posted on Flickr by King

Most individuals like to complain about where their money goes when it comes to government.  One area of complaining is about the disposal of trash.  It is a cost to government that continues to grow and yet very few want to pay more for government services.

Individuals and companies are the consuming the products and creating the waste.  Just because it is out of sight does not rid anyone of their responsibility for appropriately paying for their waste disposal.

The effective way to best way to clean up the mess and to adequately fund waste disposal is to have regulations that require the creators of the product build into the price the cost of waste disposal.  The harder it is to recycle the product the higher the price.  No product should be exempt.This will provide a market incentive to produce products that can more readily recycled and at cheaper costs.  It will discourage the production of high environmental toxins because their price to compete will be higher.

This will create new jobs in local manufacturing to create more environmental friendly and easy to recycled products for the next century.   This will create incentives for new entrepreneur businesses to form to meet this need.

Like for-profit entrepreneurs it is an opportunity for new nonprofits to evolve to address similar concerns.  For the current nonprofit community it is an opportunity to revolve as well to embrace ways to deliver their products and services.

cartoon by xkcd

• Stanford Group is shut down by regulators and the status of 8 billion dollars of investors money is unknown.
• Large Investors are able to sell and buy stock without being registered on the exchange.
• Madoff stole billions.
• The list goes on…..

What is the common denominator?  No transparency of the transactions.  Public companies should not be allowed to have any entity or individual buy or sell any investment instrument with it, unless it is registered within 24 hours of its signature.   Today the electronic filings with the SEC and electronic signatures, a filing is required.

Each entity and individual has the right to the knowledge of any transaction that has be taken against any company since the with holding of said information should be interpreted as providing a class of investors preferential treatment.

Congresses lack of action for making all financial transactions transparent provides an inference that said actions may continue.  It should be Congresses first and foremost action to set forth a resolution of bringing trust to the market.  Trying to resolve all aspects of the financial crisis when there are so many ideas and not any one assurance is not a “wait and see” option.

Pass regulations mandating transparency period and oversight authority to one government entity.  There is no reason for further debate.

Nonprofits are suppose to be conservative in their approach to investing and government let thousands of them down with the lack of enforcement.

Thousands of individuals who give millions to government in taxes and to charitable groups have conservative approaches to investing and lost billions because of a lack of enforcement.

Enforcement of the laws on the books today and requiring all financial transactions to follow the same rules is a great start.  Why does it have to be so hard to make everyone invest by the same reporting rules.

Whether you’re a nonprofit or individual it is important you convey how the current rules place you and your organization at risk and a disadvantage.

(pic by daniel</geek)

Congress has done its piece.  Prepare now by partnering with other nonprofits, foundations, donors and businesses to maximize the federal dollars to go even further.

Pic by hartboy

Another blow to the financial industry trust.  An accountant for Fireman Adviser steals 25 million from Fireman family and Charitable Foundation.

The person is described as “a trusted adviser and friend”

This underscores the need for due diligence, which means reading information and considering the source.  I would suggest there is a more neutral honest place to consider for getting direction.

Check out The Boston College Center for Corporate Citizenship Institute for Responsible Investment (IRI).  It provides provides a platform for dialogue among financial professionals, corporate practitioners, academics, unions, public interest organizations and public sector employees on fundamental issues and theories underlying socially responsible investing (SRI) and corporate citizenship.  It’s work is designed to expand the scope of a responsible investment through research and network-building that identifies cutting issues, and catalyzes growth in emerging fields.

Feel comfortable to ask why and learn, no matter who is managing the money.  Children are not afraid to ask questions, why should you be.

(pic by daniel</geek)

Investors should be considering Nonprofit and government Bonds.  Citigroup sold 12 billion dollars in bonds at 3.25%.  The reason for the buying was it was backed by a guarantee of FDIC and it paid 1% more than Treasuries.

What investors forget is much of the tax exempt bonds are also government backed, but not by the federal government.  The federal guarantee needs to be offered for nonprofit bonds, especially in the area of affordable housing, education and energy conservation.  Promote nonprofits as a great investment.  Show how the organization is not speculative in its venture and its long term commitment to the venture fits the mission.

It is time to build those bonds with investors.

Debt swaps have gone from being a blessing to being the death to financial stability.

Tax-exempt bonds once had been viewed as worthy as municipal bonds due to the nature of government regulation.  However,  with municipal bonds being viewed less favorable, the same has occurred for tax-exempt bonds.

As municipal or nonprofits default on their debt service in 2009 it will cause  serious problems for government and nonprofits needing to finance debt.

I would suggest that certain nonprofits and municipalities look to bankruptcy to create the right amount of time to negotiate with bond holders, especially if it is the change in the financial markets that has created the current fiscal crisis for the organization.

However, due to the fact that some nonprofits and government entities are unable to make the necessary decisions to do what is best for the industry I think regulations should be in place allowing state governments similar measures that the SEC and Federal Reserve have in dealing with financial institutions.

The industry of $430 billion tax exempt bonds is too important to not be more strongly supported during this time of tight credit and illogical behavior of the financial markets.  These bonds are not from entities that represent investors seeking a return but rather are from entities whom are to accomplish public good.

(pics by vintfalken, wonderwebly, and thelastminute )

pic by Leon

by cameronmaddux

The use of 529 Education Prepaid Plans allows families to lock in current tuition rates of the state higher education institutions.  How is that for creating value?  It is like a guaranteed returned.

You might ask what happens if the student does not end up going to college or their choice is another state or private.

Not to worry, the account can be used for any college but will be limited to any increase usually tied to the growth of in state tuition.

This may be the best conservative way to ensure growth in your investment of funds for future generations.

Foundations who are supporting youth in reaching a college education might just want to utilize this approach as well.

Nonprofits find value in every educational experience.

pic by royblumenthal

Taking risks does not mean giving up responsibility.

The $50 billion dollar Ponzi Scheme provides a key opportunity for learning.  The delegation of due diligence comes with risks. Board members need to understand that delegation of their duty to be fiduciary responsible comes with first asking the right questions.  It is safer to get lower returns using investments that are clearer and understandable.  It will not leave doubt in your decision making.

Charities should have as an investment goal to preserve principle and aim for a conservative return of up to 5 percent.  In most cases that is achievable through government bonds or high grade corporate bonds.  (The key word is “up to”).  Greed is what got most individuals and institutions to ignore the need to conduct due diligence.

Out of the many effected I have noted below a few examples of whom to follow and whom not to follow as examples of conducting due diligence.

Those who did their due diligence 

•  American Jewish Committee
• Combined Jewish Philanthropies

Those who seemed to not have conducted sufficient due diligence and lost money.

• Picower Foundation (952 million)
• Robert Lappin Charitable Foundation
• Carl and Ruth Shapiro (145 million)

Those who had money managers whom seemed to not have conducted sufficient due diligence and lost money.

• Maimonides School
• Foundation of the Holocaust  (15.2 million)
• Yeshiva University (110 million)
• Tufts University (20 million)
• New York Law School (3 million)

Protect yourself and any organization your responsible for from being cheated:

1. If you are going to hire money mangers or investment advisers a simple rule is that they should never handle your money directly.  They would have you place your money with a brokerage firm, bank or mutual fund.
2. To ensure legitimacy at all times you should be able to see your account on line at any time.  If this is not available this should be the only warning you need to walk away.
3. If you can not confirm on your own the transactions made on your behalf then walk away.
4. If you receive statements from both a money manager and custodian, read them.  If there are any discrepancies contact the custodian immediately.  If your not satisfied with the answer or your uncomfortable, walk away.
5. If you can not get a meeting with your money manger, you should walk away.

If you think that the time and effort is such a pain or inconvenience to you or to the Board, you should consider not having the responsibility.

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Each professional group has its own level of respect and trust.  Within the financial profession the expected cultural acceptance is the balancing of a the need to protect assets, grow assets and educate about risks/expectations.

The SEC and other government agencies were created to ensure a level of standards towards the cultural acceptance.

The private debt watch dogs Fitch Rating and Moody Standard and Poors grade the quality of the debt securities of corporations and government.

All three levels of accountability failed.

Regulations and oversight is only as good as the worthiness of the facts.  To have investments securities that can not be valued today means that they never should have been valued in the past. The financial institutions and oversight agencies have been stating that they should not be blamed for negative returns because no one could have foreseen the problem. The fact of the matter is that the standards were not followed, the nature of the risk was not stated, and you are charged fees even when you lose money.  When fees are generated for all parties by generating transactions, there is major incentive to support the creation of assets to sell.

When selecting an entity to manage financial investments one important measure is whether the entity controls or manages the investments directly.  Most financial institutions choose to invest funds in other funds, so in reality they are not managing the risk.  They have delegated your funds to another entity for the risk.

The financial industry in 2008 provided a clear message to everyone, the only entity that you should Trust is your own.  Seek advice and make sure the level of risk is clear in the decisions you make.

 pic by jovike

The Federal government is embarking on the largest infrastructure change in its history, exceeding even the Great Depression.  This endeavor is a rare opportunity for nonprofits to show how efficient, effective and competitive the industry can be in accomplishing infrastructure changes.  Another added value is the ability of nonprofits to leverage volunteers, in-kind goods and cash  to the negotiating table.

The ability to lower utility and transportation costs 10-40%  is a major savings.

My priority list to gain the biggest impact in the shortest amount of time is:

1. Any public education facility & vehicles
2. Government office buildings & vehicles
3. Housing authority properties & vehicles
4. Nonprofit own housing properties & vehicles

Get the lead out and create your plan.  Know what you want to accomplish and its costs.  Be prepared to participate.