The purpose of the chair is to raise the overall level of charitable giving by educating professional fundraisers serving the more than 1 million nonprofit organizations throughout the United States, in particular though the establishment of the Chartered Advisor in Philanthropy certificate program. The program will cover the technical aspects of estate planning, trusts, and charitable giving, as well as the nontechnical aspects of fundraising, including communication and motivation.

The Chartered Advisor in Philanthropy program is the leading certification program for philanthropy advisors. It is offered by The American College, a financial services certification organization, which also offers the very well established Certified Financial Planning (CFP) program (which has become a must have credential in the field). I hold the CAP designation and think that a certification process is an important element to the expansion of the Second Great Wave of Philanthropy.

In 2006, I wrote a chapter titled “The Evolution of the Tactical Philanthropist” for a book called Mapping the New World of American Philanthropy in which I wrote:

As awareness of philanthropic vehicles continues to rise, advisors from many different disciplines must prepare to serve the needs of the new breed of Tactical Philanthropists. Just as falling costs and increasing wealth attracted a flood of new investors into the financial markets during the 1990’s, the falling costs and increase in philanthropic capital will spur on the rising tide of donors who want to structure their giving in the most efficient way. New technology will allow some donors to achieve their goals without much professional guidance, but unprecedented demand will exist for advisors who can help clients navigate the complex world of charitable giving.

Donors now consult with a broad array of advisors such as lawyers, accountants, financial advisors, and nonprofit planned giving officers. Unfortunately it is difficult to judge the quality of advice they receive because professional philanthropic credentials for such advisors are still being developed. Accountants must earn a CPA designation, lawyers must pass the bar, and doctors must get a medical degree, but there is no “must-have” credential for philanthropic advisors. In response, the American College, which administers the well-regarded Certified Financial Planning program for financial advisors, launched the Chartered Advisor in Philanthropy program in 2003. As of this writing fewer than 200 individuals across the country have completed the program, but it is a substantial first step toward creating a new generation of advisors to give tomorrow’s Tactical Philanthropist the advice they need to make sense of the complex world of philanthropy.

I think the CAP credential process is very good. My main criticism would be that the majority of the study material treated philanthropic planning as a type of tax planning. While tax planning is an important element of philanthropic planning, it should not be the tail that wags the dog. When I examine the “philanthropic planning” offered by most wealth management companies and look under the hood, I generally find nothing but an attempt to leverage the charitable tax code to maximize personal wealth. But philanthropic planning should be so much more than that! What about the mission of the client? Why are they giving and what are they trying to achieve?

Phil Cubeta and I don’t see eye to eye on everything. Long time readers of this blog know that he and I made it a habit to spar over various issues in some of the very earliest posts I ever wrote. But I can think of no better person to shape the future of the CAP program. We can absolutely count on Phil to shake things up, to demand better and to honor the deep human values that drive philanthropy.

Congratulations to The American College for having the guts to bring Phil on board. They’re lucky to have him.

In the feeds now:

• Hacking Philanthropy
• A podcast about microfinance
• A brand new philanthropy blog that is pioneering a whole new model for the sector
• A simple, but breathtakingly effective fundraising video that might make you cry
• An eBay sponsored microfinance website
• An article why nonprofits are going to start paying their “volunteers”
• A great video from the Global Philanthropy Forum with the speaker invoking Martin Luther King
• A (not quite) magical way to help Delaware
• Why fantasy sports are going to transform philanthropy
• The slingshot fund
• Why Jewish philanthropists are about to change everything
• A site that let’s you bet on the future and give to charity
• A new investigative journalism project, being run as a nonprofit
• A study showing tech companies give more to charity than everyone else
• An argument that without philanthropy, economic systems would all collapse
• And an Audacious Idea

I can’t possible write posts about all this stuff, but you can keep up with the cutting edge of philanthropy by staying on top of the new feeds.

Check it out.

So how do you keep up with all the change? If you don’t want to be the last foundation to hold a conference in Second Life (or don’t even know what that means). If you aren’t ready to explain why an organization like Green Dimes can improve the world more and faster as a for-profit than as a nonprofit (or don’t even know that Google.org is a for-profit foundation). If you’re not LinkedIn, ego searching and getting Xigi with it (or think that sounds like your teenager talking). Than this post will show you the Top Five Ways to Know Everything About Philanthropy.

1. Start reading the blogs: Most people think of bloggers as people who have an opinion about something. That’s true, but bloggers in niche areas like philanthropy (which does not have much mainstream media coverage) also act as your personal crack research team. Reading blogs will lead you to great articles and research from such mainstream sources as the New York Times and such obscure, but important sources as Angela Eikenberry of Virginia Polytechnic Institute and State University. The Chronicle of Philanthropy’s Give & Take blog offers a daily round up of important blog posts as well as links to just about every blog in the sector. If you read the blogs, you’ll stay up to date. If you enter the blog conversation (via posting comments, emailing the authors or even… gasp… starting your own blog), you’ll find yourself making a ton of new contacts and building your network.
2. Get LinkedIn: If you work in the nonprofit or philanthropy field then I’d guess you’ve been to one or two conferences. You hear great presentations, meet neat people, then get back to the office and file your notes away. The info you learn at conferences might stick with you, but what about all those people? If you’ve got an email address you can use LinkedIn, a social networking site for “grownups”. Rather than being used to share your silly photos from last weekend, the way most social networking sites are used, LinkedIn let’s professionals connect with each other and each other’s contacts. Think Six Degrees of Separation and you’ll understand why my relatively small network includes 180,600+ people. What can you do with this network? Ask questions to the group and get answers from experts, find a new job, hire someone, and stay in touch with that super smart consultant you met at that conference you can’t remember the name of anymore.
3. Use Google Alerts: Want to stay on top of trends, your organization’s reputation, or a specific topic? Until we have 24-hour, philanthropy focused news (which we’ll see in the next decade, seriously), you can use Google Alerts. This super simple, email powered service scours news sources, websites and blogs for any mention of the words you specify. You’ll have links and summaries delivered to your inbox the instant your topics show up, once a day or once a week. In a world where information is worthless and relevant information is priceless, Google Alerts helps you focus in on what is most important to you.
4. Get Xigi With It: Are you on the map? In their own words, “xigi (pronounced "ziggy") is a social network providing market intelligence and mapping tools to make sense of the capital market for good.” Xigi let’s everyone and anyone find the connections between various players
   in the fields of philanthropy, social enterprise, and the other
   constantly evolving fields of “doing good”. Find the people and
   entities participating in the philanthropic capital markets and
   identify the deals they’re working on together. Try browsing the
   various member of the network and you’ll quickly find people and
   organizations you’ve never heard of who are working on amazing projects.
5. Uh… Read Books: OK, I hate when people say things like, “This changes EVERYTHING!” The impact of the internet and web 2.0 technologies on the social sector is huge, but it is just beginning to be felt. If you really want to be well informed, you need to be well read… of books. The ability of anyone and everyone to put their thoughts online is great. But if you want thoroughly researched, deeply explored ideas by established experts, nothing beats books. You can find a great list to start with here. The list was put together by philanthropy bloggers, that crack research team I was telling you about.

Peter profiled this blog back in May and in various other episodes has talked about:

• Where Most Needed
• White Courtesy Telephone
• Don’t Tell the Donor
• The Agitator
• Larry James’ Urban Daily
• Nonprofits in Second Life
• Donor Power Blog
• Katya’s Nonprofit Marketing Blog

Most bloggers use a combination of Google Alerts, Technorati and some sort of blog stat program (I use MyBlogLog) to keep on top of when their blog is mentioned online. I don’t know of any program that can track audio mentions. Since no one has blogged about Fundraising Success that I know of, I assume the bloggers being talked about are unaware of the show.

Does anyone know of any other audio or video programming that has mentioned philanthropy blogs? If so, let me know. I guess it still takes good old fashion word of mouth to stay on top of these mediums. Or maybe Beth Kanter will save the day and point us all to a nifty new gadget that makes things easier (Beth Kanter: The Batman of nonprofit technology! “Where does she get all those wonderful toys?").

Today’s interview is with Clara Miller. Clara is president and CEO of Nonprofit Finance Fund. NFF helps nonprofits match their passion and dedication with financial strength and sustainability. They provide impartial analysis, and flexible, frequently unsecured financing that nonprofits typically can’t get from other sources. Clara was voted one of 2006′s Power and Influence Top 50 by the Nonprofit Times. She has written and spoken extensively on nonprofit capitalization, and is the author of a number of articles on the subject.

I just got back from the Council on Foundations conference where I saw Clara speak. In this interview she explains the challenges that nonprofits face when trying to grow and how NFF is able to finance their expansion.

• Launch Podcast

Expand this post using the link below to read the transcript.

[intro music]

Sean Stannard-Stockton: Hello, and welcome to the Tactical Philanthropy Podcast. I’m Sean Stannard-Stockton, author of the Tactical Philanthropy Blog, and principal and director of tactical philanthropy at Ensemble Capital.

My guest today is Clara Miller. Clara is president and CEO of Nonprofit Finance Fund. NFF helps nonprofits match their passion and dedication with financial strength and sustainability. They provide impartial analysis, and flexible, frequently unsecured financing that nonprofits typically can’t get from other sources.

Clara was voted one of 2006′s Power and Influence Top 50 by the Nonprofit Times. She has written and spoken extensively on nonprofit capitalization, and is the author of a number of articles on the subject.

Hi, Clara. Thanks so much for joining us.

Clara Miller: Hi. I’m happy to be here.

Sean: Why don’t you start off and just begin by telling us how you personally became involved in the world of nonprofit finance.

Clara: Well, it was an odyssey that began with a project, believe it or not, on energy conservation. We’d walk through buildings and give loans for energy conservation measures that would save money. The idea was that if it would save money, it could be financed by a loan.

And these were all nonprofits, all in New York. And even I, who was not an engineer, could look up at the ceiling when we were financing, say, a more efficient light fixture, and say, you know something? The ceiling around the light fixture is leaking.

And so it occurred to me that there was more to this than met the eye. There was more than just energy conservation measures, and more than just building maintenance. There was more than just access to capital.

So essentially, we went from one piece of the puzzle to a much more holistic view of what was needed. We’re now at a place where it’s a combination of all of those things, plus essentially reforming the entire nonprofit finance climate, if you will.

Sean: So what exactly does Nonprofit Finance Fund do? I think most people have the impression that nonprofits are financed almost exclusively by donations from individuals. I know that’s not true at all. So how do they get financed, and where does Nonprofit Finance Fund come in?

Clara: Well, nonprofits are hugely diverse for their numbers. Most of them are very, very tiny. Less than $50, 000 in revenue, which for a commercial enterprise is very small. But they go all the way up to being as big as Harvard University or Stanford University or a big hospital.

So they go from these giant institutions down to very tiny, essentially volunteer, Little Leagues or something like that.

Most nonprofits, or many, many nonprofits, are government contractors. They’re financed just the way a lot of for-profit corporations are, in that they undertake to provide services to people and the government under contract.

A lot of others get individual donor contributions, but most of those are larger organizations like universities and hospitals, who get the lion’s share of individual donations, if you eliminate houses of worship.

Then there’s bingo receipts and dinner dances and grants from foundations, and all of those are a piece of the puzzle. But the largest pieces of the philanthropic pie are individual donors. Fees for service is another big revenue source. And of course, within that is government contracting.

Sean: So where does Nonprofit Finance Fund come into the picture?

Clara: We are focused primarily on midsize nonprofits. We define that as organizations that have revenue between about $500,000 on the small side up to $30 million on the large side. People going up a very difficult path, going from pretty small–almost like sole proprietorships with five full-time equivalent workers–to being a much bigger scale entity.

There are all sorts of limitations and difficulties on that path. It’s difficult in the corporate world. Everybody knows that. It’s especially difficult in the nonprofit world. We focus our financing, our technical assistance, and our advice, our advocacy, on that group of organizations.

Sean: Can a nonprofit just go to any bank and get a loan? Are those your competitors? Why do they come to Nonprofit Finance Fund as opposed to a traditional lender?

Clara: Well, frequently we’re the only option they have. When we started out lending to nonprofits, very few organizations were lending to the organizations we were focusing on. Lots of banks lend to large institutes, but rarely to the organizations that we were involved with.

Now that’s opened up a lot. But they come to us because we’ll lend up to $2 million unsecured in a growth situation. And that’s a tough kind of lending, and it’s not something that banks like. Because it’s not particularly profitable, and it would probably make the regulators very uneasy.

We have a lot of bank partners who lend to us, but we’re the ones who take the credit risk on those kinds of loans.

Sean: So NFF has been in existence for over 20 years. But as we were discussing just before we started the interview, nonprofits still don’t have access to a really robust capital market.

Where do you see the nonprofit capital markets evolving from here? Are we going to have a sophisticated nonprofit capital market in the future, and if so will it be one and the same as the for-profit capital market system? Or will they forever be somehow two separate systems?

Clara: It’s a great question. I think of it as being one big capital market, in fact. The dividing line is profitability. And profitability, I mean for the sources of capital. The reason that nonprofits often can’t get access to capital, and for many nonprofits, for the big ones, there’s a wonderful capital market.

They’re doing great. They have built subsidy engines where they have 400 people who are focused on just getting individual donations. They have access to tax-exempt bonds. Many of them have endowments that are essentially large investment management businesses. So those guys have a lot of access to capital.

And then the tiny little organizations that do fabulous work, but it’s mainly volunteers or part-timers and have one event a year; they don’t really need a capital market per se. It’s in my view the ones that are the toughest are those that are midsized, and innovating, and growing.

And so what they need is access, not just to debt, but also to equity. And equity is a tough thing because everybody, imagine the most important thing about it has to do with ownership and return.

We have, NFF has, both a debt and an equity like product that we call NFF Capital Partners. And the idea there is that the important distinction is that you invest a grant in a way that behaves like equity profit. That is, it funds the deficits on the way to creating a sustainable organization that can be profitable because of the revenue sources it’s put together and the efficiencies its been able to invest in on the way up that growth path.

I think there’re lots of people experimenting, or at least some, in that space. And a lot of people interested in looking at it and thinking about it that way, which I think is very good.

And I think that there’re some organizations that probably can become profitable for-profit businesses with the right combination of market and investment. And then there’s no reason they couldn’t have equity that provides a return.

So, I think there’s a spectrum, but I think we should look at it as everybody being in the same capital market. It’s just tax status that’s different. And what tax status does is enable people to take contributions and get the benefit of tax exemption.

Sean: Tell us a little more about what it means to have equity in a nonprofit. I think that most people understand owning a share of a for-profit entity pretty cleanly, they own a percentage of its assets and a percentage of its future earnings, but what does it mean to hold equity in a nonprofit?

Clara: Well, you can’t really hold equity in a nonprofit right now because in fact the main beneficiaries of nonprofits are the people who benefit from the mission. And individuals don’t profit in the same way as they do for for-profit.

So the way we think about equity is to say what function does equity have in the enterprise? And nonprofits, this is kind of dweeby and technical, but in the nonprofit world we account for all revenue the same.

Whether it’s for a long-term equity like investment, or whether it’s a regular part of revenue that is going to come in reliably over time. And the latter is just plain revenue in the for-profit sector. And investment in building the factory of it or the business is equity in the for-profit sector. And it never goes through the income statement.

So that’s a difference in the nonprofit sector that’s not the same in the for-profit sector. And what that does is obscure the health of the enterprise. So one thing that’s very simple and it seems almost silly, is just accounting for equity properly–labeling it and saying this is building the enterprise.

My colleague George Overholser, who’s the founder of NFF Capital Partners, wrote a terrific paper that’s on our website called Building Is Not Buying. And it spells out what that difference is. And just understanding that and understanding what the rights and privileges of owning and taking care of equity versus buying from an organization and exploiting the enterprise is a huge distinction.

Most grant makers and most people in philanthropy don’t think about that. They don’t think of the enterprise level when they make their contributions or they give their grants.

Sean: So, NFF is itself a nonprofit, what’s your view on the dangers or the promises of for-profit entities entering the nonprofit capital markets? I mean you alluded that banks fund you and you move on to fund the nonprofits, but…

Clara: Oh, I think if the for-profits can do it and come into our markets, that’s something that we embrace. We think that the primary source of capital for all nonprofits is banks and always will be–they’re scaled. We have a harder time scaling because we exit a profitable market when the banks come into it.

And that’s one aspect of why we’re nonprofit and why we’re mission driven is because we’re always driving ourselves to the margin to look for a bigger challenge or the next important innovation. So banks are always going to be lending to nonprofits and have done so more and more.

There was a terrific, another article by a professor at UC Davis, who I think his name is Yurman, which was about nonprofit debt. And he pointed out that 60% of nonprofit organizations are in debt, are using debt. Sometimes in a very sophisticated way, which is similar to statistics on the for-profit side.

So, I think the debt challenge is more one of having people understand how you get well. I mean here we are on the midst of a predatory lending crisis; the same thing can happen if we view debt as something that is somehow able to replace revenue–that’s not going to work. So using debt well and making sure that organizations don’t finance assets that actually make their businesses struggle more and hurt the people, rather than help, can be a problem.

Sean: Well, Clara, this is a complex area, but thank you for sharing your expertise with us. I certainly think it’s an area that’s going to undergo tremendous growth.

Clara: Well, thanks for speaking with me.

Sean: This has been the Tactical Philanthropy Podcast; you can visit us at tacticalphilanthropy.com. For more information about Clara Miller, visit nonprofitfinancefund.org. Thanks so much for listening.

As conference participants head back to their respective foundations, remember that online the discussion is really heating up. Did you enjoy the session “Changing Poverty Through Profit”? Did you know some people refer to this set of topics as Micro Loan Sharking? Were you interested in the mission aligned investing concepts that came up in a number of session? The online discussion of foundation investment policies held here in January was called “unprecedented” by the Aspen Philanthropy Letter. Did Clara Miller and Nancy Roob get you thinking about growth capital and scaling nonprofits? Listen to my interview with Clara Miller that will be posted tomorrow and then leave your comments or questions. Is your foundation experimenting with transparency? Let me know what you’re doing and I’ll showcase your project.

At the end of the Demonstrating Impact session, Mark Sedway had a stack of written questions from the audience that had not been answered. He announced that he would be posting them at the Philanthropy Awareness Initiative and asking the panelists to blog their answers. You don’t have to wait until next year to learn more about the subjects we’ve all explored over the last few days. The information capabilities of the web are already being utilized by a number of people to learn and discuss philanthropy. Spend some time on the blogs I list in the right-hand column or at least use the Chronicle on Philanthropy’s Give and Take blog to stay on top of the discussion.

Last night, Jeff Martin, who had invited me to attend the conference and two foundation staff members, got into a debate about foundation payout rates. It was a good debate, with the two foundation employees holding diametrically opposed views. I told Jeff that he should invite them to record a podcast (online audio) and post it to the Council on Foundations website. Everyone thought is was a good idea. It would take about 20 minutes and cost about $20 or less to make happen. These tools are available, they’re effective and cheap. Nonprofits have been quick to start using these tools. Now it is time for Council on Foundations members to do the same. I believe deeply that we are witnessing a Second Great Wave of Philanthropy. I see the way that technology has revolutionized many industries including the financial services industry that I work in. The time is now for philanthropy to embrace information technology and accelerate the cultural significance of philanthropy as a defining aspect of the early 21st century.

To me [Demonstrating Impact: How Foundations Can Show Their Value] is the one that you most have to go to. You have argued consistently (and strongly) for more foundation transparency. You should ask the foundations the questions you pose in your posts: why not share everything they have on a website? Why not publish things that are currently “internal,” like evaluations of specific charities (as opposed to “overall programs”)? Why not blog?

Mark Sedway, director of the brand new Philanthropy Awareness Initiative, had shot me an email last week encouraging me to attend. Reading the description of the session it looked like a class on how foundations can engage in better PR.

I was wrong.

Demonstrating Impact was an incredible session. The room was packed, every corner of the room full of people pressed against the walls and people outside trying to poke their heads in through the doorways. I have over five pages of single-space, type written notes. What I want to share with you isn’t just a blog post. I’m going to have to figure out how to put this all down on paper in a more comprehensive way, but I’ll share some highlights now.

The panelists were:

• James Canales, CEO, The James Irvine Foundation
• James Knickman, CEO, New York State Health Foundation
• Joel Fleishman, author of The Foundation: A Great American Secret

The discussion was nominally about how foundations can do a better job letting influential Americans and the general public know about the good work they do. But at the root of this is a discussion about identifying and measuring the impact of foundation grantmaking. And at the root of that is a discussion about transparency and the sharing of information about what works AND what doesn’t work.

Yes, foundations do great things and most people don’t understand the magnitude of these good works (the very existence of emergency 911 service is attributable to the Robert Wood Johnson Foundation, Fleishman pointed out). But what I found so incredible about the session was the advocating for communication to be designed right into the program strategy from day one. Fleishman talked about The Wallace Foundation and how they do grantmaking in teams with Program, Research and Communications all taking part in strategy design from the beginning.

To me the most important part of Fleishman’s message, the most important message of the session and maybe the conference, is that transparency is NOT about public accountability, it is about improving the sector of philanthropy. It is about improving the way that all of us do our jobs. It is about transforming ourselves from a series of silos to an integrated, robust intellectual capital platform upon which all future grantmakers, big and small, can draw.

Sharing the good works of philanthropy is not enough. A good bit of debate centered on how and why foundations should share their failures as well. To me the issue of why failures should be shared, and why doing so is not a risk for the organization if handled correctly, was nailed by James Knickman:

“We need to frame our release of “failures” as an attempt to learn. No one tells scientists they are a failure when one of their experiments don’t work!”

That’s it right there. What philanthropy is engaged in is an experiment. An experiment in how we can all make the world a better place. We don’t know what the right answer is. In fact, the “answer” is probably evolving as quickly as we can design experiments. But by being transparent, by sharing successful ideas and failed ideas. By judging ourselves not on the outcomes of each grant, but on the body of knowledge that we contribute to the field, we will truly transform philanthropy.

Knickman gave as an example a project that The James Irvine Foundation did on end of life care (if readers know more about this project, email me the relevant links) (see correction). He called it “the most successful failure I’ve ever seen”, because it really changed the way people approached the issue since the project really seemed like it should have worked.

Humans don’t like to talk about their own “failures”. But halfway through the session, someone from the audience who identified herself as a professor of marketing stood up to say that people who admit their mistakes publicly are viewed with more trust afterwards. We need to reframe transparency away from some sort of thing that philanthropy is being forced to consider by outside forces and instead celebrate transparency as the mark of an organization that is truly committed to improving the field.

I’m writing furiously in a Starbucks with a half eaten sandwich next to me. I have another session I have to attend soon. The great thing about blogging is that there is no page limit and there is no final draft (the same could be said of philanthropy). I wanted to get my first impression of the Demonstrating Impact session down while it was still fresh. I’ve completely ignored important themes of the debate that I can’t cover right now. But I’ll be returning to this topic frequently.

Thanks for reading.

This was my favorite session so far. Clara challenged the notion that nonprofits need to “scale”, get bigger, to be most effective. She pointed out that since nonprofits, by definition, lose money on every “sale” they can’t make up the losses by doing more volume. Instead, in order to get larger, they have to grow both their core business as well as their subsidy business, the fundraising that they do in order to continue an unprofitable business.

Her point, and the message of Nancy Roob, was to discuss how grantmakers can support nonprofits by supplying the growth capital they need to scale. I took away a more general message about which kind of nonprofits philanthropists should even attempt to help grow. Clara mentioned a paper written my her colleague George Overholser, Building is Not Buying:

Building an enterprise is fundamentally different than buying services from that enterprise. And yet, standard nonprofit accounting sheds no light on the building vs. buying distinction. George Overholser believes that this missing distinction is a major reason why a market for nonprofit growth capital has failed to materialize. The good news is that the system can be fixed more easily than one might expect.

When thinking about the difference between a great nonprofit that should simply be funded and one that should be given growth capital, Clara suggested we consider a neighborhood diner that served an incredibly good breakfast menu. Should it scale up? How many national chains serve an incredibly good breakfast menu? Not many, quality is difficult to scale. In this case, the customer should be content eating at the diner (funding its annual needs), but not provide growth capital to open new locations.

I’ve asked for a copy of the presentation to be emailed to me. If I get it, I’ll post some of the relevant slides. The last page of the presentation was four simple tips for grantmakers on how to structure grants. If you’ve been reading GiveWell, none of them will be a surprise, his advocacy of ignoring overhead cost ratios and making unrestricted grants mirrored Clara’s suggestions exactly.

Quick, which movie is better?

Casablanca or Look Who’s Talking, Too?

The Godfather or Bio-Dome with Pauly Shore?

Star Wars or Grease 2?

How do you know? What metrics are you using? I can’t think of any scoring system or appropriate metric to rate these movies, yet I KNOW that the first choice is a better buy at the rental store.

This country has a robust movie ranting system that is entirely qualitative. We have an enormous system of professional movie critics who make their ratings public and provide detailed commentary on why they like or dislike each film. There is no reason why a similar system could not be developed for charities.

I think the focus on quantitative rating systems has to do with the large number of nonprofits. How could a start up rating system even begin to offer educated opinions on the over 1 million 501(c)3 nonprofits in this country? I don’t think they have to. An effective program could be started rating the largest nonprofits. If successful, I think you would quickly see new startups rating “The best small nonprofits”, “The best Christian nonprofits”, “The best nonprofits to save the environment”, etc.

The system doesn’t have to be limited to professional critics. I love the site IMDb.com which aggregates all sorts of movie reviews from both pros and everyday movie fans. There is certainly a place for a user created content platform so donors could talk about their own experiences with nonprofits. As we know from film criticism, moviegoers and movie critics often like different films. However, we rarely see really bad movies doing great at the box office.

So enough with administrative expense ratios. Enough with the focus on the salary of charity officials. I want to know which nonprofits are any good and I don’t think there’s any number you can show me that will answer that question. To paraphrase Einstein’s sign, “Just because you can count the amount spent on overhead doesn’t mean it’s important and just because you can’t count the amount of good done by a nonprofit doesn’t mean that’s not the single most important thing for me to know.”

So who’s going to do this? I hope Perla Ni is up to the task…

What is the Enoch Pratt Library and why does their website keep showing up in my referral logs (which show which websites my readers are coming from)? Check out their new resource and it all makes sense.

If you haven’t seen it yet, check out the new blog World Grows Wide. In the days before she launched her blog, author Emily Turner, an employee at Philanthropy Australia, left extensive, thought provoking comments on my blog. I look forward to following her writings.

Today I am happy to release the second interview of the new Tactical Philanthropy Podcast series. Every other Friday I will be releasing an interview with someone involved in philanthropy.

Today’s interview is with Tracy Gary. Tracy has been a donor activist and philanthropist for more than 25 years. She educates and supports donors, family foundations, financial service organizations and nonprofits about the stewardship of money, leadership and philanthropy. Tracy has founded or co founded 18 nonprofits. She is currently the Director of Inspired Legacies.

• Launch Podcast
• Read Transcript

If you missed the interview with Jed Emerson, you can download the podcast and see the transcript here.

The sound quality of the interview should be a bit better this time, thanks to a tip from Corey at 501c3 Cast.

So far, I’m inclined to point to GiveWell as the first real attempt by donors to utilize social media tools. But I doubt they will be the only ones for long. In response to my request for examples, Philanthropy Australia dropped me this comment:

The Australian philanthropy sector is in a unique position because unlike the UK, USA, Canada and New Zealand there is no mandatory reporting and no overarching body with responsibility for the endorsement and regulation philanthropic bodies (foundations & trusts, namely). What this means is that more often than not, foundations are very private and reluctant to become transparent, share information in a more public field (though they do enjoy collaborating with each other on projects). The history of the sector, to date, has not been recorded in a central location, and this means that rather than sharing what they’ve learned from their mistakes, each individual foundation has a tendency to re-invent the wheel.

And this is something that they’ve identified as a problem that needs solving. We’re currently working on adopting social media tools to develop solutions to these issues – namely, a project we’re developing at the moment is a knowledge bank of Australian philanthropy – which encompasses a database of previous grants, a database of projects seeking philanthropic funding, as well as our key piece, a collation of resources using wiki software that documents the philanthropy sector – the ‘nuts and bolts’ of grantmaking, primarily, but also mapping the sector and recording its stories and history.

It’s a huge project but one we feel will be invaluable. Of course, building its content will require a shift of attitude/culture in these foundations (see above comment about privacy!), and a lot of the resources will be password protected to our members (one of the reasons they find membership valuable is that they can network with other grantmakers in a secure/private environment through us). The wiki software will also allow them to collaborate on resources themselves, again in a secure environment.

You can read the entire comment here.

There is a whole network of people who are bringing social media tools to nonprofits, such at CompuMentor, the NetSquared Community, NTEN, and blogger/consultant Beth Kanter. Can a similar movement be started to bring these tools to donors (individuals, foundations, etc)?

It may be a scary concept to some people to think about donors being able to say anything they want online and asking tougher and tougher questions of nonprofits. But I encourage everyone to look to Katya Andresen’s take on this issue. She experienced first hand the impact of GiveWell posting negative comments about Network for Good, where she is head of marketing. Her response, in my opinion, was an amazing example of how to deal with “Donor 2.0” issues.