Charities v. Businesses

This week’s post is central to the Believe In Youth mission statement. The focus is not about actual stories of youth making a difference, but rather what some of our elders are doing. This is a long post, but a very worthy read.

We are reporting two stories polar opposite in nature. The first is a Washington Post article concerning the misallocation of funds by veterans charities with an accompanying video. We are in no way condemning the charities or casting them guilty before being proven so. Rather, we are trying to make our audience readily aware of the operations of some charities. We urge everyone to research before giving. With so many productive charities and worthy causes, it would be a shame to give funds to a charity misallocating.

The second is a Wall Street Journal article about Google.org, “a massive philanthropic endeavor that erases the usual boundaries between the for-profit and nonprofit worlds” (WSJ). About four years ago, Google announced it was “devoting 1% of its equity, 1% of annual profit and an unspecified amount of employee time to Google.org,” and “yesterday’s announcement gives much-awaited shape and focus to its activities.”

Both articles come with videos, and we would love to see some commenting and discussion on this topic. BIY is also pleased to announce we will begin posting Wednesday articles this week in addition to Sunday articles, courtesy of Thabet Marzuq. We will also begin sending weekly news to our Facebook group (join here).

Scrutiny Of Veterans Charities Continues
Calif. Businessman Sees ‘Witch Hunt’
By Philip Rucker
Washington Post Staff Writer
Thursday, January 17, 2008; A01

With scores of U.S. soldiers returning home from Vietnam, California businessman and Army veteran Roger Chapin founded a charity in 1971 dedicated to those troops recuperating in hospitals.

Over the next three decades, Help Hospitalized Veterans would distribute millions of therapeutic craft kits to make moccasins, wooden wind chimes and other trinkets and would win accolades from presidents and Hollywood celebrities alike.

Yet, as the nonprofit enterprise has ballooned into one of the country’s largest veterans charities, reporting $71.3 million in donations during the past fiscal year, its spending practices have drawn sharp criticism from charity watchdogs.

Between 1997 and 2005, the charity paid $3.8 million in salary and benefits to Chapin and his wife and spent more than $200 million on fundraising and public education campaigns, according to a Washington Post analysis of federal tax filings. The public records also show that the charity awarded at least $19 million in contracts during that period to companies owned by Richard A. Viguerie, a prominent conservative political commentator and advertising consultant based in Virginia.

Help Hospitalized Veterans is one of several military-oriented charities whose spending practices are the subject of a congressional investigation. Chapin evaded U.S. marshals trying to serve him with a subpoena last month, said Rep. Henry A. Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform. Chapin, who has since been served, is expected to testify today before the committee.

Chapin, who has founded more than 20 nonprofit organizations over three decades, also is president and founder of the Coalition to Salute America’s Heroes, a smaller charity that provides emergency financial assistance to veterans and their families. That group is also under investigation by Congress, according to committee staff members, and is expected to be a subject of today’s hearing.

“We’re talking about an individual that has tried to duck the committee; he refused to testify voluntarily. It appears he has something to hide, and if you look at his past operations, there are very good reasons to be suspicious about his activities,” Rep. Chris Van Hollen (D-Md.), a committee member, said in an interview.

Van Hollen said the committee wants to find a way to distinguish between charities that truly serve veterans and those “committing fraud against the public.”

Chapin, reached at his San Diego home last month, said watchdogs and members of Congress are misrepresenting his charities.

“You don’t know me, but these guys have got this thing so wrong, it’s unbelievable,” the 75-year-old said. “It’s a witch hunt. They’re totally misrepresenting what the facts are.”

No laws at the federal or state level regulate the amount of money charities spend on overhead, fundraising or charitable causes. The American Institute of Philanthropy, a leading charity watchdog, issued a report last month suggesting that Help Hospitalized Veterans and 19 other veterans charities manage their resources poorly, paying high overhead costs and direct-mail fundraising fees.

Critics have not contended that all veterans charities manage their funds poorly. Some charities, including the Fisher House Foundation and the Disabled American Veterans Charitable Service Trust, consistently have received high marks from watchdogs.

But Help Hospitalized Veterans spends 31 percent of its funds on charitable causes, said Daniel Borochoff, president of the American Institute of Philanthropy. The institute recommends that charities spend at least 60 percent of their funds on charitable programs.

“They’re raising tens of millions of dollars for the craft kits, which is a nice treat for the veterans, but there’s a tsunami of need out there, and giving them a craft kit is not helping them that much,” Borochoff said.

Some recipients of Help Hospitalized Veterans’ direct-mail solicitations said they were surprised by the frequency and heft of the mailings.

“Those guys are relentless,” said James Lynch, a veteran from Merced, Calif. “These guys seem to hit me from twice a year to every four months. Anytime they’re spending money on postage and things like that, I wonder what the return is on it.”

High overhead costs can be expected for start-up charities, Rep. Thomas M. Davis III (R-Va.) said in an interview. But he said it is important to determine whether some veterans charities have been “a serial swindler in terms of taking people’s money and not spending it.”

Help Hospitalized Veterans paid Chapin $426,434 in salary and benefits in the past fiscal year, The Post’s review of a tax filing showed. His wife, Elizabeth, received $113,623 in salary and benefits as “newsletter editor,” the filing shows.

In the filing, the charity reports that the Chapins each worked 40 hours per week. In a separate tax filing, the Coalition to Salute America’s Heroes reported that Roger Chapin worked another 40 hours per week for his job there but did not collect pay.

Mike Lynch, executive director of Help Hospitalized Veterans, said the charity’s board considers Chapin’s wages “proper compensation.”

“He’s a dynamo,” said Thomas Palma, the coalition’s general manager. “You might find it hard to believe, but we do an awful lot of good things as a result of his efforts and his ideas.”

Some donors to Chapin’s charities said they were disappointed to discover his high compensation.

“I just got irritated as hell,” said Michael J. Feeko Sr., 77, a Korean War veteran who lives in Port Crane, N.Y., and volunteers with veterans groups. “The part that galls me is the fact that he’ll sit back and draw this money and other people are giving their time.”

Help Hospitalized Veterans has spent some of its donations in the real estate market. The charity purchased a condominium unit in Fairfax County in May 2006 for $444,600, according to property records reviewed by The Post. Chapin said the charity purchased the Falls Church apartment because of his frequent travel to Washington.

The charity also purchased at least nine properties in the past decade in California, where the group has its headquarters, records reviewed by The Post show.

The office of California Attorney General Jerry Brown (D) investigates charities that mismanage their assets, spokesman Gareth Lacy said. Lacy would not say whether Brown’s office is investigating Help Hospitalized Veterans, but he said the head of the charities division would testify at today’s congressional hearing.

The charity has long had ties to Viguerie. In the past fiscal year, Viguerie’s companies received $3.9 million from the charity, according to its filings with the Internal Revenue Service.

Viguerie has been asked to testify at the hearing. Reached at his office in Manassas this week, an assistant said Viguerie would not answer questions from a Post reporter, citing a policy against commenting on clients.

Mike Lynch said Viguerie adds “tremendous value” to the charity’s ability to raise money. Lynch added that the charity’s finances have met the fundraising standards of the Better Business Bureau, among others.

Staff researcher Meg Smith contributed to this report.

See google.org video hereGoogle: From ‘Don’t Be Evil’ to How to Do Good

By KEVIN J. DELANEY
January 18, 2008; Page B1

In one of the most widely watched efforts in corporate giving in years, Google Inc. unveiled yesterday nearly $30 million in new grants and investments, outlining how it will focus a massive philanthropic endeavor that erases the usual boundaries between the for-profit and nonprofit worlds.

The first set of major five- to eight-year initiatives it will pursue includes efforts to create systems to help predict and prevent disease pandemics, to empower the poor with information about public services and to create jobs by investing in small- and mid-size businesses in the developing world. They join previously announced initiatives to accelerate the commercialization of plug-in cars and make renewable energy cheaper than coal. The grants and investments announced yesterday are an early wave of Google’s planned efforts in the five focus areas.

Larry Brilliant, executive director of Google.org, talks with Stacey Delo about running the Internet giant’s philanthropic arm.
Valued at about $2 billion, the assets currently set aside for the company’s philanthropic arm, Google.org, make it larger than any in-house corporate foundation in the U.S., according to the Foundation Center, a nonprofit research firm. (Private foundations set up by tycoons such as Microsoft Corp.’s Bill Gates have more assets.)

Just as important, the Mountain View, Calif., Internet company is marshaling both company and foundation resources around the initiatives, which it hopes will provide more impact in tackling some of the world’s biggest problems. Philanthropy experts consider Google to be among the leading edge of donors experimenting with this hybrid for-profit/nonprofit model. Others include eBay Inc. founder Pierre Omidyar’s Omidyar Network, which invests in businesses and makes grants to nonprofits.

Google, which has found enormous success with an unconventional business style and a corporate motto of “Don’t Be Evil,” says it isn’t looking to make money on its philanthropic efforts. But, as a division of the for-profit company rather than a nonprofit offshoot,
Google.org has freedom to invest in and operate businesses, lobby for political causes and issue certain grants that a traditional corporate foundation wouldn’t. Its announcement yesterday includes a $10 million investment in closely held eSolar Inc., which is working on utility-scale solar power.
Google.org also expects to invest directly in businesses in places such as Africa to spur job creation. “We can start new industries,” says Executive Director Larry Brilliant. “I hope we will.”

The money Google.org has awarded to date (http://google.org/projects.html1) remains modest, and its progress so far has been slow compared with its parent company’s breakneck growth in staff and business reach. Some philanthropy experts warn Google that successful businesspeople with high hopes for solving the world’s problems have underestimated those problems’ complexity and have fallen short.

Selected from more than 800 suggestions, the final initiatives show Google’s special interest in projects where it can bring its engineering and information-management prowess to bear. Google staff, many of whom spend 20% of their work time on independent projects, are expected to contribute significantly to
Google.org efforts. The initiatives also exhibit Google’s characteristic penchant for audacious moves to reshape markets — from advertising to small-business financing — others are often more timid in approaching.

Google.org’s big ambitions suggest it could potentially transform the business mix of Google itself — leading the company to become a player in sectors such as energy and finance.

“They’re business and technology people saying we want to find business and technology solutions to problems,” says Mark Kramer, managing director of FSG Social Impact Advisors, a nonprofit philanthropic consulting group.”That hasn’t been done much before.”

The roots of the effort trace to Google’s April 2004 regulatory filing for an initial public offering. In it, company co-founders Sergey Brin and Larry Page announced plans for a corporate foundation with the goal that “someday this institution may eclipse Google itself in terms of overall world impact by ambitiously applying innovation and significant resources to the largest of the world’s problems.”

To start, the company created a nonprofit corporate foundation with about $90 million in funding. It announced plans to focus on issues related to energy and the environment and global poverty. After discovering in 2005 that its foundation couldn’t easily donate to One Laptop Per Child, a nonprofit initiative to sell low-cost laptops to developing countries, Google began pursuing the hybrid approach with the for-profit structure. Laws prevent corporate foundations from making gifts that might financially benefit their businesses, and the laptop project aimed at increasing Internet access arguably could boost Google’s online advertising revenue.

In February 2006, Google hired as Google.org’s executive director Dr. Brilliant, a former physician who helped direct efforts to eradicate smallpox from India in the 1970s. After the Sept. 11, 2001, attacks, he served as a bioterrorism consultant to the
U.S. Centers for Disease Control and Prevention.

With Dr. Brilliant’s arrival, Google.org added global health as a third focus area. He and colleagues sought advice from Google staff and leaders in the philanthropy field and made small “learning grants” to nonprofits. But by spring 2007, Dr. Brilliant and his team realized they needed to focus and launched an internal process to select limited initiatives in the environment, poverty and global health areas.

While some Google.org executives championed efforts to toughen energy-efficiency standards, the company’s co-founders urged them to look instead at making renewable energy cheaper. In late November, Google announced that it expected to invest hundreds of millions of dollars in efforts to make renewable electricity cheaper than power from coal-fired plants. In an unusual move, Google said it would spend millions of dollars on research and development and would create a renewable-energy research-and-development group within the company, in addition to grants and investments by
Google.org.

The other major initiatives Google.org will focus on include the program to predict and prevent disease outbreaks and other global threats. That is anchored by a $5 million grant to InSTEDD, a nonprofit created by
Google.org that is applying technology to improve the flow of information between organizations fighting such problems. Google says it believes that better data and systems for analyzing it are critical to identifying disease hot spots. Possible eventual projects for Google include creating simple tests doctors in the developing world could use to diagnose infectious diseases.

As part of the “Inform and Empower to Improve Public Services” initiative, Google is supporting efforts to provide parties in the developing world with information about public services such as education. One beneficiary of a $2 million grant from
Google.org is Pratham (www.pratham.org13), a nonprofit in India that gives reading tests to schoolchildren and publicly releases the data with the goal of improving education standards.

Google.org also aims to “Fuel the Growth of Small and Medium-Sized Enterprises” in the developing world. It will try to reduce the transaction costs for outsiders to invest in such businesses, help create funds that buy stakes in the businesses and provide investors with an “exit,” and invest directly and indirectly in such businesses.

Some warn that Google’s unconventional approach risks altering the landscape of industries, putting it in competition with other businesses. Its investment in renewable-energy research and companies, for example, makes Google a potential rival to some oil and coal concerns. Google “is becoming a catalyst for energy innovation, which makes them an invader to the traditional energy industry,” says R. Paul Herman, CEO of HIP Investor, which consults on socially responsible investing, and former strategy director at Omidyar Network.

Such philanthropic activities potentially have repercussions for Google’s core online advertising business, if energy companies cut back on buying Google ads because they viewed it as a rival. Similarly, any government officials unhappy with
Google.org’s efforts could potentially use regulatory or lawmaking powers to take it out on the company.

Dr. Brilliant says the company has considered such risks. “It’s an experiment to have a philanthropically oriented organization that’s part of the [profit and loss] of Google,” he says.

But, coming nearly four years after Google first announced it was devoting 1% of its equity, 1% of annual profit and an unspecified amount of employee time to Google.org, yesterday’s announcement gives much-awaited shape and focus to its activities.

GOOGLE.ORG’S CHOSEN INITIATIVES

The below list includes select grants and investments, including some previously announced. (See a full list.2)
Predict and Prevent
Goal: Fight disease pandemics and other disasters by using technology and bolstering data collection and analysis to identify “hot spots” and enable a rapid response.
Select Grants:
• $5 million to InSTEDD3 nonprofit to improve early detection, preparedness, and response capabilities for global health threats and humanitarian crises.
• $2.5 million to the Global Health and Security Initiative4, established by the Nuclear Threat Initiative to prevent, detect, and respond to biological threats.
* * *
Inform and Empower to Improve Public Services
Goal: Fight poverty and health problems by providing information about public services such as education, health, water and sanitation to empower citizens and communities, providers and policy makers.
Select Grants:
• $2 million to Pratham5, a nonprofit in India which gives reading tests to schoolchildren and publicly releases the data with the goal of improving education standards.
• $765,000 to the Centre for Budget and Policy Studies6, a Bangalore-based analysis group, to create a Budget Information Service for local governments to facilitate better district- and municipal-level level planning in India.
• $660,000 to the Center for Policy Research7 in India to increase the debate and discourse on issues of urban local governance and urban service delivery.
* * *
Fuel the Growth of Small and Medium-Sized Enterprises
Goal: Stimulate investment in small- and mid-sized businesses in the developing world in order to create jobs and fight poverty.
Select Grants:
• $4.7 million grant to the nonprofit TechnoServe8, which works to support enterprises, spur job creation, and alleviate poverty.
* * *
Develop Renewable Energy Cheaper Than Coal (RE<C)
Goal: Make renewable electricity cheaper than power from coal-fired plants
Select Investments:
• $10 million investment in closely held eSolar9 Inc., which is working on utility-scale solar power
• $10 million investment in closely held Makani Power10 Inc., which is working on high altitude wind-power systems.
Comment: Google separately is creating an internal research and development group staffed with engineers working on the problem.
* * *
Accelerate the Commercialization of Plug-In Vehicles (RechargeIT)
Goal: Fight climate change by accelerating the adoption of plug-in hybrid electric vehicles and vehicle-to-grid technology.
Select Grants:
• $200,000 to the nonprofit Brookings Institution11 to support a conference in spring 2008 on federal policy to promote plug-in hybrids.
• $200,000 to nonprofit Electric Power Research Institute12 to support plug-in vehicle research and development.
Comment: Google.org launched a $10 million request for investment proposals last year, and will invest amounts ranging from $500,000 to $2 million in selected for-profit companies tackling this area.

Source: Google, WSJ research

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~ by PJ on January 19, 2008.

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