Special Report: IRS Scandal Shakes Washington

This week, the US Internal Revenue Service acknowledged and apologized for behavior that had long been rumored. The IRS improperly targeted for extra scrutiny conservative groups seeking tax-exempt status.

The IRS did not ultimately deny tax-exempt status to a single group receiving extra scrutiny. Some say this proves that the actions of the IRS were baseless.

The scandal has now shaken the nation’s capital:

President Barack Obama directed Jack Lew, Secretary of the Treasury, to request the resignation of Steven Miller, Acting IRS Commissioner.

Miller resigned and Lew accepted the resignation.

The Justice Department has initiated a criminal investigation.

Exercising its oversight responsibility, Congress has begun its own probe of the IRS scandal.

Obama addressed the nation on television saying, “It’s inexcusable and Americans are right to be angry about it and I am angry about it. I will not tolerate this kind of behavior in any agency, but particularly the IRS given the power that it has and the reach that it has in all of our lives.” He promised reforms.

When wrongdoing by the government is uncovered, it is rightfully news. But, this latest government scandal cuts deeper.

What to Do When You Mess Up?

[Publisher’s Note: Before getting to this week’s post, I want to mention that Michael J. Rosen, CFRE, was a guest on The Nonprofit Coach Radio Show hosted by Ted Hart, ACFRE on Tuesday, February 26, 2013. Michael discussed his book, Donor-Centered Planned Gift Marketing. You can download a free podcast of the show by clicking here.]

Have you ever messed up at work? Stumbled? Blundered? Bungled? Botched? Made an oversight, gaffe, or mistake, big or small?

If you say you haven’t, I know that one of the following is true about you:

1. You’re not telling the truth, to others or, perhaps, just to yourself.
2. You have a selective memory.
3. You haven’t been paying attention.
4. You have virtually no work experience.
5. You need to be more creative and experimental.

Because I believe we have all made and will make mistakes during our careers, I’m going to share five tips with you that will ease the sting when such incidents occur:

Own it. When you make an error, resist the temptation to pass the blame. Instead, take responsibility. When we own our mistakes, we’re more likely to earn and retain the respect of those around us. Moreover, it puts us in the best possible position to do something positive in response to the problem.

Do not hide it. In politics, there’s a saying: “It’s not the crime, it’s the cover up.” The idea is that the cover up is usually more damaging than the trigger offense. It’s harder to fix a problem if you cover it up or simply pretend that there is not a problem at all. Furthermore, if people suspect you’re hiding something, they’ll apply that suspicion beyond the one instance. Honesty really is the best policy.

Apologize. If your misstep damages or offends another person, apologize immediately. Ok, I know that lawyers often frown at the idea of an apology. They fear it is an admission of guilt that can expose you and your organization to liability. I say, if it’s appropriate, suck it up and apologize anyway. At the very least, express your regret, which might lower the risk of legal liability since it is not an admission of guilt. (By the way, since I’m not a lawyer, I’m not giving you legal advice.)

Learn from it. When we learn from our mistakes, we’re far less likely to repeat the stumble. In some cases, learning from our missteps will allow us to improve our skills or our processes. In other words, if we look at mistakes as an opportunity to grow, our organizations and we can actually be better off than before the incident.

Turn a negative into a positive. I like the expression, “When life gives you lemons, make lemonade.” We can often turn blunders around into something good. In 1928, Alexander Fleming slipped up. He mistakenly failed to cover a Petri dish containing a Staphylococcus culture. However, it’s a good thing he messed up. When he examined the exposed Petri dish, he observed that mold growth had impeded the spread of the bacteria. Fleming’s mistake, and subsequent observation, led to the use of penicillin as a life-saving antibiotic.

In recent weeks, the news media have shared a couple of stories that nicely illustrate the points I’ve just made.

Do Not Let This Happen to Your Organization

It happened recently to a prestigious private school.

New York’s Dalton School inappropriately released private alumni information to its volunteer fundraisers. The New York Times reported the blunder that sent a shockwave through the School’s community and may have a chilling effect on fundraising.

Do not let this happen to your organization.

While volunteer and professional fundraisers must have useful information to effectively perform, organizations must protect sensitive items and keep them confidential. I’m going to provide you with eight tips that will help you keep your organization safe and your prospects and donors happy.

But first, let me tell you what went wrong at Dalton. Here’s what The New York Times reported this month:

But recently, one of the top Manhattan private schools, the Dalton School, might have been a little too open with the data it had about some graduates. The school said [February 7] that it had given out to some alumni who had volunteered to raise money for Dalton information about several other alumni whose own children had applied to the school. The information included whether those children had been admitted, information that most parents prefer not to be shared, especially in cases where the answer is no.”

It is common and acceptable practice for nonprofit organizations to share prospect and donor information with both volunteer and professional fundraisers. Such information often includes contact information, spouse or partner data, affiliation, giving history, volunteer involvement, event participation, and interests.

Dalton ran into trouble when it disseminated information about whether the children of prospects applied for admission and were rejected by the School.

The Times article quoted an upset alumna:

’It’s horrible,’ said one alumna who has been financially supportive of the school, and like nearly everyone interviewed about what happened, declined to be identified for fear of upsetting school leaders. ‘Why should anyone know how much I have given and whether my kid got in or didn’t get in or even applied?’” 

Prospects and donors care about their privacy. They do not want to feel that they are being spied on. They do not want private information about themselves or, especially, their children disseminated to friends and acquaintances. Dalton overstepped by releasing admissions information about alumni children, something acknowledged by the School:

’We apologize for and deeply regret the release of this information,’ said the letter, written by Ellen Stein, the head of school. ‘We are reviewing our protocols to ensure that information about the admissions status of all Dalton families and applicants is protected and remains confidential. We have reached out to apologize personally to those 11 alumni whose names were listed.’” 

While I applaud Dalton for reviewing its data protocols after the inappropriate release of private information, it would have been far better if it had had this review before a problem occurred. You now have that opportunity.

Before a crisis happens at your organization, take the time to review your organization’s own prospect research and information sharing protocols.

Here are some tips to guide you during your review:

To Sue or Not to Sue Over Unpaid Pledges?

Sometimes, nonprofit organizations sue philanthropists over unpaid pledges. This was recently the case with the Kansas City Art Institute. When a charity pursues this type of legal action, it sends shockwaves throughout the nonprofit and philanthropic sectors.

I do believe there are times when a nonprofit can and should sue a donor. However, this should only be done as an absolute last resort. The three instances when a lawsuit might be acceptable are:

1. The donor dies with an outstanding pledge and an heir challenges the will. In that case, the nonprofit might need to sue the estate to establish its claim and collect.

2. The nonprofit incurs real expense based on the donor’s commitment. For example, based on a pledge agreement, the nonprofit breaks-ground on a new building. The nonprofit might need to sue simply to survive.

3. The donor is about to or has entered bankruptcy. Suing the donor would be a way for the nonprofit to establish its claim. (By the way, I suspect that this fear might be what may have triggered the Art Institute case.)

In any case, suing a donor should only be done after careful consideration and only when all other options have been exhausted.

To sue or not sue over unpaid pledges? That is the question. The answer, offered by Brian M. Sagrestano, JD, CFRE and Robert E. Wahlers, MS, CFRE, is: Avoid the problem in the first place!

Brian and Robert are friends of mine. They are both seasoned, wise development professionals who have served on the national board of the Partnership for Philanthropic Planning. I’m pleased that they have offered to share some of their wisdom below as they introduce us to the concept of “concierge stewardship.”

Brian and Robert both generously provided insights and material for my book, Donor-Centered Planned Gift Marketing, for which I won the AFP-Skystone Partners Prize for Research in Fundraising and Philanthropy.

Now, Brian and Robert have written their own book, Philanthropic Planning Companion: The Fundraisers’ and Professional Advisors’ Guide to Charitable Gift Planning, and I’m honored to have been included in their comprehensive volume. The book is part of the AFP/Wiley Fund Development Series.

The official description of the book notes, “For fundraisers and professional advisors alike, The Philanthropic Planning Companion is the one-stop resource you’ll keep by your side to help your donors/clients meet their charitable and personal planning objectives.”

So, do you want to avoid a nightmare at your organization? If so, read on:

 

The Kansas City Art Institute recently sued Larry and Kristina Dodge for failure to pay $4 million on a $5 million pledge that was to be used to pay for construction of a new building, according to The Kansas City Star.

When the Dodges attempted to defend themselves (rather than hire an attorney they indicated that they could not afford), they made procedural errors and a default judgment was entered against them for the full $4 million due on the pledge. According to The Star, the Dodges made three payments on their pledge before their financial situation was impacted by the Great Recession, limiting their ability to fulfill the commitment.

In the article, Larry Dodge is quoted, indicating that he and his wife were in negotiation with the Institute to come up with a payment plan when it unexpectedly filed suit to collect on the pledge.

Regardless of the outcome, the reputations of both the Dodges and the Institute are forever harmed. Prospective donors will think twice before making a major commitment to a charity that would sue them to collect on a pledge. Meantime, the Dodges reputation, despite their many years of generous philanthropy, will be forever tarnished.

We cannot judge the merits of the Art Institute’s action or the ability of the Dodges to pay on their pledge, as we are not privy to all of the facts of the case. However, it raises a much larger issue about charities and pledges.

Special Report: Lance Armstrong Confesses, Finally

Lance Armstrong finally got around to confessing that he engaged in illegal doping. He admitted that he would not have won the Tour de France a record seven times if he had not doped. He acknowledged that he has been a bully. He demonstrated to the world that he is a liar.

Armstrong’s confession in his interview with Oprah Winfrey did not surprise everyone. However, many people did stand-by Armstrong up until the interview. Some of those folks ended up feeling foolish. 

I received an email from one of my readers yesterday. Months ago, the reader had responded to one of my earlier posts about Armstrong. The reader had expressed support for the cyclist and said he should not resign from the Lance Armstrong Foundation (LIVESTRONG) board. This reader’s view was shared by 49 percent of those who responded to my survey.

In yesterday’s email message, the reader apologized to me for having been “incredibly naïve.” I want this reader, and everyone who was duped by this doper for so long, to know that you are not the one who has anything to apologize for. While I appreciate the gesture, I can find no fault in this reader’s desire to see good in a fellow human being. If Armstrong has made anyone more jaded and less trusting as a result of his lies, it’s just another of the many offenses he’s committed.

Unfortunately, it will take us more time to understand the complete fallout from Armstrong’s actions. Will his past connection to LIVESTRONG hurt the nonprofit moving forward? Will LIVESTRONG’s slow reaction time as events unfolded be held against the organization? Now that the world  knows that Armstrong is a liar, will that erode the public’s trust in the charity he created?

Top Ten Posts of 2012, and Other Reflections

We’ve survived another “Doomsday”! Now, as 2012 draws to a close, I thought it would be interesting to look back briefly before we march into the new year.

 

Happy New Year!

 

For starters, let’s look at which of my posts have been the most read in the past year:

1. Survey Sounds Alarm Bell for Nonprofit Sector

2. Can a Nonprofit Return a Donor’s Gift?

3. 10 Essential Tips to Protect Children from Real Monsters

4. Garth Brooks Sues Hospital for Return of $500,000 Gift

5. 8 Valuable Insights from a Major Donor

6. Overcoming the 9 Fundraising NOs (Bernard Ross)

7. Breaking News: Brain Scan Study Gives Fresh Insight into Charitable Giving Behavior

8. What NOT to Do in Your Email or Direct Mail Appeals

9. 20 Factoids about Planned Giving. Some May Surprise You.

10. Two Major Factors that Demotivate Donors

I invite you to read any posts you might have missed by clicking on the title above. If you’ve read them all, thank you for being a committed reader.

I’m honored to know that I have readers from around the world. (I love the Internet!) While I appreciate all of my readers, I thought it would be interesting to look, beyond the United States, to see my top ten countries for readership:

What Do Obama, a Rapper & a Hospital Have in Common?

US President Barack Obama, South Korean rapper Psy, and Washington, DC-based Children’s National Medical Center have all found themselves involved in the same controversy this month. While much media attention has been focused on the situation, little attention has been directed at Children’s National.

So, let’s look more closely.

South Korean rapper Psy.

On December 9, 2012, the TNT television network taped Christmas in Washington for broadcast on December 21. This is the 31st year for the program. The event, held at the National Building Museum, was hosted by Conan O’Brien and featured an array of stars including Psy.

The South Korean rapper is known for his mega-hit “Gangnam Style,” which, in just four months, broke the record for most watched YouTube video in history. Traditionally, sitting US Presidents attend the event. This year, as in the past, First Lady Michelle Obama selected Children’s National as the beneficiary of the event, and the organization’s website has leveraged this with requests for donations.

So, what could go wrong?

Well, shortly before the event, a tape surfaced of Psy performing a rap number in 2004. The lyrics are not for the faint-hearted:

Kill those f**king Yankees who have been torturing Iraqi captives

Kill those f**king Yankees who ordered them to torture

Kill their daughters, mothers, daughters-in-law, and fathers

Kill them all slowly and painfully”

Some in the media questioned whether it would be appropriate for the nation’s Commander-in-Chief to attend the performance of someone holding such anti-US-military and anti-American views. The White House responded by pointing out that it had nothing to do with the planning of the event or the booking of the acts. Obama and his family planned on attending despite the controversy.

Then, days before the event, Psy issued a public apology (click here for the full text):

While I’m grateful for the freedom to express one’s self I’ve learned there are limits to what language is appropriate and I’m deeply sorry for how these lyrics could be interpreted. I will forever be sorry for any pain I have caused anyone by those words.”

Sometimes, publicity can be good even when the news is bad. So, I was curious if the publicity had a negative impact on event-related donations to Children’s National, a positive impact, or no impact at all. I contacted Children’s National.

After initially agreeing to answer my questions about Christmas in Washington, the organization abruptly declined to respond stating:

Special Report: How Will the Fiscal Cliff Affect Nonprofits?

In recent weeks, there has been an increase in the amount of media coverage of the “Fiscal Cliff” negotiations in Washington, DC. I’ve even written a number of posts on the issue including: “Obama Plan Could Cost Nonprofit Sector $5.6 Billion a Year.”

Now, the blog site Nonprofit Community, hosted by publishers John Wiley & Sons and Jossey-Bass, has asked the question:

How Will the Fiscal Cliff Affect Nonprofits?

I, along with nine other Wiley and Jossey-Bass authors from different perspectives, respond. We offer insights and great advice for every nonprofit organization. By visiting Nonprofit Community, you’ll have a chance to hear from:

Want to Retain Good Employees? Then, Don’t Do This:

Lindsey Stone and her supervisor, Jamie Schuh, were reportedly good employees at LIFE (Living Independently Forever, a Massachusetts-based nonprofit organization).

Now, they are unemployed.

Schuh took a photograph of Stone standing beside a sign. Stone appears to be shouting and flipping-off the sign which asks for “Silence and Respect.” The photo was posted on Stone’s Facebook page for her friends to see. It was meant as an ironic joke similar to the time she posted a photo of herself smoking in front of a “No Smoking” sign. I’m providing an unedited version of the photo so that you can see for yourself what I’m describing.

Lindsey Stone posing for what became a controversial photo.

But, there were four major problems with the taking and posting of the “Silence and Respect” photo: 

1. The photograph was taken beside the Tomb of the Unknowns at Arlington National Cemetery.

2. The photograph was taken during a business trip.

3. The photograph went viral on the Internet.

4. Tens of thousands of people called for the termination of the employment of Stone and Schuh.

The photo was posted in October. When the photo clearly became a controversy, Stone removed it and issued an apology on October 20, according to Gawker:

Whoa whoa whoa… wait. This is just us, being the douchebags that we are, challenging authority in general. Much like the pic posted the night before, of me smoking right next to a no smoking sign. OBVIOUSLY we meant NO disrespect to people that serve or have served our country.”

In another public apology, Stone and Schuh said:

We sincerely apologize for all the pain we have caused by posting the picture we took in Washington DC on Facebook. While posted on a public forum, the picture was intended only for our own amusement. We never meant any disrespect to any of the people nationwide who have served this country and defended our freedom so valiantly. It was meant merely as a visual pun, intending to depict the exact opposite of what the sign said, and had absolutely nothing to do with the location it was taken or the people represented there.”

For many, the apologies were not enough. Jazz Shaw, on the blog Hot Air,  wrote:

She was grossly and crudely insulting the Honored Dead.”

By contrast, Robert Johnson, a military veteran, wrote at Business Insider:

More importantly, if Lindsey Stone wants to rip on the Tomb of the Unknowns, me, my service, or the hundreds of mutilated troops I served with at Walter Reed Medical Center, she should be able to do so without fear of retribution. Freedom like that is what we fought for, and respecting other opinions is part of what the military tried to teach all of us who served.”

When LIFE found out about the image on November 19, it issued its own public statement:

This photograph in no way reflects the opinions or values of the LIFE organization, which holds our nation’s veterans in the highest regard. We are proud to have veterans serving on our staff and board of trustees, and we value their service. The men and women who have selflessly fought and sacrificed their lives to protect the rights and lives of Americans deserve our utmost respect and gratitude. We are acutely aware that this photo has done a disservice to veterans and we are deeply saddened that it was taken and shared in a public medium.”

Effective Stewardship Before, During, & After the Gift

About a month ago, Hurricane Sandy ravaged the Caribbean and the East Coast of the United States. New Jersey, New York, and Pennsylvania were especially hard hit. Millions lost electricity and were driven from their homes. Today, thousands remain without power and without homes to return to.

Through it all, the American Red Cross has been there to help those in need.

My wife and I live in Philadelphia. While many in the area were affected by flooding, fallen trees, and loss of power, we were fortunate. We made it through unscathed.

Recognizing that others fared far worse than we did, we went online and donated to the Red Cross. At the time we made the gift, we could designate to a category or to “most needed.” We were able to print a gift receipt on the spot. As an immediate follow-up, the Red Cross emailed a thank you message with a receipt, an outline of all the services the support helps provide, and another opportunity to print out the gift receipt.

Up until that point, the Red Cross had handled the process perfectly and without any surprises.

Then, several days after our contribution, as the disaster began to subside, we received another email with another thank you with the subject line: “You are amazing.” We had to open it. When we did, we were greeted with a personalized salutation and a link to a slideshow illustrating the impact of our giving.

Here’s the text of the email we received:

Dear Lisa and Michael,

My sincere thanks for your generosity over the past ten days. The outpouring of support for the families impacted by Superstorm Sandy has been extraordinary. Whether you have given a financial gift, donated life-saving blood, or volunteered your time, I’m so grateful to so many compassionate people like you in the Red Cross community, as we provide emergency relief and help millions of families recover and get back to their lives. On behalf of the families and individuals we’ve served and will continue to serve in the days and weeks ahead, thank you.

[Slideshow image and link]

We are making a difference together. To date, you have helped us provide more than 61,000 overnight shelter stays, serve 3.2 million meals and snacks to cold and hungry families and distribute more than 121,000 relief items such as warm blankets, cold weather gear, clean-up kits and hygiene kits. We have activated our entire fleet of 323 Emergency Response Vehicles to bring meals, water, information and emotional support to impacted communities and we have deployed nearly 5,900 trained Red Cross workers to support relief efforts.

Our work is far from over, but from the bottom of my heart, thank you. We’ll continue to post updates for those affected by the storm and for our caring Red Cross community on our website.

You are at the heart of our mission to relieve suffering, wherever and whenever we’re needed, and I am so grateful for your support.

Gail McGovern

President and CEO, American Red Cross”

The slideshow contains many moving images of the Red Cross at work. On the same page as the slideshow, there are tabs to access other useful information. For example, visitors can learn how to donate additional funds, how to give blood, how to help beyond donating money, and how to find assistance. The page also contains links to other useful, disaster-related information such as tips for returning home after a disaster and how to download an app to assist with future hurricane preparedness.

The Red Cross giving and thank-you process is effective for a number of reasons: