Charity Governance

THE HELMSLEY RORSCHACH TEST

DATELINE: July 2, 2008

I'm not trying to run your life, I know you wanna do what's right.
Give your love now, to whoever you choose...
It's your thing, do what you wanna do.
I can't tell you, who to sock it to.

Isley Brothers, It's Your Thing

Leona Helmsley left none of her estate to the 'little people." In fact, she left none of her money to the big people, little people, short people, tall people, or green people. Moreover, she managed to avoid paying taxes by leaving the money to a charitable trust. In short, she is laughing under her acid-washed tombstone.

What Helmsley apparently did was leave somewhere between $5 billion and $8 billion for the care and welfare of dogs, according to the New York Times' resident...

SINCE WHEN DID HARVARD UNIVERSITY BECOME THE UNITED WAY?

DATELINE: June 4, 2008, Chicago

I said, Hey! You! Get off of my cloud
Hey! You! Get off of my cloud
Hey! You! Get off of my cloud
Don't hang around 'cause two's a crowd
On my cloud
     Rolling Stones, Get Off My Cloud from December’s Children

Jennifer Juniper, hair of golden flax
Jennifer Juniper longs for what she lacks
       Donovan, Jennifer Juniper

Thank goodness we didn't go to Harvard in the 1970s. Oh yes, we’d be rich today, but we also would be so tied to our alma mater that we couldn’t imagine giving our money to any of the 984,000 other charities registered with the IRS. Sounds absurd, but that is in essence what the members of...

“IT’S ALIVE, IT’S ALIVE”: THE SERVICE RESURECTS THE COMMENSURATE-IN-SCOPE TEST

Hit me with your best shot!
Why don't you hit me with your best shot!
Hit me with your best shot!
Fire away!

Pat Benatar, Hit Me With Your Best Shot on Crimes of Passion (August 1980)

DATELINE: May 14, 2008, Chicago

You know something is up when our friends at the Chronicle of Philanthropy feature the release of an IRS determination letter in their News Update column, but Chronicle reporter Grant Williams and his editors know a big story when they see one. IRS Revokes Tax-Exempt Status of Charity That Spends Too Little Money on Charitable Programs, May 13, 2008. Williams reported yesterday that the Service issued Determination Letter 20080818023 (May 2, 2008), which concluded that a Section 501(c)(3) organization did not qualify for tax-exempt status. "Big whoop," you say, but it is because the Service invoked the much heralded...

FASB SHOULD WAKE UP AND SMELL THE COFFEE: MASSACHUSETTS TAX ON ENDOWMENTS

DATELINE: May 12, 2008, Chicago

As regular readers know, we are dissatisfied with proposed FSP 117-a, a rather obscure proposal being considered by the Financial Accounting Standards Board (FASB). It would extend current accounting principles to the financial statements of charities operating in states that have adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA). UPMIFA is spreading like wildfire, with at least 20 states enacting versions of it.

To make a long story short, FSP 117-a will continue the accounting profession's practice of overstating the amount of a charity's assets that are freely spenadable. For institutions with large endowments, this means that to donors and legislators, much of endowment looks like it is available for current expenditure despite legal restrictions which prohibit the institution's board from spending the funds. As our Jack Siegel pointed out in his recent article, FASB Puts Infinity Up on Trial: Accounting for Endowments, 60 EOTR 23 (April 2008), the inaccurate reporting mandated by FASB will pose serious problems for colleges and universities. For example, rising tuition and related costs...

BUILD IT AND THEY WILL FUND IT: WRONG

DATELINE: May 6, 2008, Chicago

The Museum of Broadcast Communications was located in the Chicago Cultural Center, a temporary location, for many years.  Over the last several years, the museum has been constructing a new museum on Chicago's State Street. The museum archives hold over 85,000 hours of broadcast and radio programming.

We hadn't been actively following the construction's progress, but we did notice when we walked past the facility that it was taking what seemed to be a...

MONTANA SUPREME COURT DELIVERS LANDMARK OPINION: 13 STATE ATTORNEYS GENERAL INTERVENE

DATELINE: April 30, 2008, Chicago

We read the e-mail alert (courtesy of Google) at 5AM this morning. Stephanie Strom and Jim Robbins of the New York Times reported in Montana Museum Board Breached Duty, Court Says that the Montana Supreme Court had delivered a decisive defeat to the board of advisors to The Charles M. Bair Family Trust, removing the entire board and instructing that it be replaced. The dispute centered on the board's decision to close the Charles M. Bair Family Museum in 2003.

The Bair Family Trust was created by Alberta M. Bair, the daughter of Charles M. Bair. There were two provisions in the trust agreement that lead to the dispute in this case. The first...

HOW TO DESTROY DONOR GOODWILL: ST. BONAVENTURE PLEDGE DISPUTE

DATELINE: March 24, 2008, Chicago

The Buffalo News is reporting that Paul and Irene Bogoni have filed suit against St. Bonaventure University after Mr. and Mrs. Bogoni refused to complete payments due under a $2 million pledge for the construction of an addition to the university's Friedsam Memorial Library. Jay Rey, St. Bonaventure Supporters Won't Pay All of Big Donation, Sue School, Mar. 20, 2008. Caroline Preston of the Chronicle of Philanthropy provides more details, reporting that St. Bonaventure asked the Mr. and Mrs. Bogoni for additional...

AROUND AND AROUND AND AROUND THE DIAL: ST. OLAF COLLEGE SELLS RADIO STATION AND IS CHALLENGED BY A LISTENERS GROUP

I've been around the dial so many times,
But you're not there.
Somebody tells me that you've been taken off the air.
Well, you were my favorite D.J.,
Since I can't remember when.
You always played the best records,
You never followed any trend.
F.M., A.M. where are you?
You gotta be out there somewhere on the dial.
On the dial.

Kinks, Around the Dial

DATELINE: March 20, 2008, Chicago

A dispute has been brewing in Minnesota for the past three and half years over a November 2004 decision by St. Olaf College to sell radio station WCAL to Minnesota Public Radio for a reported $10.5 million. SaveWCAL, a Minnesota nonprofit corporation organized to save WCAL, tried to stop the transaction, but was unsuccessful.

Following the sale, St. Olaf petitioned the Rice County District Court to release certain restrictions on endowed funds designated for WCAL's support, claiming that it was now impossible to honor the restrictions because the college no longer owned the station. Talk about trying to lift yourself by your own bootstraps. Once again, SaveWCAL tried to intervene. This time...

JUDGE ELLEN HOBBS LYLE REACHES A DECISION IN THE FISK UNIVERSITY CASE, BUT THE EXTERMINATING ANGEL IS UNLIKELY TO GO AWAY

DATELINE: March 7, 2008, Chicago

Poor Fisk University. Recall that this Nashville-based institution has faced financial difficulties in recent years. The seemingly simple solution would be to sell just two paintings from its valuable Stieglitz Collection of art, which includes works by Georgia O'Keeffe, Picasso, Renoir, and Cezanne, among other notable artists. During the last two years, Fisk has been asking Davidson County Judge Ellen Hobbs Lyle whether it can do just that.

We had hoped that Judge Lyle would put an end the dispute between Fisk and the Georgia O'Keeffe Foundation when she rendered her decision following a trial that began February 19, 2008. As we discovered late last night, that is...

IT DIDN’T HAVE TO BE THIS WAY: THE TWISTED LOGIC OF THE RECENT COURT DECISION OVER FISK UNIVERSITY’S RIGHT TO SELL AN INTEREST IN THE O’KEEFFE COLLECTION

DATELINE: February 13, 2008, Chicago

Judge Ellen Hobbs Lyle ruled last week that the trial on Fisk University's cy pres petition would not go forward. Instead, she granted summary judgment to the Georgia O'Keeffe Foundation. At the end of the day, this means that Fisk University cannot sell the two paintings from the O'Keeffe-Stieglitz Collection. Nor can it enter into the proposed agreement to share the collection with Crystal Bridges. Under that agreement, Crystal Bridges would have made a $30 million payment to Fisk University for a half interest in the collection.