I Heard it With My Own Ears

A follow-up to Katrina Part Deux

Here’s what you must know from previous posts so that you really understand what I am beefed about:

1. 1. Since 1968, the National Heritage Foundation has been encouraging Charitable Entrepreneurship. People who want to make the world a better place have been encouraged to set up a “foundation at NHF”, make donations from their own pockets, obtain funds from friends and neighbors, and from other fund raising events, then make suggestions to the final authority at NHF for the expenditure of those funds – pay reasonable compensation for salaries, fees and expenses – and help get the job done.
   
   
   
2. In 2006 – with 14 pages of laws about Donor Advised Funds in a 400 page Pension Reform Act – Congress prohibited a Donor Advised Fund from making a payment to ANYONE for either compensation or expense reimbursement. But still left it okay for compensation and expenses to be paid from a public or private foundation.
   
   
3. The day after September 11, 2001 we had – from our thousands of foundation accounts – placed over $2,000,000 in the hands of relief efforts. The same was true in the Hurricane Season of 2005, when Katrina and Rita hit Louisiana and Texas. We had many donors who picked up stakes and moved to the area to begin the clean-up and help the hard-hit residents.
   
   
4. Then August 6, 2006 the government changed the law (see #2 above) and Donor Advised Funds could no longer pay personal compensation or even expenses for the work they did.
   
   
5. My comments in Katrina Part Deux were, “What if we have another tragedy and Donor Advised Funds are no longer able to help directly? What if they can help only indirectly by giving funds to other public and private charities?” I am reminded of what Jonathan Grissom said to the CNN Reporter, when the reporter asked about the $5 million he donated to his own private foundation. He replied, “My wife and I wanted to roll up our sleeves and get our hands dirty, and help to rebuild our town.” Now they can’t – through a Donor Advised Fund.

An essential part of charitable entrepreneurship has been blocked by Congress! The NHF concept, then, grew to include:

• (1) The National Heritage Foundation, Inc. (NHF) is a Donor Advised Fund, making grants to domestic and abroad to IRS-approved (at home) or NHF-approved (abroad) charitable activities.
  
  
• (2) It includes the non-donor advised fund called Congressional District Programs, Inc. (CDP) where a “field of interest” program is initiated, managed with our supervision by a non-donor, but still unable to make any payment to a donor.
  
  
• (3) And also Charity Admin Inc. (CAI) which can set up and administer an independent public or private charity for a client individual or company.
  

So my point in “Katrina Part Deux” was that – with this Pension Reform Act on the books, and with our being unable from a Donor Advised Fund to pour resources directly into an emergency area – another emergency tragedy like Katrina would be hampered.

And then a tragedy happened. Early on a foggy morning November 8, 2007 in San Francisco Bay, I was attending an InsMark symposium conference. I was out for a jog near the waterfront – I SWEAR I HEARD IT WITH MY OWN EARS a huge freight ship hit a Bay Bridge protection barrier, gashing a tremendous hole in its side, rupturing several fuel-oil tanks and spilling at least 58,000 gallons of fuel oil into the ecological system of the San Francisco Bay from Oakland – nearly to San Jose inland, all the way past the Golden Gate Bridge to the Pacific Coast of California.

“A badly timed heartbreak,” said the San Francisco Chronicle, citing that the black slick of oil was staining one of the richest wildlife regions on the Pacific Coast. It coincided with the migration of 150,000 ducks that had just flown 2,000 miles from Canada to feed in the Bay Ecosystem.

All through the day on Thursday, the heavy fuel oil that spilled from the Cosco Butan washed up on the beaches along the San Francisco and Marin County coastlines leaving purple sheens on the water and black globs in the sand. Hundreds of birds coated in the thick globs of oil were dead. It was heartbreaking. Experts estimate it could take years to restore the ecologic system to its former order. All water birds, mammals such as seals, porpoises and whales, and of course many of the fish.

Volunteers rushed to the beaches, but most were sent home. The government organizations “in charge” did not have the proper equipment for the volunteers to be effective. If California Community Foundations were able – if ANY Donor Advised Funds were able – to pay at least the expenses – not even counting the compensation – of the volunteers, I believe the emergency could have been a lot less devastating.

The crabbers were anticipating a bountiful harvest. Now they are contemplating CANCELLING the season because of the spill. The oil will affect EVERY PART of the food chain in and around the bay. And isn’t it too bad that because of the government’s lack of appreciation of the value of the charitable sector, and their ill-considered prevention of Donor Advised Funds paying expenses of, and reasonable compensation to, volunteers, this sector of the charitable industry cannot directly help.

California is the loser for it. We are all the losers for it.

Hurricane Katrina Part Deux

When Hurricanes Katrina and Rita hit the New Orleans and Texas areas, breaking down the levees and flooding the lower lying homes, many of the foundations under the authority of the National Heritage Foundation (NHF) took immediate action. Both money and people advanced on the tragedy and did what they could to help. And many wonderful new chapters in the NHF story were written – headlined by The KATRINA HOUSING FOUNDATION, EVERY CHURCH A SCHOOL FOUNDATION, AND MUTTSHACK.

Foundations at NHF tackled the basic tasks of getting displaced persons a place to live, ECAS helped mobilize the churches in the area to rescue and rehabilitation eff orts, and MuttShack helped take care of animals left to wander on their own having been separated from their owners.

NHF staff focused on analyzing requests for reasonable compensation and expense reimbursement, worked overtime to backstop these efforts and speed up the rescue and rehabilitation work. In our offices it was very like what happened when the September 11th terrorist attacks on the country. We had nearly $2 million out the door and helping those victims in New York before the smoke settled.

I listened to John Grisham and his wife being interviewed on CNN, at the time just after Katrina hit. He had put $5 million, I believe, into a Private Foundation at great expense, and the interviewer asked: “Why did you feel you had to go to the expense of setting up a Private Foundation. Why didn’t you just send the money to the Red Cross or some other agency in the New Orleans area?”

His answer was exactly why, in 1968, Dr. Wil Rose, in San Francisco, Ron Philgreen, in Kansas City, and I set up the National Heritage Foundation in the first place. He said… in effect:

“My wife and I wanted to roll up our sleeves – we wanted to get our hands dirty – we wanted to personally help the victims. And setting up a Private Foundation was recommended to us by our Financial Planner, since we would need some reimbursement of expenses.”

AND THAT’S WHAT WE AT NHF WERE CREATED TO DO.

NHF was created in 1968 to encourage philanthropy all over the world, and in our short lifespan, we have nearly 10,000 foundations under our authority, and have impacted lives in 26 countries. These foundations, under NHF authority, are taking care of Buddhist old folks in Golok, Tibet, we are helping Sufi Moslem Orphans in Cairo, Egypt, we are building a Golden City (Hindu) in southern Andra Pradesh in India which will provide services to 27 villages. In the United States, we have a homeless shelter in slumtown Phillie, we have a battered women’s shelter in Minneapolis, and we run a park in California. We were created to help encourage Philanthropy, worldwide. Some call it…

“CHARITABLE ENTREPRENEURSHIP”

The founders of NHF have always realized that the idea of “people helping their fellow man” was indeed a Golden Thread that could well bind the world’s peoples together on this Shrinking Blue Marble called “Earth.” AND DON’T WE NEED SOME BINDING-TOGETHER?!!!

NHF provides the back office administration for anyone who feels like helping others. In a sense we are, first, an incubator – then after some progress, a greenhouse, - and perhaps later on, when the project is big enough, strong enough, to stand on its own two feet – a launching pad for charitable independence. When the new charitable endeavor is big enough for independence, we have GRADUATION DAY, where our NHF foundation – with our help – becomes an Independent Public Charity.

NOW COMES THE DARNED PENSION REFORM ACT

And now it is Verboten for a Donor Advised Fund like NHF to help individuals respond to community needs – when those needs require the payment of Reasonable Compensation for Bona Fide Charitable Activities, or the payment of Reasonable Expenses for those projects. THIS IS NOW AGAINST THE LAW FOR A DONOR-ADVISED FUND TO DO.

Yes, of course we can set up a Field of Interest Charity, as we do with the Congressional District Programs, but the donor or initiator AND HIS FAMILY OR ANY CORPORATION OF WHICH HE MAY BE A SIGNIFICANT OWNER ARE PROHIBITED FROM MAKING A CONTRIBUTION. Yet he or she may do these things if only they set up an expensive PRIVATE independent foundation.

Consider how thoughtless the new law is: An individual wants to set up a foundation at NHF to, for example, “Tutor Inner City Gifted Children After School.” As any Entrepreneur would do, he fund this idea initially with his OWN donations. Under the new restrictions, he cannot be reimbursed, even if he purchases notebooks for them to study with. The law would make that a Donor Advised Fund. Yet, if he only creates his own non-profit corporation and files (for $750) Form 1023 with the IRS and begins his own dangerous and expensive journey through the administrative minefield of charity administration, he may be reimbursed for the notebooks and materials he has purchased for this after-school program. It makes you wonder whether the Congressmen even read the entire text of The Pension Reform Act.

HERE’S THE DANGER TO AMERICA

Charitable Entrepreneurship is indispensible to our future. CE will give employment to people, especially young people, and CE will give deep job satisfaction to those who are working on aspects of “Making the World a Better Place to Live.”

We are ENCOURAGING Charitable Entrepreneurship by asking Congress to remove from the category of Donor Advised Fund all “Foundation Accounts” at Community Foundations like NHF, funds which have at least 1/3 Public Support! Call me at (561) 301-3891 and we’ll go see your favorite Congressman together.