The Download

The Download

September 19, 2016

Monday, September 19, 2016

Political Spotlight on Foundations

In the heat of the presidential campaign, both major candidates’ foundations and their activities have come under scrutiny. A tale of two foundations, the allegations against the Clinton Foundation as a public charity, and now the investigation launched into the Trump Foundation as a prviate foundation have swirled controversy and proved for political fodder.

No matter which side of the aisle, the media coverage of these philanthropic organizations brings foundations into the very public spotlight, becoming the focus of dinner table conversations for the general public, who may have limited knowledge of the workings and impact of foundations. The focus on their activities and fundraising may lead to more questions from the general public. Both Clinton and Trump’s foundations have been questioned for potential self-dealing and conflicts of interest.

Most recently the Trump Foundation has become a focus after an investigation was announced last week. The IRS fined the Trump Foundation earlier this month for making a political donation to a group supporting the campaign of Florida’s attorney general in 2013. The foundation said the contribution “was made in error due to a case of mistaken identity involving organizations with the same name,” saying they learned of the mistake in the media.

The allegations about the Trump Foundation bring into mind that self-dealing is listed as number one in the Council of Foundation's resource, the Top 10 Ways Family Foundations Get Into Trouble.

For the Clinton Foundation, the criticism stems from concerns that donors - specifically foreign donors - may have been given special access to Hillary Clinton while she served as secretary of state, “pay- for-play" situation. A Bloomberg poll this summer showed that 72 percent of voters said they were bothered that the Clinton Foundation received donations from foreign countries while Hillary Clinton was secretary of state. While Clinton did not serve on the foundation's board of directors during her time as secretary of state, or previously as senator, the issue or perceived conflict of interest has been raised. The Clinton Foundation has published a FAQ section, noting they have more than 300,000 donors around the world. 

While the IRS requires that public charities have a board-approved conflict of interest policy, best practices for private foundations also recommend a board-approved conflict of interest policy. Even if a family member of a trustee does not serve on the board but has a connection to a potential, or actual grantee, such relationships should be disclosed. 

Beyond the political discourse, the takeaway here is the continued call and need for transparency, as those outside of the social sector may feel like politics has pulled the curtain back and shone a spotlight on philanthropy.

What you can do to promote transparency via "Opening Up: Demystyifing Funder Transparency":

  • Encourage staff to tweet, Facebook, blog, etc.
  • Include a searchable online database of grants the foundation has made.
  • Look for ways to showcase lengthy reports using infographics and videos that are easy for the public to access.
  • If you ask grantees for feedback, share their responses on your website.
  • Find one internal document that would be useful to share with the public, such as a program officer's guide to making grants.

Learn more about increasing transparency from resources in CMF’s Knowledge Center.







Predatory Payday Lending

Proposed rules are on the table for payday lending reform. What’s payday lending and how is it affecting some of our lower income communities? Payday loans are short-term loans intended to get recipients through until the next payday, but they usually carry interest from 300 to 800 percent. These loans are often targeted toward lower-income populations; payday lending storefronts are common sights in low-income neighborhoods (more so than banks), and nationwide the number of storefronts totals approximately 15,766 across 36 states – more than the number of McDonald’s restaurants.

Many states have outright bans on payday lending, but Michigan is not one of them. Aaron Dorfman, president and CEO of the National Committee for Responsive Philanthropy calls payday lending, “legalized robbery.” The payday lending industry claims it provides credit to those who may not otherwise have easy access to it. The proposed reforms are targeted at protecting lower income borrowers from what many are considering to be predatory financial practices.

The recommendations from the Consumer Financial Protection Bureau (CFPB) include:

  • Full Payment Test – payday lenders will be required to determine prospective borrowers’ abilities to pay without having to borrow again and go without other basic needs like rent and food.
  • Limiting, or requiring additional justification of, additional short-term loans – If a borrower rolled over a previous short-term loan, the proposal would make it more difficult for payday lenders to push another similar loan onto the borrower in order to repay the initial loan.
  • Written notice of withdrawals – To collect payment, payday lenders can withdraw from borrowers’ checking accounts without notice and regardless of whether or not there are funds available, but the proposal would change that.

Many funders have strategies that involve helping families access credit and sound financial products so they can live more financially secure lives, including CMF members JP Morgan Chase and Co. and the Ford Foundation.

The Ford Foundation addresses financial justice in its “Inclusive Economies” work and has devoted approximately $11.5 million since 2010 to organizations that advocate consumer protection for low-income people.

JP Morgan Chase and Co. has sought to deal with the root of the payday lending problem by addressing financial security to avoid the need for payday loans. They have promoted alternatives to payday lending, such as Financial Solutions Lab, which identifies organizations that help people who may rely on payday loans.

Foundations can support payday lending reform through initiatives such as these, but also through public policy. The public can comment on the proposed payday lending reform online until October 7.






Tiny Houses, Bigger Impact?

The tiny house movement, initially inspired by those who wanted to downsize, live debt free and off the grid, has gained traction and inspired programs around the country to help others. Cities such as Portland, Oregon have explored the tiny home concept to get homeless people off the street and offer low-income residents a safe, clean place to live.

Now a first of its kind program in Michigan is using tiny houses to make a difference in the lives of low-income families and improve neighborhoods. Detroit will soon have its first community of the permanent style of tiny houses: The Cass Tiny Homes project, in the neighborhood of Elmhurst and the Lodge, is beginning construction this fall with 25 initial homes. The homes will all be rent-to-own over a seven-year period and rent will be based on the home’s square footage. A 300-square-foot home will cost $300 a month, which is a huge savings for many low income people who are in need of a safe place to call home.

Earlier this month, Cass Community Social Services and its supporters debuted a 300-square-foot tiny house, which is serving as the model for the community. The organization hopes to build more if this pilot goes well—and there is plenty of room for it, as there are at least 300 vacant lots within a mile of the site.

The project is estimated to cost $1.5 million, $700,000 of which is funded in part by the Ford Motor Company Fund, a CMF member, and the RNR Foundation.

Nonprofit Quarterly has written a few articles on the subject, and the consensus seems to be that the nonprofit community is supporting the tiny house efforts that are not portable, but permanent, because such tiny home communities can grow into full neighborhoods where low-income people can thrive.

Tiny house initiatives have had some problems in other states, including California and Oregon, for issues such as not being code compliant and not meeting minimum building size requirements. Some of the homes in other areas do not have plumbing or electricity—Cass Tiny Homes will be fully operational.

Jim Vella, president of the Ford Motor Company Fund, called the tiny home project a “game changer and transformational” and others hope that it will serve as a model and learning experience for Detroit, Michigan, and beyond.







Manistee County Community Foundation receives single largest gift in its history

The Manistee County Community Foundation (MCCF) announced it has boosted its unrestricted endowment by $1 million after matching a $500,000 challenge gift from an anonymous donor, the largest single gift in the foundation’s history. Once the challenge was met, the donor offered to continue matching gifts up to an additional $500,000 through the end of the year; if the match is met the endowment would generate an additional $80,000 in new grant funding to support area needs.

“We are thrilled that this generous donor has now doubled the match so we can serve Manistee County at a new level,” Laura Heintzelman, the community foundation’s executive director said. “The potential impact on our community is truly limitless if we can meet this challenge, and we urge all those who love Manistee County to support this important opportunity with a donation that will double in value. There has never been a better time to give to MCCF.”

Donations can be made to the Limitless Fund to support the match challenge.

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