs: Leverage Market Down-Turns” • Tax benefits inverse to market conditions • Strong stocks that have lost value • Client intends to hold • Deflated value makes for optimal • CLT funding • Leverage the Market AND the lifetime estate/gift tax exemptions

  25. The Boom in Donor-Advised Funds • Size of Donor Advised Fund Market grew almost 800% from 1995 to 2005 • Proliferation of “commercially sponsored” DAF programs

  26. Growth in Private Foundations: • Over 60,000 private foundations in US today. • 50% were created in last 10 years. • Funding of private foundations is at its highest level ever in terms of annual transfers to private foundation endowments.

  27. Giving to foundations, 1978–2006 $ in billions 29.22 29.50 25.67 16.23 9.12 12.63 6.60 5.30 4.98 Inflation-adjusted dollars 4.96 4.46 2.39 Current dollars 1.61 1978 1981 1986 1991 1996 2001 2006 Data: The Foundation Center

  28. Control for Donors in Planned Giving • Trusteeship/Co-Trusteeship • Donor-Advised Gift Options • Restricted Gifts • Board/Committee participation • Program participation • Supporting Organization structure

  29. Your Current Board • When was your organization created? • Was your Board structure created at that time? • When was the last time your Board was re-tooled? • How many Board positions does your Board consist of? • How is your Board selected? • What is the maximum tenure allowed for Board members today? • How many of your Board members have served for more than 10 years? • How do you get rid of non—productive, counter-productive Board members? • Is there a place for dedicated Board members who need to “retire” from active Board leadership?

  30. Board members’ hats • Governance hat – when functioning as a Board member • Implementation hat – when individual member is formally delegated to act on Board’s behalf • Volunteer hat – when board member is doing ANY other task for the organization • “Fourth” hat – worn by a trustee who is a participant or beneficiary of a program

  31. Retaining Board members • Issues: • Responsibilities are greater than expected. • Endless meetings where little is accomplished. • Hostilities/factions among Board members. • Board meetings are “trivial,” meaningless. • Why am I really here? • Financial statements and other reports of not meaningful or complete. • Requests for monetary support not explained or expected. • Must “represent” a demographic group, not lead the organization. • Feel “different” or out of place on the Board.

  32. The “Ideal” Board • The Board is the keeper of the organization’s mission. • Establish the mission of the organization. • Ensure that the mission is clearly articulated to itself and to the world. • Ensure that everyone, including every trustee, understands and supports the mission. • Promote work of organization to donors and potential donors. • Be a spokesperson for the organization WHEN ASKED. • Help staff develop a comprehensive marketing and communication plan. • Monitor the organization’s progress towards achieving its mission. • Serve as ambassadors to the community. • Modify the mission when necessary and appropriate. • Select and evaluate the performance of the ED/CEO; maintain and support appropriate CEO model.

  33. Fundamental Board Questions • What is the purpose of this organization? • What do we want to change in the lives of our clients or members? • What is our experience, our history? • What are our strengths and our limitations? • What are our resources? • What programs or services do we/should we provide? • Whom should we serve?

  34. Monitoring progress toward mission • Are we carrying out our mission? • Are our programs and services doing what they are intended to do? • Are the ends/goals set by the Board being accomplished? • Is the behavior of our organization congruent with its goals and values?

  35. Critical roles of effective Boards • Create a shared vision for Board, staff, volunteers. • Keep organization focused on mission. • Help provide and allocate resources to mission. • Prepare the organization to respond to opportunities and threats. • Improve performance. • Facilitate public relations and fund development • Direct the organization toward its appropriate and planned future. • Strategic planning (ongoing).

  36. Assessing the organization’s program • Process evaluations • What services/functions are being performed and by whom? • To whom? • How many are being served? • How effectively? • Outcome evaluations • Assess impact of current programs • Are skills, knowledge, resources, etc., adequate and appropriate to mission?

  37. Board composition • Skills and abilities tied to mission, not to other criteria. • Diversity (representation of community/constituency served?) • Wealth and power? Why? • Age and energy

  38. Board structure • How many is enough? Too many? • How selected? • For how long? • Rotation and retirement? • How can we accomplish this? • Board re-formats the Board. • By-laws, policies and procedures. • Is there “heaven” for Board members who rotate and retire? • Create it. • Advisory Board • Separate fundraising/endowment foundation and Board

  39. Making effective Board Members • Create a Board development committee • Review current format and membership • Identify needs for Board membership and plan for accomplishing Board development goals • Identify candidates for Board membership • Contact potential members and assess ability and willingness to be a member • Recommend slate of candidates to Board • Orient new Board members • Create and maintain Board handbook • Continuing Board education • Recognize service of retiring/rotating Board members

  40. New Board members • Orientation • Day at the organization • History of organization • Overview of governance structure, committees, meetings • Presentation of board handbook and contents • Presentation by staff of programs, services, staffing structure, by key staff members • Tour of physical plant • Site visits to served communities, agencies, etc. • Overview of fiduciary responsibilities, D&O issues, conflict of interest, expense policies, etc., by organization counsel or consultant (outsider)

  41. “THE” Issue: A Board Member and Her Money • State the “obvious.” • Board’s role in fundraising • Fundraising education • Appropriate roles and expectations • The Planned Giving Example • It’s not technical

  42. Questions and Shared Experiences

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