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Bad nonprofits: An unfortunate reality of charitable giving in America

I recently saw an article about “The WORST charities in America? These are the organizations giving over 90 PERCENT of donations to their fatcat executives – while ignoring their causes.” Anyone who’s worked with nonprofit organizations over time knows that, while most are reasonably honest and at least try to perform needed services, some aren’t.

Since 1993, we’re written grants for somewhere between 600 and 1,000 nonprofits across America. When a prospective nonprofit client calls for a fee quote, I can usually tell within a couple of minutes if the caller is a true believer (about 10%) or a more typical nonprofit. It’s much harder, however, to tell if the nonprofit is honorable, because nonprofit executives are skilled in the art of happy talk—a bit like Gríma Wormtongue in Lord of the Rings.

During initial calls, the prospective client is interviewing us, but to a degree we’re also interviewing them, since we try not to accept assignments from clients who are illegible applicants. Eligibility is almost always straightforward, but we also try to avoid scammers and scoundrels, which is much harder. A few times, callers have told us outright that they plan in effect to misuse the grant money.

Some of the red flags we look for:

  • The caller refers to their nonprofit as a “business” or “company,” or otherwise talk about their organizations as if they’re running a business that’s going to pay money out to its owners. Real nonprofit executives rarely use this sort of terminology, since nonprofits are not supposed to generate profit and there are no “shareholders” (excess revenue over expenses is usually termed “operating reserves” or “endowment”).
  • The Board of Directors has five or fewer members. While it’s possible to organize a 501(c)3 nonprofit will just a few Board members, they’re usually supposed to be “community-based,” so one expects to see a board of 7 – 11 members (odd numbers break tie votes). Tiny boards often enable the Executive Director to control the board by cherry picking compliant members. As we describe in the linked post, the Executive Director can run a nonprofit with this board structure like a small business without worrying about interference or a board coup.
  • The Executive Director admits that they own the nonprofit’s facility and lease it to the nonprofit. While not always technically illegal, this obviously raises self-dealing concerns.
  • The Executive Director brags about double or triple funders for the same client or service. For example, a substance abuse disorder (SUD) treatment provider might bill Medicaid and a specific grant or contract for the same service. This is a fairly common practice, but generally illegal and not discussed in polite company. Sometimes double-billing is the only way to provide effective services, but you’re not supposed to admit this to relative strangers.
  • The nonprofit is just straight up charging fees to its client for services rendered. I’m not talking about a Boys and Girls Club charging a modest, but waivable, fee to join a club basketball team, but rather something like a Board & Care home in effect stealing the client’s SSI payment and putting it towards “rent,” while providing little more that “three hots and a cot.” Some years ago, we had to terminate a retainer agreement with a nonprofit that was supposedly providing adoption counseling, but in reality was selling babies.

At least six Executive Directors of former S + A clients have gone to prison, usually federal, for various frauds and scams, though we only find this out when we happen to spot a news article or someone sends us the story, so the real number is likely higher. Let’s assume that under 1% of nonprofits are bad applies, but there are over 1.5 million American nonprofits, so even a 1% estimate results in tens of thousands of questionable nonprofits. Size isn’t necessarily an indication of honor, since our nonprofit clients range from mom & pop community groups to hospital chains with billions in annual revenue. The larger the organization, the greater the number of funders and potential for corruption. Why steal a small amount when you can steal a large amount?

While we attempt to identify potential scammers, it’s much harder to decide which nonprofits to donate one’s own money to. Some of my rules of thumb for personal philanthropy:

  • Don’t donate money to any organization that buys TV advertising.
  • Pick a type of charity that you’re familiar with. If you’ve had a relative struggling with addiction or homelessness, you’re likely already familiar with good local nonprofit providers.
  • Choose a charity with a local facility you can visit to meet the staff and possibly some of the clients. Mismatched office equipment or perfectly matched equipment doesn’t mean much, although if the equipment is super nice, ask how they got it. A scammer can fill their office with Goodwill rejects for show purposes, while a good nonprofit might have just received an in-kind donation from Steelcase of 20 new desks and chairs. If something doesn’t pass the smell test, ask.
  • Be wary of any organization that can “sell stuff out the back door.” This can range from re-selling donated computer gear that was supposed to go a after school program on eBay, or an animal rescue farm selling the occasional steer to McDonald’s.
  • If the donation is relatively large or your antenna has gone up, ask to see the nonprofit’s 990 Federal Tax Returns for the last few years, which among other things, should list salaries.
  • Consult Givewell.org
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Depressing NAEP math and reading assessments provide grant-writing opportunities for nimble nonprofits

Despite the media’s fascination with irrelevancies like the Kardashians and moment-by-moment interpersonal political drama, many outlets at least partially covered the disastrous recent National Center for Education Statistics (NCES) Report on the 2022 4th and 8th Grade Math and Reading Assessments.* The Report says:

Between January and March 2022, the NAEP mathematics and reading assessments were administered to representative samples of United States fourth- and eighth-grade students. [. . . ] Student academic achievement during the COVID-19 pandemic is compared to pre-pandemic performance on the 2019 NAEP assessments as well as to previous assessments dating back to 1990.

In 2022, the Report finds (the next six bullets come from the Report):

Mathematics

  • The average fourth-grade mathematics score decreased by five points and was lower than all previous assessment years going back to 2005; the average score was one point higher compared to 2003.
  • The average eighth-grade mathematics score decreased by eight points compared to 2019 and was lower than all previous assessment years going back to 2003.
  • Fourth- and eighth-grade mathematics scores declined for most states/jurisdictions as well as for most participating urban districts compared to 2019.

Reading

  • The average reading score at both fourth and eighth grade decreased by three points compared to 2019.
  • At fourth grade, the average reading score was lower than all previous assessment years going back to 2005 and was not significantly different in comparison to 1992.
  • At eighth grade, the average reading score was lower compared to all previous assessment years going back to 1998 and was not significantly different compared to 1992.
  • Fourth- and eighth-grade reading scores declined for most states/jurisdictions compared to 2019.

Take a few minutes to read these bullet points again. It’s widely recognized that, if a student can’t read at grade level in 3rd grade, the likelihood that they will not graduate from high school (and may become functionally illiterate adults) goes way up. America’s increasingly information-based economy demands workers with at least an understanding of high-school-level math. No one is going to become a coder without algebra skills. On the other hand, the Bureau of Labor Statistics (BLS) shows that many fast-growing jobs require few reading and math skills—some of those jobs being cooks, for example. And the fields with the most new jobs include “Home health and personal care aides” and ” Waiters and waitresses.” These sorts of jobs, however, usually don’t pay living wages (or barely pay them) and have very little career ladder potential.

Still, although the COVID-era learning losses are bad, they also imply opportunities for nonprofits interested in after-school and tutoring efforts. While there’s already lots of federal, state, local, and foundation funding for educational enrichment programming, there’ll likely be much grant funds for this purpose soon, as reality sinks in.

So, if your nonprofit works with at-risk youth** or wants to, the coming months will be a great time to seek funding for after school and/or tutoring programs. For example, the state of Arizona just announced a second year of funding for the OnTrack Summer Camp, which provides educational enrichment for over 70,000 school-age kids. The OnTrack Summer Camp website states: “With over $100 million from the American Rescue Plan Act ready to fund engaging Summer Camp experiences, school leaders, educators, and youth service providers like you can apply for AZ OnTrack funding so parents in your community have a trusted place to send their students for up to 8 weeks of educational opportunities.” Translated into English, this means Arizona nonprofits can apply for grants to provide these services.

These kind of RFP opportunities will be popping up all over America soon, not just Arizona. Some of the money will come from long-standing federal pass-through to states programs like 21st Century Community Learning Centers (21st CCLC) Program and the Title I Supplemental Educational Services (SES) Program, while other funding will come from COVID-era programs like ARP. Expect some new programs, too. Make sure your agency gets on the mailing/email lists for your state department of education, municipality, and school district—and start knocking on community foundation doors. The last time there was a flood of money into educational support programs was during the Clinton era, and the early days of the George W. Bush Administrations, which overlap almost perfectly with the 30 year timeframe of educational stagnation highlighted by the NAEP report.


* The “media” is also a machine for responding to reader incentives, so if articles about banal interpersonal dramas do well, the media produces more of them. Look in the mirror, and see if that the enemy is there. This is also true of voting, by the way.

** The current politically correct phrase for “at-risk youth” is now “opportunity youth,” if you like that euphemism better.

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Nonprofit boards of directors usually exist to be controlled by the organization’s executive director

At Cold Takes, Holden Karnofsky finds that “Nonprofit boards are weird” because there are usually too many people on them, the executive directors often control the boards rather than vice versa, and the board is often ornamental rather than practical. He thinks some of the main causes of nonprofit board weirdness are “Great power, low engagement, unclear responsibility, no accountability,” and he ends by saying: “The board is the only body at a nonprofit that can hold the CEO accountable to accomplishing the mission. I broadly feel like most nonprofit boards just aren’t very well-suited to this duty, or necessarily to much of anything.”

Loyal GWC readers will be unsurprised to know we have some opinions: many, if not most, the many nonprofits we work for only operate through the will of a single person (usually the executive director) or a small number of people, and this can remain true even in nonprofits with eight-figure budgets. Large nonprofits start small and grow over time, and boards are often accustomed to being passive and controlled by the executive director. Change is hard and, if an executive director controls an organization and its board, she or he is going to want to select board members who can be controlled. An external funder might be able to change this dynamic with enough cash. But most nonprofits never get above seven-figure budgets, or maybe low-eight-figure budgets, so boards remain pretty parochial. Size matters, as it does in so many things; tech startups don’t have strong boards either, because startups only have a small number of people working at or in them. Large, old companies tend to have much stronger boards. Small- and medium-sized nonprofits are similar to tech startups: the budgets and stakes aren’t big enough to generate real boards, and charismatic or effective founders often rule even when the size of the organization has increased.

The more people there are on a board, the less likely it is to do anything, thus leaving the executive director to run the show. So a founder or executive director who wants to stay in control will often want a large, amorphous board that is likely to do what the executive director says. Speaking of “running the show,” the board is often for show. Yes, the same may be true of many for-profit businesses, but the degree is much higher at nonprofits. Often, the board is there for signaling purposes, not for operations or excellence. Nonprofits are more like businesses than most people realize.

So, as in many things in human life, there is the nominal, stated function, and the actual function (see also: The Elephant in the Brain by Robin Hanson and Kevin Simler). Board members are often cultivated for their ability to donate, not govern—or, sometimes, their ability to provide political cover. Volunteers are similar, although we’d never be daft or uncouth enough to say this sort of thing in a proposal. In a proposal, the nonprofit is always noble, the board is always strong and powerful, the volunteers are always earnestly sought, and the mission comes first.

In reality, humans are what humans are. In the Federalist Papers, James Madison famously noted that “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.” Most nonprofit workers adopt the pose of being selfless and angelic. Some are! Maybe you’re one. Most, however, are mere mortals, with the usual dollops of self-interest, hypocrisy, self-deception, and so on.

You can see a lot of hypocrisy that’s uncritically accepted by a lot of organizations, including nonprofits. Exclusionary higher education is a particular notable example, given the soaring rhetoric of “inclusion” spouted by some people involved with higher ed, versus the reality of those same schools seeking to reject as many applicants as possible. Princeton University’s president, Chris Eisgruber, has, for example, blathered extensively about the school’s efforts to “combat systemic racism.” Princeton has a $37 billion endowment. The school’s undergrad acceptance rate is 5.6% and it charges a sticker price of $73,000 a year (yes, the school does accept a handful of token low-income students every year, but that the school’s overall demographics reflect its target: the wealthy). Does that sound like a school devoted to combating systemic racism to you? How can people make these kinds of arguments with a straight face? Colleges and universities are run largely for the benefit of their administrators. The other exclusionary schools are doing the same things, as are their private-school feeders, despite their vigorous marketing to the contrary.

Regarding the above paragraph, let me be clear: describing how something is, is not the same thing as approving of it.

Returning to nonprofit boards, I knew a guy who, over close to two decades, built a large nonprofit in Southern California—until his board ousted him. He’d been stealing money for many years, and probably should’ve gone to jail, but I think he was surprised to find the board finally wake up and do something. He was used to a board that would do his bidding, but his organization eventually got too big and too well-known for him to control the board. And his behavior was too repugnant. As with the example of hypocritical universities, I don’t approve of what he did, but I do note it.

As with all generalizations, there are exceptions to the principles articulated above. But the generalizations exist because they describe what’s happening on the ground, as opposed to what’s happening in the hot air and press releases many organizations produce.

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Unexpected consequences of MacKenzie Scott’s big donations to housing nonprofits like Habitat for Humanity

You might’ve read that MacKenzie Scott, Amazon founder Jeff Bezos’ ex-wife, is making huge donations to some nonprofit organizations, including donating $436 million to Habitat for Humanity. Relative to buying a giant yacht, or yet another Manhattan aerie, or giving money to universities so wealthy that they can’t spend the endowments they have and are so bureaucratic that they can’t support their own researchers during a pandemic, that’s a great thing to do. This isn’t a “you suck” post, because she doesn’t and I like her unusual approach to philanthropy. But there are two notable undercurrents that the lightly edited press releases don’t cover—likely because journalists know little about how nonprofits work or the American housing market—one is the distortion effect on many competing local nonprofits, and the other is the challenge of pouring more money into a constrained, near-zero-sum system.

Regarding the first point, local grant and human services systems will probably be distorted by unprecedentedly large donations to a particular nonprofit like Habitat. While national nonprofits like Habitat do some nationwide work, most of their activities are conducted by local affiliates, which are usually nominally independent nonprofits. When you see a media story about a new Habitat development in Worcester, MA, (I made this example up) a local affiliate is sponsoring the project. Local affiliates of national nonprofits like Habitat are required to conform to certain standards set by the national entity, but essentially do their own thing. A few years ago we worked for a local Habitat affiliate in a big East Coast city. As we worked on the project, we were startled to learn there were actually two Habitat affiliates in the same city: each carved out its own turf, and they even engaged in legal and public relations battles with each other! Many local nonprofits compete with on another for donations, grants, volunteers, and the like, even if they are playing for same team. So, it’s possible some of Scott’s Habitat donation will go to one affiliate, but not the other, in the same city.

A sudden huge donation from Scott to a national nonprofit that in turn sends a big bag of money to a particular local nonprofit, like the imagined Worcester Habitat, might create a toxic mixture of envy and disdain among other local nonprofits, much like a large inheritance or a lotto win often generates resentment among the people around the windfall recipient. The local Habitat affiliate is going to find many other local nonprofits attempting to attach themselves to any project it undertakes, in an effort to become subcontractors on that project or otherwise share in the largess. Since Habitat has the big money, other nonprofits will work overtime to get a piece of that that money. Nonprofits that realize they’re going to be outside the golden circle might quit collaborating and, in some cases, try to sabotage the lucky local Habitat. Letters of support will dry up, which won’t be a short-term problem but may become a long-term one; although “collaboration” among nonprofits is often silly, funders like to imagine it’s happening. Many don’t want to acknowledge that nonprofits compete with each other like businesses to a greater extent than most people realize—though sophisticated GWC readers already know this, either from personal experience or reading us. Another aspect is the the suddenly well-endowed local Habitat affiliate will be able to offer much higher salaries that their competitors and will poach local talent.

We saw this blowback effect happen in spectacular fashion a few years ago to one of our clients in a mid-size Midwestern city. Many nonprofits and even public agencies will become extremely unhappy when one of their peer organizations succeeds wildly. One year, at least half a dozen proposals we wrote for this otherwise ordinary nonprofit client got funded. His organization got millions of dollars in grants, which represented a huge amount of money in his low-income, high-risk community. Every other nonprofit CEO knew about his organization’s success. Superficially, all the players in our client’s service area congratulated our client, but our client, unfortunately, began to believe in his own greatness. Because he did, the quality and quantity of his interest in future grant-writing efforts declined.

Simultaneously, many local collaborators became less eager to help him. Organizations that used to provide letters, as he did for them, stopped being able to provide letters, albeit for innocuous reasons (“staffing changes,” “priority shifts:” those sorts of things). His ability to execute his organization’s mission became compromised by intransigence from the city and from other local nonprofits, all of whom were envious. These factors led to peril for our client’s organization, which eventually went under altogether; by the time he realized the danger, he was already on the deck of his sinking nonprofit ship. He should have handed out more subcontracts and acted with greater humility, but he did not. Will Habitat avoid his fate? We shall see. This is not a new tale, as Greek Tragedies, Shakespeare, movies, and politics are filled with such tales of hubris.

The second point involves housing policy itself, a topic we’ve dealt with before regarding Los Angeles’s Prop HHH initiative. Housing constraints lowered aggregate US growth by 36 percent from 1964 to 2009—an enormous amount most people don’t appreciate (imagine your organization’s budget being 36 percent larger, and your paycheck having 36 percent more dollars in it). Numerous factors impede the construction of affordable housing: parking minimums, improper building lot setbacks, height limits, neighborhood reviews, and more. Supply restrictions are everywhere, and few states or municipalities have gotten serious about alleviating them. If you add large amounts of additional money into a market that is supply-constrained, prices will go up in the face of constant demand, but more supply won’t come online. This results in numerous negative knock-on effects. There are some efforts afoot to change this dynamic—some are now calling for an “abundance agenda,” in contrast to the artificial scarcity mindset and policies now common in housing policy. In the meantime, however, we’re stuck with bottlenecks in the zoning and permitting process, which impede housing developers of all sorts—including Habitat. On top of those bottlenecks, inflation and supply chain problems have kicked up in the last few months, such that even if states begin enacting an abundance agenda, builders are still behind because of a raw-materials and skilled labor deficits. We’re constricting our population itself, as people have fewer children because so much of their money is going into housing costs.

Habitat for Humanity is likely to suffer worse than than for-profit builders. Habitat doesn’t advertise this, but they take forever to build housing units, particularly relative to commercial builders like Lennar (Lennar built 60,000 units in 2021) or Toll Brothers. While merchant builders can churn out single family homes in four to six months, it can take Habitat up to two years to finish a comparable house. I looked at the 2021 Habitat National Annual Report and IRS 990 Form, which obfuscate results with lots of happy talk, but I couldn’t find a clear statement of how many units were actually finished in 2021. Draw your own conclusions. Although Habitat hires subcontractors for the skilled trades that are required for home building, they nominally rely on volunteer labor and the “sweat equity” of buyers. As far as I can tell, Habitat mostly builds single-family units, rather than multi-family, both because those units are easier to build and provide easier roles for volunteers and homeowners, as well as making for better photo ops. But we really need more missing middle housing, rather than more single-unit one-offs in the exurbs. Everyone in the business knows how Habitat works, but don’t expect to see it in the media which has been in love with Habitat since Jimmy Carter picked up a hammer 40 years ago.

The biggest problem in American housing policy isn’t “lack of money” per se: even many nonprofits can find some amount of HUD, state, local, or foundation funding to build affordable housing. The biggest problem is the regulatory regime, which makes building new housing excruciatingly expensive, time consuming, and difficult. Until we improve the regulatory regime, we’re not going to do much to make a real dent in the housing affordability problem (housing can’t both be cheap for end users and a “good investment,” which is one of the many reasons American housing policy is incoherent).

Housing affordability is the income-related issue for our age. If someone is concerned about “income inequality” but doesn’t have “housing abundance” at the top of their agenda, are they virtue signaling, or serious?

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More networking, less working: DHHS’s “No Wrong Door Community Infrastructure Grants” RFP

The Administration for Community Living just issued an RFP for what appears to be a new grant program: No Wrong Door Community Infrastructure Grants, which offers grants “to support the development and enhancement of Network Lead Entities (NLEs) which are providing key access functions within a community such as coordination of information and referral, screening, care coordination, care transitions, eligibility and enrollment, and person centered planning.” If your eyes glaze over and you’ve quit reading already, I understand—all those verbs are abstract, and none say something like “construct new housing” or “offer opioid treatment.” They’re all process objectives and no outcome objectives; applicants don’t need to show or pretend to show that 70% of participants held a job six months after the end of project participation.

But if you’re a wily nonprofit executive director, you’re probably stroking your chin and thinking about whether you can round up a herd of partners to apply. No Wrong Door is mostly of interest because it appears to be a “walkin’ around money” program: applicants spend time “networking” and “building networks,” which usually means taking people out to lunch, holding catered meetings, strolling into other organizations with boxes of donuts, hiring new staff people (who can ideally do some direct service delivery as well, but quietly), and so on. At the end of the project, there’ll be a report describing how amazingly successful all that networking has been, and how the network will strengthen the community’s capacity to do all kinds of marvelous and wonderful things in the future, none of which are measurable. When the funding stops, ideally the staff will be trained to do some other useful stuff for the organization that hired it. That’s why this is walkin’ around money for nimble nonprofits that understand the word salad from the RFP quoted in the first paragraph.

A lot of organizations are really sustained with this kind of “glue” funding, which plugs other revenue gaps and allows it to operate more effectively than it would otherwise. Grants like No Wrong Door help pay for services to people whose reimbursements cover 85% of the costs—not 100%. Don’t be fooled by the No Wrong Door description. If you’re a nonprofit, and you can get some letters of support from the usual suspects in your service area, this is the kind of grant that’s easy to overlook but can be surprisingly valuable.

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Grant writing in another time of civil disturbances

Once again, I find myself writing grant proposals during a time of tragic civil disturbances across America.* My entire life and career have been shadowed by such events. I came of age in the 1960s, a time of extreme social unrest, both race-related—like the 1965 Watts Rebellion—as well as often violent anti-Vietnam protests. I went to my first civil rights march in Paducah, KY in 1965 (my older brother was working for the then-new Job Corps there) and participated in many anti-war marches while in college at the University of Minnesota. As I wrote about in my first GWC post in 2007, “They Say a Fella Never Forgets His First Grant Proposal,” I got my grant writing start working as a community organizer in North Minneapolis in 1972. I grew up in North Minneapolis, when it was a Jewish, trending Black, ghetto, and the community was devastated by what were then called “race riots” in 1967 and 1968. In 1972, my job was to try to get some local businesses going again, as North Minneapolis hadn’t recovered—and, in many ways, it still hasn’t recovered.

In 1992, the genesis of what ultimately became Seliger + Associates was born out of the ashes of the civil disturbances following the Rodney King verdict. I happened to be visiting friends in the Hollywood Hills when the disturbances began, and we could see the fire burning across South LA and Koreatown that night from their deck. Based on my experiences over the years, I assumed that huge amounts of federal grant funds would follow soon, and that it might be a good time to ditch my career as as city-slug community development director and try setting up a grant writing business instead. I did just that in 1993 and discovered that there was indeed a market for good grant writing consultants. The timing was also propitious because the incipient Internet allowed us to work for people across the country in a way that wasn’t possible before it.

Flash forward: in 2014, I wrote a post about about grant writing and the Ferguson, MO civil disturbances in which I noted that grant money follows major incidences of civil unrest. The government only has two real tools to use in this situation: the stick of yet more policing (the problems of which are readily observable in the news) or the carrot of grant funds to help the affected communities recover.

As I write this, civil unrest is unfolding from Minneapolis to NYC, LA, and much of the rest of America, following the obvious, videotaped murder of George Floyd.** These horrific images are juxtaposed with the inspiring images of the first manned SpaceX/NASA launch. It’s very troubling to realize that, while much has changed since I was a high school freshman in 1965, some things haven’t; then, I was listening to Barry McGuire’s huge hit single, “Eve of Destruction“: “You may leave here for four days in space, but when you return it’s the same old place.” The reference is to the Gemini 4 flight and civil rights marches/violence of the era. Feels like we’re poised on another Eve of Destruction.

Unlike Ferguson in 2014 and LA in 1992, today’s situation is more like the huge unrest that followed MLK’s assassination in 1968 in that it has radiated out to more than 40 cities and, after five nights of burning and looting, shows no sign of abating. This is unfolding after months of COVID-19 lockdowns, and those most harmed by both the virus and the lockdowns have been low-income communities of color. I’ve worked in and around these communities for over four decades: when the lockdowns began, I thought and discussed privately (but not in a post) that this could lead to great civil unrest. I wasn’t talking about the gun guys marching in front of state capitols, but rather what erupted last week in Minneapolis. While I couldn’t predict the spark, I suspected civil unrest would follow. Force millions of low-income workers to stay at home in overcrowded housing, while their jobs and incomes evaporate, and this outcome should not be surprising. If it wasn’t George Floyd, it would have been something else. I read James Baldwin’s The Fire Next Time when I was a teen and it rings true today: “God gave Noah the rainbow sign / No more water but fire next time.”

The combination of civil unrest and tens of thousands of small businesses closing in places like South Minneapolis and Flatbush in Brooklyn will be devastating for years and possibly decades to come. As noted in a recent New York Times article, “According to one recent poll, nearly 40 percent of adults living in cities have begun to consider moving to less populated areas because of the outbreak. In New York, where I live, roughly 5 percent of the population — or about 420,000 people — have already left.” For the near term, gentrification and densification of cities, big and small, is over.

Still, the twin scourges of COVID-19 and civil unrest will present great grant opportunities for nimble nonprofits, cities, and other public agencies. The three COVID-19 relief bills passed so far are raining over $2 trillion on the country, much in the form of grants, with a fourth bill likely to pass soon. We’ve been writing COVID-19 proposals furiously for two months and know that at least $2.4 million in COVID-related grants we’ve written has already been funded. The inevitable huge increase in available federal grant money, due to the civil unrest, will soon follow. If you run a nonprofit, city department, or school district, once you’re done mourning for George Floyd and recovered from the shock of COVID-19, be ready. The grant waves this time will likely center on primary health care, behavioral health services, workforce development, and economic development. It’s not inconceivable that we’ll eventually address the underlying pathologies that have bedeviled American history since before the country’s founding. But I’ve been hoping for that for decades and it remains elusive.


* For purposes of this post, I’m focusing on the negative aspects of what’s happening, not the legitimate underlying protests against police brutality. I’ll leave the details of those issues to others, while noting that police unions create systemic challenges around dealing with police misconduct; the Supreme Court’s doctrine of qualified immunity is the other challenge. The date stamps on both those links are from years ago; knowledge about these problems has circulated among intellectuals and policy nerds for years.

** On a personal note, I took my Golden Retriever to doggy day care Sunday morning, which I do most Sundays. The store, Posh Pet, is just off the part of Melrose Avenue in West Hollywood that was trashed Saturday night. When I got there, I found this sign in the window: “We have dogs here. Please don’t break window.” The glass door was smashed and the business completely looted. No idea what happened to the dogs being boarded. This small business was barely hanging on, due to COVID-19. Now, it may never reopen.

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COVID-19, donations, and foundation and government grant proposals

We’ve been in business since 1994 and have written proposals during several economic shocks; in the Great Recession in 2009, donations to nonprofits began drying up as soon as the stock market began diving (we wrote as much at the time). A decade later, COVID-19 is sending the economy into what could be a second Great Depression. While hopefully the crash will be v-shaped, there’s no way to know when a rebound will start, since much depends on the public’s response and on the success or failure of the drugs in clinical trials.

Nonprofits, and especially human services providers, are being torn between higher service demands and evaporating revenue. Particularly hard hit are Federally Qualified Health Centers (FQHCs); about 1,400 FQHCs deliver front line healthcare to Medicaid and other low-income patients. Total patient population estimates differ, but FQHCs may serve as many as 30 million people. FQHC CEOs have been telling us they have very limited capacity for treating infectious disease patients (no separate waiting rooms, scarce protective gear, etc.) and face staffing shortages, because clinicians staying home to watch their now out-of-school children. Some clinicians are pregnant and some are sick themselves. Inadequate testing infrastructure has been well-covered in the media by now.

Some nonprofits, like Head Start and other early childhood education providers or behavioral health service providers, face the same grim reality, as their centers are closed and third-party payments become delayed or non-existent. For other nonprofits that depend on donations, fundraisers, and/or membership dues (e.g., Boys and Girls Clubs, YMCAs, museums, performing arts, etc.) are likely even worse off. John Macintosh just wrote in the NYT that COVID-19 could mean extinction for many nonprofits. But this extinction can be averted—and will be by nimble nonprofits.

For the short term, nonprofits should stop or reduce screaming empty bowl-in-hand emails and mailers for donations. With the stock market in free-fall and unemployment probably already 10% and on a path to 20% *barring a sudden drug trial that works), seeking donations is delusional. When businesses, small and large, suddenly have zero revenue, millions are being laid off, and 401Ks being decimated, donations will quickly decline, no matter how good the cause or the relationship with the donor. Also, there’ll be no galas, art auctions, and other fundraisers for who knows how long.

The only real option for most nonprofits is to quickly ramp-up grant seeking and grant writing. As has been the case in previous economic crises, the federal response will likely be to dump money into grant programs and issue RFPs. In addition to already authorized FY ’20 federal funding for grant programs, by this week Congress will have passed three huge COVID-19 stimulus bills totally close to $2 trillion—dwarfing the 2009 Stimulus Bill. These bills will have a lot extra money for existing programs, as well as for a flock of new grant programs.* We saw this in 2009, when we wrote proposals for all kinds of oddball programs and projects, and this will unfold again with astonishing speed. Federal agencies will approve grant proposals much faster than usual—like most Americans, the federal bureaucracy rises from its normal stupor to meet extreme challenges. But RFPs are likely to have very short deadlines. Nonprofits that start preparing for intense grant writing will be more likely to succeed.

Most foundations, meanwhile, respond to crises like this by quickly increasing the amount of funds available from their endowments and speeding up their normal approval processes, both to address issues related to the crisis, as well as to keep essential nonprofits operating. In addition to emergency operating support, foundations will be very interested in project concepts relating to primary care access, public health education and outreach, telehealth, and behavioral health. But this foundation response won’t last more than about six months. At some point, they’ll turn off the spigot, either because their endowments will have been depleted too much or the crisis will have passed.

Even nonprofit royalty, which usually don’t sully their hands will grant writing, unless the grants are wired, know that reality has changed.** You may have read, “Met Museum Prepares for $100 Million Loss and Closure Till July.” The author reports that the Met will be “fundraising from foundations and pursuing government grants.” If the Met is turning to grant writing, so should your nonprofit and the sooner the better.

Want to talk about how Seliger + Associates can help? Give us a call at 800.540.8906 ext.1. By the time you read this, your organization’s leadership will probably already be convening meetings about what to do next.


* Extraneous program authorizations in federal spending bills are common and referred to as “ornaments.”

** As Bob Dylan put it in Things Have Changed, “People are crazy and times have changed.”

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Nonprofit executive directors have to be paid market rate salaries

I was talking to a friend and mentioned that nonprofit executive directors routinely make six figures—and sometimes well into the six figures. My friend was outraged: Aren’t the executive directors working for charitable organizations? Shouldn’t they make less money?

Maybe he’s right in some virtue-filled alternative universe, but, in the real world, nonprofit executive directors have lots of responsibilities and need diverse skill sets. When you say “nonprofit” to most civilians, they imagine a relatively small organization like the local Boys and Girls Club or afternoon program for at-risk youth, usually run by a true believer executive director who only needs local knowledge and maybe some common sense (whatever that is). In reality, many nonprofits are large, with hundreds of highly trained and specialized staff delivering complex services. For example, a Federally Qualified Health Center (FQHC) might easily have an annual operating budget north of $50M, with tens of thousands of patients and hundreds of employees. In effect, larger FQHCs resemble small HMOs and provide about the same services, except for inpatient care. Large substance use disorder (SUD) treatment providers can be similarly large and complex. In both cases, the lives of the patients/clients literally depend on the quality of the services provided. So, executive director salaries mirror those of CEOs of for-profit health care providers and can easily be over $300K—which they should be, given the advanced degrees, years of experience, technical skills needed, along with the heavy responsibilities.

Many civilians also don’t understand how even simple human services are delivered: through good organizational skills and hard work. Some of the skills nonprofit executive directors increasingly need are not easily mastered:

  • Sufficient technological expertise to supervise IT staff, vendors, etc. Just about every enterprise today is also a tech business, whether we want it to be or not. At S + A, tech-related stuff probably accounts for about 25% of management time.
  • Managerial expertise (good management looks invisible when it’s done well and is all too visible when it’s done poorly) in both supervising the management team and line staff, as well as wrangling the Board of Directors. In a nonprofit, there are no “shareholders” and the Board sets policy, including hiring and firing the executive director. Over the years, we’ve discovered variations on the following nonprofit “coup” all too often: True believer sets up a new nonprofit and hand-picks the board; as grants and donations grow to support ever-expanding operations, the board begins to morph from true believers to professionals without a direct connect to the executive director (you can call them “competent experts” or “mercenaries” depending on how you want to shade the situation). Tensions mount, and the executive director is booted out of their own nonprofit, sometimes in a public and professionally humiliating way.
  • Ability to connect with diverse stakeholders. Many nonprofits mostly serve the poorest and most marginalized persons in our society, and ideally all staff in a given organization will be able to connect with and understand such persons. But executive directors must also frequently connect with and understand white-collar donors, funders, board members, etc.
  • Ability to get things done. We have all worked with people who are better at meetings than execution, or who seem not to really do much of anything, and that can’t be true of effective executive directors.
  • Ability to cultivate donor relationships.
  • Grant management expertise, including tracking funds, submitting timely and complete reports, and keeping the funder Program Officers happy.
  • Accounting expertise.

There are probably other skills, beyond these, which are just from me thinking about the problem domain at the moment—I’m not trying to be comprehensive here, but the point is that modern nonprofit executive directors need a wide range of skills and abilities that only rarely exist in a single individual. When a set of skills is rare, the market rate for it rises. Most nonprofits, with the exception of nonprofit hospital chains, aren’t as large as even mid-size corporations, but they have become large and complex enough that the solo charismatics of an untrained and inexperienced person usually aren’t sufficient to manage a staff of dozens or hundreds of people and to maintain complex service delivery systems.

Today, small sole-proprietor shops are much less common than small or large chain stores, and something similar and analogous is happening to nonprofits. You may not like that it’s happening, but it’s happening for many reasons. Similar things are happening in business as a whole, as Tyler Cowen describes in Big Business: A Love Letter to an American Anti-Hero—a book that nonprofit leaders should be reading, even if they’re not engaged in profit-taking and -distributing enterprises. Nonprofits are more like businesses than is commonly realized, although I’m sure most regular GWC readers get this.

Many people will take some pay cut to work in and around nonprofits, but few people will take a 50% pay cut, relative to the salaries in their industry. Somewhere between 5% and 50%, the ability to acquire and retain functional people drops off. Nonprofits are competing against other kinds of organizations for qualified people.

This is a bit like people who bemoan the lack of computer science and other qualified teachers: in most districts, teachers in high-demand subjects like computer science can’t be paid any more than teachers in lower-demand subjects, like art or PE. As a result, there are major shortages of computer science teachers, and, arguably, surpluses of teachers in areas like art. Unless computer science teachers can be paid something that approaches their market values, most qualified computer science teachers will go work for software companies instead of school districts. (Incidentally, I’ve thought about teaching high school at various points, but I haven’t, in part due to the income ceiling.)

Some callers have also argued that Seliger + Associates charges too much, and, while this is a fine view, when prospective clients tell us this we always respond the same way: they can hire us; they can hire someone else; they can write it themselves; or they can not submit the proposal. Each of these outcomes has costs and benefits, and any given organization should choose the best outcome for them. But when there hundreds of thousands or millions of grant dollars are on the line, as is frequently the case for proposals we write, we begin to look like a bargain by comparison, since our fees range between $5,000 and $15,000 for typical proposals, regardless of the grant amount being sought. Paying $8,000 to us to write a million-dollar grant is a very good cost versus potential benefit analysis. And, if we’re hired, the executive director frees up time that can be deployed to other tasks.

In terms of executive director salaries, it’s important to remember that a bunch of stakeholders must be satisfied, including Boards of Directors, donors, grant-making entities, and others. If donors become overly obsessed with how much an executive director (or other senior managers) makes, they may wind up with organizations that are less effective than donors who are less obsessed with that exact issue. Many grant-making entities want functional organizations above all else, and are more likely to make grants to organizations with better executive directors. In the real world, better usually included higher paid.

Right now, many high-quality nonprofit management professionals also face the same toxic mix of rising costs we all do—healthcare, college education (their own student loans and the likely future student loans of their kids), and housing. The latter is really important for nonprofits in places like NYC, NY, SF, and Seattle, where the cost of even a modest housing unit can easily exceed $1M. One way to help moderate salaries in the nonprofit and public agency world is to support comprehensive zoning reform that will lower the cost of housing by increasing supply. This has (finally) become a national political issue, because costs are so outrageous that make stakeholders and voters are finally realizing that something must be done. As housing costs rise, so does pressure on every part of the US economy. Consider the crazy numbers from “Housing Constraints and Spatial Misallocation,” by Chang-Tai Hsieh and Enrico Moretti:

In particular, we calculate that increasing housing supply in New York, San Jose, and San Francisco by relaxing land use restrictions to the level of the median US city would increase the growth rate of aggregate output by 36.3 percent. In this scenario, US GDP in 2009 would be 3.7 percent higher, which translates into an additional $3,685 in average annual earnings.

If just the Bay Area and NYC removed many arbitrary building restrictions, we’d all be making the equivalent of $3,600 more per year. If all cities relaxed arbitrary zoning, “US GDP in 2009 would be 8.9 percent higher under this counterfactual, which translates into an additional $8,775 in average wages for all workers.” Imagine how labor markets, including ones for nonprofit workers like teachers and executive directors, would change with almost $9,000 in implied boosted salaries! We can do this, but we’ve chosen not to as a society.

An executive director in a given market must often choose between being able to pay the high rent/purchase price or being able to stay in the nonprofit sector. Nonprofits that want to stay alive must pay those rates. You may disagree with the “have to” in the title of this post. If you think you can run a nonprofit and pay below-market rates, go ahead and do it.

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“How Jeff Bezos Turned Narrative into Amazon’s Competitive Advantage”

How Jeff Bezos Turned Narrative into Amazon’s Competitive Advantage” should be mandatory reading for anyone in nonprofit and public agencies, because narrative is probably more important for nonprofits than conventional businesses; conventional businesses can succeed by pointing to product-market fit, but nonprofits typically don’t have that metric. Nonprofits have to get their stories out in other ways than profit-loss statements or sales.

Bezos is Amazon’s chief writing evangelist, and his advocacy for the art of long-form writing as a motivational tool and idea-generation technique has been ordering how people think and work at Amazon for the last two decades—most importantly, in how the company creates new ideas, how it shares them, and how it gets support for them from the wider world.

New ideas often emerge from writing—virtually everyone who has ever written anything substantive understands this, yet it remains misunderstood among non-writers. Want to generate new ideas? Require writing. And no, “Powerpoint” does not count:

“The reason writing a good 4 page memo is harder than ‘writing’ a 20 page powerpoint is because the narrative structure of a good memo forces better thought and better understanding of what’s more important than what, and how things are related,” he writes, “Powerpoint-style presentations somehow give permission to gloss over ideas, flatten out any sense of relative importance, and ignore the interconnectedness of ideas.”

I’m not totally anti-Powerpoint—I have seen books about how to do it well—but Powerpoint does not substitute for narrative (in most cases). Most people doing Powerpoint have not read Edward Tufte or adequately thought through their rationale for choosing Powerpoint over some other communications genre, like the memo. The other day I did an online grant-writing training session for the state of California for 400 people, and the guy organizing it expected me to do a Powerpoint. I said that using a Powerpoint presentation to teach writing is largely useless (he seemed surprised). Instead, I did a screencast, using a text editor as my main window, in which I solicited project ideas and RFPs germane to the viewers. I picked a couple and began working through the major parts of a typical proposal, showing how I would construct an abstract using the 5Ws and H, and then how I would use those answers to begin fleshing out typical narrative sections in the proposal. Because it was screencast, participants can re-watch sections they find useful. I think having a text document and working with actual sentences is much closer to the real writing process than babbling on about a prepared set of slides with bullet points. The talk was less polished than it would have been if I’d prepared it in advance, but writing is inherently messy and I wanted to deliberately show its messiness. There is no way to avoid this messiness; it’s part of the writing process on a perceptual level. It seems linked to speech and to consciousness itself.

To return to the written narrative point, written narrative also allows the correct tension between individual creativity and group feedback, in a way that brainstorming sessions don’t, as the article explains. Most human endeavors involving group activity require some tension between the individual acting and thinking alone versus being part of a pair or larger group acting in concert. If you are always alone, you lose the advantage of another mind at work. If you are always in a group, you lack the solitude necessary for thinking and never get other people out of your head. Ideal environments typically include some “closed door” space and some “open door” serendipitous interaction. Written narrative usually allows for both.

Nonprofit and public agencies that can’t or won’t produce coherent written documents are not going to be as successful as those that do. They aren’t going to ensure key stakeholders understand their purpose and they’re not going to be able to execute as effectively. That’s not just true in grant writing terms; it’s true in organizational terms. Reading remains at present, the fastest way to transmit information. If you’re not hiring people who can produce good stuff for reading, you’re not effectively generating and using information within your organization.

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Philanthropy is not being disrupted by Silicon Valley

The Atlantic writes that “Silicon Valley Has Disrupted Philanthropy.” A lovely article, except for one minor issue: Silicon Valley has not “disrupted” philanthropy. The evidence presented for the article’s thesis is an anecdote from a Boys & Girls Club, “a 2016 report about Silicon Valley philanthropy written by two women who run a consulting firm that works with nonprofits and donors” (we could write similar reports), and this:

The Silicon Valley Children’s Fund, which also works with foster youth, has contracted with a marketing firm that will help it “speak in the language of business and metrics,” Melissa Johns, the organization’s executive vice president, told me.

There are a few other anecdotes, too, though these anecdotes don’t even rise to the level of “How to lie with statistics.” The author, Alana Semuels, is likely correct that some nonprofits have learned to adjust their proposals to use the language of data and metrics. She’s also correct that “rising housing prices in Silicon Valley mean increased need for local services, and more expensive operations for nonprofits, which have to pay staff more so they can afford to live in the area.” But the solution to that is zoning reform, not philanthropy, as anyone who is data- and knowledge-driven will soon discover.

Still, it’s possible that philanthropists will eventually adopt the tenets of effective altruism en masse. But I doubt it. Some reasons for my doubt can be seen in “Foundations and the Future,” a post in 2008 that was accurate but not especially prescient, because it points to features in human nature. In the ten year since I wrote that post, we’ve seen little substantive change in foundations. Other reasons can be seen in Robin Hanson and Kevin Simler’s book, The Elephant in the Brain: Hidden Motives in Everyday Life; the chapter on charity explains how most donors are most interested in feeling good about themselves and raising their status in the eyes of their peers. Most donors don’t care deeply about effectiveness (although they do care about appearing to care about effectiveness), and caring deeply about effectiveness often invites blowback about donors being hard-hearted scrooges instead of generous benefactors. What do you mean, you want to audit all of our program for effectiveness? You don’t just TRUST us? No one else wants to do this. Fine, if you must, you can, but I find it improper that you are so skeptical of our good works… you can see the youth we’re helping! They’re right here! Look into their eyes! You can tell me all you want about data, but I know better.

The real world of nonprofits and motivation is quite different than the proposal world. It’s also easier, far easier, to write about doing comprehensive cost-benefit analyses than it is to actually do epistemically rigorous cost-benefit analyses. I know in part because I’ve written far more descriptions of cost-benefit analyses than have actually been performed in the real world.

It’s not impossible to do real evaluations of grant-funded programs—it’s just difficult and time-consuming. And when I say “difficult,” I don’t just mean “difficult because it costs a lot” or “difficult because it’s hard to implement.” I mean conceptually difficult. Very few people deeply understand statistics sufficiently to design a true evaluation program. Statistics and regression analyses are so hard to get right that there’s a crisis going on in psychology and other social sciences over replication—that is, many supposed “findings” in the social sciences are probably not true or are due to random chance. If you’d like to read about it, just Google the phrase “replication crisis,” and you’ll find an infinite amount of description and commentary.

Medicine has seen similar problems, and John Ioannidis is the figure most associated with foregrounding the problem. In medicine, the stakes are particularly high, and even there, many supposed studies defy replication.

The point is that if most accomplished professors, who have a lot at stake in terms of getting the data right, do not or cannot design or implement valid, rigorous studies, it’s unlikely that many nonprofits will, either. And, on top of that, it’s unlikely that most donors actually want such studies (though they will say they want such studies, as noted previously).

To be sure, lest my apparent cynicism overwhelm, I applaud the goal of more rigorously examining the efficaciousness of foundation-funded programs. I think effective altruism is a useful movement and I’d like to see more people adopt it. But I’m also aware that the means used to measure success are quickly going to be gamed by nonprofits, if they aren’t already. If a nonprofit hired me to write a whiz-bang report about how Numbers and Statistics show their program is a raging success, I’d take the job. I know the buzzwords and know just how to structure such a document. And if I didn’t do it, someone else would. A funder would need strong separation between the implementing organization, the evaluating organization, and the participants in order to have any shot at really understanding what a grant-funded program is likely to do.

It’s much easier for both nonprofits and funders to conduct cargo-cult evaluations, declare the program a success, and move on, than it is to conduct a real, thorough evaluation that is likely to be muddled, show inconclusive results, and reduce the good feelings of all involved.* Feynman wrote “Cargo-Cult Science” in 1974, long before The Elephant in the Brain, but I think he would have appreciated Simler and Hanson’s book. He knew, intuitively, that we’re good at lying to ourselves—especially when there’s money on the line.


* How many romantic relationships would survive radical honesty and periodic assessments by disinterested, outside third-parties? What should we learn from the fact that there is so little demand for such a service?