Good Advice to Charities

We are often asked at ECFA about giving helpful advice to charities and churches that want to avoid scandal and fraud. A helpful adage is "less is more" and while we have lots of advice, we tend to give a little too much and get a little too technical to be easily remembered let alone implemented.

For purposes of simplicity therefore, I've taken all of the principles and best practices of ECFA as well as other organizations that make recommendations regarding financial accountability and good governance, and have come up with a list of the three main things I would advise all charities to remember:

1) Proper Governance: Defined as an independent board (elders, trustees, members, deacons, etc) consisting of not less than five individuals that are independent-- meaning neither employees nor family members and most importantly independent thinkers. We recommend that this group would meet at least semiannually to review Policies, Performance and Pay (the three "P"'s).

2) Accounting Controls: Too often, nonprofits and especially churches think that blind trust can replace accounting controls and that is sure folly. Professional accounting standards are important to ensure that proper receipts are generated and maintained for both income and expenses and that assets are properly safeguarded. Nonprofits also need to empower their accountants and CPA's and not tell them what rules need to be followed and which ones can be ignored.

3) Transparency: Transparency means "we have nothing to hide". This includes being transparent in sources and uses of all income, expenses, assets, liabilities, etc. All tax-exempt organizations except for churches and some religious charities are required by the Federal Government to file annual a form 990 and provide a copy of the 990 to anyone upon written request. ECFA, for 27 years, has required our accredited members, including those that are normally exempt from the form 990 requirement, to provide a copy of their financial statements to all that provide a written request.

Interestingly, the Panel on the Nonprofit Sector (of which ECFA is a member) and the Independent Sector has recently released a broad proposal which embraces 33 standards for charities which fall into four categories and are very similar to ECFA standards. Information is posted on ECFA's website. Check http://www.ecfa.org/ news and archived stories.

Y BUY 4N?

I just love my new state of Virginia. Here in Virginia, because they are relatively inexpensive, there are a lot of "vanity" plates and I saw one on a Cadillac in my neighborhood that said, "Y BUY 4N". That makes me smile as I spent over twenty years working for an American automaker.

Recently, Ford and GM have been in the papers a lot. Motor Trend magazine editor said that for his entire adult life the American automobile makers have been trying to go out of business and he believes that they have the determination and stamina to make good on that quest.

Most people are unlikely to fully appreciate the complexity of the automotive industry but are usually pretty opinionated on exactly what a company like Ford or GM needs to do to get better. Likely, it's because most of us believe we have invested a small fortune in our vehicles from small little sport cars to fancy SUV's, and it give us at least an informed opinion on what it would take to be a good automobile company.

Roger Simmermaker is the editor of a website that shares the same sentiments as my neighbor who drives the Caddy with the vanity plate. Roger's website is http://www.howtobuyamerican.com/ and is full of information for those people that want to buy American. While I fully appreciate his sentiment, I'm not a fanatic as I'm neither a globalist nor a protectionist. However, I do like to be fully informed of product quality, value and opportunity and often feel I'm a little misinformed.

Roger wrote an article on Ford and GM that attempts to clear up some of the misperceptions that people have regarding the two remaining US automobile makers and I've given the link at the top of this blog for those that are interested in the article. It's a pretty good read.

Roger comments that while Ford and GM have been beating Toyota in quality in study after study, few Americans would be aware of the fact. Nevertheless, JD power & Associates rated both the Ford Fusion and Mercury Milan higher than both the Camry and the Honda Accord this past year.

One of the other misperceptions is the greater investment that both Ford and GM have been making in existing US factories, usually with little or no tax breaks. Typically we hear of new Japanese and German investment in America and American companies creating US layoffs. Too bad because it just adds to the confusion and misperception of the investment that the US automakers continue to make in this economy.

The article states that American automotive employees involved in R&D are also much more likely to be working for either Ford or GM. Japanese companies, reports Roger, employ 3,600 American workers in R&D vs. 65,000 similarly skilled employees at Ford and GM.

His closing remarks regarding quality were the best. The recent 2006 J.D. Power 2006 dependability study identified the top five quality brands which were (in order): Lexus, Mercury, Buick, Cadillac and then Toyota. Lincoln and Ford brands were also in the top half of the quality mix, above many foreign brands that have the reputation for quality that may be not totally deserved.

Ford and GM have some work to do on their financial picture and if they follow the same path that got them to some relative success in their strive for quality, they'll make it.

Accreditation vs. Watchdog

Part of the prayerful hope in the founding of ECFA was to help good Evangelical charities become great Evangelical charities. Now in its 27th year, the ECFA is comprised of over 1,200 accredited evangelical Christian organizations. The mission statement emphasizes the development and maintenance of standards of accountability and ethical practices.

Recently, a few self-described charity watchdog groups have been gaining popularity, particularly in the press, primarily because of their willingness to rate charities typically based on financial calculations and publish (as well as release to the media) the results. Many also rate the charities on a letter scale (i.e., A to F) or via two, three or four stars, like movies and hotels.

ECFA is not a watchdog group but an accreditation agency and many people likely are unaware of the difference. The ECFA model is an accreditation model which provides a seal of approval to the organization that has met the requirements of accreditation, primarily compliance with the Seven Standards of Responsible Stewardship. These standards include an evangelical statement of faith, an independent board of directors, audited financial statements, conforming use of resources, transparency in their finances, avoidance of conflicts of interest and truthfulness in fundraising.

Compliance with the Standards is monitored by ECFA in three ways. First, all ECFA members must annually submit membership review information including audited financial statements, IRS Form 990 (if applicable), salary information, fund-raising appeals, board composition, changes in organizing documents, and much more to verify compliance with the Standards. Second, ECFA conducts on-site field reviews at over 12% of its membership each year. These field reviews verify the information submitted in the annual membership review, confirm compliance with the ECFA Standards, and give support to the member organizations. Third, ECFA responds to complaints against member organizations. All such complaints are investigated thoroughly in order to determine possible noncompliance with the Standards.

Typically charity watchdog groups rate charities based primarily, if not solely, on a mathematical analysis of functional expenses and balance sheet data. The ability to retrieve financial information submitted to the government by charities via the web has provided the data access for the charity watchdog groups to evaluate charities based on the financial information provided to the government annually on Form 990.

The methodology embraced by the watchdog groups as well as their commentary related to their analyses equates the efficiency of the charity (i.e.. how much of their expenses goes to fundraising and general and administrative costs) with the effectiveness of the organization. In their words, because an organization has a low overhead, they are therefore an organization that is worthy of your consideration.

While these watchdog groups may be well-meaning, they are somewhat misguided. Most people that are intimately involved in charitable, philanthropic causes know that a rush to judgment of the integrity and effectiveness of a charity based on simple financial calculations is inappropriate.

Because there are many different charity watchdogs, the same charity may receive a “plus” for certain financial results from one watchdog group while another watchdog would give the same charity a “minus” for the same financial results. Some watchdog groups, for example, approve and give higher scores to charities that have cash reserves (e.g., higher is better) with the idea that the cash reserves provide stability. Other watchdog groups give the lowest scores to charities that have high cash reserves (e.g., lower is better).

While none of the watchdog groups state that charity evaluation is a simple exercise, it can be troubling to charity leaders as well as donors to think that someone or some group is equating charity efficiency (very little spent on fund-raising and administration) with charity effectiveness. If this “efficiency equals effectiveness” premise were true, FEMA’s decision to use $2,000 debit cards to victims of Hurricane Katrina would have been applauded by the general public and national media, while in reality it was scoffed at as another example of a government fiasco and incompetence.

Perhaps this connection between efficiency and effectiveness in rating charities is best articulated by Jim Collins, author of “Good to Great” and recently the monograph to accompany his book entitled, “Good to Great and the Social Sector”. In the very beginning of the book, Jim Collins discusses this confusion between financial inputs and charitable outcomes or outputs:

“I recently opened the pages of a business magazine that rated charities based in part on the percentage of budget spent on management, overhead and fundraising. It’s a well-intentioned idea, but reflects profound confusion between inputs and outputs”. Think about it this way: if you rank collegiate athletic departments based on coaching salaries, you’d find that Stanford University has a higher coaching cost structure as a percentage of total expenses than some other Division I schools. Should we therefore rank Stanford as “less great”? Following the logic of the business magazine, that’s what we might conclude-and our conclusion would be absurd. Stanford won the National Association of Collegiate Directors of Athletics Cup for best overall performance for 10 consecutive years, beating out all other major schools, while delivering athlete graduation rates above 80%.”

“The confusion between inputs and outputs stems from one of the primary differences between the business and the social sectors. In business, money is both an input (a resource for achieving greatness) and an output (a measure of greatness). In the social sectors, money is only an input, and not a measure of
greatness.”

Jim Collins book is a great read for everyone involved in chartable work. It is highly recommended to further understand the complexity involved in becoming not just a good charity but a great one. Another interesting read would be “Why ECFA does not rate charities” also found on the ECFA website at www.ecfa.org.

ECFA accreditation carries clout, financial peace of mind for groups

Winchester —
By Lorraine Halsted
The Winchester Star

Serving vast needs with limited funding means faith-based nonprofit organizations must make some tough decisions about how to spend their money. But annual membership in the Evangelical Council for Financial Accountability in Winchester is one budget item that many Christian organizations won’t skimp on, even though it can be costly.

Most of the expense is invested in an independent financial audit, which members must have on an annual basis to earn accreditation from the ECFA. For modest-sized organizations, an audit can cost $5,000 and up. And for larger outfits, it’s usually much higher, said ECFA President Ken Behr.

What organizations get in return is the ECFA seal of approval that tells donors their accounting books are wide open and donated funds are wisely spent. “I think the main goal is to try to be transparent,” said Vickie Koth, vice president of Christian Freedom International in Front Royal, a 20-year member of ECFA that provides humanitarian aid and advocacy to persecuted Christians around the world. “We want to be good stewards.”

ECFA accreditation has been embraced by the Christian nonprofit community since the council’s inception in 1979. Since then, membership has grown from 150 founding organizations to its current roster of 1,200 parent groups and 800 subsidiaries.

The accreditation carries clout, with membership including some of the nation’s biggest Christian outreach and ministerial groups, such as The 700 Club, Campus Crusade for Christ, Salvation Army, and Focus on the Family.

“We’ve had lots of stories from donors who said they will only give to our members,” Behr said.

Koth has heard similar comments from those who give to CFI. The accreditation, she said, is especially helpful to young organizations trying to build their reputation and attract donors.

“It’s the confidence that ECFA gives donors,” Koth said.


After Congress expressed concerns in the late 1970s about the lack of financial accountability for both religious and secular nonprofits, Mark Hatfield, a former senator from Oregon, encouraged action among Christian leaders that led to the ECFA’s founding. “A hundred and fifty Christian organizations came together and agreed to voluntarily submit to each other — to be accountable to one another,” Behr said.

In addition to the audited financial statement, ECFA developed six other standards for membership that include requirements for the size of the nonprofit’s board, how often it meets, and who can be a board member — for instance, relatives of board members are barred from serving.

Fundraising practices are also monitored. Behr said the ECFA discourages “aggressive” campaigns, such as exaggerated or deceptive statements made by an organization to attract donors. A big part of ECFA’s faith-based mission is to help members who may be in noncompliance with the standards, which could result in being dropped from the membership rolls.

“We try not to do that,” Behr said. “We see what we do as redemptive in nature.”

In the spirit of fiscal prudence, the ECFA gradually moved westward, first to Herndon — where rent at the time was somewhat cheaper than its previous location in Washington — then to Winchester in 1999, after the price for office space started soaring in Northern Virginia.

“We chose Winchester and bought into a business condo,” said Paul Nelson, former ECFA president who passed the baton to Behr this year. “We thought it was a wise investment.”

Before stepping in as ECFA’s president 12 years ago, Nelson served on the council’s board while he was working as executive vice president and chief operating officer for Focus on the Family, a Christian radio ministry based in Colorado.

“I saw an opportunity in ECFA that I though would be a challenge,” said Nelson, who lives in Winchester. “I saw the need for an increased profile for ECFA.”

Under Nelson’s leadership, membership nearly doubled. He also nurtured the development of field review teams, which meet with members on a random basis to double-check reported information and compliance with ECFA’s standards.

“Going out into the field was something that’s been a big undertaking, but that’s one of the hallmarks of the accreditation,” he said.

While field teams were already in place before Nelson came on board as president, he said they became more active as ECFA’s membership continued to grow. Now field teams visit 10 percent of ECFA’s member organizations each year.

“That once seemed like an insurmountable dream,” Nelson said, “but now it’s achievable.”

Nelson was also pleased when ECFA unexpectedly developed relationships with overseas organizations. It started when ECFA officials met with interested parties in China, who were intrigued that a U.S. organization could hold nonprofits financially accountable without government involvement.

Since then, ECFA has become involved with the International Committee on Fundraising Organizations, a board of representatives from various financial accountability groups in other countries that meet yearly to exchange ideas.

As ECFA’s new president, Behr wants to continue raising the organization’s profile within the Christian community.

“In order for our seal to mean something, we need to be larger,” he said.

One way the ECFA will try to do this is by creating a new category of accreditation for nonprofits that cannot afford the required financial audit.

While Behr says smaller organizations could really benefit from an ECFA accreditation, a different category for them would be created to keep the reputation of the original seal intact, since it represents ECFA’s highest standards.

“The value of the seal is that those who have it have done something to earn it,” he said.
Another major component of ECFA’s mission is its educational offerings.

Behr and Vice President Dan Busby travel the country, offering classes on financial management for Christian nonprofits and churches.

“When we are on the road, more than half the people attending our classes are not members,” Behr said.

Reaching those nonmembers is intentional, he added: “This is a ministry for us.”

Travel and instructional expenses are covered by ECFA’s membership fees, which account for 90 percent of the organization’s income. The other 10 percent in ECFA’s $1.5 million annual budget comes from donations and grants.

Busby, a certified public accountant and author of a number of financial management books geared toward Christian nonprofits and church organizations, said ECFA’s educational offerings have tripled in recent years.

When it comes to financial accountability, ECFA doesn’t exclude itself from the fiscal scrutiny of others.

That’s why it has a 15-member board of directors and a 15-member committee charged with reviewing the membership standards. Half of the board and committee members are required to be representatives of nonmember organizations.

Behr said ECFA also makes its budget information readily accessible to the public, a “transparency” that the council tries to instill in its member organizations.

“There’s not a lot of questions people have,” he said, “if the questions are answered.”

Making a Difference

I recently had the opportunity to attend my first large nonprofit conference which was an assemblage of approximately 800 or so leaders of various non profit charitable organizations, foundations and assorted interests. The three-day event was full of interesting forums and discussions on various topics of curiosity to those assembled but I had the interesting viewpoint of being one of the few evangelicals or conservatives present. I don’t assume to know the true religious conviction of all of those present but from a political perspective, it was obvious that most had entered the building from one of the doors on the “left”. If I was a better story-teller, I may describe it as an out-of-body experience.

Despite my feelings of being in a small minority, one of the hopes that I came away with, that I also pray was a common aspiration for most of the leaders in attendance, is that we are making a difference. Christian charities spend over $90 billion annually making a difference: we collectively provide food to those that are hungry and shelter to those that are homeless; we provide medicine, education and training for literally millions of individuals both here in the United States and even more significantly abroad in those nations that are still developing and also in distress; we provide emergency assistance and relief in draught and famine, in natural disasters and in war ravaged areas. Most importantly, we provide hope and the offer of an eternal relationship with the Creator of the Universe and the Savior of all mankind.

Organizations like ECFA are also making a difference. We have mentioned before the very active role that ECFA took in the deliberations these past two years in Washington DC on the Panel on the Nonprofit Sector. The Panel and the meetings have run their course, significantly impacting the breadth and outcome of legislation that was passed and signed into law in August of this year. Interestingly, final recommendations coming out of the Panel addressed how our elected representatives and the IRS may encourage integrity and ethics within our nonprofits, both secular and religious. These recommendations featured prominently the impact of accreditation agencies like the ECFA.

The Panel found that while about half of the large nonprofit organizations (those with revenues of $1 million or more) are covered by one or more of the accreditation agencies, most of these agencies have differing standards--some activity based and some donor based. Some of these accreditation agencies carry the ‘weight-of-law” while others, like ECFA are voluntary and have primarily the impact of membership and reputation.

One of the primary recommendations of the Panel was to encourage accreditation groups to embrace governance, transparency and financial accountability standards. While most accreditation agencies are primarily focused on a narrow segment or activity (i.e. education, health care, child care), very few included what I consider to be the “dna” of ECFA accreditation, which is the integrity of our finances, and transparency in our fund raising. My prayer is that ECFA accreditation may increase in influence and together we may call more and more of our Evangelical charities including our churches to a “higher standard and a higher purpose”.

Christian Evangelicals and U.S. Foreign Policy

For those of you that from time to time visit this Blog, (mostly family and friends) you'll notice that I haven't been posting as much as I've been posting mainly on my organizations website (www.ecfa.org).

Here is an interesting article that was published by The Council on Foreign Relations. A think-tank headquartered here in Washington DC.

Introduction

Evangelical Christians are believed to represent the single largest religious group in the United States, and as their numbers have grown, there are signs of increasing activism in U.S. foreign policy. Opinion surveys show evangelicals overwhelmingly supported President George W. Bush's reelection, are among the country's staunchest defenders of Israel, and remain supporters of the U.S. military campaign in Iraq. But experts say it is wrong to think of evangelicals as a monolithic force in lockstep with the Bush administration. A major evangelical group recently issued an appeal for more activism to prevent global warming and fight poverty, and evangelicals have pressed the administration and Congress to adopt a range of humanitarian and human rights initiatives.

What are evangelical Christians?

Evangelicals generally say they accept Jesus Christ as "Lord and savior," they have a personal relationship with Jesus, and they are committed to spreading his message so others can achieve salvation. Many evangelicals share in the belief derived from the Bible known as premillennialism, which holds that Christ's return will come ahead of a thousand-year reign of peace. Derived from the Greek word meaning "good news," the term "evangelical" took on broad significance when it was adopted by followers of Martin Luther after the Protestant Reformation. Evangelical Protestantism was the dominant form of Christianity in the early years of the United States and remained a strong part of American culture into the twentieth century. Many U.S. evangelicals today follow in the tradition of Billy Graham and Carl Henry, leaders who gained prominence in the mid-twentieth century by promoting activism in spreading the faith, as well as engagement with other religions to improve human welfare.

Are they different from fundamentalist Christians?

Experts say a common misperception is to equate evangelicals with fundamentalist Christians. Timothy Samuel Shah, senior fellow at the Pew Forum on Religion and Public Life, says both groups share a number of common beliefs, but an important difference is the activism of evangelicals. "Both evangelicals and fundamentalists tend to believe that [biblical] scripture is inerrant, that it is without error, and both tend to read scripture fairly literally and view it as absolutely authoritative from beginning to end," Shah says. "The difference, though, is that fundamentalists tend to be separatists [withdrawing from politics and culture] while evangelicals tend to be activists." Major evangelical denominations in the United States include the Southern Baptist Convention, theAssemblies of God, the National Baptist Convention, and various Pentecostal churches. Their adherents are estimated to range from 40 million to 75 million, a widely varying figure because of the lack of institutional identity, such as that which exists in mainline Protestant denominations or in the Roman Catholic Church.

What has been their traditional role in U.S. foreign policy?

Christian evangelicals have long been fervent backers of an Israeli state, predating its creation in 1948, but their activism on this issue has been most pronounced in recent years. Another issue they have taken a strong interest in for the past twenty-five years is international family planning. Evangelicals are prominent among the groups that have pressed administrations since the Reagan presidency to withhold funding for population programs that permit abortion.

CFR Senior Fellow Walter Russell Mead writes in the latest Foreign Affairs that the worldview of U.S. politicians tended to be dominated by liberal Protestantismduring World War II and the Cold War. Among those coming from this tradition, he says, were presidents Franklin D. Roosevelt, Harry Truman, and Dwight D. Eisenhower. But evangelical Christians have become more prominent in recent years. Former President Jimmy Carter is one, and experts say President Bush fits the profile of an evangelical Christian, although Bush doesn't describe himself as such.

How influential are evangelicals on U.S. foreign policy?

Experts say their influence has been notable on human rights issues over the past ten years and is growing. Evangelicals, often working with coalitions that involve other Christian groups, secular liberals, and Jews, among others, have played a prominent role in the following issues:

The end of Sudan's north-south civil war. U.S. efforts to end Africa's longest civil war were a response in part to steady campaigning by evangelicals concerned about reports the government in Khartoum was imposing slavery and Islam on the predominantly Christian south. The 2005 peace deal, brokered by former U.S. senator John Danforth, an ordained Episcopalian minister, still holds, although a separate civil conflict in Darfur rages on. Evangelicals are among a number of groups pressing for international action to end the bloodshed in Darfur.

AIDS/humanitarianism.

During Bush's time in office, U.S. aid to Africa has risen 67 percent, including $15 billion committed over five years for programs to fight HIV and AIDS. The policy has faced criticism from some health advocates who say its emphasis on abstinence at the expense of efforts such as condom distribution has slowed the response to fighting the disease. Delegates from Africa, speaking at an international AIDS conference in Toronto in August 2006, said the administration's strategy has a mixed record so far.

The International Religious Freedom Act of 1998.

Experts say evangelicals played a key role in the effort to pass legislation making freedom of religion and conscience a top objective of U.S. foreign policy. Under the law, the U.S. State Department set up an agency to advise the government on how countries perform on religious freedom. Countries given poor grades could face economic sanctions and other punitive measures.

The North Korea Human Rights Act of 2004 (PDF). This act required Bush to appoint a special envoy for human rights in North Korea and says human rights in the country should be a "key element in future negotiations between the United States, North Korea, and other concerned parties in Northeast Asia."

The Trafficking Victims Protection Act (PDF). Passed in 2000, the act aims to deter trafficking, punish traffickers, and protect and rehabilitate victims. New legislation signed by President Bush in January 2006 will provide an estimated $360 million over the next two years to fight human trafficking and offer victim protection.

Nancy E. Roman, CFR vice president and director of its Washington program, says this pattern of activism by evangelicals is likely to intensify. "I think in general the Southern Baptist Convention and other organized groups of evangelicals have decided that really it's important to engage politically and certainly in the foreign policy realm," Roman says. "By sheer dint of the numbers, I think the evangelicals are having more of a measurable impact right now" than other religious groups. "Evangelicals," Mead writes, "have given new energy and support to U.S. humanitarian efforts under President Bush."

What is the evangelical stance on U.S. policy toward Israel?

Evangelicals generally view the Middle East through a biblical prism and thus are staunch supporters of Israel, experts say. Richard Land, head of the Southern Baptist Convention's public policy arm, said at a CFR meeting in September 2005 that his group does not "give blind acceptance of everything that the state of Israel does or has done." But he added: "I think it's safe to say that a significant majority of the people who identify themselves as evangelicals believe that God gave the land of Israel to the Jews ... and that God has said that God blesses those who bless the Jews and God curses those who curse the Jews."

Adds Mead, writing in Foreign Affairs: "Many believe that the promise of [the bible's book of] Genesis still stands and that the God of Abraham will literally bless the United States if the United States blesses Israel." But fundamentalist Christians tend to hold more rigid views on policy matters related to Israel than mainstream evangelicals. Some fundamentalists have raised funds to promote the Israeli settlement of the occupied West Bank and Gaza. Some conservative evangelicals disagree with the Bush administration's support for the "roadmap to peace" because it foresees an Israeli withdrawal from the occupied territories as part of a compromise with Palestinians. One prominent fundamentalist evangelical, Pat Robertson, said after then-Israeli Prime Minister Ariel Sharon was stricken with a debilitating stroke in January that it was God's punishment for withdrawing from Gaza.

What is the view of evangelicals toward Muslims?

Surveys taken by the Pew Forum (PDF) show that of all Americans, evangelicals have the most negative views of Islam and Muslims. Shah of the Pew Forum says the 9/11 attacks confirmed the view among many evangelicals that Islam is a source of violence in the world. He said evangelicals already equated Islam with the high incidence of religious persecution found in many Muslim states. "In a sense I think many evangelicals see the war on terror, the war in Iraq, the struggle [against] religious persecution as part of a piece, as part of a general foreign policy thrust to challenge radical Islam," Shah said. "I think many evangelical elites see it that way."

Reverend Franklin Graham, a leading evangelist and son of Billy Graham, created a stir when he said after the 9/11 attacks that Islam was a "very evil and a very wicked religion." Land, of the Southern Baptist Convention, said at the 2005 CFR meeting that "many evangelicals too easily equate radical Islamic jihadism with Islam" and that his view is that Islam is a "many-splintered thing," much like Christianity. Evangelicals have also supported the Bush administration's campaign to democratize Iraq more consistently than most other domestic groups, according to polls conducted earlier this year by both Pew and Zogby International.

What are some other foreign policy priorities of evangelicals?

Evangelicals have shown an increasing interest in environmental issues, which they call "creation care." In late 2004, the National Association of Evangelicals adopted a platform on civil responsibility that included a section onenvironmentalist activism (PDF). Pursuing the environmental theme further, a group of prominent evangelicals in February 2006 formed the Evangelical Climate Initiative, which they described as a collective effort to encourage action by evangelical Christians and others to make adjustments in their lives to help ease global warming pressures. They released a statement that said human-induced climate change is real, it will disproportionately affect the poor, and that Christians have a moral responsibility to act urgently to address the problem, such as reducing carbon dioxide emissions. CFR's Roman says the new environmental activism, which is challenged by some evangelicals, signals that evangelicals cannot be easily pigeonholed into a political bloc. "The evangelicals do not very neatly align themselves with one policy prescription, there's more diversity than one would think," Roman says.

Pension Reform Act not all bad for Charities

The bulk of the Pension Protection Act is intended to compel employers to shore up their pension plans. In addition, it will in many ways encourage more non-defined pension plans including 401K’s and 403B’s in lieu of defined plans. Presently, many pensions are under funded, which means that promised pension benefits would exceed the funds available, leaving pensions short of money. The Pension Protection Act of 2006 "requires most pension plans to become fully funded over a seven-year period" starting in 2008, according to a CCH tax briefing.

According to a press release by Sen. Grassley, the pension bill includes a “good package of charitable giving incentives and loophole closers.” Grassley commented, “It makes sense to tighten areas of abuse while increasing incentives for charitable giving. Americans are very generous with their donations. They deserve to know that their money helps the needy, not the greedy.” Grassley thanked Sen. Santorum, Republican of Pennsylvania who he said was especially helpful in developing the giving incentives, and the Panel on the Nonprofit Sector, who Grassley said, “represented many of the nation’s charities in a comprehensive effort to study ways to improve the non-profit sector”.

To achieve full pension funding, the new law allows employers to deduct the cost of making additional contributions to fund the pension, provides strict funding guidelines, and imposes a 10% excise tax on companies that fail to correct their funding deficiencies.

Charitable IRA Donations

The good news for charities is that The Pension Protection Act allows taxpayers to donate money to charity directly from their IRA account. The distributions will be tax-free and avoid the penalty on early withdrawals. Taxpayers are allowed to donate up to $100,000 per year from their IRA. Since the distribution will not be included in taxable income, individuals will not be able to claim a tax deduction for the charitable contribution.

Individuals won't get a tax deduction for the contribution. So why should they do it?

At age 70 ½ individuals must start taking a minimum amount of money out of their IRA each year. The Money taken out is added to your adjusted gross income, and is subject to federal and state taxes.

If the same amount is donated to charity, the amount qualifies for a tax deduction but it doesn’t negate the full amount of the tax. That is because the amount of the IRA withdrawn is still in adjusted gross income, which may affect a number of things. The amount many have been enough to place the individual into a higher tax bracket; an increase in adjusted gross income would also reduce the deduction for medical and other expenses and personal exemptions. Likely, the higher adjusted gross income would increase income tax on Social Security benefits.

With the new allowable Charitable IRA donation, a donation of money directly from the IRA to a charity would never show up in the adjusted gross income, eliminating the possibility of higher taxes. Charitable IRA donations also fully qualify as a portion or the entire minimum amount of money required to be withdrawn from IRA’s belonging to individuals age 70 ½ and older.

Stricter Rules on Charitable Donations

The Pension Protection Act toughens the tax laws for charitable donations. Effective in 2007, to qualify as a deductible expense, taxpayers must now keep records of all cash donations. Individuals must show a receipt from the charity, a canceled check, or credit card statement to prove their donation. No tax deduction will be allowed if the taxpayer cannot provide any supporting documentation. Previously, receipts were required if an individual monetary gift was $250 or more.

Taxpayers will not need to mail in the receipts with their tax return. Instead, taxpayers will need to keep receipts and other documentation with their copy of the return in the event of an IRS audit.

The new law also toughens the rules for non-cash donations. Donated items, such as clothing and household goods, must be in good used condition. While the new law does not define “good condition” the law does specify that no tax deduction will be allowed for items in less than good condition. In addition, for non-cash donations in excess of $500, taxpayers will be required to file a qualified appraisal for the donated property.

Future legislation

The “Panel on the Nonprofits” which included ECFA participation along with nineteen other national organizations, reviewed and commented on a number of other charitable provisions of which some are still likely to ultimately become law. Sen. Charles Grassley, mentioned above and the sponsor of the Pension Reform act commented, “I look forward to working with the same individuals to put together more legislative proposals to increase governance, transparency, and accountability in the non-profit sector."