Nonprofit Newswire | July 27, 2009

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Sarah Palin, Inc.: The biggest brand name in conservative politics is about to enter the burgeoning right-wing marketplace — and she’s perfect for it. Ka-ching!
Jul 17, 2009; Boston Phoenix | This looks like just one more article about the beleaguered now-former governor of Alaska and John McCain’s impromptu running mate in 2008, but there’s a very interesting nonprofit story here.  The Phoenix looks at Sarah Palin’s future political fundraising prospects by covering some of Palin’s predecessors’ efforts as well as the works of certain politically conservative magazines and 501(c)(4) tax exempts.  Oddly, the Phoenix story misses a number of items.  It addresses Newt Gingrich’s consulting and for-profit ventures after leaving Congress, but doesn’t address his multiple nonprofit connections including his own eponymous foundation.  Same for Alan Keyes after his quixotic run for President, focusing on for-profit and PAC operations and missing his nonprofit arms.  The article does reference various “charitable entities” which the author suggests “appear to be shells existing only to perpetuate the flow of money from contributors to the direct-mail companies.”  It would be worthwhile for readers to know which nonprofits he is examining here (other than David Bossie’s Citizens United group).  Moreover, when the author criticizes their 990s for describing their purposes and program achievements as “educating the public”, he might want to know that nonprofits of various ideological hues do the same.  But the importance of the Phoenix article is to remind readers about the interconnections between politicians’ PACs, 527s, 501(c)(4)s, and 501(c)(3)s and to be on guard to protect the integrity of the nonprofit sector from political abuse.  —Rick Cohen

Nonprofit medical facilities in declining financial health
Jul 26, 2009; American Medical News | While they are generally larger and more robust than other nonprofits, Standard & Poor’s review of nonprofit hospitals for 2008 documented seriously declining credit ratings and operating margins, even while stating that the report did not take into account the losses of the last disastrous quarter of the year. Mass layoffs in this sector more than doubled and the number of jobs created declined by about 1/3. Analyses for this subsequent period are expected to be worse, of course. Before you get to feeling too bad for these institutions, however, remember that this is one category of nonprofit under pretty intense scrutiny by federal legislators on the grounds that they may not provide sufficient community benefit to justify their tax exemption. Ruth McCambridge

SSU Foundation’s Private Land Loans
Jul 25, 2009; The Press Democrat | Some nonprofits are established to lend money and perhaps other assets, for example, community loan funds which support neighborhood revitalization projects.  But for most nonprofits, it’s a pretty clear example of what not to do.  But no one seemed to tell the Sonoma State University Academic Foundation, which not only made a number of loans backed by real estate, but in some cases to the real estate and mortgage firm that owned some of the properties, often at interest rates that were favorable to that firm and not appropriate given the value of the collateral or security (vacant land, in some cases).  The mortgage guy served on the foundation board until 2 days before the first of the loans went to him.  He subsequently arranged the majority of the foundation’s 19 loans to local landowners (the largest being a $4.5 million loan to himself), leading to the foundation maintaining half of its investment portfolio in private loans (not looked on favorably by its auditors, but ignored by the foundation’s president band board).  In July, the mortgage guy gave back a 10-acre vacant site to the foundation because he couldn’t repay the loan.  Where did the money for the loans come from? From charitable donations to the SSU foundation for scholarships and other education-related activities. Apparently at SSU, the education mission of the foundation ranks second to its desire to be a bigtime banker for local property owners and speculators.  —Rick Cohen

Wisconsin Alters Endowment Spending Law
Jul 21, 2009; JSOnline | Governor Jim Doyle signed a new law this week that will allow nonprofits to spend more freely from endowments. Nonprofits around the nation have found themselves in a bind as the demand for their program services increases during the recession but they can’t draw on their endowments to maintain critical programs and pay for operating costs. Wisconsin foundations and other endowed nonprofits have have seen their endowments drop by 20 – 40% at the precise time when social need is up. The new legislation which was backed by foundations, the United Way, and others sets up interesting “criteria for trustees to use in determining how much to spend from the endowment.” Similar changes are contemplated or have been enacted in Massachusetts and other states.  Forty states plus DC have adopted a change in the Uniform Prudent Management of Institutional Funds Act which, according to Foley Hoag LLP, allows charitable institutions “to tap into endowment funds whose values have depreciated below their “historic dollar values” (i.e., “underwater” endowment funds)”.  Wisconsin’s action may allow some nonprofits to tap resources that will help them and their clients and constituents weather this economic storm.  —Ruth McCambridge

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